f10k2010_masshysteria.htm

Equipment and Furniture

Equipment and furniture will be stated at historical cost less accumulated depreciation. The cost of maintenance and repairs to equipment and furniture will be expensed as incurred, and significant additions and improvements will be capitalized. The capitalized costs of leasehold and building improvements will be depreciated using a straight-line method over the estimated useful life of the assets or the term of the related leases, whichever is shorter. All other equipment and furniture assets will be depreciated using a straight-line method over the estimated useful life of the assets.

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, 2010, the Company owned a website costing $3,230 and had an estimated useful life of three (3) years. Depreciation expenses related to website development costs during the years ended November 30, 2010 and 2009 were $874 and $90, respectively.

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.

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 repped content 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 time as the amounts are collected and the allocation order can be reasonably determined.

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.

Recently Adopted and Recently Enacted Accounting Pronouncements

In August 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-05, Measuring Liabilities at Fair Value, or ASU 2010-05, which amends ASC 820 to provide clarification of a circumstance in which a quoted price in an active market for an identical liability is not available. A reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities (or similar liabilities when traded as assets) and/or 2) a valuation technique that is consistent with the principles of ASC 820. ASU 2010-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability. The adoption did not have a material impact on our financial statements.

NOTE 3 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company 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.

NOTE 4 – ACCRUED LIABILITIES

Accrued liabilities by major classification are as follows:

	November 30, 2010		November 30, 2009
Accrued interest	$	30,095	$	-
Accrued consulting fees		75,000		-
Accrued legal fees		3,075		-
Accrued payroll taxes		27,800		-
Other accrued expenses		5,844		5,620

Total accrued liabilities	$	141,814	$	5,620

Accrued interest represents interest on a long term loan from a related party, and the interest on a short term note payable from an external party. Accrued consulting fees are for script writers and a film consultant. Other accrued expenses consist of accrued rent and related office parking.

Based on the CEO’s employment agreement, the Company accrues $30,000 per month for gross wages, and pays these wages at various times as capital becomes available. During the year ended November 30, 2010, accrued wages of $82,000 were personally forgiven by the CEO; as a result, this amount was recorded to contributed services in the accompanying statement of stockholders’ deficit. The CEO’s compensation is required to be reported on IRS Form W-2; however, no such reporting has been made by the Company. Payroll taxes are accrued for the CEO’s salary to properly reflect the amount of expense related to his compensation. In the event the Company is audited by the IRS, it will likely be liable for certain taxes, penalties and interest.

NOTE 5 - BORROWINGS

Related Party

Since July 2009, a member of the Control Group of the Company has made advances on behalf of the Company and purchased predecessor convertible debt totaling $305,430, as of November 30, 2009. During the quarter ended February 28, 2010, $55,268 of convertible debt acquired by this related party, as part of the recapitalization and change in ownership, was converted into 5,900,000 shares of common stock for full satisfaction of the liability. During the quarter ended February 28, 2010, the holder advanced the Company $88,199 in working capital for operations. Cumulative advances as of February 28, 2010 were established in a convertible note totaling $338,362. Such note is convertible into 4,229,512 common shares, based on $0.08 share price. The convertible note bears interest at 6% per annum, and is due February 28, 2015. During the quarter ended May 31, 2010, the holder advanced the Company an additional $75,383, for which an additional note agreement was effected. Such note is convertible into 1,507,660 common shares based on a fixed conversion price of $0.05, interest at 6% per annum, due May 31, 2015. During the quarter ended August 31, 2010, the holder advanced the Company an additional $33,511, for which an additional note agreement was effected, which dictates that the note will be convertible into 837,775 common shares based on a fixed conversion price of $0.04, interest at 6% per annum, due August 31, 2015. During the quarter ended November 30, 2010, the holder advanced the Company an additional $5,805, for which an additional note was effected, which indicates that the note will be convertible at a fixed conversion price of $0.03 per share, interest at 6% per annum. The notes are to be immediately convertible; no beneficial conversion feature was deemed applicable at the date of issuance. As of November 30, 2010, the Company has accrued $27,679 of interest expense related to these notes.

Other

On July 13, 2010, the Company borrowed $60,000 from a shareholder for use as operating capital. Both parties entered into a loan agreement which makes the Company liable for repayment of the principal and 15% annual interest within a twelve month period following the execution of the loan agreement. During the year ended November 30, 2010, the Company incurred and accrued for $2,416 interest expense related to this short term debt. As of November 30, 2010, the Company has accrued $2,416 of interest expense related to this note.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Month-to-Month Office Space Rental

On September 1, 2009, the Company entered into a sublease for its office space with Charter Consulting Group, Inc.(owned by a member of the Control Group of the Company). The sublease is month to month at a rate of $4,818. Included within the sublease is various other office expenses including phone equipment rental and phone services, among others. In addition, the Company paid a security deposit of $9,636.

