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| MHYS.PK > SEC Filings for MHYS.PK > Form 10-Q on 4-Nov-2009 | All Recent SEC Filings |
4-Nov-2009
Quarterly Report
CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q (THIS "FORM 10-Q"), CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF MICHAEL LAMBERT, INC. ("THE COMPANY", "MLI", "WE", "US" OR "OUR") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-Q, UNLESS ANOTHER DATE IS STATED, ARE TO AUGUST 31, 2009.
Michael Lambert, Inc. was incorporated in Nevada on November 2, 2005. Up until August 5, 2009, the Company manufactured handbags. We produced only 613 handbags from inception to May 31, 2009 and no other clothing accessories. We only sold our products under the brand "Michael Lambert" and only sold our products at two independently owned clothing stores in the San Antonio, Texas area. We manufactured the handbags, which were hand-sewn by a third party, Fuerza Unida, a sewing cooperative in San Antonio, Texas consisting of minority women.
On August 5, 2009 (the "Effective Date"), pursuant to the terms of a Stock Purchase Agreement, Daniel Grodnik and affiliated parties purchased a total of 7,984,548 shares of our issued and outstanding common stock. This constituted a majority control of the Company. In addition to the shares purchased, the Company also issued 42,015,452 shares to Daniel Grodnik and certain affiliated parties in connection with the Change of Control. The total of 50,000,000 shares issued to Daniel Grodnik and the affiliated parties represents 75.72% of the shares of outstanding common stock of the Company at the time of transfer.
In connection with the Change of Control, the Company has changed our name to Mass Hysteria Entertainment Company, Inc. and also changed our business plan. Mass Hysteria Entertainment Comany, Inc. ("MHe") is an innovative motion picture studio that produces branded young adult film content for theatrical, DVD, and television distribution managed by the former Chairman/CEO of National Lampoon, Inc. MHe's plan is to produce a minimum of three theatrical films a year that appeal specifically to the youth market.
Plan of Operations For The Next Twelve Months
Mass Hysteria Entertainment is a development stage company at a time of great change in the entertainment business. Like much of corporate America, the entertainment sector is currently going through an upheaval. The motion picture business has had four significant revenue streams (theatrical, home video, cable and broadcast) since the early 1980's. Today, home video is in decline and new profit centers are opening up such as video-on-demand and internet portals that rely on micro-transactions. Mass Hysteria Entertainment is endeavoring to be a company at the forefront of creating new revenue streams as they relate to the motion picture experience. Over the next twelve months, Mass Hysteria will be creating movies that will take advantage of traditional revenue streams that are still viable, and at the same time, identifying those micro-transactions that will define new media's involvement in the film business such as downloading applications to smart phones that will allow the theater-goer to "participate" with the on-screen experience. Mass Hysteria is working with filmmakers who have realized great success such as producer Albert Ruddy (two Academy Awards for best picture, The Godfather and Million Dollar Baby), writer Pat Proft (Police Academy, Hot Shots, Naked Gun, and Scary Movie) and also also with executives from the video game and social networking sectors. Mass Hysteria Entertainment's plan is to combine these individual entertainment experiences and destinations into an alternative theatrical experience for the youth audience.
Results of Operation for the Three Months Ended August 31, 2009 Compared to the Three Months Ended August 31, 2008
We did not have any sales revenues or related costs of sales for the three month periods ended August 31, 2009, or August 31, 2008, other than those related to the discontinued operations (handbag company). We recognized $1,388,276 net loss from discontinued operations during the three months ended August 31, 2009 vs. $22,696 in net losses from discontinued operations during the three months ended August 31, 2008. The lack of sales in current period is a direct reflection of the change of control and introducing a new focus and business plan. As the new Company meets its business plan goals, we expect to generate revenue in the future.
For the three months ended August 31, 2009, we had general and administrative expenses of $99,915, selling expenses of $590, and interest expense of $376. For the three months ended August 31, 2008, all expenses incurred were for the handbag business which has since been discontinued. The general and administrative, selling, and interest expenses were a result of expenses incurred relative to the change in control and overall business focus to the film and entertainment industry.
We had a net loss from continuing operations of $100,881, and a net loss from discontinued operations of $1,388,276 for the three months ended August 31, 2009, compared to a net loss from continuing operations of $0, and discontinued operations of $22,696 for the three months ended August 31, 2008, an increase in total net loss of $1,466,461 from the prior period. The increase in net loss was mainly attributable to the $99,915 in general and administrative expenses incurred for the new business focus, and the $1,388,276 loss from discontinued operations due primarily to extinguishment of prior debt.
Liquidity and Capital Resources
We had total assets of $3,204 as of August 31, 2009, including $64 of prepaid webhosting fees and $3,140 of fixed assets (website), net accumulated amortization of $90.
We had total liabilities of $214,315 as of August 31, 2009, consisting of current liabilities, which included $34,563 of accounts payable; $30,088 of accrued liabilities; $1,156 of bank credit line payable; and $73,268 of related party debt. We had long-term liabilities including a related party loan payable of $75,240.
We had negative working capital of $139,011, a total shareholders' deficit of $211,111 as of August 31, 2009 and an accumulated deficit as of August 31, 2009 of $4,712,378.
We had $70,006 in net cash used in operating activities for the nine months ended August 31, 2009, which included $1,796,739 in net loss, offset by $510,000 in shares issued for services; $1,144,000 loss on the extinguishment of debt; $63,157 in change in accounts payable and accrued liabilities, $4,401 of change in inventory; $(64) change in prepaids; $1,800 of imputed rent expense and $3,349 of imputed interest on debt.
We had $3,230 net cash used in investing activities to purchase a website.
We had $73,050 of net cash provided by financing activities for the nine months ended August 31, 2009, which included $89,032 in loans from stockholders, and $15,982 in repayments.
We depend to a great degree on the ability to attract external financing in order to conduct our business activities and in order that we have sufficient cash on hand to expand our operations. We are currently funded solely by our shareholders. We anticipate that our founders and shareholders will continue to support our operations and loan us additional funds on an as needed basis until such time as we can support our operations with revenues from our products, if ever.
If we are unable to raise additional capital from conventional sources, including increases in the Line of Credit and/or additional sales of additional 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.
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, may result in dilution to our shareholders. We cannot assure you, however, that financing will be available in amounts or on terms acceptable to us, or at all.
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