ITEM 1. DESCRIPTION OF BUSINESS
Corporate History
We were incorporated in Nevada on November 2, 2005 under the name “Michael Lambert, Inc.”. Until August 5, 2009 we manufactured handbags. On August 5, 2009, pursuant to the terms of a Stock Purchase Agreement, Daniel Grodnik (our current Chief Executive Officer) and affiliated parties purchased a total of 7,985 shares of our issued and outstanding common stock (the “Change of Control”). This constituted majority control of the Company. In addition to the shares purchased, we also issued 42,015 shares to Daniel Grodnik and certain affiliated parties in connection with the Change of Control. The total of 50,000 shares issued to Daniel Grodnik and the affiliated parties represented 74.6% of the shares of outstanding common stock of the Company as of that date. Mr. Grodnik has remained our Chief Executive Officer and controlling shareholder since that date.
In connection with the Change of Control, we changed our name to Mass Hysteria Entertainment Company, Inc. (“we”, “us“, the “Company”, or “Mass Hysteria”) and also changed our business plan. We are now a multi-media entertainment company created to produce feature films for theatrical, DVD, video on demand (VOD) and television distribution for commercial, documentary and educational film market. In addition, we intend to continue developing multi-screen entertainment solutions.
Our executive offices are located at 2920 W. Olive Avenue, Suite 208, Burbank, CA 91505. Our telephone number at our executive office is (818) 459-8200.
Industry Overview
The film business has a high profile among consumers worldwide which can be leveraged for ancillary revenue, marketing and promotional activities. While new technologies continue to expand the revenue and profit potential of motion pictures, the film entertainment industry has proven to be relatively resistant to the economic cycles that adversely affect other businesses, resulting in multi-billions in annual revenue dollars. We are engaged in the development, financing, and production phases of the film and television industries.
Production Process
The process begins with the development of a screenplay or teleplay. During the development phase, the studio engages writers to draft and revise the screenplay and begins to obtain commitments from a director and principal cast. These steps, called packaging, are necessary to ascertain the value of a project prior to financing. Once a value is established, the producer is than able to create a funding plan to "greenlight" (i.e., approve) the film for production. A proposed production schedule and budget may also be prepared during this phase.
In recent years, independent film companies have been able to attract top-level talent because the large studios are more interested in creating “tent-pole” franchise films such as the Marvel movies. This focus away from the smaller, character driven drama or thriller has created opportunity for independent producers such as Mass Hysteria, that has the experience and deal-flow, to attract cutting edge filmmakers with an eye toward producing star driven, theatrical movies. In addition, Mass Hysteria has the skill-set and access to the crews needed to produce films for substantially less than a large studio, including lower development and overhead costs. This adds up to Mass Hysteria being able to take creative risks that don’t rely on franchises, sequels and formulaic approaches which can very attractive for filmmakers and stars.
The production process starts with the acquisition and development of a screenplay and continues with i) pre-production, ii) principal photography, and iii) post-production as seen below. Pre-production includes the securing of necessary production facilities and personal, the finalization of motion picture budgets and production schedules, and the selection of motion picture shooting locations and the building of necessary sets.
Production involves principal photography.
Post-production includes picture editing, the creation of special visual effects and opticals, the composing and recording of the musical score, sound editing, synchronizing dialogue, sound effects and music insertion, and ultimately the “final cut” and completion of the elements necessary for distribution.
Distribution to traditional media
Films are distributed through several windows of exploitation. Theatrical exhibition occurs first when release prints of the film are distributed to movie theaters worldwide in concert with extensive advertising (P&A, prints and advertising expense). Typically, theater owners retain approximately 50-60% of consumer ticket prices which in the aggregate comprise box office gross. Theatrical releases overseas occur at different times in each country and can be as much as 6 months after the U.S. release.
About 4-6 months after theatrical release is the VOD / DVD release. Distributors receive wholesale prices on product that is sold directly to consumers from retail outlets such as Wal-Mart and Best Buy and earn a percentage of rental income from chains such as Blockbuster and Netflix. Related costs for advertising, duplication, packaging, mastering and shipping typically run about 35% of distributor’s revenue. The DVD “street date” and the pay-per-view window are concurrent.