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 is to create and write our movies. Per the terms of his engagement, Mr. Proft received 200,000 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 year ended November 30, 2010, accrued cash and stock compensation totaling $15,000 and $40,000, respectively, was due to Mr. Proft and included in accrued liabilities on the accompanying balance sheet. This agreement terminated in August 2010.

On December 17, 2009, the Company entered into an employment agreement with our President and 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. The President and CEO was also awarded options to purchase common stock. See Note 8. During the current year, the President and CEO voluntarily forgave $82,000 of accrued wages, which the Company recorded to equity as contributed services.

On May 20, 2010, we entered into an agreement with a law firm for legal representation pertaining to general corporate and entertainment matters. Per this agreement, fees for services performed would be billed at 65 percent of the firm’s normal rates until November 1, 2010; then the fees revert back to normal rates. The remainder of the firm’s fees are payable in the form of warrants to purchase up to 2.5 percent of the issued and outstanding common stock of the Company (determined on a fully diluted basis). During June 2010, the Company decided not to proceed with this agreement, and pay full rates instead. Accrued legal fees due the law firm as of November 30, 2010, were $14,272.

On October 5, 2010, the Company entered into a guarantee agreement with Carjacked Entertainment, LLC (“CE”) and Carjacked Investments, LLC (“CEI”) in which the Company guaranteed repayment of up to $250,000 of the investment provided by the financier - Wet Rose Productions, LLC. As consideration, the Company would receive a $50,000 “guarantor fee” upon close of production funding for the motion picture – Carjacked. Funding closed on December 23, 2010, subsequent to the Company’s fiscal year end. In connection therewith, the Company will receive $50,000 of compensation for the guarantee, which will be recorded as a stand-ready obligation liability until the contingency is resolved over time.

During November, the first of three $25,000 payments was received by the Company and recorded as revenue. The remaining payments were earned subsequent to the Company’s fiscal year end.

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 agreement is one year; however the Company would have the option to extend this option agreement for two additional years. As consideration, the Company would pay the Writer $2,000 for the initial term, and $3,500 and $7,500 for each respective extended year chosen. If the Company exercises this Option, the Writer would be paid a purchase price of between $40,000 and $100,000, depending on the final production budget for the motion picture. 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.

Salary Reporting and Related Taxes

During the year ended November 30, 2010, the Company paid certain accrued salaries to its CEO which were not reported on Internal Revenue Service Form W-2. In the event the Company is audited by federal or state agencies, certain assessments for taxes, penalties and interest may be assessed. In connection therewith, the Company has accrued approximately $27,000 for possible assessments.

NOTE 7 - STOCKHOLDERS’ DEFICIT

Capital Stock

The Company has two classes of stock:

●	Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding; and,
●	Common stock, $0.001 par value, 140,000,000 shares authorized, 80,106,077 and 68,530,952 shares issued and outstanding as of November 30, 2010 and 2009, respectively.

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.

Reorganization and Settlement of Liabilities with Common Stock

In June 2009, the Company issued 4,800,000 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 $0.24 per share shortly after the extinguishment.

On August 5, 2009, the Control Group acquired or received 50,000,000 shares of common stock, as well as 6,000,000 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 5,900,000 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 200,000 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 $0.31.

On September 29 2009, the Company issued 100,000 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 $0.43 per share based on the closing stock price on the date of issuance.

On October 6, 2009, the Company issued 100,000 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 $0.42 per share based on the closing stock price on the date of issuance.

On October 16, 2009, the Company issued 2,000 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 $0.29 per share-based on the closing stock price on the date of issuance.

On November 25, 2009, the Company issued 100,000 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 $0.10 per share-based on the closing stock price on the date of issuance.

In December 2009, upon Board approval the Company issued 152,000 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 $0.10 on the date of issuance.

In January 2010, upon Board approval the Company issued 50,000 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 $0.18 on the date of issuance.

Also during January 2010, upon Board approval, the Company issued 20,000 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 $0.07 on the date of issuance.

On February 22, 2010, upon Board approval, the Company issued 145,000 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 $0.11 on the date of issuance.

On February 20, 2010, 1,000,000 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 166,667 shares of common stock based on the market price on of the Company’s common stock on the preceding day of $0.09 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 375,000 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 $0.08 on the date of issuance.

On May 27, 2010, upon Board approval, the Company issued 78,125 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 $0.03 on the date of issuance.

On June 23, 2010, upon Board approval, the Company issued 600,000 shares to five individuals / entities for consulting services rendered to the Company. One consultant, who received 100,000 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 $0.04 on the date of issuance.

On September 1, 2010, upon Board approval, the Company issued 1,255,000 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 $0.03 per share on the date of issuance.

