-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GiSo/DibIO+RbcibEMYR2i306qxfIa1Zj1Vfbr1uVyFnX6oDqwHh4t0NtalZcRRv WGrxuD9eUX7r/6gW7TpMLw== 0001093094-03-000106.txt : 20030814 0001093094-03-000106.hdr.sgml : 20030814 20030814141937 ACCESSION NUMBER: 0001093094-03-000106 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KINGS ROAD ENTERTAINMENT INC CENTRAL INDEX KEY: 0000773588 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 953587522 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14234 FILM NUMBER: 03846156 BUSINESS ADDRESS: STREET 1: 3489 WEST CAHUENGA BLVD STREET 2: SUITE D CITY: HOLLYWOOD STATE: CA ZIP: 90068 BUSINESS PHONE: (323) 512-5045 MAIL ADDRESS: STREET 1: 1901 AVE OF THE STARS STREET 2: SUITE 1545 CITY: LOS ANGELES STATE: CA ZIP: 90067 10QSB/A 1 kren10qajanuary2002.txt AMENDED JANUARY 31, 2002 FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB/A-1 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended January 31, 2002 Commission File No. 0-14234 KINGS ROAD ENTERTAINMENT, INC. (Name of small business issuer in its charter) Delaware 95-3587522 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 5743 NW 66th Ave., Parkland, FL 33067-1330 (Address of principal executive office) Issuer's telephone number: (212) 709-8111 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] As of March 15, 2002, the Registrant had 3,664,390 shares of its common stock outstanding. Transitional Small Business Disclosure Format: YES [_] NO [X] 1 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF JAN. 31, 2002 ---------------------- (Restated) CURRENT ASSETS Cash $ 85,036 Accounts receivable 79,740 ------------------- Total Current Assets 164,776 ------------------- FIXED ASSETS, NET 1,491 ------------------- OTHER ASSETS Film Development Costs, net 29,305 Other Assets 148 Advance to shareholder 28,000 ------------------- Total Other Assets 57,453 ------------------- TOTAL ASSETS $ 223,720 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 137,067 Note Payable 19,000 Note Payable - Related Party 7,220 Accrued Expenses 145,413 Deferred Revenue 35,200 ------------------- Total Current Liabilities 343,900 ------------------- TOTAL LIABILITIES 343,900 ------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common Stock, $.01 par value, 12,000,000 shares authorized, 3,664,390 shares issued and outstanding 36,644 Additional Paid-In Capital 24,906,655 Deficit (25,063,479) ------------------- TOTAL STOCKHOLDERS' EQUITY (120,180) ------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 223,720 =========== The accompanying notes are an integral part of these consolidated financial statements.
2 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED JAN. 31, ENDED JAN. 31, 2002 2001 2002 2001 -------------------------------- -------------------------------- (Restated) (Restated) REVENUES Feature Films $ 291,198 $ 296,248 $ 520,741 $1,267,442 Theatrical Admissions - 274,292 - 285,586 --------------------------------- --------------------------------- 291,198 570,540 520,741 1,553,028 COSTS AND EXPENSES Costs Related to Revenue - - - 266,191 Development Cost Write-down 118,617 - 118,617 - Selling Expenses 50,593 - 61,627 35,585 General & Administrative Expenses 79,502 571,888 569,234 1,089,379 Impairment of Goodwill - - 67,965 - --------------------------------- --------------------------------- 248,712 571,888 817,443 1,391,155 --------------------------------- --------------------------------- OPERATING PROFIT/(LOSS) 42,486 (1,348) (296,702) 161,873 OTHER INCOME/(EXPENSE) Interest Expense (339) (438) (1,017) (1,004) Other Income - - 2,484 - Interest Income - 135 38 7,802 Gain From Cancellation of Indebtedness - - - 126,313 --------------------------------- --------------------------------- (339) (303) 1,505 133,111 --------------------------------- --------------------------------- INCOME/(LOSS) BEFORE DISCONTINUED OPERATIONS AND INCOME TAXES 42,147 (1,651) (295,197) 294,984 Gain (Loss) from Discontinued Operations 149 11,766 (71,298) 94,200 --------------------------------- --------------------------------- INCOME (LOSS) BEFORE INCOME TAXES 42,296 10,115 (366,495) 389,184 --------------------------------- --------------------------------- Provision for Income Taxes - - - 1,600 --------------------------------- --------------------------------- NET INCOME/(LOSS) $ 42,296 $ 10,115 $(366,495) $ 390,784 ========== ========== ========== ========== Net (Loss) Per Share - Discontinued Operations $ 0.00 $ 0.00 $ (0.02) $ (0.03) ========== ========== ========== ========== Net Income/(Loss) Per Share - Basic and Diluted $ 0.01 $ 0.00 $ (0.10) $ 0.11 ========== ========== ========== ========== Weighted Average Number of Common Shares - Basic and Diluted 3,664,390 3,487,390 3,664,390 3,487,390 ========== ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
