Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended |
Nov. 30, 2013 | |
Document and Entity Information: | ' |
Entity Registrant Name | 'Mass Hysteria Entertainment Company, Inc. |
Document Type | '10-K |
Document Period End Date | 30-Nov-13 |
Amendment Flag | 'false |
Entity Central Index Key | '0001388488 |
Current Fiscal Year End Date | '--11-30 |
Entity Common Stock, Shares Outstanding | 18,145,865 |
Entity Filer Category | 'Smaller Reporting Company |
Entity Current Reporting Status | 'No |
Entity Voluntary Filers | 'No |
Entity Well-known Seasoned Issuer | 'No |
Document Fiscal Year Focus | '2013 |
Document Fiscal Period Focus | 'FY |
Entity Public Float | $308,480 |
BALANCE_SHEETS_PARENTHETICAL
BALANCE SHEETS (PARENTHETICAL) (USD $) | Nov. 30, 2013 | Nov. 30, 2012 |
Stockholders' Equity: | ' | ' |
Common stock, par value | $0.00 | $0.00 |
Common shares authorized | 2,000,000,000 | 2,000,000,000 |
Common shares issued | 18,145,865 | 599,872 |
Common shares outstanding | 18,145,865 | 599,872 |
Preferred stock, par value | $0.00 | $0.00 |
Preferred shares authorized | 10,000 | 10,000 |
Preferred shares issued | 10 | 10 |
Preferred shares outstanding | 10 | 10 |
STATEMENT_OF_OPERATIONS
STATEMENT OF OPERATIONS (USD $) | 12 Months Ended | 52 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | Nov. 30, 2013 | |
Net Income (Loss) | ' | ' | ' |
Revenues | $0 | $0 | $72,500 |
Operating expenses: | ' | ' | ' |
General and administrative | 1,461,526 | 990,150 | 4,873,265 |
Selling expense | 0 | 0 | 30,573 |
Impairment of film costs | 0 | 93,250 | 93,250 |
Total Expenses | 1,461,525 | 1,083,400 | 4,997,088 |
Loss from operations | -1,461,525 | -1,083,400 | -4,924,588 |
Other income (expense) | ' | ' | ' |
Other income | 0 | 65,006 | 65,432 |
Interest expense | -342,811 | -205,478 | -726,634 |
Excess fair value of derivative | -69,071 | -250,478 | -346,640 |
Gain on fair value of derivative liability | 66,982 | 143,242 | 252,382 |
Loss on stand-ready guarantee | 0 | -200,000 | -200,000 |
Income (loss) before income taxes | -1,806,426 | -1,531,108 | -5,880,048 |
Income taxes | 0 | 0 | 0 |
Net income (loss) qualified | ($1,806,426) | ($1,531,108) | ($5,880,048) |
Earnings Per Share: | ' | ' | ' |
Net loss per common share (basic and diluted) | ($0.59) | ($4.89) | ' |
Weighted average number of common shares outstanding | ' | ' | ' |
Weighted average number of shares outstanding during the period - basic and diluted | 3,062,690 | 312,837 | 3,062,690 |
STATEMENT_OF_STOCKHOLDERS_EQUI
STATEMENT OF STOCKHOLDERS' EQUITY (USD $) | Common Stock | Preferred Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Total |
Shares issued, at Nov. 30, 2008 | 11,594 | 0 | 0 | 0 | 11,594 |
Stock issued during period, Value, services | $0 | $0 | $667,580 | $0 | $667,580 |
Stock issued during period, Shares, services | 4,122 | 0 | 0 | 0 | 4,122 |
Stock issued during period, Value, recapitalization | 1 | 0 | -1 | 0 | 0 |
Stock issued during period, Shares, recapitalization | 42,015 | 0 | 0 | 0 | 42,015 |
Stock issued during period, Value, debt | 0 | 0 | 1,152,000 | 0 | 1,152,000 |
Stock issued during period, Shares, debt | 10,800 | 0 | 0 | 0 | 10,800 |
Adjustments to paid in capital | 0 | 0 | 12,273 | 0 | 12,273 |
Net income (loss) qualified | 0 | 0 | 0 | -2,052,019 | -2,052,019 |
Stockholders' Equity at Nov. 30, 2009 | 1 | 0 | 4,658,346 | -4,967,658 | -309,311 |
Shares issued, at Nov. 30, 2009 | 68,531 | 0 | 0 | 0 | 68,531 |
Stock issued during period, Value, services | 0 | 0 | 337,050 | 0 | 337,050 |
Stock issued during period, Shares, services | 5,675 | 0 | 0 | 0 | 5,675 |
Stock issued during period, Value, debt | 0 | 0 | 55,268 | 0 | 55,268 |
Stock issued during period, Shares, debt | 5,900 | 0 | 0 | 0 | 5,900 |
Adjustments to paid in capital | 0 | 0 | 82,000 | 0 | 82,000 |
Net income (loss) qualified | 0 | 0 | 0 | -1,045,674 | -1,045,674 |
Stockholders' Equity at Nov. 30, 2010 | 1 | 0 | 5,361,331 | -6,013,332 | -652,000 |
Shares issued, at Nov. 30, 2010 | 80,106 | 0 | 0 | 0 | 80,106 |
Stock issued during period, Value, services | 0 | 0 | 106,520 | 0 | 106,520 |
Stock issued during period, Shares, services | 10,310 | 10 | 0 | 0 | 10,320 |
Stock issued during period, Value, conversion of notes | 0 | 0 | 18,000 | 0 | 18,000 |
Stock issued during period, Shares, conversion of notes | 8,015 | 0 | 0 | 0 | 8,015 |
Stock issued during period, Value, debt | 0 | 0 | 10,000 | 0 | 10,000 |
Stock issued during period, Shares, debt | 10,000 | 0 | 0 | 0 | 10,000 |
Adjustments to paid in capital | 0 | 0 | 75,000 | 0 | 75,000 |
Net income (loss) qualified | 0 | 0 | 0 | -1,086,060 | -1,086,060 |
Stockholders' Equity at Nov. 30, 2011 | 1 | 0 | 5,810,851 | -7,099,392 | -1,288,540 |
Shares issued, at Nov. 30, 2011 | 108,431 | 10 | 0 | 0 | 108,441 |
Stock issued during period, Value, services | 0 | 0 | 30,541 | 0 | 30,541 |
Stock issued during period, Shares, services | 27,483 | 0 | 0 | 0 | 27,483 |
Stock issued during period, Value, conversion of notes | 5 | 0 | 163,187 | 0 | 163,192 |
Stock issued during period, Shares, conversion of notes | 388,017 | 0 | 0 | 0 | 388,017 |
Stock issued during period, Value, debt | 0 | 0 | 78,627 | 0 | 78,627 |
Stock issued during period, Shares, debt | 75,941 | 0 | 0 | 0 | 75,941 |
Adjustments to paid in capital | 0 | 0 | 159,631 | 0 | 159,631 |
Net income (loss) qualified | 0 | 0 | 0 | -1,531,108 | -1,531,108 |
Stockholders' Equity at Nov. 30, 2012 | 6 | 0 | 6,482,837 | -8,630,500 | -2,147,657 |
Shares issued, at Nov. 30, 2012 | 599,872 | 10 | 0 | 0 | 599,882 |
Stock issued during period, Value, conversion of notes | 17 | 0 | 26,582 | 0 | 26,599 |
Stock issued during period, Shares, conversion of notes | 1,758,108 | 0 | 0 | 0 | 1,758,108 |
Stock issued during period, Value, debt | 8 | 0 | 11,759 | 0 | 11,767 |
Stock issued during period, Shares, debt | 787,885 | 0 | 0 | 0 | 787,885 |
Adjustments to paid in capital | 0 | 0 | 38,715 | 0 | 38,715 |
Net income (loss) qualified | 0 | 0 | 0 | -1,806,426 | -1,806,426 |
Stockholders' Equity at Nov. 30, 2013 | $181 | $0 | $7,399,743 | ($10,436,926) | ($3,037,002) |
Shares issued, at Nov. 30, 2013 | 18,145,865 | 10 | 0 | 0 | 18,145,875 |
STATEMENT_OF_CASH_FLOWS
STATEMENT OF CASH FLOWS (USD $) | 12 Months Ended | 52 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | Nov. 30, 2013 | |
Statement of Cash Flows | ' | ' | ' |
Net Income (loss) | ($1,806,426) | ($1,531,108) | ($5,880,048) |
Depreciation | 519 | 874 | 3,141 |
Bad debt expense | 0 | 6,616 | 31,616 |
Share-based compensation | 840,000 | 344,168 | 2,035,735 |
Loss on settlement of convertible notes | 0 | 0 | -14,000 |
Impairment of script costs | 0 | 93,250 | 93,250 |
Contributed services | 0 | 0 | 89,500 |
Change in fair market value of derivative liability | -66,982 | -143,242 | -252,382 |
Loss on excess fair value of derivative liability | 69,071 | 250,478 | 346,640 |
Amortization of discount on convertible debt | 200,041 | 147,282 | 450,734 |
Loss on default | 65,350 | 0 | 65,350 |
Provision for stand ready obligation | 0 | 200,000 | 200,000 |
Accounts receivable | 0 | -9,414 | -12,211 |
Prepaid expenses | 0 | 0 | -295 |
Accounts payable | 56,831 | 41,550 | 181,916 |
Accrued liabilities | 443,766 | 331,656 | 392,611 |
Unearned revenue | 1,000 | 0 | 1,000 |
Accrued payroll | 388,884 | 184,719 | 748,711 |
Bank credit line | 0 | 0 | -1,156 |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | -139,602 | -319,362 | -1,519,888 |
Film costs | 0 | 0 | -32,000 |
Other assets | 2,333 | -2,333 | 1,214 |
NET CASH PROVIDED BY INVESTING ACTIVITIES | 2,333 | -2,333 | -30,786 |
Stand ready obligation | 0 | 0 | 25,000 |
Proceeds from issuance of convertible debt | 137,000 | 157,500 | 632,001 |
Proceeds from issuance of convertible debt to related parties | 0 | 0 | 453,061 |
Proceeds from issuance of short-term debt | 0 | 155,622 | 225,622 |
Proceeds from sale of commons tock | 0 | 5,000 | 214,999 |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 137,000 | 318,122 | 1,550,683 |
Increase (Decrease) in cash and cash equivalents | -270 | -3,573 | 9 |
Cash and Cash Equivalents, at Carrying Value, Beginning Balance | 279 | 3,851 | 0 |
Cash and Cash Equivalents, at Carrying Value, Ending Balance | 9 | 279 | 9 |
Interest | 0 | 0 | 0 |
Income taxes, net | 0 | 0 | 800 |
Conversion of notes payable to stock | $537,088 | $155,970 | $537,088 |
Schedule_of_Accrued_Liabilitie
Schedule of Accrued Liabilities (USD $) | 12 Months Ended | 52 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | Nov. 30, 2013 | |
Schedule of accrued liabilities | ' | ' | ' |
Accrued interest | $182,305 | $118,195 | $182,305 |
Accrued consulting fees | 91,000 | 91,000 | 91,000 |
Accrued payroll taxes on CEO's compensation | 134,461 | 98,461 | 134,461 |
Accrued auto allowances due CEO | 36,000 | 24,000 | 36,000 |
Total accrued liabilities | $443,766 | $331,656 | $392,611 |
Organization_Consolidation_and
Organization, Consolidation and Presentation of Financial Statements | 12 Months Ended |
Nov. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements: | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure | ' |
Michael Lambert, Inc. (“MLI”) was incorporated in Nevada on November 2, 2005. MLI was in the business of manufacturing handbags, but ceased operations in June 2009. | |
On June 9, 2009, the Company entered into a material definitive agreement with Belmont Partners, LLC by which Belmont acquired 11,286 shares of the Company’s common stock in a private transaction. Following the transaction, Belmont Partners, LLC controlled approximately 85.41% of the Company’s outstanding capital stock. | |
To better reflect the Company’s new business plan, on June 25, 2009, MLI changed their 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. The Company’s plan is to produce a minimum of three theatrical films a year that appeal specifically to the youth market. | |
On August 5, 2009 (date of “Inception” for financial reporting purposes), 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 almost 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. The Company is endeavoring to be a company at the forefront of creating new revenue streams as they relate to the motion picture experience. Over the next twelve months, Mass Hysteria will be creating movies that will 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. Technology is evolving, too. Interactive mobile applications are in development by third parties. The Company expects to license or develop our own mobile applications in the near future, depending on our ability to raise capital and generate traditional sources of revenues. There are technology and competitive risks associated with interactive mobile devices and theatrical films. | |
Basis of Accounting | ' |
Development Stage Company | |