Sale of Common Stock

On November 30, 2009, the Company sold 1,000,000 shares to an individual pursuant to a subscription agreement at a price of $0.20 per share. The cash was received on December 1, 2009. The subscription agreement executed by the Company called for an adjustment (“Ratchet”) after six months based on the market price of the Company’s common stock. If, on that date, the Company’s closing bid price for the immediately preceding trading day was less than $0.20 per share, then the Company was required to issue additional shares of its common stock to the purchaser to offset the purchaser’s total investment. Initially, since the number of shares under the ratchet provision was indeterminate and based on a fixed dollar amount to the market price at the end of six months, management recorded the common stock as a liability in the accompanying balance sheet at November 30, 2009. Upon the adjustment date of May 31, 2010, the additional amount of shares required to be issued were determinable and thus were reclassified from liability to equity as the adjustment provision expired. Based on a closing common stock price of $0.05 on the next business day, the Company computed an additional 3,000,000 shares of common stock a required to be issued to the individual. The Company issued such shares on or about October 10, 2010.

NOTE 8 – EMPLOYEE STOCK OPTIONS

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 20,000,000 shares at an exercise price of $0.07 per share. The options shall vest equally over a five-year period (4,000,000 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	$	0.06

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. Through November 30, 2010, stock compensation of $228,667 of this had been recorded as expense. Future compensation expense is $240,000, annually through 2014. As of November 30, 2010, approximately 3,831,732 options are fully vested and are exercisable by the CEO.

NOTE 9 – FILM PRODUCTION COSTS

The Company capitalizes film production costs in accordance with Statement of Position ASC 926 – “Entertainment”, formerly ("SOP") 00-2, Accounting by Producers or Distributors of Films. 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. Related expenses incurred during the year ended November 30, 2010, totaling $95,250, have been recorded to script costs in non-current assets.

NOTE 10– MEDIA DISTRIBUTION AGREEMENTS - RELATED PARTIES

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 currently entitled “Slam I Am” (aka “A Funny Dirty Stoner Movie") written by Kevin Sepe and Tom Alexander and produced by Kevin Sepe, the Control Group member that funded the Company’s working capital as discussed in Note 6. Current release date is February 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.

Carjacked

Carjacked Entertainment, LLC (the “LLC”) was formed to produce Carjacked, a feature film. 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. Also see below.

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, and is to receive an additional $50,000 upon close of production funding. The first payment was received during November 2010. Close of production funding occurred on December 23, 2010.

NOTE 11 - DISCONTINUED OPERATIONS

The Company’s decision to discontinue the operations of its handbag business coincided with the Control Change which occurred at the beginning of June 2009. As a result, all financial data pertaining directly to the operations relative to the handbag business was collapsed with the net amount reported separately from the continuing operations. This collapsing effect was used to restate the financials for all periods presented. For the years ended November 30, 2010 and 2009, and the period from Inception to November, 2010, losses from discontinued operations were $0; $1,641,239; and $0, respectively.

NOTE 12 – INCOME TAXES

We have identified our U.S. Federal tax returns as our “major” tax jurisdiction, and our corporate offices are located in California. For year ending November 30, 2009, we filed a U.S. Federal tax return and U.S. State tax return. The Company has had losses to date, and therefore has paid no income taxes.

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 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, 2010, are approximately $1.6 million; the deferred tax asset is approximately $300,000. 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 $300,000.

The difference between the California statutory rate of approximately 8.83% and the actual provision rate is due to permanent difference required to arrive at taxable income. A full valuation allowance has been placed on 100% of the Company's deferred tax assets as it cannot be determined if the assets will be ultimately realized through future taxable income.

NOTE 13 - SUBSEQUENT EVENTS

Carjacked

On December 23, 2010, production funding for Carjacked was complete, thus triggering the guarantor credit of $50,000 due Mass Hysteria. This credit was recorded as income during the first quarter of 2011.

Stock Issuance

On February 18, 2011, the Company’s Board approved the issuance of 420,000 shares of common stock to a professional services firm for legal services rendered. Based on the closing market price that day, the Company recorded stock compensation of $12,900 related to this transaction.

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 23,000,000 shares, subject to adjustment.

Capital Raise

During February 2011, the Company entered into two 8 percent convertible promissory notes to raise $55,000 in operating capital. Both notes mature on November 28, 2011, and any unpaid principal or interest at that date accrues interest at the default rate of 22 percent annually. Each note may be converted into common stock, at 59 percent of market price with a floor of $0.001(par value), at any time after 180 days from the issuance date until the maturity date. These notes contain a “ratchet” provision, which protects the note holders in case the issuer sells stock during the term of the notes for a per-share price which is less than the effective conversion rate. Due to this ratchet provision, and with the floor at par value, the Company could be potentially liable for in-excess of 52 million shares to be issued. As a result, these notes are considered to contain a derivative instrument associated with the embedded conversion feature.

In accordance with ASC 815, Derivatives and Hedging, formerly EITF 07-05, Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock, the Company calculated the fair market value of this conversion feature on the date of the note signing, using the Black Scholes Model, and reduced the note by this amount, recognizing expense immediately. Using the Black Scholes pricing model variables listed below, the fair market value of the conversion feature on the date of note issuance was $45,388, leaving a notes payable balance of approximately $7,112 at the date of the note issuances. The Company will amortize the debt discount over the life of the note using the effective interest method.