The pay TV window (HBO, Showtime, Encore) begins approximately 18 months after theatrical release. Prices received by distributors are based on contractual output arrangements and are tied to the film’s box office performance. A year or two later, the distributor will sell the film to a network or major cable channel and then about 5 years later, the film will be sold into syndication or re-sold to pay or cable.
The major film studios perform all of these activities in the U.S. and through owned and operated offices in about 30 overseas markets that comprise the lion’s share of international revenue. Producers often sell a film’s distribution rights through a sales agent to separate independent distributors in each overseas market. These sales are referred to as “pre-sales”, “advances” or “minimum guarantees”. These independent distributors, many of which are owned by major media companies and have considerable leverage in their home markets, will perform the above mentioned distribution functions. For each unit of revenue earned, the local distributor deducts a distribution fee, local distribution costs, and the advance that it paid and remits the remainder to the producer.
Our Business
Initially, we were an entertainment company created to produce feature films for theatrical, DVD, VOD and television distribution with an interactive component for the commercial, documentary and educational film market. Our mission was to bring multi-screen engagement to the theatrical motion picture venue. Eventually, we would like to create interactive theatrical films annually, and also create a second screen (mobile) experience for currently produced non-interactive films. We may also license our IP to other film companies that wish to create interactive entertainment. . As a small company, we do not presently have the resources or manpower to actively pursue these verticals so we are entertaining discussions with sources outside the Company to help us build out this business.
In August of 2014, Mass Hysteria Entertainment shifted its’ primary focus from a Company engaged in creating interactive cinema to a film finance and production entity. The change came about because the Company wasn’t earning any revenue from interactive and we felt the Company needed to put itself on a faster track toward cash-flow. We completed our first deal sixty days later by structuring a transaction to co-fund a feature film entitled, “Daughter Of God,” starring Keanu Reeves. Mass Hysteria arranged for an investment in the film of
$500,000 (five-hundred thousand dollars) from an independent funding source, which advanced the funds to the Company in exchange for a convertible promissory note in the principal amount of $505,000 incurring 8% per annum, and Warrants to acquire 1,262,500,000 shares of our common stock at a warrant exercise price of $0.0003, exercisable for a five year term. For this investment we will receive 6.65% of the profits from the film and the funding source, operating as Remark Pictures, will receive 6.65 percent of the profits.
In the fourth quarter of 2014, the Company was involved a second motion picture titled “Bus 657” starring Robert DeNiro. Both Bus 657 and Daughter of God will be theatrically released in the United States through Lionsgate’s action label, Grindstone Entertainment.
The Company develops projects from the ground up as well as looking at late-stage packages that are in need of either debt or equity capital to commence principal photography. Mass Hysteria is also interested in providing “finishing funds,” and bridge financing. When providing capital for outside packages, the Company analyzes the foreign sales estimates based on the star value, localized tax incentives, bank and debt financing, and upside potential plus 20% interest on the equity and 12.5% interest on debt. In each film we arrange funding on, we expect we will be paid a fee plus a percentage of the profits.
Government Regulation
Our business may be subjected to governmental regulation and required to comply in the following areas:
Distribution Arrangements. We intend to release our films in the United States through existing distribution companies. We will retain the right for ourselves to market the films on a jurisdiction-by-jurisdiction basis throughout the rest of the world and to market television and other uses separately. To the extent that we may engage in foreign distribution of our films, we will be subject to all of the governmental regulations of doing business abroad including, but not limited to, government censorship, exchange controls, and copying, and licensing or qualification. At this point it is not possible to predict, with certainty, the nature of the distribution arrangements and extent of exact governmental regulations that may impact our business.
Intellectual Property Rights. Rights to motion pictures are granted legal protection under the copyright laws of the United States and most foreign countries, including Canada. These laws provide substantial civil and criminal penalties for unauthorized duplication and exhibition of motion pictures. Motion pictures, musical works, sound recordings, artwork, and still photography are separately subject to copyright under most copyright laws. The results of such investigations may warrant legal action, by the owner of the rights, and, depending on the scope of the piracy, investigation by the Federal Bureau of Investigation and/or the Royal Canadian Mounted Police with the possibility of criminal prosecution. Under the copyright laws of Canada and the United States, copyright in a motion picture is automatically secured when the work is created and "fixed" in a copy. We intend to register our copyrights. Only the expression (camera work, dialogue, sounds, etc.) fixed in a motion picture can be protected under copyright. Registration with the appropriate office establishes a public record of the copyright claim.