On August 5, 2009, the Company entered into the development stage with its intended new business, which currently has minimal revenues. Management expects to sustain losses from operations until such time it can generate sufficient revenues sufficient to meet its anticipated cost structure. The Company is considered a development-stage company in accordance with Accounting Standards Codification (“ASC”) 915 – “Development-Stage Entities.” Upon distribution of the Company’s products, it will exit the development stage. The nature of our operations is highly speculative, and there is consequently a risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition, and management of the identified business opportunity. | |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require the Company's most significant, difficult and subjective judgments include the valuation and recognition of share-based compensation, evaluation of the Company’s stand-ready obligation and values of derivative instruments. We use the Black-Scholes valuation model for simplicity purposes. Various valuation techniques render varying amounts. We consistently use this model and use inputs that are appropriate. As the Company develops its technologies, and capitalization of costs occurs, the carrying value of those long-lived assets will need to be evaluated for impairment. | |
We base our estimates and judgments on historical experience and on various other factors that are considered reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results could differ materially from these estimates. | |
Fair Value of Financial Instruments | |
The Company accounts for financial instruments under the guidance of ASC 820-10 – “Fair Value Measurements”. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: | |
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 - Other inputs that are directly or indirectly observable in the marketplace. | |
Level 3 - Unobservable inputs which are supported by little or no market activity. | |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | |
As of November 30, 2013 and 2012, the Company’s derivatives which include the embedded conversion feature on the convertible note payable were considered level 2 financial instruments. See Note 5 for valuation technique and assumptions used. | |
The Company's financial remaining instruments consisted primarily of (level 1), accounts payable, accrued liabilities, and short-term debt. The carrying amounts of the Company's financial instruments generally approximate their fair values as of November 30, 2013 and 2012 due to the short term nature of these instruments. | |
The Company did not have any level 3 instruments at November 30, 2013 and 2012. | |
Cash and Cash Equivalents | |
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. | |
The Company may maintain cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000. Deposits with these banks may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk. The Company did not have any cash equivalents at November 30, 2013 and 2012. | |
Film Costs | |
The Company capitalizes film production costs in accordance with ASC 926 – “Entertainment”. Film costs include costs to develop and produce films, which primarily consist of consulting fees, equipment and overhead costs, as well as the cost to acquire rights to films. Film costs include amounts for films still in development. The Company began capitalizing script costs on March 1, 2010. See Note 9 for additional disclosure. | |
Website Development Costs | |
Website development costs are for the development of the Company's Internet website. These costs have been capitalized when acquired and installed, and are being amortized over its estimated useful life of three years on a straight line basis. The Company accounts for these costs in accordance with ASC 340, “Other Assets and Deferred Costs”, which specifies the appropriate accounting for costs incurred in connection with the development and maintenance of websites. At November 30, 2013, the Company owned a website costing $3,140 which had an estimated useful life of three (3) years. Amortization expenses related to website development costs during each of the years ended November 30, 2013 and 2012 were $519 and $874, respectively. | |
Software Development Costs | |
Software development costs for internal use are capitalized and, once placed in service, amortized using the straight-line method over the estimated useful life, generally three years. The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. | |
All other property and equipment is depreciated or amortized on a straight-line basis over the estimated useful lives of three to ten years. | |
Derivative Financial Instruments | |
The provisions of ASC 815 - “Derivatives and Hedging” applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined by ASC 815 and to any freestanding financial instruments that are potentially settled in an entity's own common stock. The guidance impacts the Company's financial statements and position due to certain warrants and embedded conversion features in which the exercise or conversion price resets upon certain events. See Note 5 for the impact of such transactions on the financial statements. | |
Our issued and outstanding common stock purchase warrants and embedded conversion features are recorded at their fair value upon issuance and at each reporting period. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities market, and as such, we estimate the fair value of these warrants using the Black-Scholes option pricing model. The value of the embedded conversion feature also determined using the Black-Scholes option pricing model. All future changes in the fair value of the embedded conversion feature will be recognized currently in earnings until the note is converted or redeemed. | |
Convertible Debt | |
If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. In those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | |
Guarantees | |
During the year ended November 30, 2011, the Company entered into an agreement to provide for a guarantee of indebtedness. The Company’s exposure to credit loss, in the event of nonperformance of the related film financed by the indebtedness, is represented by the amounts stipulated in the agreement, and is limited to a maximum of $250,000. The total guarantee accruals do not necessarily represent future cash requirements or cash reserves. As of November 30, 2013, management has evaluated the guarantee liability under ASC 460-10 – “Guarantees” and ASC 450-20 – “Loss Contingencies” by reviewing the ability to repay the obligation under contract to determine if there is a probable chance of a default, and if so, provide a reasonable estimate for losses. At November 30, 2013 management determined that the full guarantee will be called. See Note 6 for Management’s determination. | |
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 November 30, 2013, the Company’s dilutive securities outstanding consisted of (1) the CEO’s options to purchase shares of common stock (see Note 8), for which the exercise price is above the average closing price of the Company’s common stock and thus excluded under the treasury method; | |
(2) 6,768 shares relative to convertible notes to a related party expected to be issued (post conversion) beginning in February 2015; (3) 692,959 shares relative to convertible notes (post conversion); and (4) 72 shares related to warrants issued with the $37,500 convertible note. At November 30, 2012, the Company’s dilutive securities outstanding consisted of (i) the CEO’s options to purchase shares of common stock (See Note 8) for which the exercise price is above the average closing price of the Company’s common stock and thus excluded under the treasury method; (2) 6,768 shares relative to convertible notes to a related party expected to be issued (post conversion) beginning in February 2015; (3) 131,643 shares relative to convertible notes (post conversion) and (4) 944 shares related to warrants issued with the $37,500 convertible note. The preceding common equivalent was excluded from the diluted net loss per share as the effects would have been anti-dilutive. | |
Impairment of Long-Lived Assets | |
The Company has adopted ASC 360-10, - "Property, Plant and Equipment" which requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment, annually, or more often, if events and circumstances warrant such. At November 30, 2012 management considered that the values of the $ 93,250 of script costs were impaired and they were accordingly expensed. | |
Recoupable Costs and Producer Advances | |
Recoupable costs and producer advances represent amounts paid by the Company that will be expected to be subsequently recouped through the collection of fees associated with the Company's licensing of content represented by third parties. In connection with the film production segment's content operations which may be represented by others, the Company will enter into sales agency agreements whereby the Company will act as a sales agent for a producer's film ("Sales Agency Agreements"). These Sales Agency Agreements typically include provisions whereby certain costs that are incurred for promotion related activities will be paid by the Company on behalf of the producer (such as movie trailer and ad material costs). The Company may also pay the producer an advance for the related film prior to the distribution of such film. As the Company subsequently licenses the producer's film and license fees are collected, the recoupable costs and producer advances will be recovered by the Company through these license fee collections. License fees typically are not paid to the producer of the related film until such recoupable costs and producer advances have been fully recovered by the Company. | |
Producers Fees | |
Producer fees will be recognized upon receipt of the fees and delivery of the related services. If upon receipt of the fees all services have not been provided, the fees will be deferred and recognized as the services are performed. | |
Royalties | |
Royalty and profit participation will be recognized when the amounts are known and the receipt of the royalties is reasonably assured. Accordingly, recognition generally occurs upon receipt (usually quarterly or semi-annually). | |
Distribution Revenues | |
Distribution revenues will be recognized when earned and appropriately reported by third (3rd) party distribution companies and recorded gross along with any distribution expenses charged by the Distributor and upon receipt of such revenues. | |
Producer Development, Production Service Fees and Film Distribution Fees | |
As these services are provided, these fees will be invoiced to the third party financiers and producers and recognized when the amount has been determined and receipt is reasonably assured. | |
Stock Options | |
In accordance with the provisions of ASC 718 “Compensation-Stock Compensation,” the Company accounts for employee and non-employee director stock issuances and stock options under the fair value method which requires the use of an option pricing model for estimating fair value. Accordingly, share-based compensation is measured at grant date based on the estimated fair value of the award. The Company uses the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. | |
Reverse Stock Split | |
On December 28, 2012, the Company’s board of directors approved, a 1-for-1000 reverse stock split pursuant to which all shareholders of record received one share of common stock for each one thousand shares of common stock owned (subject to minor adjustments as a result of fractional shares). GAAP requires that the reverse stock split be applied retrospectively to all periods presented. As a result, all common stock, warrant and option transactions described herein have been adjusted to reflect the 1-for-1000 reverse stock split. | |
Accounting for Non-Employee Stock-Based Compensation | |
The Company measures compensation expense for its non-employee stock-based compensation under ASC 505 - “Equity”. The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital. | |