Variable	February 23, 2011
Annual dividend yield	0.00
Expected life (in years)	0.760
Risk-free interest rate	0.26%
Expected volatility	96%
Stock price	$0.0200
Strike price (59% of market)	$0.0118

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On September 29, 2009, we dismissed Malone & Bailey, P.C. as our independent registered public accounting firm. Our Board of Directors approved such termination on September 29, 2009 due to the change of control and business plan as described in more detail in our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 10, 2009 Our Board of Directors participated in and approved the decision to change our independent registered public accounting firm. Other than the disclosure of uncertainty regarding the ability for us to continue as a going concern which was included in our accountant’s report on the financial statements for the past two years, Malone & Bailey’s reports on our financial statements for the years ended November 30, 2008 and 2007 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. For the two most recent fiscal years and any subsequent interim period through Malone & Bailey’s termination on September 29, 2009, Malone & Bailey disclosed the uncertainty regarding the ability of Michael Lambert, Inc. to continue as a going concern in its accountant’s report on the financial statements. In connection with the audit and review of our financial statements through September 29, 2009, there were no disagreements on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with Malone & Bailey’s opinion to the subject matter of the disagreement. In connection with the audited financial statements of the Company for the years ended November 30, 2008 and 2007 and interim unaudited financial statements through September 29, 2009, there have been no reportable events with us as set forth in Item 304(a)(1)(v) of Regulation S-K.

On September 29, 2009, our Board appointed dbbmckennon, certified public accountants (“dbbm”) as the our new independent registered public accounting firm. The decision to engage dbbm was approved by our Board of Directors on September 29, 2009. Prior to September 29, 2009, we did not consult with dbbm regarding (1) the application of accounting principles to a specified transactions, (2) the type of audit opinion that might be rendered on our financial statements, (3) written or oral advice was provided that would be an important factor considered by us in reaching a decision as to an accounting, auditing or financial reporting issues, or (4) any matter that was the subject of a disagreement between usand its predecessor auditor as described in Item 304(a)(1)(iv) or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

As of November 30, 2010, we are in the process of assessing the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments. Based on our preliminary evaluation, we concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to the size of the deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

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 November 30, 2009 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.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

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.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our sole executive officer and director and his age as of March 15, 2011 is as follows:

NAME	AGE	POSITION

Daniel Grodnik	59	Chairman, President, Chief Executive Officer, Chief Financial Officer and Secretary

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

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. Currently, he is in prep on “Carjacked” starring Ron Perlman and Rose McGowan and “The Courier” an action film directed by Russell Mulcahy. Mr. Grodnik is in post-production on a romantic comedy entitled, “Overnight” and in development on 4 new theatrical films with two-time Academy Award winner for Best Picture, (“The Godfather” and “Million Dollar Baby”) Albert S. Ruddy. Mr. Grodnik’s recent films include his third original movie for the Sci-Fi Channel entitled “Yeti” which aired in November and received the second highest rating of the year for a Saturday night premiere. Also, in November 2008, Mr. Grodnik and Mr. Ruddy’s film, “Camille” starring Sienna Miller (“Factory Girl”) and James Franco (“Spiderman III”), began its theatrical release. In May of 2008, the Sci-Fi Channel aired, “Never Cry Werewolf” which was the third highest rated Sunday Night movie in the history of the channel. Additionally, Mr. Grodnik currently has a thriller in release entitled “Hallowed Ground”, written and directed by David Benullo (“Around the World in 80 Days”) and starring Jaime Alexander (“Rest Stop”) and a Danielle Steel adaptation for Newline entitled “Safe Harbour”, starring Melissa Gilbert. Mr. Grodnik was nominated for a Golden Globe for best picture on his production of “Bobby”. The movie 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.

In 2006, Mr. Grodnik went to Little Rock, Arkansas with actress Ashley Judd to produce a coming-of-age drama entitled, “Come Early Morning.” The movie had its’ North American premiere at the Sundance Film Festival.

In 2003-2004 Mr. Grodnik partnered with Franchise Pictures founder Andrew Stevens to produce several action and sci-fi titles that included; “Pursued” for Lion’s Gate starring Christian Slater, “Blood Angels” starring Lorenzo Lamas for Screen Media and Universal Pictures, “Sea Ghost,” “Deep Evil,” “Glass Trap,” and “Blue Demon” for Blockbuster Entertainment.

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 Bulletin Board, 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:

●

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

●

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;

●

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

●

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, 2010, 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 at 5555 Melrose Avenue, Swanson, Building, Suite 400, Hollywood, CA 90038.

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, 2010, 2009 and 2008 in all capacities for the accounts of our executive, including the Chief Executive Officer and Chief Financial Officer:

Name and Principal Position	Year	Salary ($)			Bonus ($)		Stock Awards ($)			Option Awards ($)			All Other Compensation ($)		Total ($)

Daniel Grodnik Chairman, President Chief Executive Officer and Chief Financial Officer and Secretary	2010	$	360,000	(1)		-0-		-0-		$	228,667	(2)		-0-	$	588,667
	2009	$	150,000			-0-	$	1,500	(3)		-0-			-0-	$	151,500
	2008		-0-			-0-		-0-			-0-			-0-		-0-

(1)	$62,930 of this amount was accrued as salary but not paid. In addition, Mr. Grodnk forgave $82,000 of his accrued and unpaid salary for the year ended November 30, 2010.