Censorship. An industry trade association, the Motion Picture Association of America, assigns ratings for age group suitability for domestic theatrical distribution of motion pictures under its Code and Rating Administration. The film distributor generally submits its film to the Administration for a rating, a practice we plan to follow. We intend that all our branded content will carry a rating no greater than PG13.
Labor Laws. Many of the screenplay writers, performers, directors and technical personnel in the entertainment industry who we intend to be involved in our productions are members of guilds or unions that bargain collectively on an industry-wide basis and may have state and governmental regulations that we must comply with.
Employees
As of November 30, 2014, we employed one person, our Chief Executive Officer and director, Daniel Grodnik. Accordingly, Mr. Grodnik is our sole officer, director and employee as of the date of this report.
Where You Can Find More Information
We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). These filings are not deemed to be incorporated by reference into this report. You may read and copy any documents filed by us at the Public Reference Room of the SEC, 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings with the SEC are also available to the public through the SEC’s website at http://www.sec.gov.
ITEM 1A.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. In any event, there are no such unresolved comments.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
Our corporate offices are located at 2920 S. Olive Avenue, Suite 208, Burbank, CA.. The office space is leased from an unrelated landlord.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
To the best of our knowledge, there are no known or pending litigation proceedings against us. We are engaged in an arbitration proceeding regarding the Coral Ridge funding, which we hope to settle within the next quarter.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted on the OTC Market under the symbol MHYS. The following table shows the high and low closing prices for our common stock for each quarter during the fiscal years ended November 30, 2014 and 2013 as reported by the OTC Electronic Market. All share prices have been adjusted to provide for 1 for 1,000 reverse stock split effectuated on February 1, 2013. Some of the bid quotations from the OTC Markets set forth below may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
As of November 30, 2014, there were approximately 94 holders of record of our common stock.
We have not paid any cash dividends since our inception and do not contemplate paying dividends in the foreseeable future. It is anticipated that earnings, if any, will be retained to retire debt and for the operation of the business. Shares eligible for future sale could depress the price of our common stock, thus lowering the value of a buyer’s investment. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for shares of our common stock.
Our revenues and operating results may fluctuate significantly from quarter to quarter, which can lead to significant volatility in the price and volume of our stock. In addition, stock markets have experienced extreme price and volume volatility in recent years. This volatility has had a substantial effect on the market prices of securities of many smaller public companies for reasons unrelated or disproportionate to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.
Recent Sales of Unregistered Securities
During the year ended November 30, 2014, we issued a total of 1,861,750,127 shares of our common stock. Of that total, 12,500,000 shares were issued to consultants under a Form S-8 registration statement, 185,714,250 shares were issued as restricted shares to our sole officer and director in satisfaction of accrued salaries due of $371,000, and the balance of 1,663,535,877 shares were issued on conversion of outstanding convertible notes in the principal amount of approximately $356,000. The unregistered shares were issued pursuant to exemptions from registration under Section 4(2) of the Securities Act of 1933, in compliance with Rule 144 issued by the SEC under that Act.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to
provide the information required under this item.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K/A (THIS “FORM 10-K/A”), CONSTITUTE “FORWARD LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE “REFORM ACT”). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “BELIEVES”, “EXPECTS”, “MAY”, “SHOULD”, OR “ANTICIPATES”, OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BYDISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF MASS HYSTERIA ENTERTAINMENT COMPANY, INC. (“THE COMPANY”, “WE”, “US” OR “OUR”) TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-K, UNLESS ANOTHER DATE IS STATED, ARE TO NOVEMBER 30, 2014.