3 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JANUARY 31, 2002 2001 -------------------------------------- (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net (Loss)/Income $ (366,495) $ 390,784 Adjustments to reconcile Net (Loss)/Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 1,072 281,528 Development Cost Write-down 118,617 - Impairment of Goodwill 67,965 - Gain from Cancellation of Indebtedness - (126,313) Changes in Assets and Liabilities: Decrease/(Increase) in Accounts Receivable 140,536 (206,537) Decrease/(Increase) in Inventory 34,071 (215,890) Decrease/(Increase) in Prepaid Expenses 99,673 (184,871) Increase in Other Assets - (41,440) (Decrease)/Increase in Accounts Payable (27,669) 71,810 (Decrease)/Increase in Accrued Expenses (8,495) 6,827 Increase in Deferred Revenue 32,900 8,030 -------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 92,175 (16,072) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of Other Investments - (10,000) Additions to Film Development Costs (21,604) - Theater Production Costs - (37,385) Disposal of Fixed Assets - 6,514 -------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (21,604) (40,871) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of Note - 39,000 Repayment of Note (40,155) (20,000) -------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES (40,155) 19,000 -------------------------------------- NET INCREASE/(DECREASE) IN CASH 30,416 (37,943) CASH AT BEGINNING OF PERIOD 54,620 85,159 -------------------------------------- CASH AT END OF PERIOD $ 85,036 $ 47,216 =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
4 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements. Accordingly, they do not include all of the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended April 30, 2001 included in the Kings Road Entertainment, Inc. ("Company" or "Registrant") annual report on Form 10-KSB for that period. In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position at January 31, 2002 and the results of its operations and cash flows for the nine month periods ended January 31, 2002 and 2001 have been included. The results of operations for the three and nine month periods ended January 31, 2002 are not necessarily indicative of the results to be expected for the full fiscal year ended April 30, 2002. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended April 30, 2001. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Certain amounts for the three and nine month periods ended January 31, 2001 have been reclassified to conform to the presentation of the January 31, 2002 amounts. The reclassifications have no effect on reported net income. The Company's financial statements have been prepared assuming the Company will continue as a going concern. As described in Item 2 - Liquidity and Capital Resources, the Company does currently have sufficient capital resources to fund its operations for more than approximately 6 months. If the Company does not raise additional capital, increase its revenues or sell certain of its assets, the Company will, in all likelihood, be forced to significantly reduce its operations or liquidate. NOTE B - FILM COSTS Film costs consist of film projects actively in development at January 31, 2002. NOTE C - NOTES PAYABLE In connection with the acquisition of Animal Town, Inc. ("Animal Town") on August 31, 2000, the Company issued a note to the seller of the common stock of Animal Town in the principal amount of $39,000, bearing interest at 7% per annum with an initial maturity date of November 30, 2000. The outstanding balance of the note at January 31, 2002 was $20,908 consisting of principal of $19,000 plus accrued and unpaid interest of $1,908. As of January 31, 2002, the Company was in default of the note. See Note E - Litigation and Contingencies. 5 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE D - INCOME TAXES A reconciliation of the provision for income taxes to the expected income tax expense at the statutory federal tax rate of 34% is as follows:
Nine Months Nine Months Ended Ended Jan. 31, 2002 Jan. 31, 2001 ------------- ------------- Computed Expected Tax at Statutory Rate $(124,608) $ 132,867 State and Local Taxes - 1,600 Valuation Allowance 124,608 (132,867) ------------- ------------- $ - $ 1,600 ============= =============