(2)

On December 17, 2009, the Company agreed to Mr. Grodnik an option award of 20,000,000 shares with exercise price of $0.07. Our stock price was $0.06 on December 17, 2009. The options vest equally (pro-rata per day) over a five year period. As such, 3,831,732 shares under such option vested as of November 30, 2010.

(3)	The stock award was valued at $0.0001 per share.

Grants of Plan-Based Awards

The following table sets forth information concerning the number of shares of common stock underlying restricted stock awards and stock options granted to the Named Executive Officers in the year ended November 30, 2010:

All Other

Stock

Awards:

All Other

Option

Awards:

Name

Grant Date

Approval Date

Estimated Future Payouts Under

Non-Equity

Incentive

Plan Awards

Estimated Future Payouts Under

Equity

Incentive

Plan Awards

Number of

Shares of Stock

Units

(#)

Number of

Securities

Underlying Options

(#) (1)

Exercise or

Base Price

of Option Awards

($/Sh) (2)

Grant Date

Fair Value of Stock and

Option Awards

(3)

Daniel Grodnik

12/17/2009

—

20,000,000

$0.07

$1,200,000

(1)	On December 17, 2009, pursuant to an employment agreement the Company agreed to grant Mr. Grodnik an option to purchase 20,000,000 shares of common stock . The options vest over equally (pro-rata per day) over a 5 year period until fully vested on December 17, 2014.

(2)	The exercise price is $0.07 per share.

(3)	Represents the grant date fair value of each equity award calculated in accordance with FAS 123R.

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, 2010.

Option Awards

Stock Awards

Name

Number of Securities

Underlying Unexercised

Options (#) Exercisable

Number of Securities

Underlying Unexercised

Options (#) Unexercisable

Option Exercise

Price ($)

Option

Expiration Date

Number of Shares

or Units of Stock That

Have Not Vested (#)

Market Value of Shares

or Units of Stock

That Have Not Vested

Daniel Grodnik

3,831,732

16,168,268

0.07

12/17/2016

(1)

—

(1)	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

3,831,732 shares under Daniel Grodnik’s option to purchase 20,000,000 shares vested in the year ended November 30, 2010. No stock options were exercised by any named executive officer in the year ended November 30, 2010.

Employment Agreements

On December 17, 2009, we entered into employment agreements with Daniel Grodnik pursuant to which we employ Mr. Grodnik as our Chief Executive Officer. 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 20,000,000 shares at an exercise price of $0.07 per share. The options shall 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 by shall 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.

Name		Potential Payment upon Termination
Daniel Grodnik		$5,000,000

Compensation of Directors

The following table sets forth the compensation paid to each director (other than compensation set forth under Executive Compensation) for services rendered during the fiscal year ended November 30, 2010.

	Fees Earned or
	Paid in	Stock	Option	All Other
Name	Cash	Awards ($)	Awards ($)	Compensation	Total ($)
Daniel Grodnik	--	--	--	--	--

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 our behalf the year ended November 30, 2010.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 7, 2011, certain information with respect to the beneficial ownership of the Company’s common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock, as well as by each of our current directors and executive officers and the directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock underlying options or warrants which are currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. Except as otherwise set forth below, the address is each person is 5555 Melrose Avenue, Swanson Building, Suite 400, Hollywood, CA 90038.

Name And Address	Number Of Shares Beneficially Owned				Percentage Owned (1)
5% Stockholders:
Michael Greenfield (2)		10,000,000		12.4		2%
Kevin Sepe (3)(4)		8,000,000		9.93		%
Gianna Sepe (3)		5,000,000		6.21		%
Seth Eber (3)		5,000,000		6.21		%
Directors and Officers:
Daniel Grodnik		20,720,563	(5)	24.02		%
All directors and officers as a group (1 person)		20,720,563	(5)	24.02		%

*Less than 1%.

(1)	Based upon 80,526,077 shares issued and outstanding on March 7, 2011.

(2)	The address is 8313 Fountain Avenue, #A, Los Angeles, CA 90069

(3)	The address is 1050 NE 91 Terrace, Miami Shores FL 33138.

(4)	Includes 5,000,000 shares held by Gianna Sepe, his daughter.

(5)	Includes 5,720,563 shares underlying presently exercisable options.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

On February 28, 2010, we issued a 6% convertible promissory note in the amount of $338,631 to Kevin Sepe, a significant stockholder. The note has a maturity date of May 31, 2015. The note is convertible into shares of our common stock at a fixed conversion price of $0.08 per share. The note aggregates advances previously made to us by this investor and such proceeds were used for working capital and general corporate purposes. The issuance was exempt under Section 4(2) of the Securities Act of 1933, as amended.

