Note 4 - Accrued Liabilities

9 Months Ended

Aug. 31, 2014

NOTE 4 – ACCRUED LIABILITIES

Accrued liabilities by major classification are as follows:

	August 31, 2014	November 30, 2013
Accrued interest	$ 97,636	$ 182,305
Accrued consulting fees	91,000	91,000
Accrued payroll taxes on CEO’s compensation	161,461	134,461
Accrued auto allowances due CEO	28,837	36,000
Total accrued liabilities	$ 378,934	$ 443,766

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

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

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

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

Accrued payroll is as follows:

	August 31, 2014	November 30, 2013
Accrued and unpaid compensation due CEO	$ 491,704	$ 624,732
Accrued and unpaid compensation due CFO	118,125	118,125
Total accrued payroll	$ 609,829	$ 742,857

Mass Hysteria Entertainment Company, Inc. 10-Q