Deferred Producer Liabilities | |
Deferred producer liabilities represent outstanding amounts due to the producer or to be retained by the Company upon the collection of license fee amounts related to the sale of content represented by the Film Production segment. In accordance with the Sales Agency Agreements entered into by the Company and represented content producers, when license fees associated with the Company's sale of represented content are collected, the amounts are paid to the producer and/or retained by the Company. Amounts are paid to the Company for its sales agency commission, recoupment of outstanding film costs and producer advances ("Recoupable Costs") or as market fee revenue. The terms of the Sales Agency Agreements provide that collected license fees will be distributed to the producer and/or retained by the Company based on a specific allocation order as defined by each agreement. The allocation order is dependent on certain criteria including total license fee collections, outstanding Recoupable Cost balances and certain other criteria as specified by the Sales Agency Agreements. Because these criteria cannot be reasonably determined until the license fees are collected, the appropriate allocation order of uncollected license fees cannot be established. Accordingly, the uncollected license fee amounts are recorded as deferred producer liabilities until such | |
Income Taxes | |
The Company makes certain estimates and judgments in determining its income tax provision expense. These estimates and judgments are used in the determination of tax credits, benefits and deductions, and the calculation of certain tax assets and liabilities which are a result of differences in the timing of the recognition of revenue and expense for tax and financial statement purposes. The Company also uses estimates and judgments in determining interest and penalties on uncertain tax positions. Significant changes to these estimates could result in a material change to the Company's tax provision in subsequent periods. | |
The Company is required to evaluate the likelihood that it will be able to recover its deferred tax assets. If the Company's evaluation determines that the recovery is unlikely, it would be required to increase the provision for taxes by recording a valuation allowance against the deferred tax assets equal to the amount that is not expected to be recoverable. The Company currently estimates that its deferred tax assets will be recoverable. If these estimates were to change and the Company's assessment indicated it would be unable to recover the deferred tax assets, the Company would be required to increase its income tax provision expense in the period of the change in estimate. | |
The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of tax regulations. The Company adopted the provisions of ASC 740 “Income Taxes”. ASC 740 contains a two-step approach to recognizing and measuring uncertain tax position liabilities. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This process is based on various factors including, but not limited to, changes in facts and circumstances, changes in tax law, settlement of issues under audit, and new audit activity. Changes to these factors and the Company's estimates regarding these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. | |
Recent Accounting Pronouncements | |
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. Those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company. | |
Use of Estimates, Policy | ' |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require the Company's most significant, difficult and subjective judgments include the valuation and recognition of share-based compensation, evaluation of the Company’s stand-ready obligation and values of derivative instruments. We use the Black-Scholes valuation model for simplicity purposes. Various valuation techniques render varying amounts. We consistently use this model and use inputs that are appropriate. As the Company develops its technologies, and capitalization of costs occurs, the carrying value of those long-lived assets will need to be evaluated for impairment. | |
We base our estimates and judgments on historical experience and on various other factors that are considered reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results could differ materially from these estimates. | |
Going Concern Note | ' |
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 is a development-stage company, has limited available capital, has limited revenues from intended operations, suffered losses since inception 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. | |
Accounting_Policies
Accounting Policies | 12 Months Ended |
Nov. 30, 2013 | |
Accounting Policies: | ' |
Significant Accounting Policies | ' |
Development Stage Company | |
On August 5, 2009, the Company entered into the development stage with its intended new business, which currently has minimal revenues. Management expects to sustain losses from operations until such time it can generate sufficient revenues sufficient to meet its anticipated cost structure. The Company is considered a development-stage company in accordance with Accounting Standards Codification (“ASC”) 915 – “Development-Stage Entities.” Upon distribution of the Company’s products, it will exit the development stage. The nature of our operations is highly speculative, and there is consequently a risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition, and management of the identified business opportunity. | |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require the Company's most significant, difficult and subjective judgments include the valuation and recognition of share-based compensation, evaluation of the Company’s stand-ready obligation and values of derivative instruments. We use the Black-Scholes valuation model for simplicity purposes. Various valuation techniques render varying amounts. We consistently use this model and use inputs that are appropriate. As the Company develops its technologies, and capitalization of costs occurs, the carrying value of those long-lived assets will need to be evaluated for impairment. | |
We base our estimates and judgments on historical experience and on various other factors that are considered reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results could differ materially from these estimates. | |
Fair Value of Financial Instruments | |
The Company accounts for financial instruments under the guidance of ASC 820-10 – “Fair Value Measurements”. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: | |
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 - Other inputs that are directly or indirectly observable in the marketplace. | |
Level 3 - Unobservable inputs which are supported by little or no market activity. | |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | |
As of November 30, 2013 and 2012, the Company’s derivatives which include the embedded conversion feature on the convertible note payable were considered level 2 financial instruments. See Note 5 for valuation technique and assumptions used. | |
The Company's financial remaining instruments consisted primarily of (level 1), accounts payable, accrued liabilities, and short-term debt. The carrying amounts of the Company's financial instruments generally approximate their fair values as of November 30, 2013 and 2012 due to the short term nature of these instruments. | |
The Company did not have any level 3 instruments at November 30, 2013 and 2012. | |
Cash and Cash Equivalents | |
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. | |
The Company may maintain cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000. Deposits with these banks may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk. The Company did not have any cash equivalents at November 30, 2013 and 2012. | |
Film Costs | |
The Company capitalizes film production costs in accordance with ASC 926 – “Entertainment”. Film costs include costs to develop and produce films, which primarily consist of consulting fees, equipment and overhead costs, as well as the cost to acquire rights to films. Film costs include amounts for films still in development. The Company began capitalizing script costs on March 1, 2010. See Note 9 for additional disclosure. | |
Website Development Costs | |
Website development costs are for the development of the Company's Internet website. These costs have been capitalized when acquired and installed, and are being amortized over its estimated useful life of three years on a straight line basis. The Company accounts for these costs in accordance with ASC 340, “Other Assets and Deferred Costs”, which specifies the appropriate accounting for costs incurred in connection with the development and maintenance of websites. At November 30, 2013, the Company owned a website costing $3,140 which had an estimated useful life of three (3) years. Amortization expenses related to website development costs during each of the years ended November 30, 2013 and 2012 were $519 and $874, respectively. | |
Software Development Costs | |
Software development costs for internal use are capitalized and, once placed in service, amortized using the straight-line method over the estimated useful life, generally three years. The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product. | |
All other property and equipment is depreciated or amortized on a straight-line basis over the estimated useful lives of three to ten years. | |
Derivative Financial Instruments | |
The provisions of ASC 815 - “Derivatives and Hedging” applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined by ASC 815 and to any freestanding financial instruments that are potentially settled in an entity's own common stock. The guidance impacts the Company's financial statements and position due to certain warrants and embedded conversion features in which the exercise or conversion price resets upon certain events. See Note 5 for the impact of such transactions on the financial statements. | |
Our issued and outstanding common stock purchase warrants and embedded conversion features are recorded at their fair value upon issuance and at each reporting period. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities market, and as such, we estimate the fair value of these warrants using the Black-Scholes option pricing model. The value of the embedded conversion feature also determined using the Black-Scholes option pricing model. All future changes in the fair value of the embedded conversion feature will be recognized currently in earnings until the note is converted or redeemed. | |
Convertible Debt | |
If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. In those circumstances, the convertible debt will be recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | |
Guarantees | |
During the year ended November 30, 2011, the Company entered into an agreement to provide for a guarantee of indebtedness. The Company’s exposure to credit loss, in the event of nonperformance of the related film financed by the indebtedness, is represented by the amounts stipulated in the agreement, and is limited to a maximum of $250,000. The total guarantee accruals do not necessarily represent future cash requirements or cash reserves. As of November 30, 2013, management has evaluated the guarantee liability under ASC 460-10 – “Guarantees” and ASC 450-20 – “Loss Contingencies” by reviewing the ability to repay the obligation under contract to determine if there is a probable chance of a default, and if so, provide a reasonable estimate for losses. At November 30, 2013 management determined that the full guarantee will be called. See Note 6 for Management’s determination. | |