For federal income tax purposes, the Company has available net operating loss carryforwards to offset current and future income tax liabilities. NOTE E - LITIGATION AND CONTINGENCIES On April 30, 2001, Kelrom Agency, Inc. filed suit against the Company and KRTR, Inc. seeking payment of $5,968 related to theater advertising for the play "End of the World Party." The Company does not believe it has any liability in connection with such advertising and intends to defend itself vigorously. On August 15, 2001, Sensory Lighting and Sound, Inc. filed suit against the Company and KRTR, Inc. seeking payment of $14,080 for lighting equipment rental in connection with the play "End of the World Party." The Company does not believe it has any liability in connection with such equipment rental and intends to defend itself vigorously. On October 10, 2001, Kenneth Kolsbunn filed suit against the Company in Superior Court of California, County of Sonoma for collection of the note described in Note C - Notes Payable. A default judgment was entered against the Company on February 26, 2002 in the amount of $24,281.36. On April 9, 2002, the Company entered into a settlement agreement with Mr. Kolsbunn resolving all claims between the parties. Under the terms of the settlement, the Company is required to pay Mr. Kolsbunn $10,000, $5,000 of which was paid on April 18, 2002. The balance is payable upon Mr. Kolsbunn satisfying various conditions of the settlement agreement. The Company has been advised of a lawsuit filed against the Company by the Theatrical and Television Motion Picture Special Payments Fund seeking the payment of residuals under a collective bargaining agreement with the American Federation of Musicians. The Company has not yet been served and, therefore, does not have sufficient information regarding the specifics of such claim(s). The Company believes it has previously satisfied all of its obligations with respect to the American Federation Musicians collective bargaining agreement and intends to vigorously defend itself. The Company cannot yet assess the potential impact of such claim(s) on its results of operations. 6 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE E - LITIGATION AND CONTINGENCIES (CONTINUED) In the ordinary course of business, the Company has or may become involved in disputes or litigation. On the basis of information available to it, management believes such contingencies will not have a materially adverse effect on the Company's financial position or results of operations. NOTE F - DISCONTINUED OPERATIONS During the three months ended October 31, 2001, the Company elected to cease all operations pertaining to its Animal Town subsidiary. Subsequent to its purchase by the Company, Animal Town's operations proved to be unprofitable and the Company was unable to determine a reasonable scenario under which Animal Town could become a profitable entity. Therefore, as of January 31, 2002, Animal Town's operations have been classified as discontinued and have been segregated from the Company's viable operations. At the date of discontinuance, Animal Town had assets totaling $34,584 and liabilities of $57,329. The following is a summary of the loss from discontinued operations resulting from the elimination of the operations of Animal Town. The financial statements have been retroactively stated to reflect this event. No tax benefit has been attributed to the discontinued operations.
THREE MONTHS NINE MONTHS ENDED JAN. 31, ENDED JAN. 31, 2002 2001 2002 2001 --------------------------------- --------------------------------- REVENUES Catalog Sales $ 22,350 $ 394,010 $ 81,642 $ 486,760 --------------------------------- -------------------------------- 22,350 394,010 81,642 486,760 COSTS AND EXPENSES Costs Related to Revenue 9,686 300,890 49,223 425,608 General & Administrative Expenses 12,515 81,354 103,717 155,352 -------------------------------- ---------------- --------------- 22,201 382,244 152,940 580,960 -------------------------------- ---------------- --------------- NET LOSS FROM DISCONTINUED OPERATIONS $ 149 $ 11,766 $ (71,298) $ (94,200) ========= ========= ========= =========
7 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE G - CORRECTION OF ERROR Subsequent to the original issuance of the January 31, 2002 consolidated financial statements, the Company determined that revenue was not properly recognized along with associated costs primarily related to residual obligations. The Company also incorrectly accounted for the consolidation of a subsidiary. Correction of these errors had the following effect on the previously reported Assets, Liabilities and Net Loss as of and for the nine months ended October 31, 2001 and has an equal understatement of the retained deficit as of January 31, 2002.
Originally As Reported Restated Difference ------------------- ------------------ ----------------- Cash $ 84,874 $ 85,036 $ 143 (2) Accounts receivable - 79,740 79,740 (1) Other assets - 148 148 (2) Advance to shareholder - 28,000 28,000 (2) Accounts payable 90,430 137,067 45,312 (1) 1,325 (2) Accrued expenses 12,747 145,413 131,566 (1) 1,100 (2) Related party payable 7,843 7,220 623 (2) Accumulated deficit 25,042,705 25,063,479 10,971 (1) 9,803 (2) Net loss (206,278) (366,495) 130,887 (1) 58,833 (2) (29,503) (3) Loss per share $ (0.08) $ (0.10) $ (0.02) (4) --------------------
(1) Relates to the proper recognition of revenue and related receivables along with costs associated with related residual obligations for the year ended April 30, 2001 and the nine months ended January 31, 2002. (2) Relates to the proper consolidation of the Company's subsidiary, Kings Road Productions (Europe) GmbH. (3) Erroneous reporting of gain on sale of marketable securities. (4) Loss per share increased by $0.02 per share. 8 Item 2 - Management's Discussion and Analysis of Financial Position and Results of Operations Recent Developments Subsequent to the fiscal year ended April 30, 1995, the Company has not produced any new films and has derived its film revenues almost exclusively from the exploitation of films produced in prior years. The Company continues to fund and develop motion picture projects, with the intention of either producing the motion picture, establishing a partnership or joint venture with another film production company to develop and/or produce the project or an outright sale of the project. On August 31, 2000, the Company completed the acquisition of the common stock of Animal Town, Inc. ("Animal Town"), a privately-held direct mail order catalogue company that markets children's toys, games, crafts and books specializing in cooperative play and development, animal protection and environmental awareness. The Company acquired all of the outstanding common stock of Animal Town in exchange for a combination of approximately $12,000 in cash, a note payable in the amount of $39,000 to the seller of the common stock and the issuance of 77,000 shares of the Company's common stock, the exact number of shares determined based upon a debt-for-equity exchange offer made to then existing Animal Town creditors that commenced on September 29, 2000 and was concluded on January 29, 2001. Due to recurring operating losses since the Company's acquisition of Animal Town and current market conditions, the Company has discontinued the operations of Animal Town. Results of Operations The Three Months Ended January 31, 2002 vs. the Three Months Ended January 31, 2001 For the quarter ended January 31, 2002, feature film revenues were $291,198 as compared to $296,248 for the quarter ended January 31, 2001. The decrease of $5,050 results primarily from decreased royalties on the Company's feature film library. Costs and expenses increased to $248,712 for the quarter ended January 31, 2002 as compared to $571,888 during the quarter ended January 31, 2001. This decrease of $323,176 is due to the decrease in operations, specifically the play. The Company's had a gain from discontinued operations for $149 during the quarter ended January 31, 2002 as compared to $11,766 gain during the quarter ended January 31, 2001. This increase results from the fact that the operations of Animal Town were discontinued during the quarter ended October 31, 2001. The Company had net income of $42,296 for the quarter ended January 31, 2002 as compared to net income of $10,115 for the quarter ended January 31, 2001. During the quarters ended January 31, 2002 and 2001, the Company had no provision for income taxes. 9 The Nine Months Ended January 31, 2002 vs. the Nine Months Ended January 31, 2001 For the nine months ended January 31, 2002, feature film revenues were $520,741 as compared to $1,267,442 for the nine months ended January 31, 2001. The decrease of increase of $659,125 principally related to (i) the sale of the Company's rights to "Ticker", a feature film project that had been developed by the Company during the nine months ended January 31, 2001 and (ii) decreased domestic and foreign distribution revenues from feature films in the Company's film library during the nine months ended January 31, 2002. Costs related to revenue were $0 for the nine months ended January 31, 2002 as compared to $266,191 during the nine months ended January 31, 2001 reflecting the full amortization of costs associated with the Company film library. The Company recorded a write-down in development costs of $118,617 that the Company does not expect to recover. Selling expenses increased to $61,627 during the nine months ended January 31, 2002 as compared to $35,585 during the nine months ended January 31, 2001 reflecting the Company's efforts to offset the significant decrease in the Company's revenues. General and administrative costs decreased to $569,234 for the nine months ended January 31, 2002 from $1,089,379 for the nine months ended January 31, 2001. The decrease resulted principally from general expenses from the play decreasing and the discontinued operations. Interest income decreased significantly to $38 for the nine months ended January 31, 2002 versus $7,802 for the nine months ended January 31, 2001 reflecting a decrease in cash and cash equivalents held during the respective periods. During the nine months ended January 31, 2002, the Company recorded an expense of $67,965 related to the impairment of goodwill in connection with the Company's acquisition of Animal Town. During the nine months ended January 31, 2001, the Company recorded a gain of $126,313 from the cancellation of certain indebtedness relating to the Company's investment in Immediate Entertainment Group ("Immediate"). The Company's loss from discontinued operations, decreased to $71,298 during the nine months ended January 31, 2002 as compared to income of $94,200 during the nine months ended January 31, 2001. This decrease results primarily from the significantly reduced operations of Animal Town during the nine months ended January 31, 2002 as compared to the same period last year. The Company had a net loss of $366,495 for the nine months ended January 31, 2002 as compared to net income of $390,784 for the nine months ended January 31, 2001. The decrease in net income resulted primarily from (i) significantly decreased revenues during the nine months ended January 31, 2002, as discussed above, (ii) the expense of $67,965 related to the impairment of good will in connection with the Company's acquisition of Animal Town and (iii) a gain from the cancellation of certain indebtedness relating to the Immediate transaction during the nine months ended January 31, 2001, for which there was no comparable gain during the nine months ended January 31, 2002. During the nine months ended January 31, 2002 and 2000, the Company had no significant provision for income taxes. 10 Liquidity and Capital Resources The Company's principal source of working capital during the three and nine month periods ended January 31, 2002 was motion picture royalty income. The Company does not currently have sufficient capital to fund its operations, including its commitment to "The Flying Aces" described below under Future Commitments, for more than approximately 6 months. If the Company fails to raise additional capital, increase revenues or sell certain of its assets, the Company will, in all likelihood, be forced to significantly reduce its operations or liquidate. For the nine months ended January 31, 2002, the Company's net cash flow provided by operating activities was $92,175 compared to net cash out flow of $16,072 for the comparable nine month prior year period. At January 31, 2002, the Company had cash of $85,036 as compared to $47,216 at January 31, 2001. Future Commitments The Company has committed to approximately $320,000 in future payments related to a German language documentary series entitled "The Flying Aces." The Company has paid $89,500 of its commitment through January 31, 2002. The Company does not currently have sufficient capital to fund the balance of its commitment. Forward-Looking Statements The foregoing discussion, as well as the other sections of this Quarterly Report on Form 10-QSB, contains forward-looking statements that reflect the Company's current views with respect to future events and financial results. Forward-looking statements usually include the verbs "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "understands" and other verbs suggesting uncertainty. The Company reminds shareholders that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors which could cause the actual results to differ materially from the forward-looking statements. Potential factors that could affect forward-looking statements include, among other things, the Company's ability to identify, produce and complete film projects that are successful in the marketplace, to arrange financing, distribution and promotion for these projects on favorable terms in various markets and to attract and retain qualified personnel. Item 3 - Controls and Procedures In order to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis, the Company has formalized its disclosure controls and procedures. The Company's principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Exchange Act Rules 13a-14(c) and 15d-14(c), as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (and its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. Since the Evaluation Date, there have not been any significant changes in the internal controls of the Company, or in other factors that could significantly affect these controls subsequent to the Evaluation Date. 11 PART II - OTHER INFORMATION Item 1 - Legal Proceedings Kelrom Agency, Inc. v. Kings Road Entertainment Inc., et al. ------------------------------------------------------------- On April 30, 2001, Kelrom Agency, Inc. filed suit against the Company and KRTR, Inc. with the Civil Court of the City of New York. Case no. (or Index) 013294 CVN 2001, seeking payment of $5,968 related to theater advertising for the play "End of the World Party." This suit was subsequently settled for the amount of $ 2,500, released and discharged on November 13, 2002. On February 15, 2003, subsequent to the period covered by this report, a Stipulation of Discontinuance was filed. Sensory Lighting and Sound, Inc. v. Kings Road Entertainment Inc., et al. ------------------------------------------------------------------------- On August 15, 2001, Sensory Lighting and Sound, Inc. filed suit against the Company and KRTR, Inc. with the Civil Court of the City of New York. case no. 026893 CVN 2001 seeking payment of $14,080 for lighting equipment rental in connection with the play "End of the World Party." This suit was subsequently settled for the amount of $ 7,500, released and discharged on December 6, 2002. On December 16, 2002, subsequent to the period covered by this report, a Stipulation of Discontinuance was filed. Kennetch Kolsbunn v. Kings Road Entertainment, Inc. --------------------------------------------------- On October 10, 2001, Kenneth Kolsbunn filed suit against the Company in Superior Court of California, County of Sonoma; for collection of a note payable. A default judgment was entered against the Company on February 26, 2002 to the amount of $24,281.36. On 9 April 2002, the Company entered into a settlement agreement with Mr. Kolsbunn resolving all claims between the parties. Under the terms of the settlement, the Company was required to pay Mr. Kolsbunn $10,000, $5,000 of which was paid on April 18, 2002. The balance was subsequently paid upon Mr. Kolsbunn satisfying various conditions of the settlement agreement. The Company is not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on the Company's financial position or results of operations. 12 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-B) 3.1 Restated Certificate of Incorporation of Registrant. (1) 3.2 Bylaws of Registrant. (2) 10.1 1998 Stock Option Plan (1) 21 Subsidiaries of Registrant (3) 99.1** Section 302 certification by the Chief Executive Officer 99.2** Section 302 certification by the Chief Financial Officer 99.3** Section 906 certification -------------- (1) Incorporated by reference to Form 10-KSB for the fiscal year ended April 30, 1998. (2) Incorporated by reference to Form 10-K for the fiscal year ended April 30, 1988. (3) Incorporated by reference to Form 10-KSB for the fiscal year ended April 30, 2001 ** Filed Herewith (b) Forms 8-K On March 29, 2002, the Company filed a Form 8-K reporting under Item 5 thereof that Michael Berresheim resigned as the Company's Chairman and Chief Executive Officer. Geraldine Blecker replaced Mr. Berresheim as Chief Executive Officer. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KINGS ROAD ENTERTAINMENT, INC. Date: August 14, 2003 /S/ Geraldine Blecker ------------------------------- By: Geraldine Blecker Its: Chief Executive Officer Date: August 13, 2004 /S/ H. Martin DeFrank ------------------------------- By: H. Martin DeFrank Its: Chief Financial Officer 14 EX-99 3 ceocert.txt EXHIBIT 99.1 302 CERTIFICATION (CEO) KINGS ROAD ENTERTAINMENT, INC. A Delaware corporation CERTIFICATION OF CHIEF EXECUTIVE OFFICER Section 302 Certification I, Geraldine Blecker, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of GK Intelligent Systems, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2003 /S/ Geraldine Blecker ------------------------------- By: Geraldine Blecker Its: Chief Executive Officer EX-99 4 cfocert.txt EXHIBIT 99.2 - 302 CERTIFICATION (CFO) KINGS ROAD ENTERTAINMENT, INC. A Delaware corporation CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER Section 302 Certification I, H. Martin DeFrank, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of GK Intelligent Systems, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 14, 2003 /S/ H. Martin DeFrank ------------------------------- By: H. Martin DeFrank Its: Chief Financial Officer EX-99 5 crt906jan2002.txt EXHIBIT 99.3 - 906 CERTIFICATION KINGS ROAD ENTERTAINMENT, INC. A Delaware corporation CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Periodic Report of Kings Road Entertainment, Inc. (the "Company") on Form 10-QSB for the year ended January 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Geraldine Blecker, Chief Executive Officer, and I, H. Martin DeFrank, President and Chief Financial Officer, certify, pursuant to 18 U.S.C. ss.ss. 1350, as adopted pursuant to ss.ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 14, 2003 /S/ Geraldine Blecker ------------------------------- By: Geraldine Blecker Its: Chief Executive Officer Date: August 14, 2003 /S/ H. Martin DeFrank ------------------------------- By: H. Martin DeFrank Its: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----