General
We were incorporated in Nevada on November 2, 2005 under the name “Michael Lambert, Inc.”. Until August 5, 2009 we manufactured handbags. On August 5, 2009, pursuant to the terms of a Stock Purchase Agreement, Daniel Grodnik (our Chief Executive Officer) and affiliated parties purchased a total of 7,985 shares of our issued and outstanding common stock, which represented majority control of the Company. In addition to the shares purchased, the Company also issued 42,015 shares to Daniel Grodnik and certain affiliated parties in connection with the change of control. The total of 50,000 shares then held by Daniel Grodnik and the affiliated parties represented 74.6% of the shares of outstanding common stock of the Company as of the effective date.
In connection with the change of control, we changed our corporate name to Mass Hysteria Entertainment Company, Inc. (“we”, “us“, the “Company”, or “Mass Hysteria”) and also changed our business plan and became a multi-media entertainment company created to produce feature films for theatrical, DVD, video on demand (VOD) and television distribution with an interactive component for commercial, documentary and educational film market. Our plan was to eventually produce a minimum of two original interactive theatrical films annually, and also create a second screen (mobile) experience for non-Mass Hysteria films. In addition, we intended to continue creating traditional film and television projects.
In August 2014, we changed our business direction to financing and producing theatrical films for the world market. We are now involved in all stages of production; development, financing, producing, and selling theatrical films. In the fiscal year ended November 30, 2014, we were involved in two major theatrical motion pictures; “Daughter Of God,” starring Keanu Reeves, and “Bus 657” starring Robert DeNiro. Daughter of God has completed filming and is now in post-production and Bus 657 has begun filming on location. Both films will be theatrically released in the United States through Lionsgate’s action label, Grindstone Entertainment.
We are exploring many other opportunities and have recently announced a partnership with Affirm Films, the faith-based production division of Sony Pictures Worldwide Acquisitions, to develop and produce a feature film. We now develop projects from the ground up as well as looking at late-stage packages that are in need of either debt or equity capital to commence principal photography. We are also interested in providing “finishing funds,” and bridge financing. When providing capital for outside packages, we analyze domestic and foreign sales estimates based on the star value, localized tax incentives, bank and debt financing, and upside potential plus 20% interest on the equity and 12.5% interest on debt for each project. In each film for which we arrange or provide funding, we expect we will be paid a fee plus a percentage of the profits from the theatrical release of the film.
During the formative years of the Company, from 2009 until 2014, we were engaged in trying to change the paradigm for filmed entertainment by changing the viewing experience from passive to engaged by assisting in the creation of a software application (the “App”) that would allow the user to interact with the content in live time for commercial, documentary and educational film markets. We have achieved "proof of concept" with the App and are exploring options to bring it to market. Our hope is to eventually produce an original interactive theatrical film. We intend to outsource additional development and testing of the App that will allow audiences to interact, via their handset, between theatrical movies, other audience members and a cloud server if and when funds are available. The nature of the interaction involves social connectivity, conversation between audience members, narrative extensions, in-experience gaming and content acquisition. The three core
innovations are a mobile app, a mobile website and specially designed cloud architecture - together these three technologies will create what we believe to be a unique immersive quality that can offer each theatrical audience member a customizable and sharable movie entertainment experience. We also intend to enter into negotiations with leading entertainment companies with similar objectives and technologies relating to the creation and exhibition of an interactive viewing experience, with the objective of exploring possible joint ventures and mergers to combine synergies and expertise in the interactive area.
Comparison of Operating Results
RESULTS OF OPERATION FOR THE YEAR ENDED NOVEMBER 30, 2014 COMPARED TO THE YEAR ENDED NOVEMBER 30, 2013
We had revenue of $37,500 for the year ended November 30, 2014 and no revenues for the year ended November 30, 2013. Revenue during the current year is directly related to the establishment of our new business plan. As the Company meets its business plan goals, we expect to generate more revenue in the future.
For the year ended November 30, 2014, we had general and administrative expenses of $991,714; net interest expense of $695,968, excess fair value of derivative of $3,618,680, and gain in fair value of derivative liability of $189,909. For the year ended November 30, 2013, we had general and administrative expenses of $1,461,526; net interest expense of $342,811, excess fair value of derivative of $69,071, and gain in fair value of derivative liability of $66,982.
We had a net loss of $5,078,953, for the year ended November 30, 2014, as compared to a net loss from continuing operations of $1,806,426, for the year ended November 30, 2013. The increase in net loss is primarily a result of larger interest expense charges and charges for the excess fair value of derivative liabilities, net of decreases in general and administrative costs.