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 November 30, 2013, the Company’s dilutive securities outstanding consisted of (1) the CEO’s options to purchase shares of common stock (see Note 8), for which the exercise price is above the average closing price of the Company’s common stock and thus excluded under the treasury method; | |
(2) 6,768 shares relative to convertible notes to a related party expected to be issued (post conversion) beginning in February 2015; (3) 692,959 shares relative to convertible notes (post conversion); and (4) 72 shares related to warrants issued with the $37,500 convertible note. At November 30, 2012, the Company’s dilutive securities outstanding consisted of (i) the CEO’s options to purchase shares of common stock (See Note 8) for which the exercise price is above the average closing price of the Company’s common stock and thus excluded under the treasury method; (2) 6,768 shares relative to convertible notes to a related party expected to be issued (post conversion) beginning in February 2015; (3) 131,643 shares relative to convertible notes (post conversion) and (4) 944 shares related to warrants issued with the $37,500 convertible note. The preceding common equivalent was excluded from the diluted net loss per share as the effects would have been anti-dilutive. | |
Impairment of Long-Lived Assets | |
The Company has adopted ASC 360-10, - "Property, Plant and Equipment" which requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment, annually, or more often, if events and circumstances warrant such. At November 30, 2012 management considered that the values of the $ 93,250 of script costs were impaired and they were accordingly expensed. | |
Recoupable Costs and Producer Advances | |
Recoupable costs and producer advances represent amounts paid by the Company that will be expected to be subsequently recouped through the collection of fees associated with the Company's licensing of content represented by third parties. In connection with the film production segment's content operations which may be represented by others, the Company will enter into sales agency agreements whereby the Company will act as a sales agent for a producer's film ("Sales Agency Agreements"). These Sales Agency Agreements typically include provisions whereby certain costs that are incurred for promotion related activities will be paid by the Company on behalf of the producer (such as movie trailer and ad material costs). The Company may also pay the producer an advance for the related film prior to the distribution of such film. As the Company subsequently licenses the producer's film and license fees are collected, the recoupable costs and producer advances will be recovered by the Company through these license fee collections. License fees typically are not paid to the producer of the related film until such recoupable costs and producer advances have been fully recovered by the Company. | |
Producers Fees | |
Producer fees will be recognized upon receipt of the fees and delivery of the related services. If upon receipt of the fees all services have not been provided, the fees will be deferred and recognized as the services are performed. | |
Royalties | |
Royalty and profit participation will be recognized when the amounts are known and the receipt of the royalties is reasonably assured. Accordingly, recognition generally occurs upon receipt (usually quarterly or semi-annually). | |
Distribution Revenues | |
Distribution revenues will be recognized when earned and appropriately reported by third (3rd) party distribution companies and recorded gross along with any distribution expenses charged by the Distributor and upon receipt of such revenues. | |
Producer Development, Production Service Fees and Film Distribution Fees | |
As these services are provided, these fees will be invoiced to the third party financiers and producers and recognized when the amount has been determined and receipt is reasonably assured. | |
Stock Options | |
In accordance with the provisions of ASC 718 “Compensation-Stock Compensation,” the Company accounts for employee and non-employee director stock issuances and stock options under the fair value method which requires the use of an option pricing model for estimating fair value. Accordingly, share-based compensation is measured at grant date based on the estimated fair value of the award. The Company uses the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. | |
Reverse Stock Split | |
On December 28, 2012, the Company’s board of directors approved, a 1-for-1000 reverse stock split pursuant to which all shareholders of record received one share of common stock for each one thousand shares of common stock owned (subject to minor adjustments as a result of fractional shares). GAAP requires that the reverse stock split be applied retrospectively to all periods presented. As a result, all common stock, warrant and option transactions described herein have been adjusted to reflect the 1-for-1000 reverse stock split. | |
Accounting for Non-Employee Stock-Based Compensation | |
The Company measures compensation expense for its non-employee stock-based compensation under ASC 505 - “Equity”. The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital. | |
Deferred Producer Liabilities | |
Deferred producer liabilities represent outstanding amounts due to the producer or to be retained by the Company upon the collection of license fee amounts related to the sale of content represented by the Film Production segment. In accordance with the Sales Agency Agreements entered into by the Company and represented content producers, when license fees associated with the Company's sale of represented content are collected, the amounts are paid to the producer and/or retained by the Company. Amounts are paid to the Company for its sales agency commission, recoupment of outstanding film costs and producer advances ("Recoupable Costs") or as market fee revenue. The terms of the Sales Agency Agreements provide that collected license fees will be distributed to the producer and/or retained by the Company based on a specific allocation order as defined by each agreement. The allocation order is dependent on certain criteria including total license fee collections, outstanding Recoupable Cost balances and certain other criteria as specified by the Sales Agency Agreements. Because these criteria cannot be reasonably determined until the license fees are collected, the appropriate allocation order of uncollected license fees cannot be established. Accordingly, the uncollected license fee amounts are recorded as deferred producer liabilities until such | |
Income Taxes | |
The Company makes certain estimates and judgments in determining its income tax provision expense. These estimates and judgments are used in the determination of tax credits, benefits and deductions, and the calculation of certain tax assets and liabilities which are a result of differences in the timing of the recognition of revenue and expense for tax and financial statement purposes. The Company also uses estimates and judgments in determining interest and penalties on uncertain tax positions. Significant changes to these estimates could result in a material change to the Company's tax provision in subsequent periods. | |
The Company is required to evaluate the likelihood that it will be able to recover its deferred tax assets. If the Company's evaluation determines that the recovery is unlikely, it would be required to increase the provision for taxes by recording a valuation allowance against the deferred tax assets equal to the amount that is not expected to be recoverable. The Company currently estimates that its deferred tax assets will be recoverable. If these estimates were to change and the Company's assessment indicated it would be unable to recover the deferred tax assets, the Company would be required to increase its income tax provision expense in the period of the change in estimate. | |
The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of tax regulations. The Company adopted the provisions of ASC 740 “Income Taxes”. ASC 740 contains a two-step approach to recognizing and measuring uncertain tax position liabilities. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This process is based on various factors including, but not limited to, changes in facts and circumstances, changes in tax law, settlement of issues under audit, and new audit activity. Changes to these factors and the Company's estimates regarding these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. | |
Recent Accounting Pronouncements | |
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. Those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company. | |
Cash and Cash Equivalents, Policy | ' |
Cash and Cash Equivalents | |
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. | |
The Company may maintain cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000. Deposits with these banks may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk. The Company did not have any cash equivalents at November 30, 2013 and 2012. | |
Derivatives, Policy | ' |
Derivative Financial Instruments | |
The provisions of ASC 815 - “Derivatives and Hedging” applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined by ASC 815 and to any freestanding financial instruments that are potentially settled in an entity's own common stock. The guidance impacts the Company's financial statements and position due to certain warrants and embedded conversion features in which the exercise or conversion price resets upon certain events. See Note 5 for the impact of such transactions on the financial statements. | |
Our issued and outstanding common stock purchase warrants and embedded conversion features are recorded at their fair value upon issuance and at each reporting period. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire. These common stock purchase warrants do not trade in an active securities market, and as such, we estimate the fair value of these warrants using the Black-Scholes option pricing model. The value of the embedded conversion feature also determined using the Black-Scholes option pricing model. All future changes in the fair value of the embedded conversion feature will be recognized currently in earnings until the note is converted or redeemed. |
Intangible_Assets_Goodwill_and
Intangible Assets, Goodwill and Other | 12 Months Ended |
Nov. 30, 2013 | |
Intangible Assets, Goodwill and Other: | ' |
Goodwill and Intangible Assets Disclosure | ' |
The Company capitalizes film production costs in accordance with Statement of Position ASC 926 – “Entertainment”. Film costs include costs to develop and produce films, which primarily consist of salaries, equipment and overhead costs, as well as the cost to acquire rights to films. Film costs include amounts for completed films and films still in development. The Company began capitalizing script costs on March 1, 2010. Costs incurred during the year ended November 30, 2010, totaling $95,250, were recorded to script costs in non-current assets in connection with Mass Hysteria, the movie. The Company has assessed script costs in determining that $93,250 write-off of capitalized costs was necessary as of November 30, 2012. |
Commitment_and_Contingencies
Commitment and Contingencies | 12 Months Ended |
Nov. 30, 2013 | |
Commitment and Contingencies: | ' |
Commitments and Contingencies Disclosure | ' |
Office Leases | |
On April 14, 2011, the Company entered into a lease for office space. The lease was for one (1) year and required monthly payments of $2,927 in addition to a security deposit of $8,782 (equal to three month’s rent in advance). The security deposit was reduced after six months of on-time rent payments, with the reduction applied to against one month’s rent. Subsequent to the initial one year lease, the Company continued to rent the office space on a month-to-month basis until December 31, 2012 when it vacated the offices. Office lease expense for the years ended November 30, 2013 and 2012 was $2,927 and $35,129, respectively. | |
Consulting Agreements | |
In August 2009, the Company entered into a one year engagement agreement with successful comedy writer Pat Proft to hire him as the Senior Vice President of Comedy. His role was to create and write our movies. Per the terms of his engagement, Mr. Proft received 200 shares of our common stock (see Note 7), and an initial monthly fee of $10,000 for a minimum of one year. During March 2010, a new agreement was negotiated which reflected that Mr. Proft would be paid half of this monthly fee in the form of stock compensation – retroactive from January 2010. As of the years ended November 30, 2013 and 2012, accrued cash compensation of $15,000 and stock compensation of $40,000 was due to Mr. Proft and included in accrued liabilities on the accompanying balance sheet. This agreement terminated in August 2010. | |
Employment Agreement | |
On December 17, 2009, the Company entered into an employment agreement with our CEO which provides for a base salary of $360,000 per year, payable semi-monthly for a period of five years, expiring December 17, 2014. Among other things, the employment agreement calls for periodic increases in the base salary and bonuses based upon performance. The agreement also allows for the Company, at the discretion of the Board of Directors, to provide for medical insurance and a contribution to a retirement benefit plan. Our CEO was also awarded options to purchase common stock. See Note 8. During fiscal 2010, our CEO voluntarily forgave $82,000 of accrued wages, which the Company recorded in equity as contributed services. A total of $624,732 in accrued salary is reflected on the Company’s financial statements under this agreement as of November 30, 2013. | |
Stand-Ready Obligation | |
During the production of the film Carjacked, the production company Carjacked Entertainment, LLC and Carjacked Investments, LLC (collectively “Carjacked LLC’s”) obtained financing from Wet Rose Productions, LLC (“Wet Rose”) in the amount of $850,000. Grodfilm Corp, owned by the Company's CEO, is the managing member of the LLCs and acts on behalf of 9207-8856 Quebec Inc., a Quebec company and owner of the copyright to the motion picture "Carjacked". | |
On October 5, 2010, the Company entered into an indirect guarantee of the indebtedness in which the Company guaranteed any shortfalls in repayment of the $850,000 of debt related to the investment provided by Wet Rose up to an amount not to exceed $250,000. The financing from Wet Rose becomes due and payable at a date which is 30 months after first release of the film Carjacked . The film was released on November 22, 2011 and accordingly a payable may become due in approximately 21 months on May 22, 2014. As of November 30, 2013, management evaluated the guarantee liability under ASC 460-10 – “Guarantees” and ASC 450-20 – “Loss Contingencies” by reviewing the projected ability of the Carjacked film to repay the obligation under contract to determine if there is a probable chance of a default, and if so, provides a reasonable estimate for losses. As of November 30, 2013, management believed that past performance and current projections indicated that full repayment by the Company to Wet Rose was probable. Accordingly, management recorded a provision for loss of $200,000 related to the stand-ready obligation during the year ended November 30, 2012, together with the $50,000 “guarantor fee” previously recorded as a stand-ready obligation in the prior year, a total of $250,000 is reflected as a stand-ready obligation as of November 30, 2013. | |
Film Costs and Movie Rights Option Contract | |
On November 1, 2010, the Company entered in to an “option/purchase” agreement with Richard Taylor (the “Writer”) in which the Company would be granted the exclusive right and option (“Option”) to acquire all motion picture, television and allied and ancillary rights to the Writer’s screenplay – “Bad Monday”. The initial term of this option agreement was for one year; however, the Company subsequently obtained an extension through October 31, 2013. As consideration, the Company paid the Writer $2,000 which is included in Film Costs. It is the intention of the Company to produce the motion picture and has renewed the option for which the Writer will be paid a purchase price of $150,000. Additionally, the Writer would be entitled to 5% of the net proceeds of the picture, and an additional 2.5% of net proceeds if the Writer received shared writing credit on the picture. |
Debt
Debt | 12 Months Ended | |
Nov. 30, 2013 | ||
Debt: | ' | |
Short-term Debt | ' | |
Short-Term Debt | ||
(A) | Related Parties | |
On February 28, 2012, our former Chief Financial Officer made an interest free demand advance of $30,000 to the Company to provide working capital, which remains outstanding at November 30, 2013. 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 had been made as of November 30, 2013 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 bore 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 years ended November 30, 2013 and 2012, the Company incurred and accrued $13,678 and $14,802 in interest expense, respectively, related to this short-term debt. As of November 30, 2013 and 2012, the Company has accrued $39,897 and $29,003 of interest expense related to these notes respectively. | ||
(B) | Film Finance Agreement | |
On May 11, 2012, we entered into an agreement with Coral Ridge Capital Partners, LLC (“CRCP”) under which CRCP agreed to provide up to $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 to us on June 12, 2012. While it was the Company’s intent to commence filming of the Picture by September 1, 2012, certain casting delays have postponed the commencement date, to a date yet to be determined. In the event that the motion picture is abandoned, we are required to repay CRCP all funds paid to us, plus interest of 12% per annum. On January 25, 2013 we received a written notice of termination of agreement from CRCP and we are currently negotiating a mutual settlement. Accordingly, we have included the $100,000 advance within short-term debt until the status of the Picture has been better determined and we have accrued interest payable of $17,622 through November 30, 2013. | ||
Through November 30, 2013, we have paid cumulative expenses totaling $13,688 in connection with the Picture, which have been recorded within operating expenses. | ||
Short-term Convertible Debt with Ratchet Provisions | ||
(A) Short-term Convertible Debt | ||
(i) On January 11, 2012, March 1, 2012, May 9, 2012, July 9, 2012, September 14, 2012 and September 28, 2012 the Company borrowed $22,500, $10,000, $32,500, $30,000, $22,500 and $10,000 (for a total of $127,500), from external parties for use as operating capital. See iv. below for additional advances made by this party during the nine months ended August 31, 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. | ||
On March 18, 2013 the Company received a notice of default from one of the lenders holding a total of $130,700 of short-term convertible debt at that date. 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 remaining outstanding principal balance together with default interest of 22% as provided for in the Notes. | ||
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. | ||
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 59 percent 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 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. | ||
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 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. | ||
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 July14, 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 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. | ||
The Company discounts the notes by the fair market value of the derivative liability upon inception of each note. These discounts will be accreted back to the face value of the notes over the note term using the effective interest method. | ||
Long-term Debt | ' | |
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 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 year ended November 30, 2013, interest expense from accretion of the discount was $20,013, leaving a remaining discount of $21,684. The discount being amortized approximates the effective interest method over the term of the note. | ||
Former Related Party | ||
At November 30, 2013, the Company has convertible notes totaling $453,061 due to a former affiliate and significant stockholder of the Company. The notes are convertible into common shares, based on $40 to $80 share price, most of which is at the higher price. The convertible notes bear interest at 6% per annum and are due May 31, 2015. As of November 30, 2013, the Company has accrued $109,304 of interest expense related to these notes. | ||
Equity
Equity | 12 Months Ended | |
Nov. 30, 2013 | ||
Equity: | ' | |
Stockholders' Equity Note Disclosure | ' | |
Capital Stock | ||
The Company has two classes of stock: | ||
? | Series A Preferred stock, $0.00001; 10,000,000 shares authorized; 10,000 issued and outstanding; and, | |
? | Common stock, $0.00001 par value; 2,000,000,000 shares authorized; 18,145,865 and 599,872 shares issued and outstanding as of November 30, 2013 and 2012, respectively. | |
Amended and Restated Charter | ||
We filed amended and restated articles of incorporation with the Nevada Secretary of State on each of December 16, 2011 and January 5, 2012, respectively (with the January 5, 2012 version superseding the previously filed version), which amended and restated articles (i) increased our authorized common stock to two billion (2,000,000,000) shares; (ii) reduced the par value for its capital stock from $0.001 per share to $0.00001 per share; (iii) granted authority to our board of directors to effectuate a stock split or reverse stock split without stockholder approval; (iv) elected not to be governed by certain provisions pertaining to “resident domestic corporations” under the Nevada Revised Statutes; and (v) elected not to be governed by certain provisions relating to “issuing corporations” under the Nevada Revised Statutes. A copy of the amended and restated articles was filed as an exhibit to our Definitive Information Statement on Form 14C, filed with the Securities and Exchange Commission on January 13, 2012. The amended and restated articles were effective on February 17, 2012, as stated therein. | ||
Stock Incentive Plans | ||
2012 Stock Incentive Plan | ||
On March 13, 2012, our Board of Directors adopted the 2012 Stock Incentive Plan . The purpose of our 2012 Stock Incentive Plan is to advance the best interests of the Company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either common stock or stock options under the plan is 56,000 shares, subject to adjustment. As of November 30, 2013, all shares have been granted under the plan. | ||
Our Board of Directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. Any decision made, or action taken, by our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive. | ||
The Board of Directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the Company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options and hold the common stock issued. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the Company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the Company. | ||
In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan. | ||
Our Board of Directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our Board of Directors may deem appropriate and in our best interest. | ||
2012 Stock Incentive Plan #2 | ||
On August 21, 2012, our Board of Directors adopted the 2012 Stock Incentive Plan #2. The purpose of our 2012 Stock Incentive Plan #2 is to advance the best interests of the Company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either common stock or stock options under the plan is 132,800 shares, subject to adjustment. As of November 30, 2013, 17,000 shares have been granted under the plan. | ||
Our Board of Directors administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. Any decision made, or action taken, by our board of directors arising out of or in connection with the interpretation and administration of the plan is final and conclusive. | ||
The Board of Directors, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the Company, and such other persons as the board of directors or compensation committee may select, and permit holders of common stock options to exercise such options and hold the common stock issued. Stock options may also be granted by our board of directors or compensation committee to non-employee directors of the Company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the Company. | ||
In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan. | ||
Our Board of Directors may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our Board of Directors may deem appropriate and in our best interest. | ||
Common Stock | ||
Stock Split | ||
On June 23, 2009, the directors of the Company approved a three (3) for one (1) stock split (the “Forward Split”) of the Company’s issued and outstanding common stock by written consent in lieu of a special meeting in accordance with the Nevada Corporation Law. | ||
On June 29, 2009, we notified The Financial Industries Regulatory Authority (“FINRA”), is the independent regulator for all securities firms doing business in the United States, of our name change and the forward split of our common shares. On July 31, 2009, FINRA declared the name change effective and as a result of the effectiveness of the name change our symbol was changed to MHYS. FINRA also declared our forward split effective with a record date of June 23, 2009 and a payable date of August 5, 2009. | ||
On December 28, 2012, the Company’s board of directors approved a One (1) for One Thousand (1,000) reverse stock split. All common stock, warrant and option transactions described herein have been adjusted to reflect the Reverse Split. | ||
Issuance of Series A Preferred Shares | ||
On April 5, 2011, our Board approved the issuance of 10,000 shares of Series A Preferred Stock to our CEO, Dan Grodnik, in consideration of $10,000 of accrued compensation due Mr. Grodnik. The Board’s sole director determined and approved the fair market value of these shares to be $1.00 per share. The shares were issued on April 13, 2011. | ||
On April 13, 2011, pursuant to a resolution passed by our director under the authority of our certificate of incorporation, as amended, we filed a Certificate of Designation with the Nevada Secretary of State to create and set for the terms of a series of preferred stock of the Company known as Series A Preferred Stock, par value $0.001 per share. The Series A Preferred Stock is not convertible. Holders of the Series A Preferred Stock do not have any preferential dividend or liquidation rights. The shares of Series A Preferred Stock are not redeemable. Pursuant to the certificate of designation establishing the Series A Preferred Stock, on all matters submitted to a vote of the holders of the common stock, including, without limitation, the election of directors, a holder of shares of the Series A Preferred Stock shall be entitled to the number of votes on such matters equal to the product of (a) the number of shares of the Series A Preferred Stock held by such holder, (b) the number of issued and outstanding shares of our common stock, as of the record date for the vote, or, if no such record date is established, as of the date such vote is taken or any written consent of stockholders is solicited, and (c) 0.0002. | ||
The issuance of the Series A Preferred Stock effectively transferred voting control of the Company to Mr. Grodnik. | ||
Reorganization and Settlement of Liabilities with Common Stock | ||
In June 2009, the Company issued 4,800 shares of common stock upon conversion of notes with predecessors which resulted in an extinguishment charge of $1,124,957 based on the closing price of the Company’s common stock of $240 per share shortly after the extinguishment. | ||
On August 5, 2009, the Control Group acquired or received 50,000 shares of common stock, as well as 6,000 shares of common stock from the conversion of $10,000 of notes acquired. In connection with the recapitalization, the convertible notes totaling $55,238 acquired by a Control Group member were paid in full through the issuance of 5,900 shares of common stock during the quarter ended February 28, 2010. Because this note was part of the recapitalization, the conversion of the shares was afforded such treatment. | ||
Issuance of Common Stock Related to Employment Agreements and Services Rendered | ||
? | On August 24, 2009, the Company issued 200 shares per the terms of the employment agreement with Pat Proft which were immediately vested. These shares were valued at $62,000 based on the closing price per share on the date of issuance of $310. | |
? | On September 29, 2009, the Company issued 100 shares of common stock to one individual for Board of Director services rendered to the Company. This issuance was expensed as share-based compensation at a cost of $43,000, or $430 per share based on the closing stock price on the date of issuance. | |
? | On October 6, 2009, the Company issued 100 shares of common stock to one individual for services rendered to the Company as the Senior Vice President of Technology. This issuance was expensed as share-based compensation at a cost of $42,000, or $420 per share based on the closing stock price on the date of issuance. | |
? | On October 16, 2009, the Company issued 2 shares of common stock to two individuals for consulting services rendered to the Company. This issuance was expensed as share based compensation at a cost of $580, or $290 per share-based on the closing stock price on the date of issuance. | |
? | On November 25, 2009, the Company issued 100 shares of common stock to four individuals for legal services provided to the Company. This issuance was expensed as share based compensation at a cost of $10,000, or $100 per share-based on the closing stock price on the date of issuance. | |
? | In December 2009, upon Board approval the Company issued 152 shares to four individuals for consulting and Board of Director services to the Company. These shares were expensed to share-based compensation for $15,200, based on a closing stock price per share of $100 on the date of issuance. | |
? | In January 2010, upon Board approval the Company issued 50 shares to one individual for consulting services rendered to the Company. These shares were expensed by the Company at $9,000, based on a price per share of $180 on the date of issuance. | |
? | Also during January 2010, upon Board approval, the Company issued 20 shares to an outside consulting firm for services rendered. These shares were expensed by the Company at $1,400, based on a price per share of $70 on the date of issuance. | |
? | On February 22, 2010, upon Board approval, the Company issued 145 shares to five individuals for various operational services rendered to the Company. These shares vested immediately and were expensed by the Company at $15,950, based on a price per share of $110 on the date of issuance. | |
? | On February 20, 2010, 1,000 shares of common stock issued to two prior shareholders during August 2009 were cancelled upon a request by the CEO and concurrence by the two shareholders. | |
? | On March 9, 2010, upon Board approval, a revised employment agreement (retroactive to January 1, 2010) was negotiated between the Company and Pat Proft to reflect that half of his monthly $10,000 salary would be paid in the form of stock compensation. Thus, on the date of the agreement, for the months of January, February and March 2010, $15,000 of accrued wages due Pat would be converted into 167 shares of common stock based on the market price on of the Company’s common stock on the preceding day of $90 per share. As of August 31, 2010, accrued wages for shares yet to be issued are $40,000. The liability is included in accrued liabilities in the accompanying balance sheet. | |
? | On March 9, 2010, upon Board approval, the Company issued 375 shares to three individuals for operational consulting and advisory services rendered to the Company. These shares were fully vested and expensed by the Company at $30,000, based on a price per share of $80 on the date of issuance. | |
? | On May 27, 2010, upon Board approval, the Company issued 78 shares to an individual for accounting and advisory services rendered to the Company. These shares were fully vested and expensed by the Company at $2,500 based on a price per share of $30 on the date of issuance. | |
? | On June 23, 2010, upon Board approval, the Company issued 600 shares to five individuals / entities for consulting services rendered to the Company. One consultant, who received 100 shares for services rendered, is a brother of the CEO. These shares were fully vested and expensed by the Company in the amount of $24,000 based on a price per share of $40 on the date of issuance. | |
? | On September 1, 2010, upon Board approval, the Company issued 1,255 shares to three individuals for consulting services rendered to the Company. These shares were fully vested and expensed by the Company in the amount of $39,000 based on a price of $30 per share on the date of issuance. | |
? | On February 18, May 5, June 17, July 14, and October 18, 2011, the Company’s Board approved the issuances of 420, 900, 450, 165, and 3,500 shares of common stock, respectively, to a professional services firm for legal services rendered. Based on the closing market prices on the respective days ranging from $3.20 to $27.00 per share, the Company recorded stock compensation of $50,320 related to these transactions. | |