On May 31, 2010, we issued a 6% convertible promissory note in the amount of $75,383 to Kevin Sepe, a significant stockholder. The note has a maturity date of May 31, 2015. The note is convertible into shares of our common stock at a fixed conversion price of $0.05 per share. The proceeds were used for working capital and general corporate purposes. The issuance was exempt under Section 4(2) of the Securities Act of 1933, as amended.

On August 31, 2010, we issued a 6% convertible promissory note in the amount of $33,511.19 to Kevin Sepe, is also a significant stockholder. The note has a maturity date of August 31, 2015. The note is convertible into shares of our common stock at a fixed conversion price of $0.04 per share. The proceeds were used for working capital and general corporate purposes. The issuance was exempt under Section 4(2) of the Securities Act of 1933, as amended.

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 sole officer and director is the principal officer and controlling stockholder of Grodfilm Corp. In addition, our sole officer and director is the managing member of Carjacked Entertainment, LLC.

On December 2, 2010, we entered into a Motion Picture Distribution Agreement with In Cue, LLC pursuant to which we agreed to a division of proceeds received from Screen Media Ventures LLC related to distribution of the motion picture currently titled “Stonerville.” We will received 10% of the first $630,000 in proceeds received from Screen Media and 15% of any proceeds in excess of $630,000 while In Cue LLC will retain 90% and 85%, respectively. Additionally, we will be reimbursed up to a maximum of $10,000 in actual out-of-pocket expenses incurred in the distribution process. Kevin Sepe, one of our significant stockholders is a controlling member of In Cue, LLC.

We currently sublease our premises from Charter Consulting Group, Inc. Mr. Kevin Sepe, one of our significant shareholders is a controlling stockholder of Charter Consulting Group. Mr. Sepe is charging us the same rate being charged to Charter Consulting Group under the original lease.

Our sole officer and director 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 sole officer and director 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.

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. PRINCIPAL ACCOUNTING FEES AND SERVICES

Appointment of Auditors

Our Board of Directors has not yet selected independent accountants to audit our financial statements for the year ending November 30, 2011. dbbmckennon audited our consolidated financial statements for the fiscal years ended November 30, 2010 and 2009.

Audit Fees

dbbmckennon billed us $30,000 in fees for our 2010 annual and for the review of our quarterly financial statements in 2010. dbbmckennon billed $24,000 in fees for our 2009 annual audit.

Audit Related Fees

There were no fees for audit related services for the years ended November 30, 2010 and 2009.

Tax Fees

For the Company’s fiscal years ended November 30, 2010 and 2009, 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, 2010 and 2009.

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. 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

Exhibit No.		Description

3.1		Articles of Incorporation of Michael Lambert, Inc. (now known as Mass Hysteria Entertainment Company, Inc.), incorporated by reference to our Registration Statement on Form SB-2 filed on October 5, 2007.
3.2		Certificates of Correction to Articles of Incorporation of Michael Lambert, Inc. (now known as Mass Hysteria Entertainment Company, Inc.), incorporated by reference to our Registration Statement on Form SB-2 filed on October 5, 2007.
3.3		Articles of Amendment to Articles of Incorporation of Michael Lambert, Inc. (now known as Mass Hysteria Entertainment Company, Inc.), incorporated by reference to our Current Report on Form 8-K, filed on August 10, 2009.
3.4		Bylaws of Michael Lambert, Inc. (now known as Mass Hysteria Entertainment Company, Inc.), incorporated by reference to our Registration Statement on Form SB-2 filed on October 5, 2007.
4.1		Form of 6% Convertible Promissory Note.
4.2		Form of 8% Convertible Promissory Note.
10.1		Employment Agreement for Daniel Grodnik, incorporated by reference to our Annual Report on Form 10-K for the year ended November 30, 2009 filed on March 16, 2010.
10.2		Agreement with In Cue LLC dated December 1, 2010.
10.3		Guarantee Agreement.
23.1		Consent of dbbmckennon
31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

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 15, 2011

By:	/s/ Daniel Grodnik
	Daniel Grodnik
	President,, Chief Executive Officer, Chief Financial Officer, Chairman and Secretary (Principal Executive Officer and Principal Financial and 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.

Name	Title	Date
/s/ Daniel Grodnik	President, Chief Executive Officer, Chief Financial Officer	March 15, 2011
Daniel Grodnik	Chairman and Secretary (Principal Executive Officer and Principal Financial and Accounting Officer)

Nevada		20-3107499
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

Larger accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Fiscal 2009 (OTC Bulletin Board)	High Bid		Low Bid
Third quarter	$	0.99	$	0.10
Fourth quarter		0.76		0.08

Fiscal 2010 (OTC Bulletin Board)	High Bid		Low Bid
First quarter	$	0.325	$	0.050
Second quarter		0.108		0.030
Third quarter		0.050		0.025
Fourth quarter		0.040		0.022

	November 30, 2010			November 30, 2009

ASSETS

CURRENT ASSETS
Cash	$	780		$	160
Subscription receivable		-			200,000
Other receivable		2,797			-
Total current assets		3,577			200,160