Liquidity and Capital Resources
We had total assets of $527,830 as of November 30, 2014, consisting of $16,480 in cash and $511,350 in other assets. We had a working capital deficit of $6,547,329.
We had total liabilities of $6,669,722 as of November 30, 2014, consisting of current liabilities, which included $217,970 of accounts payable; accrued liabilities of $427,562, accrued payroll of $639,529; short term debt of $249,523; short term convertible debt of $515,025, a stand ready obligation of $250,000, deferred revenue of $1,000, and derivative liabilities of $4,263,200. In addition, we had convertible long-term debt of $105,913 as of November 30, 2014.
As of November 30, 2014, we had a total stockholders’ deficit of $6,141,892 and an accumulated deficit of $15,515,879.
We had $185,379 in net cash used in operating activities for the year ended November 30, 2014, which included $5,078,953 in net loss, offset by $296,000 in share-based compensation, $641,449 in amortization of discount debt, $189,909 of change in fair value of derivative liability, $3,618,680 loss on excess fair value of derivative liability. Cash flows used in operations were offset by changes in operating assets and liabilities totaling $527,354.
We had $705,000 of net cash provided by financing activities for the year ended November 30, 2014, which was from the issuance of convertible debt. Of this amount $500,000 was used immediately for an investment in a film.
The Company has procured financing primarily through convertible debt agreements whereby the debt holder can convert the stock at a given time at a discount to market. The majority of these notes bear interest at a rate between 8-10% and are due within one (1) year of issuance. See Note 5 to the financial statements for a more detailed listing of convertible promissory notes.
Since we have no liquidity and have suffered losses, we depend to a great degree on the ability to attract external financing in order to conduct our business activities and expand our operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. If we are unable to raise additional capital from conventional sources, including increases in related party and non-related party loans and/or additional sales of stock, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results. We have no commitments to provide us with financing in the future, other than described above. Our independent registered public accounting firm included an explanatory paragraph raising substantial doubt about the Company’s ability to continue as a going concern.
In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when it approaches a condition of cash insufficiency. The sale of additional equity securities, if accomplished, and the conversion of convertible debt, if converted, may result in dilution to our shareholders. We cannot provide assure, however, that financing will be available in amounts or on terms acceptable to us, or at all.
Critical Accounting Policies and Estimates
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Use of Estimates:
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
Revenue Recognition:
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured. We had $37,500 in revenue for the year ended November 30, 2014 and $0 for the year ended November 30, 2013 relating to continuing operations.
Stock-Based Compensation:
The Company accounts for its stock-based compensation under the provisions of ASC 718 “Compensation-Stock Compensation.” Under ASC 718, the Company is permitted to record expenses for stock options and other employee compensation plans based on their fair value at the date of grant. Any such compensation cost is charged to expense on a straight-line basis over the periods the options vest. If the options had cashless exercise provisions, the Company utilizes variable accounting.
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 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.
Off-Balance Sheet Arrangements
None.
ITEM 7A.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by SEC Rule 13a-15 or Rule 15d-15, our Chief Executive and Principal Accounting Officers carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing evaluation, we have concluded that our disclosure controls and procedures are not effective as of November 30, 2014 and that they do not allow for information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive and Principal Accounting Officers as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the November 30, 2014. We believe that internal control over financial reporting is not effective. The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:
(1) lack of a functioning audit committee and lack of a majority of outside directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
(2) inadequate segregation of duties consistent with control objectives;
(3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and
(4) ineffective controls over period end financial disclosure and reporting processes.
The aforementioned material weaknesses were identified by the Company’s Chief Financial Officer in connection with the review of our financial statements as of November 30, 2013 and communicated the matters to our management. Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not affect the Company’s financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures can affect the Company’s results and its financial statements for the future years.
We are committed to improving our financial organization. As part of this commitment, we will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company’s Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the company may encounter in the future.
Changes in Internal Control: There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls: The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or its system of internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system of internal control are met. The design of the Company’s control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.
This annual report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management’s report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below is certain information concerning our directors and executive officers as of the date of this report:
Name
Age
Position
Daniel Grodnik
President, Chief Executive Officer and Chairman
Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years.
Daniel Grodnik is a director and our President and Chief Executive Officer. 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. Mr. Grodnik has produced dozens of movies over the course of his career including “Bobby,” which had an all-star cast including Anthony Hopkins, Demi Moore, Sharon Stone, Helen Hunt, Lawrence Fishburne, Elijah Wood, Lindsay Lohan, William H. Macy, Nick Cannon, and Heather Graham and for which he was nominated for a Golden Globe for Best Picture; Powder, Blind Fury and “1969” starring Robert Downey and Kiefer Sutherland and scores of other theatrical and television movies with stars such as Ashley Judd, Tim Allen, Richard Dreyfuss, Christian Slater, Alec Baldwin, Jeff Goldblum, Winona Ryder, etc. Mr. Grodnik is a member of the Producer’s Guild of America and for the past 20 years has been an oral panelist at his Alma-Mater USC to grade the Masters’ Thesis in producing.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board
Information about our Board and its Committees
We do not have either an audit committee, compensation committee, or a nominating committee. It is the view of the board of directors that it is appropriate to not have any of these committees since they are not required to maintain a listing on the OTC Markets, since it only has one director who would serve on any such committees in any event, and due to the additional and unnecessary costs associated with administering the committees.
We do not have any defined policy or procedure requirements for stockholders to submit recommendations or nominations for directors. Our board of directors believes that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.
A stockholder who wishes to communicate with our board of directors may do so by directing a written request to our Company addressed to our Chief Executive Officer. We intend to hold annual meetings of stockholders during the summer season, at which meetings our directors will be up for re-election. We currently do not have a policy regarding the attendance of board members at the annual meeting of stockholders.
Family Relationships
There are no family relationships between or among any of the current directors, executive officers or persons nominated or charged by the Company to become directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past ten years:
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been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
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had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;
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been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or
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been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Director Independence
Our board of directors has determined that currently none of it members qualify as “independent” as the term is used in Item 407 of Regulation S-B as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, Inc. - Marketplace Rule 4200. The chairman of the board is also an officer of the Company. The Company plans to appoint an outside director as chairman in the future.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.
To our knowledge, based solely on review of the copies of such reports furnished to us for the period ended November 30, 2014, no Section 16(a) reports required to be filed by our executive officers, directors, and greater-than-10% stockholders were filed on a timely basis.
Code of Ethics
We have adopted a code of ethics that applies to the principal executive officer and principal financial and accounting officer. We will provide to any person without charge, upon request, a copy of our code of ethics. Requests may be directed to our principal executive offices.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the years ended November 30, 2014, and 2013 in all capacities for the accounts of our executive, including the Chief Executive Officer and former Chief Financial Officer:
(1)
$360,000 of this amount was originally accrued as salary but not paid.
(2)
During fiscal 2014, the Company issued 185,714,250 shares of common stock for the conversion of accrued salary totaling $371,429. The converted portion was not specific as to which year the converted accrued salary applied.
(3)
On December 17, 2009, the Company agreed to Mr. Grodnik an option award of 20,000 shares with exercise price of $70. Our stock price was $60 on December 17, 2009. The options vest equally (pro-rata per day) over a five year period. As such 4,000 and, 4,000 shares under such option vested in the years ended November 30, 2014, and 2013 respectively.
(4)
$45,000 of this amount was accrued as salary but not paid.
(5)
In February 2014 the Company issued Mr. Grodnik 7,500,000 shares of common stock valued at $0.004 per share .
Grants of Plan-Based Awards
We did not grant any plan based awards to executive officers in the year ended November 30, 2014. In February 2014, Mr. Grodnik was awarded 7,500,000 shares at $0.004 per share.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth all outstanding equity awards made to each of the Named Executive Officers that are outstanding at the end of the year ended November 30, 2013.
(1) Adjusted for the 1-for-1000 reverse stock split effectuated on February 1, 2013
(2) The options vest equally (pro-rata per day) over a 5 year period until fully vested on December 17, 2014. Each option expires 24 months after vesting.