? | On June 15 and September 1, 2011, the Company’s Board approved the issuances of 1,000 and 900 shares, respectively to one individual for consulting services rendered to the Company. Based on closing market prices on the respective days ranging from $8 to $20 per share, the Company recorded stock compensation of $27,200 related to these transactions. | |
? | On September 1, 2011, the Company’s Board approved the issuance of 1,500 shares to one individual for consulting and advisory services rendered to the Company. These shares were fully vested and expensed by the Company in the amount of $12,000 based on a price of $8 per share on the date of issuance. | |
? | On August 15 and October 24, 2011, the Company’s Board approved the issuances of 225 and 250 shares, respectively to two vendors for services rendered to the Company. These shares were fully vested and expensed by the Company in the amount of $3,000 based on closing market prices on the respective days ranging from $3 to $10 per share on the date of issuance. | |
? | On November 1, 2011, the Company’s Board approved the issuance of 1,000 shares to one individual for employment services rendered to the Company. These shares were fully vested and expensed by the Company in the amount of $4,000 based on a price of $4 per share on the date of issuance. | |
? | During the years ended November 30, 2011 and 2010 and the period from Inception to November 30, 2011, the Company recorded $96,520, $128,800 and $382,900 in stock-based compensation related to services in general and administrative expense in the accompanying statement of operations. These expenses are exclusive of stock option expense in Note 8. | |
? | On February 8, 2011, the Company entered into a Fee Agreement pursuant to which the Company agreed to issue common stock to Indeglia & Carney, P.C. (“I&C”) for legal services rendered to the Company. During the year ended November 30, 2012, our Board of Directors approved the issuance of a total of 75,941, shares of common stock to I&C in consideration of legal services rendered and recorded a reduction of accrued legal fees of $78,627. For the year ended November 30, 2011, the Board of Directors approved the issuance of a total of 1,935 shares of common stock to I&C in consideration of legal services rendered and recorded a reduction of accrued legal fees of $39,120 during the period. | |
? | In addition, our Board of Directors approved (a) the issuance of a total of 2,500 shares of common stock to a third party attorney in consideration of legal services rendered and an expense of $11,750 based on the stock’s closing market price of $4.70 on the date of the grant; and (b) the issuance of a total of 6,000 shares of common stock to a third party marketing consultant in consideration of services rendered and an expense of $4,800 based on the stock’s closing market price of $0.80 on the date of the grant. | |
? | On February 14, 2012 our Board of Directors approved the issuance of 5,000 shares to a relative of our CEO for $5,000 received on January 3, 2012 based on the stock’s closing market price on the date of the grant. The stock issuance was exempt under Section 4(2) of the Securities Act of 1933, as amended. | |
? | In October 2013 our Board of Directors approved the issuance of 5,000,000 shares valued at $200,000 based on the stock’s closing market price on the date of the grant to a relative of our CEO in compensation for advisory services performed prior to October 31, 2013. | |
? | In October 2013 our Board of Directors approved the issuance of 10,000,000 valued at $400,000 based on the stock’s closing market price on the date of the grant to a third-party consultant in compensation for advisory services performed prior to October 31, 2013. | |
? | In addition, our Board of Directors approved (a) the issuance of a total of 785,000 shares of common stock to a third party attorney in consideration of legal services rendered and an expense of $11,767 based on the stock’s closing market price of $0.015 on the date of the grant. | |
Technology Transfer and License. | ||
On February 6, 2012, we entered into two related agreements with Three Point Capital (“3PC”). In exchange for $65,000 in cash and five Class B Units in 3PC’s subsidiary FanCloud, LLC (representing a 5% interest), we transferred certain of our intellectual property related to our mobile application. Concurrently with this transfer, 3PC granted us an exclusive, irrevocable, worldwide license to such transferred technology within the field of cinema. The $65,000 receipt was recorded as “other income” fiscal 2012. | ||
On February 6, 2012, in connection with a Technology and Transfer License (above) with Three Point Capital (“3PC”) our Board of Directors approved the issuance of (i) 1,992 shares to three individuals for services, including the development of a long-term business plan and (ii) 1,992 shares to 3PC for services rendered, based on the combined fair market value totaling $1,992 of the Company’s common stock at that time. | ||
Compensation_Related_Costs_Sha
Compensation Related Costs, Share Based Payments | 12 Months Ended | ||||
Nov. 30, 2013 | |||||
Compensation Related Costs, Share Based Payments: | ' | ||||
Disclosure of Compensation Related Costs, Share-based Payments | ' | ||||
In addition to his annual salary, the President and CEO’s Employment Agreement grants employee stock options to purchase common stock in an amount equal to 20,000 shares at an exercise price of $70 per share. The options shall vest equally over a five-year period (4,000 shares per year), commencing on December 17, 2009. Each series of options shall survive for 24 months following vesting, and may be exercised all or in part, and each series of options shall include a “cashless feature.” | |||||
Using the Simplified Method under ASC 718, the expected term of these options would be approximately 6.5 years. Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. In determining historical volatility, we used both the Company’s volatility as well as the volatility for other similar public companies. We believe due to the limited history in the Company’s stock, this was the best approach. The selection of another methodology to calculate volatility or even a different weighting between implied volatility and historical volatility could materially impact the valuation of stock options and other equity based awards and the resulting amount of share-based compensation expense recorded in a reporting period. | |||||
These options, granted in December 2009, have a fair market value of $1,200,000, as calculated using the Black-Scholes pricing model with inputs as defined below: | |||||
Expected volatility | 238 | % | |||
Dividend yield | 0 | % | |||
Expected option life (years) | 6.5 | ||||
Risk-free interest rate | 2.24 | % | |||
Market price of option | $ | 60 | |||
Under ASC 718, stock compensation expense of $1,200,000 will be recognized and expensed quarterly, beginning with the first quarter of the Company's 2010 fiscal year and equally over the five-year vesting period until the options are vested in their entirety in December 2014. During the years ended November 30, 2013 and 2012 and the period from Inception to November 30, 2013, stock compensation of $240,000, $240,000, and $948,667 has been recorded as expense in general and administrative in the accompanying statement of operations, respectively. Future compensation expense is $240,000, annually through 2014. As of November 30, 2013, approximately 15,831options are fully vested and are exercisable by the CEO. | |||||
The weighted average options outstanding as of November 30, 2013 and 2012 equaled the options issued to the CEO above, 20,000, there were no other options issued, exercised or forfeited during the years then ended. The weighted average exercise price was $70 for both the years ended November 30, 2013 and 2012. The weighted average remaining contractual life of the options for the years ended November 30, 2013 and 2012 was approximately two (2) and three (3) years, respectively. There is no intrinsic value for options outstanding as all exercise prices are above the year end closing Company stock price. | |||||
Stock Incentive Plans | |||||
On February 16, 2011, our board of directors adopted the 2011 Stock Incentive Plan. The purpose of our 2011 Stock Incentive Plan is to advance the best interests of the Company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. The total number of shares available for the grant of either stock options or compensation stock under the plan is 23,000 shares, subject to adjustment. As of November 30, 2013, the Company had no shares remaining to be issued under the plan. | |||||
On March 13, 2012, our board of directors adopted the 2012 Stock Incentive Plan. | |||||
On August 21, 2012, our board of directors adopted the 2012 Stock Incentive Plan # 2. | |||||
Income_Taxes
Income Taxes | 12 Months Ended |
Nov. 30, 2013 | |
Income Taxes: | ' |
Income Tax Disclosure | ' |
We have identified our U.S. Federal tax returns as our “major” tax jurisdiction, and our corporate offices are located in California. The United States Federal return years 2008 through 2012 are still subject to tax examination by the United States Internal Revenue Service; however, we do not currently have any ongoing tax examinations. The Company is subject to examination by various State agencies for the years ended 2007 through 2012 and currently does not have any ongoing tax examinations. The Company has had losses to date, and therefore has paid no income taxes. The Company has not filed tax returns for the fiscal year 2011, 2012 and 2013. | |
Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company elected to capitalize all start-up costs for income tax reporting purposes under Section 195 and 248 of the Internal Revenue Code. The Company's deferred tax assets consist entirely of start-up costs. Effective August 5, 2009 (Inception), prior net operating loss carry forwards are no longer available to the Company, due to the Company’s abandonment of the related handbag manufacturing business. | |
Aggregate start-up costs capitalized through November 30, 2013, is approximately $3.5 million; the deferred tax asset is approximately $1.5 million. The amount of benefits the Company may receive from the start-up costs for income tax purposes is further dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Accordingly, management recorded a valuation allowance for 100% of the deferred tax assets of approximately $1.5 million, an increase from the prior year of $0.3 million. In fiscal 2012, management increased the valuation allowance approximately $0.4 million. | |
The difference between the federal rate of approximately 34% and the actual rate is due to non-deductible stock and accrued compensation, changes in derivative liabilities aggregating approximately $0.3 million and the valuation allowance described above. | |
Derivative_Instruments_and_Hed
Derivative Instruments and Hedging Activities | 12 Months Ended | ||||||||
Nov. 30, 2013 | |||||||||
Derivative Instruments and Hedging Activities: | ' | ||||||||
Derivative Instruments and Hedging Activities Disclosure | ' | ||||||||
B) Determination of Derivative Liability | |||||||||
The Company calculated the derivative liability 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. | |||||||||
The Company calculated the derivative liability 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 November 30, 2013 and November 30, 2012, the Company has outstanding principal amounts on convertible debt of $296,780 and $121,030, respectively. At the inception of these notes inception, 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 $26,151 and $70,489 as of November 30, 2013 and November 30, 2012, respectively. For the year ended November 30, 2013, interest expense from accretion of the discount, including converted notes, was $200,041. | |||||||||
During the year ended November 30, 2013, lenders of convertible notes converted $26,600 of principal and interest thereon through the issuance of 1,758,108 shares. | |||||||||
Aggregate derivative liabilities associated with remaining convertible notes were $324,020 as of November 30, 2013 and $223,637 as of November 30, 2012. Based on this revaluation at year 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 $66,982 and $143,242 during the year ended November 30, 2013 and 2012, respectively. | |||||||||
During the years ended November 30, 2013 and 2012, the range of inputs used to calculate derivative liabilities noted above were as follows: | |||||||||
30-Nov-13 | 30-Nov-12 | ||||||||
Annual dividend rate | 0 | % | 0 | % | |||||
Conversion price | $0.0089-$0.18 | $0.18-$0.51 | |||||||
Expected life (years) | .01 - 1 years | .01 - .92 years | |||||||
Risk-free interest rate | .03% - .13 | % | .03% - .18 | % | |||||
Expected volatility | 331.50% - 479.40 | % | 71.35% - 350.90 | % | |||||
Fair_Value_Measures_and_Disclo
Fair Value Measures and Disclosures | 12 Months Ended |
Nov. 30, 2013 | |
Fair Value Measures and Disclosures: | ' |
Fair Value Disclosures | ' |
Fair Value of Financial Instruments | |
The Company accounts for financial instruments under the guidance of ASC 820-10 – “Fair Value Measurements”. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: | |
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 - Other inputs that are directly or indirectly observable in the marketplace. | |
Level 3 - Unobservable inputs which are supported by little or no market activity. | |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | |
As of November 30, 2013 and 2012, the Company’s derivatives which include the embedded conversion feature on the convertible note payable were considered level 2 financial instruments. See Note 5 for valuation technique and assumptions used. | |
The Company's financial remaining instruments consisted primarily of (level 1), accounts payable, accrued liabilities, and short-term debt. The carrying amounts of the Company's financial instruments generally approximate their fair values as of November 30, 2013 and 2012 due to the short term nature of these instruments. | |
The Company did not have any level 3 instruments at November 30, 2013 and 2012. | |
Related_Party_Disclosures
Related Party Disclosures | 12 Months Ended |
Nov. 30, 2013 | |
Related Party Disclosures: | ' |
Related Party Transactions Disclosure | ' |
Slam I Am | |
On July 12, 2010, the Company entered into an agreement with NY-based Screen Media Ventures, LLC, (“Screen Media”) in which the Company agreed to license to Screen Media the distribution rights to the motion picture ”Stonerville” written by Kevin Sepe and Tom Alexander and produced by Kevin Sepe, the Control Group member that funded the Company’s working capital. This movie was released in January 2011. | |
Under this ten year agreement, the Company and Screen Media will share net proceeds from Home Video (“HV”) and Video on Demand (“VOD”) sales on a 50/50 ratio. Net proceeds is defined as gross proceeds less a five percent service fee to Screen Media and any third party distribution/marketing costs directly related to the distribution of the movie. | |
For all distribution excluding HV and VOD, Screen Media shall earn a 25% distribution fee and shall be reimbursed for all legitimate distribution costs as defined by both parties. The balance of the proceeds is then distributed to Mass Hysteria, which in turn pays the producer and financier (the related party discussed in Note 5) these proceeds less an amount defined in a drafted agreement between the Company and the producer/financier. The agreement, executed on December 1, 2010, allows for the Company to be paid 10% of the first $600,000 in proceeds received from Screen Media, and 15% for any proceeds in excess of $600,000. Additionally, the Company will be reimbursed up to a maximum of $10,000 in actual out-of-pocket expenses incurred in the distribution process. | |
As of November 30, 2013, no monies are due to the Company with respect to the distribution referred to above and no revenues are expected in the future. | |
Carjacked | |
Carjacked Entertainment, LLC (the “LLC”) was formed to produce Carjacked, a feature film. The rights to Carjacked, the movie, are held by a Montreal, Canada company. Mass Hysteria’s CEO is the managing member and holds an equity interest in the LLC through a company he controls, Grodfilm Corp. See Note 6 for guarantee agreement provided by Mass Hysteria in connection with an unrelated investor in the amount of $250,000. | |
The Company was assigned an agreement by Grodfilm Corp (owned by the Company’s CEO, Dan Grodnik) which entitled Mass Hysteria to $75,000 in revenue for its participation in the pre-production of the movie. Under this agreement, Mass Hysteria received $25,000 during pre-production of the movie during fiscal 2010 and $25,000 during fiscal 2011. We will not receive the final payment, and accordingly, we provided an allowance for such amount. | |
SideFlick™ | |
The Company believes that consumer dynamics and mobile usage patterns have created a demand for multi-screen solutions at cinematic events to allow moviegoers to actively participate and share event experiences in real-time with friends instead of passively watching. The Company has initiated the introduction in this new media market with our SideFlick™ technology, and has retained an independent software programmer (“PGAH”) to assist with the development of this technology. MHYS has developed the concept of interactive movies through a second screen mobile experience and has the capability and knowledge to produce engaging: content. PGAH has demonstrated an initial "proof of concept" regarding the synchronization of content between the second screen and the primary screen and we believe PGAH has the skill and knowledge to build and service a custom built application(s) for use on Android, iPhones/iPads and Microsoft mobile phones and .on other future platforms to provide interactivity between filmed entertainment and mobile phones and handsets | |
The Company will form a separate wholly-owned subsidiary corporation called Mass Hysteria Interactive, Inc. ("MHI") through which the SideFlick™ Technology, process patents and SideFlick trademark will be exclusively distributed, licensed and exploited, including the receipt of any and all receipts and proceeds derived from thatch exploitation. PGAH agreed that the Technology will be for the exclusive use of MHI. PGAH and MHYS further agreed that the technology, including all modifications, enhancements, fixes and upgrades thereto and derivative works thereof will be jointly owned by PGAH and MHYS, which will split any and all net profits equally (50/50) from the exploitation of the technology in all media in perpetuity, after deduction for mutually agreed, actual and necessary operating costs, including the costs of filing process patents in the US and in Europe, which patents will be also be co-owned by MHYS and PGAH. When the SideFlick™ trademark has been obtained by PGAH, PGAH will arrange for such trademark to be assigned to MHYS for co-ownership of PGAH and MHYS. |
Subsequent_Events
Subsequent Events | 12 Months Ended |
Nov. 30, 2013 | |
Subsequent Events: | ' |
Subsequent Events | ' |
Conversion of short-term convertible debt | |
Subsequent to November 30, 2013, the Company issued 7,400,001 shares of common stock to a holder of short-term convertible debt for the conversion of $17,760 of principal. The conversion price was $0.0024. The remaining principal on this note through the date of this report is approximately $940. | |
Subsequent to November 30, 2013, the Company issued 1,700,000 shares of common stock to a holder of short-term convertible debt for the conversion of $72 of principal and $1,876 of accrued interest. The conversion price was $0.00226. The remaining principal on this note through the date of this report is approximately $39,928. The remaining dilutive impact of this convertible note, which converts at a discount to current market, or approximately $0.002 per share, is substantial, and at the current market, would result in the issuance of approximately 19,964,000 additional shares of common stock to fully convert the note. | |
Subsequent to November 30, 2013, the Company issued another 1,700,000 shares in conversion of $1,729.54 of principal and $2,082.46 in interest on a promissory note previously issued to Metacomet Company. | |
Shares issued for services | |
In February, 2014, 5,000,000 shares were issued to an advisory board member for his service and 7,500,000 shares were issued to the Company CEO for his service. | |
As a result of the post-November 30, 2013 issuances, there were 41,445,866 common shares issued and outstanding at March 17, 2014. | |
Promissory note | |
In November, 2013, we agreed to a $3,000 promissory note to Metacomet for the payment of outstanding payables. The loan was funded in December, 2013 although the note was dated November 27, 2013. The funded amount will be reported in our next quarterly report. | |
BALANCE_SHEETS
BALANCE SHEETS (USD $) | Nov. 30, 2013 | Nov. 30, 2012 | |
Current Assets | ' | ' | |
Cash | $9 | $278 | |
Other assets | 0 | 5,261 | |
Total Current Assets | 9 | 5,539 | |
Intangible assets, net | 0 | 519 | |
Film costs | 2,000 | 2,000 | |
Total Noncurrent Assets | 2,000 | 2,519 | |
Total Assets | 2,009 | 8,058 | |
Current Liabilities | ' | ' | |
Accounts payable | 137,740 | 108,922 | |
Accrued liabilities | 443,766 | [1] | 331,656 |
Accrued payroll | 742,857 | 353,973 | |
Short-term debt | 237,622 | 225,622 | |
Short-term convertible debt | 270,629 | 50,541 | |
Derivative liability | 324,020 | 223,637 | |
Deferred revenue | 1,000 | 0 | |
Stand ready obligation | 250,000 | 0 | |
Convertible debt - related party | 453,061 | 453,061 | |
Total Current Liabilities | 2,860,695 | 1,747,412 | |
Non-current Liabilities | ' | ' | |
Stand ready obligation - long term | 0 | 250,000 | |
Convertible long-term debt, net of discount of | 178,316 | [2] | 158,303 |
Total Liabilities | 3,039,011 | 2,155,715 | |
Stockholder's Deficit | ' | ' | |
Common Stock | 181 | [3] | 6 |
Preferred Stock | 0 | [4] | 0 |
Additional paid in capital | 7,399,743 | 6,482,837 | |
Deficit accumulated during the development stage | -10,436,926 | -8,630,500 | |
Total Stockholders' Deficit | -3,037,002 | -2,147,657 | |
Total Liabilities and Stockholders' Deficit | $2,009 | $8,058 | |
[1] | Net of debt discount of $26,151 and $41,486 | ||
[2] | Net of debt discount of $21,684 and $47,697 | ||
[3] | $0.00001 par value; 2,000,000,000 shares authorized, 18,145,865 and 599,872 shares issued and outstanding | ||
[4] | $0.00001 par value; 10,000 shares authorized; 10 issued and outstanding |