Intangible assets, net		2,266			3,140
Film costs (Note 9)		95,250			-
Other assets		9,996			9,700
TOTAL ASSETS	$	111,089		$	213,000

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable	$	45,284		$	5,111
Accounts payable - related party		-			6,150
Accrued liabilities (Note 4)		141,814			5,620
Accrued payroll		62,930			-
Short-term debt (Note 5)		60,000			-
Common stock liability (Note 7)		-			200,000
Total current liabilities		310,028			216,881

Convertible notes due to related party (Note 5)		453,061			305,430
TOTAL LIABILITIES		763,089			522,311

COMMITMENTS AND CONTINGENCIES (Note 6)

STOCKHOLDERS'DEFICIT
Preferred stock, $0.001 par value; 10,000,000 authorized; none issued and outstanding		-			-
Common stock, $0.001 par value; 140,000,000 authorized; 80,106,077 and 68,530,952 issued and outstanding at November 30, 2010 and 2009, respectively		80,106			68,531
Additional paid-in capital		5,281,226			4,589,816
Deficit accumulated during the development stage		(6,013,332	)		(4,967,658	)
Total Stockholders' Deficit		(652,000	)		(309,311	)
Total Liabilities and Stockholders' Deficit	$	111,089		$	213,000

PART I

ITEM 1.	Business	1
ITEM 1A.	Risk Factors	7
ITEM 1B.	Unresolved Staff Comments	7
ITEM 2.	Properties	7
ITEM 3.	Legal Proceedings	7
ITEM 4.	(Removed and Reserved)	7

PART II

ITEM 5.	Market For Registrant’s Common Equity, Related Stockholder Matters	7
ITEM 6.	Selected Financial Data	9
ITEM 7.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operation	9
ITEM 7A	Quantitative And Qualitative Disclosures About Market Risk	11
ITEM 8.	Financial Statements	12
ITEM 9.	Changes In And Disagreements With Accountants On Accounting And Financial Disclosure	27
ITEM 9A.	Controls And Procedures	27
ITEM 9B.	Other Information	28

PART III

ITEM 10.	Directors, Executive Officers And Corporate Governance	29
ITEM 11.	Executive Compensation	31
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management	33
ITEM 13.	Certain Relationships And Related Transactions, And Director Independence	33
ITEM 14.	Principal Accounting Fees And Services	34

PART IV

ITEM 15.	Exhibits, Financial Statements Schedules	35

SIGNATURES		36

		For the period from Inception to November 30,		Year ended November 30,			Year ended November 30,
		2010		2010			2009
REVENUES

Production revenue	$	25,000		$	25,000		$	-

OPERATING EXPENSES
General and administrative, including $357,467; $149,510; and $506,977 of stock based compensation for the years ended November 30, 2010 and 2009, and for the period from inception to November 30, 2010, respectively.		1,421,011			1,026,022			394,989
Sales and marketing		30,573			18,782			11,791
TOTAL OPERATING EXPENSES		1,451,584			1,044,804			406,780

OPERATING LOSS		(1,426,584	)		(1,019,804	)		(406,780	)

OTHER INCOME AND EXPENSE
Interest income		225			225
Interest expense		(30,095	)		(26,095	)		(4,000	)

NET LOSS FROM CONTINUING OPERATIONS		(1,456,454	)		(1,045,674	)		(410,780	)

Loss from discontinued operations		-			-			(516,282	)
Loss on extinguishment of debt from discontinued operations		-			-			(1,124,957	)

NET LOSS	$	(1,456,454	)	$	(1,045,674	)	$	(2,052,019	)

WEIGHTED AVERAGE NUMBER OF BASIC & DILUTED COMMON SHARES OUTSTANDING					76,404,361			31,340,233

NET LOSS PER COMMON SHARE
Basic and diluted - continuing operations				$	(0.01	)	$	(0.01	)
Basic and diluted - discontinued operations				$	-		$	(0.05	)

	Common Stock							Deficit Accumulated			Total Stockholders' Deficit
	Number of Shares		Amount		Additional Paid-in Capital			during the Development Stage			Total Stockholders' Deficit

Balances at November 30, 2008		11,593,500		11,594		2,814,900			(2,915,639	)		(89,145	)

Common shares issued for services		1,620,000		1,620		268,380			-			270,000
Imputed rent expense		-		-		4,773			-			4,773
Common shares issued to extinguish debt of predecessors		10,800,000		10,800		1,141,200			-			1,152,000
Shares issued for services on August 5, 2009 at $0.24 per share		1,000,000		1,000		239,000			-			240,000
Shares issued in recapitalization		42,015,452		42,015		(42,015	)		-			-