Option Exercises and Stock Vested
A total of 4,000 shares under Daniel Grodnik’s option to purchase 20,000 shares vested in the year ended November 30, 2014. No stock options were exercised by any named executive officer in the year ended November 30, 2014.
Employment Agreements
We have an employment agreement with Daniel Grodnik, our Chief Executive Officer. A description of the material terms of Mr. Grodnik’s agreement is set forth below.
Daniel Grodnik Employment Agreement
The agreement is for an initial term of five years and provides for an annual base salary during the term of the agreement of $360,000, which amount shall automatically be increased by 10% when and if the Company’s revenues exceed $1,000,000. Mr. Grodnik may also receive bonuses at the discretion of the board of directors and will receive a bonus equal to 2% of gross theatrical box office sales for any of our theatrically released motion pictures.
In addition to his annual salary, the agreement grants employee stock options to purchase common stock in an amount equal to 20,000 shares at an exercise price of $70.00 per share. The options vest equally (pro-rata per day) over a five-year period (until fully vested on December 17, 2014. Each series of options shall survive for 24 months following vesting, and may be exercised all or in part and include a “cashless feature.”
The agreement also contains the following material provisions: (i) reimbursement for all reasonable travel and other out-of-pocket expenses incurred in connection with his employment; (ii) four (4) weeks paid vacation leave, including payment of actual vacations not to exceed $15,000; (iii) medical, dental and life insurance benefits; (iv) an $800 per month automobile allowance; (v) a severance payment of $5,000,000 in the event that Mr. Grodnik’s duties and responsibilities are significantly changed or in the event of a “Change in Control” (as defined in the agreement).
Potential Payments upon Termination
Under the terms of Mr. Grodnik’s employment agreement, he is entitled to a severance payment of $5,000,000 in the event that Mr. Grodnik’s duties and responsibilities are significantly changed or in the event of a “Change in Control” (as defined in the agreement).
The following table sets forth quantitative information with respect to potential payments to be made to Mr. Grodnik upon termination in the circumstances described above. The potential payments are based on the terms of the Employment Agreement discussed above. For a more detailed description of the Employment Agreement, see the “Employment Agreements” section above.
Compensation of Directors
No compensation was paid to any director (other than compensation set forth under Executive Compensation) for services rendered during the fiscal year ended November 30, 2014.
All directors receive reimbursement for reasonable out-of-pocket expenses in attending Board of Directors meetings and for promoting our business.
From time to time we may engage certain members of the Board of Directors to perform services on our behalf. In such cases, we compensate the members for their services at rates no more favorable than could be obtained from unaffiliated parties. We did not engage any members of the Board of Directors to perform services on our behalf the year ended November 30, 2014.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of November 30, 2014 by the following persons:
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each person who is known to be the beneficial owner of more than five percent (5%) of our issued and outstanding shares of common stock;
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each of our directors and executive officers; and
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all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The number of shares and the percentage beneficially owned by each individual listed above include shares that are subject to options held by that individual that are immediately exercisable or exercisable within 60 days from November 30, 2014, and the number of shares and the percentage beneficially owned by all officers and directors as a group includes shares subject to options held by all officers and directors as a group that are immediately exercisable or exercisable within 60 days from November 30, 2014.
(1)
Unless otherwise noted, the address is 2920 W. Olive Avenue, Suite 208, Burbank, CA 91505.
(2)
Based on 1,879,895,992 common shares issued and outstanding at November 30, 2014.
(3)
Based on 10 Series A preferred shares issued and outstanding at November 30, 2014.
(4)
Holders of our common stock are entitled to one vote per share, for a total of 716,596 votes. Holders of our Series A preferred stock are 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 Mass Hysteria’s common stock, on a fully-diluted basis, 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.
(5)
Includes 1,000 shares related to presently exercisable warrants and 69,948 shares issuable under presently exercisable promissory notes.
(5)
Includes 2,512,000 shares under presently exercisable options.
Securities Authorized for Issuance Under Equity Compensation Plans.
The following provides information concerning compensation plans under which our equity securities are authorized for issuance as of November 30, 2014:
(1) 2011 Stock Incentive Plan. 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 22,997 shares, subject to adjustment.
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 an 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 prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. 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.
(2) 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 remaining available for the grant of either stock options or compensation stock under the plan is 55,938 shares, subject to adjustment.
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 an 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 prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. 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.
(3) 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 stock options or compensation stock under the plan is 132,800 shares, subject to adjustment.
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 an 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 prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. 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.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On October 5, 2010, we entered into that Guarantee Agreement with Carjacked Entertainment LLC (“CE”) and Carjacked Entertainment Investments, LLC (“CEI”, together with CE, the “Producers”), pursuant to which we guaranteed repayment of up to $250,000 to Wet Rose Productions, LLC for funds invested by Wet Rose for the film “Carjacked.” In exchange for the guarantee, the Producers agreed to pay us $50,000. Our sole officer and director is managing member of CE.
Effective November 1, 2010, Grodfilm Corp. assigned that certain Memorandum of Agreement with Carjacked Entertainment, LLC related to producer fees on the film entitled “Carjacked” to us. Our President and Chief Executive Officer is the principal officer and controlling stockholder of Grodfilm Corp. In addition, our President and Chief Executive Officer is the managing member of Carjacked Entertainment, LLC. Neither our president and CEO nor CE owns the rights to the film “Carjacked.”
Our President and Chief Executive Officer currently has other interests in other companies in the film industry. He is currently sole officer and sole stockholder of Grodfilm Corp., a company involved in producing motion pictures. Until such time as we are better capitalized, our President and Chief Executive Office will devote the majority of his time to our company but may not devote his entire time to us. He will devote so much of his time as is, in his judgment necessary to conduct such business in the best interest of our company. Any agreements entered into between us and any affiliates shall be on terms and conditions no less favorable to us than can be obtained by independent third parties.
On April 5, 2011, we issued 10,000 shares of Series A Preferred Stock to our President in satisfaction of $10,000 of accrued but unpaid salary.
On February 28, 2012, our former Chief Financial Officer provided an interest free advance to us in the amount of $30,000.
We did not grant any plan based awards to executive officers in the year ended November 30, 2014. In February 2014, Mr. Grodnik was awarded 7,500,000 shares at $0.004 per share.
On August 8, 2014 the Company issued 185,714,250 shares of its common stock for the conversion of $371,429 in accrued salary.
Director Independence
For our description of director independence, see “Director Independence” under the section entitled “Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act” above.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Appointment of Auditors
dbbmckennon audited our consolidated financial statements for the fiscal years ended November 30, 2014 and 2013.
Audit Fees
dbbmckennon billed us $32,000 and $36,000 in fees for our 2014 and 2013 annual audit and review of our quarterly financial statements, respectively.
Audit-Related Fees
For the Company’s fiscal years ended November 30, 2014 and 2013, we were not billed for audit-related fees.
Tax Fees
For the Company’s fiscal years ended November 30, 2014 and 2013, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended November 30, 2014 and 2013.
Pre-Approval Policies and Procedures
We have implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under these procedures, our board of directors pre-approves all services to be provided by dbbmckennon and the estimated fees related to these services.
All audit, audit related, and tax services were pre-approved by our board of directors, which concluded that the provision of such services dbbmckennon was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. Our pre-approval policies and procedures provide for the board of directors’ pre-approval of specifically described audit, audit-related, and tax services on an annual basis, but individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policies and procedures also require specific approval by our board of directors if total fees for audit-related and tax services would exceed total fees for audit services in any fiscal year. The policies and procedures authorize the audit committee to delegate to one or more of its members pre-approval authority with respect to permitted services.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) We have filed the following documents as part of this Annual Report on Form 10-K:
1. Financial Statements
Report of Independent Registered Public Accounting Firm
Financial Statements:
Balance Sheets
Statements of Operations
Statements of Stockholders’ Deficit
Statements of Cash Flows
Notes to Financial Statements
2. Financial Statement Schedules: None
3. Exhibits: See the Exhibit index below
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 17, 2015
By:
/s/ Daniel Grodnik
Daniel Grodnik
President, Chief Executive Officer, Chairman and Secretary
(Principal Executive Officer and Principal Accounting Officer)
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
/s/ Daniel Grodnik
Daniel Grodnik Sole Director