Contribution to capital		-		-		7,500			-			7,500
Shares issued for services:
on August 24, 2009 at $0.31 per share		200,000		200		61,800			-			62,000
on September 29, 2009 at $0.43 per share		100,000		100		42,900			-			43,000
on October 6, 2009 at $0.42 per share		100,000		100		41,900			-			42,000
on October 16, 2009 at $0.29 per share		2,000		2		578			-			580
on November 29, 2009 at $0.10 per share		100,000		100		9,900						10,000
Stock issued for cash, November 30, 2009 at $0.20 per share (Note 6)		1,000,000		1,000		(1,000	)		-			-
Net loss		-		-		-			(2,052,019	)		(2,052,019	)
Balances at November 30, 2009		68,530,952	$	68,531	$	4,589,816		$	(4,967,658	)	$	(309,311	)

Shares issued for services:
on December 10, 2009 at $0.10 per share		152,000		152		15,048			-			15,200
on January 10, 2010 at $0.07 per share		20,000		20		1,380			-			1,400
on January 28, 2010 at $0.18 per share		50,000		50		8,950			-			9,000
on February 22, 2010 at $0.11 per share		145,000		145		15,805			-			15,950
on March 9, 2010 at $0.08 per share		375,000		375		29,625			-			30,000
on May 27, 2010 at $0.032 per share		78,125		78		2,422			-			2,500
on June 23, 2010 at $0.04 per share		600,000		600		23,400			-			24,000
on September 1, 2010 at $0.03 per share		1,255,000		1,255		37,745			-			39,000
Share based compensation related to options issued granted during December 2009		-		-		228,667			-			228,667
Common shares issued to extinguish debt acquired from predecessors by Control Group member		5,900,000		5,900		49,368			-			55,268
On October 12, 2010, shares issued as committed on June 1, 2010		3,000,000		3,000		197,000			-			200,000
Contributed services		-		-		82,000			-			82,000
Net loss		-		-		-			(1,045,674	)		(1,045,674	)
Balances at November 30, 2010		80,106,077	$	80,106	$	5,281,226		$	(6,013,332	)	$	(652,000	)

	Period from Inception to November 30, 2010			Year ended November 30, 2010			Year ended November 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,456,454	)	$	(1,045,674	)	$	(2,052,019	)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation		874			874			90
Stock based compensation		515,047			357,467			667,580
Loss on extinguishment of debt					-			1,124,957
Gain on settlement of convertible notes		(14,000	)		-			-
Contributed services		89,500			82,000			7,500
Imputed rent expense					-			4,773
Changes in operating assets and liabilities:
Accounts receivable		(2,797	)		(2,797	)		-
Prepaid expenses		(295	)		(295	)		-
Inventory		-			-			4,401
Accounts payable		61,908			40,173			2,329
Accounts payable related party		(6,150			(6,150	)		-
Accrued liabilities		133,242			144,123			3,131
Bank credit line		(1,156			-			-
NET CASH USED IN OPERATING ACTIVITIES		(680,281	)		(430,279	)		(237,258	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles		-			-			(3,230	)
Film costs		(32,000	)		(32,000	)		-
Other assets		-			-			(9,700	)
NET CASH USED IN INVESTING ACTIVITIES		(32,000	)		(32,000	)		(12,930)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible notes to related parties		453,061			202,899			250,162
Proceeds from issuance of short-term debt		60,000			60,000			-
Proceeds from sale of common stock		200,000			200,000			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		713,061			462,899			250,162

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS		780			620			(26	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		-			160			186
CASH AND CASH EQUIVALENTS, ENDING OF YEAR	$	780		$	780		$	160

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	-		$	-		$	-
Cash paid for income taxes	$	800		$	800		$	-
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTNG AND FINANCING ACTIVITIES
Conversion of notes	$	73,268		$	55,268		$	18,000
Cash received under subscription receivable	$	200,000		$	-		$	200,000
Stock-based compensation to be issued, included in accrued liabilities, for script development	$	40,000		$	40,000		$	-
Common stock issued in lieu of cash payment for script costs	$	23,250		$	23,250		$	-

	MASS HYSTERIA ENTERTAINMENT, INC.

	By:
	Name:	Dan Gronik
	Title:	President

Principal Amount: $12,500.00	Issue Date: February 23, 2011
Purchase Price: $12,500.00

MASS HYSTERIA ENTERTAINMENT, INC.

By:
	DANIEL GRODNIK
	Chief Executive Officer

		METACOMET COMPANY, LLC
		8515 Costa Verde Boulevard, Suite 907
		San Diego, CA 92122
		Attention: Certificate Delivery
		(858) 412-4156

		Date of Conversion: _____________
		Applicable Conversion Price: $____________
		Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: ______________
		Amount of Principal Balance Due remaining Under the Note after this conversion: ______________

METACOMET COMPANY, LLC

By:
Name:	Frank Marshik
Title:	Manager
Date:
8515 Costa Verde Boulevard, Suite 907
San Diego, CA 92122

A)	Ninety percent (90%) of all receipts from distribution throughout the Territory.

B)	At such point as gross receipts equal six hundred and thirty thousand dollars ($630,000.00) In Cue shall retain eighty-five percent (85%) of all gross receipts thereafter.


By:	/s/ Daniel Grodnik
	Daniel Grodnik
	President, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer)