-----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, FPxmcbu/90bqbsEwsJsV6dojvPZaVD8cH4MYGRVXZKNyH9pFx6FxrZ94bPW91yXv mBpxgE/XA4gz7VtwEvwitg== 0001093094-04-000103.txt : 20040716 0001093094-04-000103.hdr.sgml : 20040716 20040715183707 ACCESSION NUMBER: 0001093094-04-000103 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030430 FILED AS OF DATE: 20040716 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: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14234 FILM NUMBER: 04916668 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 10KSB/A 1 kren10k43003.txt FORM 10-KSB/A 04/30/03 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB/A Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended April 30, 2003 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.) 447 B Doheny Drive, Beverly Hills, CA 90210 (Address of principal executive office) Issuer's telephone number: 310-278 9975 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.01 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 [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] State issuer's revenues for its most recent fiscal year: $ 548,944 As of February 10, 2004, the aggregate market value of the voting stock held by non-affiliates (based on the average of the closing bid and ask prices of $ 0.08 as reported on the Pink Sheets) was $ 172,041, calculated on the basis of 2,150,523 shares held by non-affiliates according to the beneficial ownership tables. As of February 10, 2004 the registrant had 3,857,770 shares of its common stock outstanding. Documents Incorporated by Reference: None Transitional Small Business Disclosure Format: Yes [ ] No [X] CAUTIONARY STATEMENT Some of the statements contained in this Form 10-KSB for Kings Road Entertainment, Inc. ("Company") discuss future expectations, contain projections of results of operation or financial condition or state other "forward-looking" information. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. Important factors that may cause actual results to differ from projections include, for example: o the success or failure of management's efforts to implement their business strategy; o the ability of the Company to raise sufficient capital to meet operating requirements; o the uncertainty of consumer demand for our product; o the ability of the Company to protect its intellectual property rights; o the ability of the Company to compete with major established companies; o the effect of changing economic conditions; o the ability of the Company to attract and retain quality employees; and o other risks which may be described in future filings with the SEC. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include those set forth herein under "Risk Factors" as well as those noted in the documents incorporated herein by reference. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 2 PART I. ITEM 1. DESCRIPTION OF BUSINESS General Kings Road Entertainment, Inc. ("Company" or "Registrant"), incorporated in Delaware in 1980, has been engaged primarily in the development, financing and production of motion pictures for subsequent distribution in theaters, to pay, network and syndicated television, on home video, and in other ancillary media in the United States (the domestic market) and all other countries and territories of the world (the international market). The Company began active operations in January 1983 and released its first motion picture in 1984, All of Me, starring Steve Martin. There have been 17 additional pictures theatrically released in the domestic market and seven pictures have been released directly to the domestic home video or pay television market. Business Development Subsequent to the fiscal year end April 30, 1995, the Company has not produced any new films and has derived revenues principally from the exploitation of films produced prior to April 30, 1995. Following the death on October 4, 1996 of Mr. Stephen Friedman, the Company's founder and then Chairman of the Board of Directors and Chief Executive Officer, the Company has explored various business options. On November 6, 1998, pursuant to a Stock Acquisition Agreement, FAB Capital Corporation ("FAB"), MBO Music Verlag GmbH ("MBO"), West Union Leasing Ltd. ("West") and RAS Securities Corp. (collectively, the "Acquirers") purchased 962,360 shares of the Company's common stock (approximately 50.3% of the Company's then outstanding common stock) from the Estate of Stephen Friedman ("Estate") and Christopher Trunkey, the former Chief Financial Officer of the Company, for a purchase price of $2.35 per share or $2,261,546 in the aggregate. In addition, Music Action Ltd. ("MAC") agreed that it would, as soon as practicable but in any event within 120 days after November 6, 1998, make or cause to be made an offer to each of the Company's shareholders other than the Acquirers, the Estate and Mr. Trunkey, for the purchase of up to ninety percent (90%) of such shareholder's shares at a price of $2.35 per share ("Purchase Offer"). On February 3, 1999, the Stock Acquisition Agreement was amended to eliminate the Purchase Offer due to the fact that the Company's closing share price exceeded the $2.35 Purchase Offer price for the previous 10 trading days. On November 9, 1998, the Company acquired 2,393,235 shares of Immediate Entertainment Group, Inc. ("Immediate"), approximately 19% of Immediate's then outstanding common stock, for an aggregate of $2,300,000 in cash, 1,477,567 newly issued shares of the Company's common stock and a note payable to the sellers of the stock for $210,803 that was subsequently cancelled, by a revised agreement between the parties, in exchange for the cancellation of other obligations due from entities that were either affiliated or related to Immediate. Immediate was an entertainment holding company that provided services relating to music production, audio recording, CD manufacturing, film soundtrack and script development and operated a mail order music club. The Company, after carefully evaluating the carrying value of its investment in Immediate, decided to effect a complete write down during the year ended April 30, 2000. This decision was based upon Immediate's continued operating losses, changes in management, a "going concern" opinion rendered by Immediate's auditors, a material decrease in the trading price of Immediate's common stock and the subsequent filing of certain insolvency proceedings in Germany by the principal operating subsidiary of Immediate. The Company does not believe that it will recover any portion of the investment in Immediate. Animal Town On August 31, 2000, the Company completed the acquisition 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 3 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 existing Animal Town creditors that commenced on September 29, 2000 and was concluded on January 29, 2001. The Company also agreed, on an interim basis in advance of the closing of the acquisition, to provide a secured credit facility in order for Animal Town to immediately commence production of a Fall 2000 catalog. The credit facility to Animal Town was consummated, which allowed for the production, printing and subsequent distribution of over 600,000 catalogs, and was collateralized by Animal Town's entire inventory, trademarks and proprietary customer list. During October 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, Animal Town's operations were classified as discontinued and 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 Company created a reserve of $45,000 to cover any unforeseen claims against Animal Town. In April 2002 the Company decided to transfer all its rights and interest in Animal Town to a Florida corporation headed by a former Company Director and Company Officer, Mr. David Dube, in exchange for the assumption of Animal Town's liabilities by the new owner. The Company does not expect to undertake any future mail order catalogue sales operations. Pursuant to a subsequent agreement with Mr. Dube, on August 15, 2002, the Company transferred its ownership in Animal Town to Peak Partners, a Florida corporation headed by Mr. Dube. KRTR Inc. On August 10, 2000, the Company incorporated the wholly-owned subsidiary KRTR, Inc. with its registered office situated at 12. E. 33rd St., New York, NY 10016, for the purpose of theatre production. On August 31, 2000, the Company announced that it had entered into an agreement as Executive Producer for an Off-Broadway production of the play "End of the World Party." Originally planned as a joint venture with the play's producer, Timothy C. Raney, the joint-venture agreement was never finalized. Managing director was the Company's former Director, President and Chief Operating Officer, Mr. David Dube. The play opened November 9, 2000 and received a substantial number of favorable press reviews. On March 13, 2001 the Company announced that the play had conducted its final show after 17 previews and 124 performances. During October 2001, the Company elected to cease all operations pertaining to the stage play. All operations pertaining to the Play were classified as discontinued and were segregated from the Company's viable operations. At the date of discontinuance, KRTR had no assets and liabilities of $15,000. The Company created a reserve of $5,000 to cover any unforeseen claims related to the Play. The Company does not expect to undertake any future production activities with respect to live performances. KRTR has consequently been inactive since such operations ceased. KRTR is in the process of being dissolved, which should be finalized as soon as its 2003 tax returns have been filed with the State of New York. Kings Road Productions (Europe) GmbH On January 23, 2001, the Company along with Joachen Hasmanis entered into an agreement with the shareholders of Reboost GmbH, a German limited company ("Reboost"), under which the Company would purchase 50% of the shares of Reboost and Mr. Hasmanis would purchase 50% of the shares of Reboost. Pursuant to the terms of the agreement, the Company would purchase a total of 30,500 shares of Reboost as follows: 4 (a) 25,000 shares of Reboost from MBO Media GmbH (formerly MBO Musikverlags GmbH, a company owned and controlled by Michael Berresheim), for $20,200; (b) 5,000 shares of Reboost from Oliver Schwichtenberg, for $4,050; (c) 5,000 shares of Reboost from Erik Poth, for $4050; and (d) 500 shares of Reboost from Marc Werner for $400. Concurrently therewith the Company advanced the sum of $28,700 to Mr. Hasmanis (the "Hasmanis Advance"), who had entered into an agreement to purchase 35,500 shares of Reboost from Marc Werner. On April 6, 2001, Mr. Hasmanis, unable to repay the advance of $28,700, sold and transferred 35,500 shares of Reboost to MBO Media GmbH, at a sale price of $28,700, and MBO Media GmbH became responsible for the repayment of the Hasmanis advance. At the date of the transfer and sale by Mr. Hasmanis to MBO Media, MBO Media and Michael Berresheim, its principal shareholder and an officer and director of MBO Media, were collectively the single largest shareholders of the Company and assuming common control of Reboost, the Company accounted for Reboost as a 100% wholly-owned subsidiary of the Company. The name of the Reboost which was renamed Frame Spotting Media GmbH on February 5, 2001, was changed to Kings Road Productions (Europe) GmbH, with a registered office located at Gerauerstr. 58 a, D-64546 Moerfelden-Walldorf, Germany. On May 31, 2001, MBO Media having failed to repay the Hasmanis Advance, the Company agreed to accept the 35,500 shares of Reboost held by MBO Media in full satisfaction of the Hasmanis Advance, whereupon the Company owned of record 100% of the shares of Kings Road Productions (Europe) GmbH. Mr. Berresheim was the managing director of Kings Road Productions (Europe) GmbH (formerly Reboost) from its inception until his resignation on May 2, 2002, whereupon Ms. Geraldine Blecker took over this position. Although this subsidiary was acquired in order to qualify for European regional and national film subsidies and to be eligible for the various tax incentives accessible within the European film industry for the purposes of film and TV production, it continues to be a drain on the Company's reserves, since it has not produced anything since its inception. Shortly after the acquisition of this subsidiary it became clear that the Company could not support this subsidiary with the funds required to operate its European business. This was due to the considerable overspending involved in sustaining the US subsidiaries of Animal Town and KRTR. Management is currently taking steps to dissolve this entity. In early January 2004, Mr. Joachen Kley, who assumed the position of managing director in June 2003 was forced to resign due to a serious illness; Ms. Blecker reassumed this position and is now taking the necessary steps to recover all documentation in order to shut down this entity as soon as possible, either by outright sale or putting it into liquidation. Taking the current situation of the German film industry into account and this subsidiary's total lack of self-sufficiency, it is evident that it is unlikely to operate effectively in the near future and would otherwise continue to be a drain on the parent company. Development Development activities are a fundamental building block to the Company's future financial success and the existing properties, which the Company owns and exploits through prequels, sequels, and remakes are among the Company's most valuable assets. Financing The Company's strategy has been to fully finance its pictures by obtaining advances and guarantees from the licensing of distribution rights in its pictures and other investments from third parties. Once fully financed, the Company would primarily earn fees for its development and production services 5 plus contingent compensation based on the success of a film. If necessary, the Company may finance a portion of the cost of a film using internally generated funds or debt financing. Production Once a project is fully financed, the Company attempts to produce a picture at the lowest possible cost consistent with the quality that it seeks to achieve. The Company avoids the substantial overhead of major studios by maintaining only a small staff and by renting production facilities and engaging production staff only as required. The Company has generally produced pictures that have had a cost of production between $1,000,000 and $10,000,000 and did not exceed their budgeted cost. Although the Company's past production experience allows it certain control over production costs, production costs of motion pictures as an industry trend have substantially escalated in recent years. As of April 30, 2002, the Company has produced (or co-produced) 25 pictures, 18 of which were theatrically released in the domestic market and seven of which were released directly to video or pay television in the domestic market, as follows:
Title Principal Cast Release Date ---------------------------------------------------------------------------------------------------- All of Me Steve Martin, Lily Tomlin September 1984 Creator Peter O'Toole, Mariel Hemingway September 1985 Enemy Mine Dennis Quaid, Louis Gossett, Jr. December 1985 The Best of Times Robin Williams, Kurt Russell January 1986 Touch & Go Michael Keaton, Maria Conchita Alonso August 1986 Morgan Stewart's Coming Home Jon Cryer, Lynn Redgrave February 1987 The Big Easy Dennis Quaid, Ellen Barkin August 1987 In the Mood Patrick Dempsey, Beverly D'Angelo September 1987 Rent-A-Cop Burt Reynolds, Liza Minelli January 1988 The Night Before Keanu Reeves, Lori Louglin March 1988 My Best Friend is a Vampire Robert Sean Leonard, Cheryl Pollack May 1988 Jacknife Robert DeNiro, Ed Harris March 1989 Time Flies When You're Alive Paul Linke July 1989 Kickboxer Jean Claude Van Damme August 1989 Homer & Eddie Whoopi Goldberg, James Belushi December 1989 Blood of Heroes Rutger Hauer, Joan Chen February 1990 Kickboxer II Sasha Mitchell, Peter Boyle June 1991 Kickboxer III Sasha Mitchell June 1992 Paydirt Jeff Daniels, Catherine O'Hara August 1992 Knights Kris Kristofferson, Kathy Long November 1993 Brainsmasher Andrew Dice Clay, Teri Hatcher November 1993 Kickboxer IV Sasha Mitchell July 1994 The Stranger Kathy Long March 1995 The Redemption Mark Dacascos August 1995 The Haunted Heart Diane Ladd, Olympia Dukakis January 1996
6 The Company also has profit participation in the following theatrical film releases: o SLAP SHOT (1977). Starring Paul Newman and Michael Ontkean. Directed by George Roy Hill (famous for "Butch Cassidy and the Sundance Kid"). o FAST BREAK (1979). Starring Gabe Kaplan o LITTLE DARLINGS (1980). Starring Tatum O'Neal, Kristy McNichol and Matt Dillon o THE HAUNTED HEART (1996). Starring Diane Ladd, Olympia Dukakis o TICKER (2001) Starring Steven Seagal, Tom Sizemore, Dennis Hopper. Distribution Theatrical - The Company, when practical, has licensed its pictures to distributors for theatrical distribution in the domestic market. These distributors undertake all activities related to the distribution of the Company's motion pictures, including booking the picture into theaters, shipping prints and collecting film rentals. In certain cases, distributors have advanced the costs of advertising and publicizing the motion pictures and the manufacture of prints, however, in most cases, the Company has been required to fund or arrange funding for these costs itself. The Company's most recent pictures, however, were not theatrically released and were initially released on either home video or pay television. Home Video - Distribution into the home video market has occurred by licensing the home video rights for the Company's pictures to video distributors including HBO Video, Paramount Pictures, Live Home Video and Trimark Pictures. These video distributors, in turn, sell videocassettes to video retailers that rent or sell videocassettes to consumers. During the year ended April 30, 1999, the Company licensed the home video and DVD rights for the United States and Canada to 19 of its pictures to Trimark Pictures. All but one of the pictures had been previously released. Pay and Free Television - Distribution on pay television has occurred by licensing the pay television rights of its movies to cable television companies such as HBO/Cinemax, Showtime/The Movie Channel and various pay-per-view distributors. After licensing to pay television, the Company's films are then made available to television stations and basic cable outlets. The Company has licensed the free television rights to its films to companies such as ITC Entertainment and Worldvision Enterprises who, in turn, sell packages of films to television stations and basic cable services. Other Rights - Network television, non-theatrical, music publishing, soundtrack album, book publishing, and other miscellaneous rights in the Company's pictures have been, whenever possible, licensed by the Company to third parties. The revenue derived from the exercise of these other rights is generally not as significant as revenue derived from other sources. International Markets - The Company previously generated substantial revenues from the licensing of its pictures outside of the United States. However, in 1996 the Company sold the international distribution rights to most of its films to another company. For those pictures where international distribution rights are still owned by the Company, it licenses these pictures to local distributors on a territory-by-territory basis. Each license may cover one or more pictures and may include all rights or only certain rights. Sales, collections and delivery of product are handled by outside foreign sales organizations. Such organizations generally receive a commission based on a percentage of cash receipts. The Company believes that, based on its current and anticipated future level of film production, it is more efficient and cost effective to use outside foreign sales organizations rather than to maintain its own staff. Employees As of April 30, 2003, the Company employed three full-time employees. The Company is subject to the terms of certain industry-wide collective bargaining agreements with the Writers Guild of America, the Directors Guild of America and the Screen Actors Guild, among others, relating to its completed films and projects in development. The Company considers its employee relations to be satisfactory at present, although the renewal of these union contracts does not depend on the Company's activities or decisions 7 alone. Any strike, work stoppage or other labor disturbance may have a materially adverse effect on the production of motion pictures. (Please see Item 9 - Significant Employees.) Competition The motion picture industry is highly competitive. The Company faces intense competition from motion picture studios and numerous independent production companies, many of which have significantly greater financial resources than the Company. All of these companies compete for motion picture projects and talent and are producing motion pictures that compete for exhibition time at theaters, on television and on home video with pictures produced by the Company. Regulation and Governmental Approval Distribution rights to motion pictures are granted legal protection under the copyright laws of the United States and most foreign countries, which provide substantial civil and criminal sanctions for unauthorized duplication and exhibition of motion pictures. Motion pictures, musical works, sound recording, artwork, still photography and motion picture properties are each separate works subject to copyright under most copyright laws, including the United States Copyright Act of 1976, as amended. The Company has taken all appropriate and reasonable measures to obtain agreements from licensees to secure, protect and maintain copyright protection for all motion pictures under the laws of all applicable jurisdictions. The Classification and Rating Administration of the Motion Picture Association of America, an industry trade association, assigns ratings for age-group suitability for motion pictures. The Company submits its pictures for such ratings. Management's current policy is to produce or participate in the production of motion pictures that qualify for a rating no more restrictive than "R". Patents Trademarks and Other Intellectual Property The Company owns distribution rights in all North American territories (US & Canada) to all media in regard to 14 completed motion pictures and additionally retains ownership to all world rights in all media to one motion picture (Knights). In most cases, the Company owns all remake, prequel, sequel and TV film and series rights to all motion picture properties. Additionally, the Company has legal ownership of certain intellectual properties in the form of 10 screenplays and the corresponding underlying rights in all but two cases (The Magic Mountain, Leaving Cheyenne). Reports to Security Holders Copies of the Company's periodic reports, as filed with the Securities and Exchange Commission are available and can be accessed and downloaded via the internet at http://www.sec.gov/cgi-bin/srch-edgar, and simply typing in "Kings Road Entertainment." ITEM 2. DESCRIPTION OF PROPERTY On November 15, 2003, subsequent to the period covered by this report, the Company's registered office was changed from 5743 NW 66th Ave., Parkland, FL 33067-1330 to 447 B Doheny Drive, Beverly Hills, CA 90210. This property comprises yearly leased accommodation of approximately 500 square feet at a monthly rent of $1,400. On June 7, 2002, the Company established an additional office at 67 Wall St., Suite 2211, New York NY10005, at a monthly cost of $ 87, in order to centralize and expedite operations. The Company continues to maintain representation in London, England, and Frankfurt, Germany, in the form of agents, who utilize their own residences for work involving the Company. Since 1999, the Company maintains a 3-unit storage facility in Mission Hills, CA, rented from Stor America at an annual cost of $3,300. These units contain all the Company's film materials: i.e. reels, artwork, etc. 8 The Company does not own or intend to acquire production facilities and will rent any such facilities as needed on a film-by-film basis. The Company has not experienced any difficulty to date in obtaining such facilities. ITEM 3. 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 its wholly-owned subsidiary 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 a Stipulation of Discontinuance was filed. Demand for Investigation by Shareholders Action Committee On April 17, 2003, subsequent to the period covered by this report, the Company received a formal request by a Shareholders Action Committee for the Board to investigate a series of Related Party Transactions, which occurred during the period of November 1998 through April 2001. The Board appointed independent counsel to investigate these transactions and report to the Board. Rigel USA Inc. vs. Kings Road Entertainment, Inc. On July 31, 2003, subsequent to the date of this report, Rigel USA Inc., a California corporation, filed suit in the Superior Court of California, County of Los Angeles, case number BC300041, in which the plaintiff alleged causes of action against the Company, Micky Berresheim, and Ken Aguado for breach of contract, promissory estoppel, breach of implied in law contract, breach of implied in fact contract, declaratory relief and unfair competition. The plaintiff was seeking declaratory relief in excess of $5,000,000. On or about June 3, 2004, the Company entered into a Settlement Agreement with Rigel providing for the settlement of the matter and other possible claims of the parties. Pursuant to the terms of the Settlement Agreement Rigel and the Company have each agreed to release the other from any and all claims arising out of the lawsuit. Additionally, as part of the Settlement the Company and Rigel executed an Option and License Agreement, whereby in consideration of $10,000 paid by Rigel to the Company, the Company granted Rigel two exclusive options to use the word "Kickboxer" in the title of up to two live-action feature length motion pictures. The first option period shall commence on August 1, 2004 and end on October 31, 2005, and shall be exercised by commencement of principal photography and the payment of $90,000 to the Company. The option for the second motion picture shall commence on November 1, 2005 and end on July 31, 2006, and shall be exercised by the commencement of principal photography and the payment of $75,000 to the Company. Either or both motion pictures are produced, the Company shall also be entitled to 10% of net proceeds. Second Demand Letter from the Shareholders Action Committee Subsequent to the period covered by this report, the Company received a letter dated November 10, 2003 from the Chairman of the Kings Road Shareholders Action Committee inquiring as to the status of the Independent Counsel's investigation into a series of transactions that occurred during the period of November 1998 through April 2001. The inquiry as conducted by the independent counsel was proceeding at an unsatisfactory pace and therefore the Board removed this first independent counsel. The Board has recently appointed new independent counsel to investigate these transactions and report to the Board, the Shareholders Action Committee and the Shareholders. The inquiry is now proceeding at a satisfactory pace and the Board expects to receive a status report in the very near future. 9 Demand and Notice For Annual Meeting Subsequent to the period covered by this report, the Board received a Letter dated November 17, 2003, from counsel for Kings Road Enterprises Corp. (formerly Parkland AG) of which Mr. Michael Berresheim a former officer and director of the Company, is the principal shareholder, the President and a director. In this letter, Kings Road Enterprises Corp., the holder of 1,507,247 shares of common stock of the Company, claims that the Board has failed to comply with SEC filing regulations and announced his intention of calling a Special Shareholders Meeting in order to replace the Board of Directors. Mr. Berresheim through his counsel was advised that the Board was working with the Company's auditors in order to complete any delinquent reports and intended on holding an annual meeting of the Shareholders as soon as practical after the Company's period reports were current and the Company had received the report from the independent counsel pertaining to the Demand of the Shareholders Action Committee. Claim Against Michael Berresheim, Eric Ottens, et al. Subsequent to the period covered by this report, on or about April 1, 2004, the Company discovered that checks in an aggregate amount of $103,517, from Paramount Pictures Group ("Paramount") payable to Regal Productions c/o Kings Road Entertainment (belonging to the Company and Regal Productions) as part of its joint venture on the film "Fastbreak", were diverted, misappropriated and deposited into accounts of Kings Road Entertainment, Inc., (Florida Corporation P03000042628) and Kings Road to Fame, Inc. (Florida Corporation P03000043121) dba Regal Productions, corporations controlled by Messrs. Michael Berresheim and Eric Ottens. The Company's investigation has revealed that four checks sent by Paramount between April 1, 2003 and December 20, 2003, payable to Regal Productions c/o Kings Road Entertainment, were mailed to 5743 NW 66th Avenue, Parkland, Florida 33067, the previous address of the Company. Rather than contacting and forwarding these check to the Company the checks were deposited into accounts of Kings Road Entertainment, Inc. (Florida Corporation P03000042628) and Kings Road to Fame, Inc. (Florida Corporation P03000043121) dba Regal Productions, corporations controlled by Messrs. Berresheim and Ottens. The Company has learned that on April 11, 2003, Messrs. Berresheim and Ottens filed electronic Articles of Incorporation with the Secretary of State of Florida, to form Kings Road Entertainment, Inc. (Florida Corporation P03000042628) which Articles were processed on April 16, 2003. According to the Florida Secretary of State records, Mr. Berresheim was and is the President and a Director, and Mr. Ottens was and is the Secretary and a Director, of Kings Road Entertainment, Inc. (Florida Corporation P03000042628). On April 11, 2003, Messrs. Berresheim and Ottens also filed electronic Articles of Incorporation with the Secretary of State of Florida, to form Kings Road to Fame, Inc. (Florida Corporation P03000043121), which Articles were processed on April 17, 2003. According to the Florida Secretary of State records, Mr. Berresheim was and is the President and a Director, and Mr. Ottens was and is the Secretary and a Director, of Kings Road to Fame, Inc. (Florida Corporation P03000043121). On April 17, 2003, Kings Road to Fame, Inc. (Florida Corporation P03000043121) filed an application for registration of the use of the fictitious name "Kings Road Entertainment" and "Regal Productions." Between April 18, 2003 and December 20, 2003, without the knowledge or authorization of the Company, the 4 checks totaling $103,517, belonging to the Company and Regal Productions were diverted and deposited into accounts of Kings Road Entertainment, Inc., (Florida Corporation P03000042628) and Kings Road to Fame, Inc. (Florida Corporation P03000043121) dba Regal Productions. 10 On June 8, 2004, the Company made a demand upon Kings Road Entertainment, Inc., (Florida Corporation P03000042628) Kings Road to Fame, Inc. (Florida Corporation P03000043121) dba Regal Productions, and Messrs. Berresheim and Ottens, to pay the Company the sum of $103,517 plus interest and attorneys fees. The Company is currently in negotiations with counsel for Mr. Berresheim et al with regard to the repayment and settlement of this matter. If settlement cannot be reached according to terms acceptable to the Company, the Company intends to proceed as necessary to recover the amounts due. As of the date of this report no settlement has been reached. The Company is not aware of any 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's shareholders during the fiscal year covered by this report. PART II. ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock trades on the Pink Sheets under the symbol: "KREN.PK." The following table sets forth the high and low sales prices of the Company's common stock during the years ended April 30, 2002 and 2003:
Fiscal Year 2002 High Low ---------------- ---- --- First Quarter 0.135 0.11 Second Quarter 0.055 0.05 Third Quarter 0.15 0.07 Fourth Quarter 0.22 0.16 Fiscal Year 2003 High Low ---------------- ---- --- First Quarter 0.050 0.040 Second Quarter 0.050 0.020 Third Quarter 0.080 0.030 Fourth Quarter 0.100 0.040
Holders As of February 10, 2004, the Company had approximately 264 stockholders of record. In October 1999, the Company's common stock was de-listed from the NASDAQ SmallCap Market because the Company failed to meet certain minimum listing maintenance criteria set by NASDAQ and on September 17, 2002 the Company was delisted from the OTC Bulletin Board for failing to meet its eligibility requirements. The Company continues to fail in meeting the listing requirements. Dividends The Company has not declared any cash dividends with respect to its common stock, and does not intend to declare dividends in the foreseeable future. There are no material restrictions limiting, or that are likely to limit, the Company's ability to pay dividends on its securities. 11 Recent Sale of Unregistered Securities None. ITEM 6. 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 revenues almost exclusively from the exploitation of films produced prior to April 30, 1995. Following the death on October 4, 1996 of Mr. Stephen Friedman, the Company's founder and then Chairman of the Board of Directors and Chief Executive Officer, the Company explored various business options. 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 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 existing Animal Town creditors that commenced on September 29, 2000 and was concluded on January 29, 2001. The Company also agreed, on an interim basis in advance of the closing of the acquisition, to provide a secured credit facility in order for Animal Town to immediately commence production of a Fall 2000 catalog. The credit facility to Animal Town was consummated, which allowed for the production, printing and subsequent distribution of over 600,000 catalogs, and was collateralized by all of Animal Town's inventory, trademarks and proprietary customer list. In April 2002 the Company decided to transfer all its rights and interest in Animal Town to a Florida corporation headed by former Company Director and Company Officer Mr. David Dube in exchange for the assumption of Animal Town's liabilities by the new owner. The Company does not expect to undertake any future mail order catalogue sales operations. Pursuant to a subsequent agreement with Mr. Dube, on August 15, 2002, the Company transferred its share in Animal Town to Peak Partners, a Florida corporation headed by Mr. Dube. On August 31, 2000, the Company announced that it had entered into an agreement as Executive Producer for an Off-Broadway production of the play "End of the World Party". The play opened November 9, 2000 and received a substantial number of favorable press reviews. The Company announced on March 13, 2001 that the play conducted its final show after 17 previews and 124 performances. During October 2001, the Company elected to cease all operations pertaining to the stage play "End of the World Party" (the "Play"). Therefore, all operations pertaining to the Play were classified as discontinued and segregated from the Company's viable operations. At the date of discontinuance, the Play had no assets and liabilities of $15,000. The Company created a reserve of $5,000 to cover any unforeseen claims related to the Play. The Company does not expect to undertake any future production activities with respect to live performances. On May 31, 2001, MBO Media having failed to repay the Hasmanis Advance, the Company agreed to accept the 35,500 shares of Reboost held by MBO Media in full satisfaction of the Hasmanis Advance, whereupon the Company owned of record 100% of the shares of Kings Road Productions (Europe) GmbH. 12 Overview During the years ended April 30, 2003 and 2002, the Company did not produce any films. The Company's most recent picture, The Redemption, was completed in early 1995 and premiered on Home Box Office pay television in August 1995. The Company expects to increase its expenditures on development activities, including the purchase of books and screenplays, in order to obtain the types of projects that will attract third party financing and subsequently achieve commercial success. (See "Item 1. - Description of Business"). The Company's revenues have been substantially derived from the exploitation of the feature films it produces and are typically spread over a number of years. The Company attempts to generate revenues from theatrical distributors as soon as possible following completion of a picture. However, lower budget films, which the Company has produced most recently, often do not have a theatrical release. Revenues from home video are initially recognized when a film becomes available for release on videocassette, typically six months after the initial theatrical release or, when no theatrical release occurs, upon delivery of the film to the distributor. Revenues from pay and free television of a film are similarly recognized when a film becomes available for exploitation in those media, typically six to twenty-four months after the initial release. Some distribution contracts, however, may license more than one medium, a "multiple rights license". In this case, the full license fee is recognized when the film is exploited in the first available medium. Revenues from international markets generally follow the same pattern as revenues from the domestic market and may include multiple rights licenses as well. However, the Company sold the international distribution rights to most of its films to another company in 1996 and international revenues have substantially decreased due to this sale. As a result of these factors, the Company's revenues vary significantly each year depending on the number and the success of the release of films that become available in the various media during that fiscal year. Although the Company has not produced any films since 1995, the Company believes its present development activities, which may include the sale of certain projects to non-affiliated companies, as was the case with respect to the sale of "Ticker" during the year ended April 30, 2001, will achieve commercial success, while limiting the Company's front end exposure. In order to generate sufficient revenue to continue operations, the Company entered into two deals during the second half of 2002: 1) In June 2002, the Company sold all rights to its 4-picture martial arts film package to Moonstone Entertainment for $ 100,000. This sum represents approximately the income that this package would have generated over the next 5 years. 2) In September 2002, the Company entered into a sub-publishing agreement with Cherry Lane Music Publishing for an advance of $ 100,000 against future music royalties. This represents a 50/50 split of music publishing revenues. Cherry Lane is an efficient, international publisher and effectively able to administer the Company's music publishing catalogue (mainly consisting of film soundtracks) on a worldwide basis. As revenues have been recognized for each film, the Company has amortized the costs incurred in producing that film. The Company previously amortized film costs under the income forecast method as described in Financial Accounting Standards Board Statement No. 53 ("FAS 53"), which provided that film costs are amortized for a motion picture in the ratio of revenue earned in the current period to the Company's estimate of total revenues to be realized. The Company's management had periodically reviewed its estimates on a film-by-film basis and, when unamortized costs exceeded net realizable value for a film, that film's unamortized costs had been written down to net realizable value. During the year ended April 30, 2001, the Company adopted Financial Accounting Standards Board Statement No. 139, which, in effect, replaced FAS 53. Since the Company has not produced a motion picture film since 1995 and in light of the fact that all of the Company's previously produced motion picture films have been fully amortized, there was no effect to the Company in adopting this new accounting standard. Costs relating to projects that have been abandoned or sold before being produced have been charged to overhead in the year that event occurs. 13 Demand for Investigation by Shareholders Action Committee On April 17, 2003, the Company received a formal request by a Shareholders Action Committee for the Board to investigate a series of Related Party Transactions, which occurred during the period of November 1998 through April 2001. The Board appointed independent counsel to investigate these transactions and report to the Board. Second Demand Letter from the Shareholders Action Committee Subsequent to the period covered by this report, the Company received a letter dated November 10, 2003 from the Chairman of the Kings Road Shareholders Action Committee inquiring as to the status of the Independent Counsel's investigation into a series of transactions that occurred during the period of November 1998 through April 2001. The inquiry as conducted by the independent counsel was proceeding at an unsatisfactory pace and therefore the Board removed this first independent counsel. The Board has recently appointed new independent counsel to investigate these transactions and report to the Board, the Shareholders Action Committee and the Shareholders. The inquiry is now proceeding at a satisfactory pace and the Board expects to receive a status report in the very near future. Demand and Notice of For Annual Meeting Subsequent to the period covered by this report, the Board received a Letter dated November 17, 2003, from counsel for Kings Road Enterprises Corp. (formerly Parkland AG) of which Mr. Michael Berresheim a former officer and director of the Company, is the principal shareholder, the President and a director. In this letter, Kings Road Enterprises Corp., the holder of 1,507,247 shares of common stock of the Company, claims that the Board has failed to comply with SEC filing regulations and announced his intention of calling a Special Shareholders Meeting in order to replace the Board of Directors. Mr. Berresheim through his counsel was advised that the Board was working with the Company's auditors in order to complete any delinquent reports and intended on holding an annual meeting of the Shareholders as soon as practical after the Company's period reports were current and the Company had received the report from the independent counsel pertaining to the Demand of the Shareholders Action Committee. Results of Operations For the year ended April 30, 2003, feature film revenues were $648,228 as compared to $605,965 for the year ended April 30, 2002. The increase in feature film revenues resulted primarily from increased domestic and foreign distribution revenues from feature films in the Company's library. The increase is the result of managment's efforts to televise and distribute in video and DVD the Company's film library. Until such time as the Company either produces new films or develops and implements a different overall strategic plan, the Company expects that its feature film revenues will decline. Expenses related to impairment of film development costs were $0 and $118,617 for the years ended April 30, 2003 and 2002, respectively. The decrease resulted primarily because of the amortization of all production costs as of April 30, 2002. Selling expenses were $0 and $61,627 for the years ended April 30, 2003 and 2002, respectively. This decrease resulted primarily from commissions payable to the Company's sales agent handling foreign distribution of the Company's film library in 2002. General and administrative costs were $546,165 and $723,058 for the years ended April 30, 2003 and 2002, respectively, a decrease of $176,893. This resulted primarily from reducing and ending legal and accounting services as the Company resolved some of its litigation in 2003. Included in operating expenses for 2003 was $28,000 as the value of shares of common stock issued to officers and directors for services performed. 14 The Company recorded an impairment of goodwill and development costs of $67,965 in the year ended April 30, 2002 because it was unable to establish the ability to successfully market some of the projects it had under development. Interest expense decreased to $0 during the year ended April 30, 2003 from $1,017 for the year ended April 30, 2002. This decrease resulted primarily from paying off past due accounts payable in 2002. During the year ended April 30, 2002, the Company recorded a gain on forgiveness of debt of $16,147, principally reflecting the Company's settlement of liabilities at less than the recorded amount. During the year ended April 30, 2003 the Company recorded a gain of $100,000 from the sale of all rights to its 4-picture martial arts film package to Moonstone Entertainment. During this same period, the Company entered into a sub-publishing agreement with Cherry Lane Music Publishing for an advance of $100,000. This sale will result in lower on going royalties from the Company's music rights. During the year ended April 30, 2003, the Company incurred a net income of $215,357 versus a net loss of $420,827 during the year ended April 30, 2002. The income for the year ended April 30, 2003 resulted primarily from the increased revenues of the Company which were improved by decreases in general and administrative expenses, principally due to the factor of lower legal and accounting expenses. Included in the net income (loss) were gain (losses) from discontinued operations of $33,043 and ($71,298), respectively. These gains and losses relate to the Animal Town operations as explained above. During the years ended April 30, 2003 and 2002, the Company had no significant provision for income taxes, however, there is a significant tax loss carry forward of approximately $ 15,000,000, which may be offset against future taxable income. Liquidity and Capital Resources The production of motion pictures requires substantial capital. In producing a motion picture, the Company may expend substantial sums for both the production and distribution of a picture, before that film generates any revenues. In many instances, the Company obtains advances or guarantees from its distributors but these advances and guarantees generally defray only a portion of a film's cost. The Company's principal source of working capital during the year ended April 30, 2003 was motion picture licensing income. Except for the financing of film production costs, management believes that its existing cash resources and licensing income will be sufficient to fund its ongoing operations. During the year ended April 30, 2003, the Company's operating activities used $77,246 of cash that was primarily due to an increase in accounts receivable. The Company generated cash of $100,000 from the sale of the music rights to 4 of its films. During the year ended April 30, 2002, the Company's operating activities generated $18,459 of cash that was primarily used to repay notes payable. The Company had cash of approximately $50,679 and $27,925 at April 30, 2003 and 2002, respectively. Future Commitments The Company does not have any other material future commitments. Forward-Looking Statements The foregoing discussion, as well as the other sections of this Annual Report on Form 10-KSB, 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 which are successful in the market, to arrange financing, distribution and promotion for these projects on favorable terms in various markets and to attract and retain qualified personnel. 15 ITEM 7. FINANCIAL STATEMENTS The Financial Statements of Kings Road Entertainment, Inc., as restated, are listed on the Index to Financial Statements set forth on page F-2. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth information with respect to the directors and executive officers of the Company. Directors are elected at the annual meeting of stockholders to serve for staggered terms of three years each and until their successors are elected and qualified. Officers serve at the request of the Board of Directors of the Company.
Expiration Name Age Position of Term - ---------------------------------------------------------------------------------- Geraldine Blecker 57 Director, Chief Executive Officer, Vice 2004 President and Company Secretary Ms. Blecker took over as CEO on 5th March 2002 H. Martin DeFrank 56 Director, President, and Chief 2004 Operating Officer Mr. DeFrank took over as President on 5th March 2002 Philip M. Holmes 53 Director 2004 Mr. Holmes was appointed to the Board on October 16, 2003, upon the resignation of Mr. Wolfgang Stangl
There are no arrangements or understandings between any of the directors or executive officers, or any other person or persons pursuant to which they were selected as directors and/or officers. Executive Officers and Directors GERALDINE BLECKER has been a director and Vice President of the Company since April 2001, coordinating the Company's on-going film script development activities and international production. In March 2001 Ms. Blecker took over as Company Secretary and on March 5, 2002, she took over as Chief Executive Officer from Mr. Michael Berresheim. With a solid background in music and the performing arts, Ms. Blecker moved on to become an active film and television screenwriter, lyricist, musical supervisor and script consultant for numerous productions and production companies, (Europe's ZDF, HR, SFB, WDR, SAT 1, networks, (SCHLOSS & SIEGEL, Cannes Film Festival entry and winner of the Max Orphuls prize for best screenplay), as well as a developer of film and television product for a variety of companies in Germany and the UK (BBC, ATV, London Weekend, TaunusFilm, Traumwerk, FFP Entertainment, Madbox Filmtrick, TempoMedia, U5 Film). In addition to founding BSS Music Publishing Company in 1985, Ms. Blecker was founder and managing director of PDN Media GmbH, formed in 1997 16 to develop and package multimedia product for the international market. She has worked as a TV journalist for RTL, ZDF and Deutsche Bank TV and as a freelance print journalist for a variety of music and film publications. Ms. Blecker studied music and performing arts at California's Pasadena Playhouse and attended London's National Film and Television School (specializing in production). H. MARTIN DeFRANK has been a director and Chief Operating Officer of the Company since April 2001. In March 2002, he took over the additional post of Company President upon the resignation of Mr. Michael Berresheim. Mr. DeFrank was Managing Director of Weathervane Entertainment Group from 1995 through 2001, inclusive, where he directed the creation and production of interactive and reality television programming. From 1991 through 1994, Mr. DeFrank was Director of Development Treetop Systems, Inc., where he managed the development and patenting of robotically controlled telescoping tower systems for aerial videography. In addition, from 1976 to 1994, Mr. DeFrank was a producer for Unicorn Enterprises Films, Inc., where he had executive and line producer responsibilities on a range of feature film and television productions ranging from classic drama to light comedy featuring a variety of stars from the Redgraves to Dolly Parton. During the eighties, he was one of the founders of the postproduction house, Finecut Films Ltd., which provided the technical and creative services to television and feature film producers on a range of projects including "Heaven's Gate", "The Muppet Movie", and "Heat and Dust". He has provided facilities and technical expertise to such renowned film distributors as Columbia-Warner-EMI, the Rank and Cannon Groups. In 1981 he formed Television Syndication Group, which assembled and distributed film libraries worldwide. Mr. DeFrank attended Yale Drama and the University of New Haven. PHILIP MICHAEL HOLMES began his career in the UK as an apprentice Radio and TV Technician before moving into accounting at the Post Office for four years prior to his relocation to Germany in 1978. He successfully completed commercial accounting studies in Munich in 1985 whilst working as Chief Accountant for Ansell, an Australian distributor of household rubber goods, from 1980 to 1986. He then joined the process automation division of an American Company, Combustion Engineering Inc. in their European Headquarters in Germany as their CFO for Central Europe from 1986 thru 1991 and accompanied their merger with ABB in 1989. From 1991 thru 1997 he was CFO for two US and German based software companies before becoming self-employed in 1997 as a business consultant. Most notable achievement was accompanying the start-up of a cable TV company in 1998 as a co-investor, financial consultant and acting CFO thru to its private placement in 2000 for (euro) 176 million bringing a 400% return for its investors. In 2001 he accompanied the start-up phase of a new cable TV venture in Germany and was co-founder and main investor of Audio Elevation GmbH, a manufacturer of high-end sub-woofers. In 2002 he set up with his business partners the PFS - PRO Finance Services GmbH, a finance consulting company concentrating on start-ups, financing, mergers and acquisitions and IPO consulting. His activities as a business consultant with PFS include accompanying start-ups in the very different areas of cross-media document management, designers of customized business software, and manufacturers of environmental technology. Significant Employees The Company is currently being run by two of its Directors, H. Martin DeFrank, who, as current President and Chief Operating Officer, deals with global rights management and the basic corporate administration from Los Angeles. Geraldine Blecker, as Chief Executive Officer, is responsible for overseeing all aspects of Company administration. In her function as Company Secretary, she is also the keeper of all Corporate Records and Minutes. Based in Europe (Frankfurt), Ms. Blecker is additionally in charge of all international feature film co-production. Mr. DeFrank is actively involved in creative media production and currently concerned with certain franchises (remakes, sequels, TV-series) of the Company's feature film product. Family Relationships There are no family relationships between any of the directors or executive officers. 17 Involvement In Certain Legal Proceedings During the past five years, no present director, executive officer or person nominated to become a director or an executive officer, promoter or control person of the Company: (1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time; (2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was 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 or banking activities, (4) was 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. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers, directors and persons who own more than ten percent of the Company's Common Stock, to file initial reports of beneficial ownership on Form 3, changes in beneficial ownership on Form 4 and an annual statement of beneficial ownership on Form 5, with the SEC. Such executive officers, directors and greater than ten percent shareholders are required by SEC rules to furnish the Company with copies of all such forms that they have filed. Based solely on its review of the copies of such forms filed with the SEC electronically, received by the Company and representations from certain reporting persons, the Company believes that for the fiscal year ended April 30, 2003, all the officers, directors and more than 10% beneficial owners complied with the above described filing requirements, although the initial Forms 3 and 4 of each officer and director was filed late. ITEM 10. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth the compensation for each of the last three fiscal years of the Company's Chief Executive Officers and up to four of the other most highly compensated individuals serving as executive officers at April 30, 2003 whose total salary and bonus exceeded $100,000 for the fiscal year ("Named Officers"). No other Named Officer of the Company received salary and bonus in excess of $100,000 in any of the last three fiscal years. 18 SUMMARY COMPENSATION TABLE
Long Term Compensation Annual Compensation Awards Payouts - ------------------------------------------------------------------------------------------------------------------- Securities All Other Underlying Other Annual Restricted Options/ LTIP Compen- Name and Year or Compen- Stock SAR's Payouts sation Principal Period Salary Bonus sation) Awards (#) ($) ($) Position Ended ($) ($) ($) (a) (b) (c) (d) (e) (f) (g) (h) (i) - ------------------------------------------------------------------------------------------------------------------- Michael L. Berresheim 2003 $0 0 $0 0 0 0 0 Former, CEO, and 2002 $120,000 0 $0 0 0 0 0 President * 2001 $120,000 $5,000 $0 0 0 0 0 David W. Dube 2003 $0 0 $0 0 0 0 0 Former President, 2002 $0 0 $0 0 0 0 0 COO, and CFO** 2001 $100,000 0 $0 50,000 (1) 0 0 0 H. Martin DeFrank 2003 $42,000 $3,000 $0 0 0 0 0 COO, President 2002 $36,000 $3,000 $0 100,000 (2) 0 0 0 CFO 2001 $36,000 $0 $0 0 0 0 0 0 Geraldine Blecker 2003 $42,000 $3,000 $0 0 0 0 0 CEO, Vice President 2002 $36,000 $3,000 $0 100,000 (2) 0 0 0 Secretary 2001 $36,000 $0 $0 0 0 0 0 0 James P. Leaderer 2003 $0 0 $0 0 0 0 0 Former Director 2002 $0 0 $0 0 0 0 0 2001 $0 0 $0 50,000 (1) 0 0 0
- --------------------- PLEASE NOTE THAT MANAGEMENT SALARIES WERE RAISED ON SEPTEMBER 1, 2003. * Mr. Beresheim ceased to be an officer in March 2002. ** Mr. Dube ceased to be an officer in March 2001. (1) See Option Grants, Exercises and Year-End Values immediately below. (2) Shares granted on May 22, 2002 as compensation for future services to the Company. All officers and directors serve for a term of one year, which is renewed automatically or until the next annual shareholders meeting which ever comes first. Option Grants, Exercises and Year-End Values The Company adopted a 1999 Stock Option Plan, under which the Company can grant options to purchase shares of the Company's Common Stock. In consideration for their services as Members of the Board of Directors, on September 14, 1999, an option was granted to both David W. Dube and James P. Leaderer, terms as follows: The Date of Grant of option for vesting purposes was September 13, 1999; The Expiration Date of Option is September 12, 2004; The Number of Shares covered by each Option is 50,000; The Exercise Price per share for each Option is $ 0.9375; The vesting period for this Option commenced on the one-year anniversary that each individual became a director. In these cases, the vesting period commenced on April 1, 1999. At any time on or after April 1, 2000, but before April 1, 2001, they may purchase or have purchased under this Option up to 25,000 Shares; on or after April 1, 2001, they may purchase or have purchased all of the Number of Shares. They can never exercise the Option for more than the Number of Shares or after the Expiration Date (in each case as adjusted under the Terms of the Plan). 19 These Options were, however, cancelled on April 20, 2001 in accordance with a Board Resolution of that date and were replaced by the issuance of 100,000 shares in the aggregate of common stock of the Company to David W. Dube and James P. Leaderer as per Officer's Certificate dated August 18, 2001. Shown below is information with respect to ownership by the Named Officers of options and option values as of April 30, 2003. No options were granted or exercised during the year ended April 30, 2003. Option Grants Table The following tables reflect certain information with respect to stock options granted under the Company's stock option plans to certain executive officers and directors up through the end of the fiscal year. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Number Of % Of Total Securities Options Underlying Granted To Exercise Options Employees Or Base Granted In Fiscal Price Expiration Name (#) Year(%) ($/Sh) Date - ------------------------------------------------------------------------------------------------------------------- H. Martin DeFrank 0 0 0 0 Geraldine Blecker 0 0 0 0 Philip Michael Holmes 0 0 0 0
No options were granted or exercised during the year ended April 30, 2003. Option Exercise and Year End-Value Table The following tables reflect certain information, with respect to the exercise of stock options by certain executive officers during fiscal 2003: Aggregated options/SAR exercises in last fiscal year and end option/SAR value.
Value of Unexercised Number of Unexercised In-the-Money Options Options at April 30, 2003 at April 30, 2003 ------------------------- --------------------- Name Exercisable Unexercisable Exercisable Unexercisable N/A - - - -
There are no outstanding options. 20 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Principal Stockholders The following table sets forth certain information, as of February 10, 2004 concerning ownership of shares of Common Stock by each person who is known by the Company to own beneficially more than 5% of the issued and outstanding Common Stock of the Company:
Number of Percent of Name and Address of Beneficial Owner Shares Class MBO Musikverlags, GmbH 577,479 (1) 14.97% Gerauer Street 58A Moerfelden Walldorf, Germany 64546 MBO Media, GmbH 373,350 (1) 9.68% Gerauer Street 58A Moerfelden Walldorf, Germany 64546 Parkland AG 556,418 (1) 14.42% 5743 NW 66hth Avenue Parkland, FL 33067 Total 1,507,247 39.07%
- ------------------------------------------------------------------------------ (1) Michael Berresheim, a former officer and director of the Company, is the sole shareholder of MBO Media, GmbH which was formerly MBO Musikverlags, GmbH. Michael Berresheim is also the controlling shareholder of Parkland AG, which subsequent to the period covered by this report has changed its name to Kings Road Enterprises Corp. with its offices at 1001 East Sample Road, Suite 8W, Pompano Beach, Florida 33064. Therefore, in effect, Michael Berresheim controls 39.07% of the Company's outstanding common stock. Additionally, the Company has been advised of a claim of ownership by MBO, as successor-in-interest to West Union Leasing Limited, and to 150,000 shares owned by Robert H. Jaffe & Associates, P.A. as trustee for Lancaster Consultants, Inc. and Robert H. Jaffe & Associates, P.A. In the event that MBO Musikverlags Gmbh is determined to be the owner of such shares, the ownership of common stock by entities controlled by Michael Berresheim would increase to 1,657,247 shares or 42.96% of the Company's outstanding common stock. Total shares Common Stock outstanding as of February 10, 2004 was 3,857,770 21 Security Ownership of Management The following table sets forth, as of February 10, 2004, certain information concerning ownership of shares of Common Stock by each director of the Company and by all executive officers and directors of the Company as a group:
Name and Address of Directors/Officers Number of Percent of And Number of Persons in Group Shares Class Geraldine Blecker 100,000 2.59% Director, CEO, Vice President and Secretary Wetteraustr 23 Frankfurt, Germany 60389 H. Martin DeFrank 100,000 2.59% Director, COO, President 447 B Doheny Drive, Beverly Hills, CA 90210 Philip Michael Holmes 0 0.0% Director Pastor-Klein-Str. 17 D D-56068 Koblenz Germany All Executive Officers and Directors as a Group (3 persons) 200,000 5.18%
Except as otherwise disclosed herein, the Company does not know of any arrangements, including any pledge of the Company's securities, the operation of which at a subsequent date may result in a change of control of the Company. Changes In Control To the best of the Company's knowledge there are no present arrangements or pledges of the Company's securities, which may result in a change in control of the Company. Securities Authorized for Issuance Under Equity Compensation Plans
---------------------------------- --------------------- ------------------- ---------------------- Number of Weighted-average Number of securities Securities to be exercise price of remaining available issued upon outstanding for future issuance exercise of options, warrants under equity outstanding and rights compensation plans options, warrants (excluding and rights securities reflected in column (a)) ---------------------------------- --------------------- ------------------- ---------------------- ---------------------------------- --------------------- ------------------- ---------------------- (a) (b) (c) ---------------------------------- --------------------- ------------------- ---------------------- ---------------------------------- --------------------- ------------------- ---------------------- Equity compensation plans approved by security holders(1) - $- - ---------------------------------- --------------------- ------------------- ---------------------- ---------------------------------- --------------------- ------------------- ---------------------- Equity compensation plans Not approved by security - $- - holders(2) ---------------------------------- --------------------- ------------------- ---------------------- ---------------------------------- --------------------- ------------------- ---------------------- Total - $- - ---------------------------------- --------------------- ------------------- ----------------------
No securities have been authorized for issuance as part of any Equity Compensation Plan. 22 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On January 23, 2001, the Company along with Joachen Hasmanis entered into an agreement with the shareholders of Reboost GmbH, a German limited company ("Reboost"), under which the Company would purchase 50% of the shares of Reboost and Mr. Hasmanis would purchase 50% of the shares of Reboost. Pursuant to the terms of the agreement, the Company would purchase a total of 30,500 shares of Reboost as follows: (a) 25,000 shares of Reboost from MBO Media GmbH (formerly MBO Musikverlags GmbH, a company owned and controlled by Michael Berresheim) for $20,200; (b) 5,000 shares of Reboost from Oliver Schwichtenberg, for $4,050; (c) 5,000 shares of Reboost from Erik Poth, for $4050; and, (d) 500 shares of Reboost from Marc Werner for $400. Concurrently therewith the Company advanced the sum of $28,700 to Mr. Hasmanis (the "Hasmanis Advance"), who had entered into an agreement to purchase 35,500 shares of Reboost from Marc Werner. On April 6, 2001, Mr. Hasmanis, unable to repay the advance of $28,700, sold and transferred 35,500 shares of Reboost to MBO Media GmbH, at a sale price of $28,700, and MBO Media GmbH became responsible for the repayment of the Hasmanis advance. At the date of the transfer and sale by Mr. Hasmanis to MBO Media, MBO Media and Michael Berresheim, its principal shareholder and an officer and director of MBO Media, were collectively the single largest shareholders of the Company and assuming common control of Reboost, the Company accounted for Reboost as a 100% wholly-owned subsidiary of the Company. The name of the Reboost which was renamed Frame Spotting Media GmbH on February 5, 2001, was changed to Kings Road Productions (Europe) GmbH, with a registered office located at Gerauerstr. 58 a, D-64546 Moerfelden-Walldorf, Germany. On May 31, 2001, MBO Media having failed to repay the Hasmanis Advance, the Company agreed to accept the 35,500 shares of Reboost held by MBO Media in full satisfaction of the Hasmanis Advance, whereupon the Company owned of record 100% of the shares of Kings Road Productions (Europe) GmbH. Mr. Berresheim was the managing director of Kings Road Productions (Europe) GmbH (formerly Reboost) from its inception until his resignation on May 2, 2002, whereupon Ms. Geraldine Blecker took over this position. During 2002 a discrepancy was found in the number of shares which Kings Road was due to receive from Western Union Leasing and those actually received in the November 1998 transaction in which Kings Road acquired Immediate Entertainment shares from three sellers of the shares. It was determined that the number of shares Western Union Leasing was to provide was deficient by 150,000. The Board is investigating this matter and will seek a resolution. 23 ITEM 13. 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) 31** Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 31** Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 32** 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-KSB 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 There were no reports on Form 8-K filed during the period covered by this report. Subsequent to the period covered by this report the Company filed a report on Form 8-K on October 21, 2003. ITEM 14. 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. ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES Independent Public Accountants The Company's independent accountants for the fiscal years ended April 30, 2003 and 2002 were HJ Associates & Consultants, LLP. (a) Audit Fees. For the fiscal years ended 2003 and 2002, the aggregate fees billed by HJ Associates & Consultants, LLP for services rendered for the audits of the annual financial statements and the review of the financial statements included in the quarterly reports on Form 10-QSB or services provided in connection with the statutory and regulatory filings or engagements for those fiscal years was $80,093. (b) Audit-Related Fees. For the fiscal years ended 2003 and 2002 fees billed by HJ Associates & Consultants, LLP, were an aggregate $3,503 for any audit-related services other than as set forth in paragraph (a) above. (c) Tax Fees. For the fiscal years ended 2003 and 2002, HJ Associates & Consultants, LLP did not bill any fees for tax compliance services. The auditors did not provide tax-planning advice for the fiscal years ended 2003 and 2002. 24 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: July 15, 2004 /Geraldine Blecker/ _______________________________ By: Geraldine Blecker Its: Chief Executive Officer Date: July 15, 2004 /H. Martin DeFrank/ _______________________________ By: H. Martin DeFrank Its: Chief Financial Officer 25 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES RESTATED CONSOLIDATED FINANCIAL STATEMENTS April 30, 2003 F - 1 C O N T E N T S Independent Auditors' Report.............................................. F - 3 Restated Consolidated Balance Sheet....................................... F - 4 Restated Consolidated Statements of Operations............................ F - 5 Restated Consolidated Statements of Stockholders' Equity (Deficit)........ F - 7 Restated Consolidated Statements of Cash Flows............................ F - 8 Notes to the Restated Consolidated Financial Statements................... F - 9 F - 2 INDEPENDENT AUDITORS' REPORT To the Shareholders and the Board of Directors Kings Road Entertainment, Inc. Beverly Hills, California We have audited the accompanying consolidated balance sheet of Kings Road Entertainment, Inc. and Subsidiaries (the Company) as of April 30, 2003 and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended April 30, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kings Road Entertainment, Inc. and Subsidiaries as of April 30, 2003 and the results of their operations and their cash flows for the years ended April 30, 2003 and 2002 in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the consolidated financial statements, the Company has sustained recent losses from operations, has a deficit working capital and stockholders' deficit. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 10. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. As discussed in Note 11, the April 30, 2003 consolidated financial statements have been restated as a result of revenues erroneously omitted together with related receivables and obligations. HJ Associates & Consultants, LLP Salt Lake City, Utah March 1, 2004, except for Notes 6, 7 and 11 which are dated July 7, 2004 F - 3 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Consolidated Balance Sheet
ASSETS April 30, 2003 ------------------ (Restated) CURRENT ASSETS Cash $ 50,679 Accounts receivable 350,345 ------------------ Total Current Assets 401,024 ------------------ FIXED ASSETS, NET (Note 4) - ------------------ OTHER ASSETS Film development costs, net (Note 2) 47,345 Advances to shareholder, net (Note 8) - Investments (Note 3) - ------------------ Total Other Assets 47,345 ------------------ TOTAL ASSETS $ 448,369 ================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 99,855 Accrued expenses 189,002 Deferred revenue 86,667 Liabilities from discontinued operations (Note 9) 4,000 ------------------ Total Current Liabilities 379,524 ------------------ TOTAL LIABILITIES 379,524 ------------------ COMMITMENTS AND CONTINGENCIES (Note 7) STOCKHOLDERS' EQUITY Common stock, $.01 par value, 12,000,000 shares authorized, 3,864,390 shares issued and outstanding 38,644 Additional paid-in capital 24,932,655 Accumulated deficit (24,902,454) ------------------ TOTAL STOCKHOLDERS' EQUITY 68,845 ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 448,369 ==================
The accompanying notes are an integral part of these consolidated financial statements. F - 4 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Consolidated Statements of Operations
For the Years Ended April 30, 2003 2002 ------------------- ------------------ (Restated) REVENUES Feature films $ 648,228 $ 605,965 ------------------- ------------------ Total Revenue 648,228 605,965 ------------------- ------------------ COSTS AND EXPENSES Selling expenses - 61,627 Depreciation 684 1,429 Impairment of goodwill - 67,965 Impairment of film development cost - 118,617 General and administrative expenses 545,481 723,058 ------------------- ------------------ Total Costs and Expenses 546,165 972,696 ------------------- ------------------ OPERATING INCOME (LOSS) 102,063 (366,731) ------------------- ------------------ OTHER INCOME (EXPENSE) Interest income 151 38 Other income 880 2,484 Interest expense - (1,017) Bad debt expense - related party (Note 8) (20,780) - Gain on forgiveness of debt - 16,147 Gain on sale of assets 100,000 - Loss on disposal of fixed assets - (450) ------------------- ------------------ Total Other Income 80,251 17,202 ------------------- ------------------ INCOME (LOSS) BEFORE INCOME TAXES 182,314 (349,529) PROVISION FOR INCOME TAXES - - ------------------- ------------------ INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS 182,314 (349,529) DISCONTINUED OPERATIONS (Note 9) Gain on sale of subsidiary 33,043 - Loss on discontinued operations - (71,298) ------------------- ------------------ Total Discontinued Operations 33,043 (71,298) ------------------- ------------------ NET INCOME (LOSS) $ 215,357 $ (420,827) =================== ==================
The accompanying notes are an integral part of these consolidated financial statements. F - 5 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Continued)
For the Years Ended April 30, 2003 2002 ------------------- ------------------ (Restated) BASIC INCOME (LOSS) PER SHARE Income (loss) before discontinued operations $ 0.05 $ (0.10) Income (loss) from discontinued operations 0.01 (0.02) ------------------- ------------------ $ 0.06 $ (0.12) =================== ================== FULLY DILUTED (LOSS) PER SHARE Income (loss) before discontinued operations $ 0.05 $ (0.10) Income (loss) from discontinued operations 0.01 (0.02) ------------------- ------------------ $ 0.06 $ (0.12) =================== ================== Weighted Average Number of Common Shares - Basic 3,852,335 3,664,390 =================== ================== Diluted 3,852,335 3,664,390 =================== ==================
The accompanying notes are an integral part of these consolidated financial statements. F - 6 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit)
Additional Common Stock Paid-in Accumulated -------------------------------- Shares Amount Capital Deficit --------------- --------------- --------------- --------------- Balance, April 30, 2001 3,664,390 $ 36,644 $ 24,906,655 $ (24,696,984) Net loss for the year ended April 30, 2002 - - - (420,827) --------------- --------------- --------------- --------------- Balance at April 30, 2002 3,664,390 36,644 24,906,655 (25,117,811) Issuance of common stock for services 200,000 2,000 26,000 - Net income for the year ended April 30, 2003 (Restated) - - - 215,357 --------------- --------------- --------------- --------------- Balance, April 30, 2003 $ 3,864,390 $ 38,644 $ 24,932,655 $ (24,902,454) =============== =============== =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. F - 7 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows
For the Years Ended April 30, 2003 2002 ------------------- ------------------- (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $ 215,357 $ (420,827) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 684 1,429 Impairment of goodwill - 67,965 Loss on disposal of fixed assets - 450 Common stock issued for services 28,000 - Bad debt expense - related party 20,780 - Gain on sale of assets (100,000) Gain on sale of subsidiary (33,043) Impairment of film development costs - 118,617 Gain on forgiveness of debt - (16,147) Changes in assets and liabilities: Decrease in accounts receivable (246,498) 116,429 (Increase) decrease in inventories - 34,071 (Increase) decrease in prepaid expenses - 99,673 Increase to development film costs (5,540) (34,105) Decrease in other assets - 148 Decrease in accounts payable (41,165) (12,155) Increase in accrued expenses 32,712 30,011 Increase (decrease) in deferred revenue 51,467 32,900 ------------------- ------------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (77,246) 18,459 ------------------- ------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of assets 100,000 - ------------------- ------------------- NET CASH USED IN INVESTING ACTIVITIES 100,000 - ------------------- ------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of related party payable - (40,154) Repayment of notes payable - (5,000) ------------------- ------------------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES - (45,154) ------------------- ------------------- NET INCREASE (DECREASE) IN CASH 22,754 (26,695) CASH AT BEGINNING OF YEAR 27,925 54,620 ------------------- ------------------- CASH AT END OF YEAR $ 50,679 $ 27,925 =================== =================== SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES: CASH PAID FOR Interest $ - $ - Income taxes $ - $ - SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Common stock issued for services $ 28,000 $ -
The accompanying notes are an integral part of these consolidated financial statements. F - 8 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES a. Organization The consolidated financial statements include those of Kings Road Entertainment, Inc. and its wholly-owned subsidiaries (collectively the "Company"). All intercompany items and transactions have been eliminated in consolidation. The wholly-owned subsidiaries include Kings Road Productions (Europe) GmbH, (a German Corporation), which was active at April 30, 2003, Ticker, Inc., (a California corporation), which was inactive at April 30, 2003 and KRTR, Inc., (a New York corporation) which was inactive at April 30, 2003. b. Accounting Method The Company's consolidated financial statements are prepared using the accrual method of accounting. The Company has elected an April 30 year-end. c. Recognition of Revenues Revenues from theatrical exhibition are recognized on the dates of exhibition. Revenues from international, home video, television and pay television license agreements are recognized when the license period begins and the film is available for exhibition or exploitation pursuant to the terms of the applicable license agreement. Once complete, a typical film will generally be made available for licensing as follows:
Months After Approximate Marketplace Initial Release Release Period ---------------------------------------------- ------------------ ---------------- Domestic theatrical 6 months All international markets 1-10 years Domestic home video 6 months 6-12 months Domestic cable/pay television 12-18 months 18 months Domestic syndicated/free television 24-48 months 1-6 years
During the years ended April 30, 2003, and 2002, the Company earned revenue from four significant customers of approximately $396,000 (73%) and $451,000 (74%), respectively, from feature film revenues. Revenues from foreign sources were approximately $-0- and $31,000 in 2003 and 2002, respectively. The Company has $86,667 of deferred revenue. The Company is following the guidelines of SOP 00-02 for film production and distribution. F - 9 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Film Development Costs Film development costs, including any related interest and overhead,are capitalized as incurred. Profit participations and residuals, if any, are accrued in the proportion that revenue for a period bears to the estimated future revenues. The individual film forecasts method set forth in FASB Statement No. 53 ("FASB 53") is used to amortize these costs based on the ratio of revenue earned in the current period to the Company's estimate of total revenues to be realized. Management periodically reviews its estimates on a film-by-film basis and, when unamortized costs exceed net realizable value for a film, that film's unamortized costs are written down to net realizable value. During the years ended April 30, 2003 and 2002, the Company recognized $-0-, and $118,617, respectively of film development impairment costs. e. Newly Issued Accounting Pronouncements In April 2002, the FASB issued Statement No. 145 "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS 145). SFAS 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement of Financial Accounting Standards No. 4 (SFAS 4). Extraordinary treatment will be required for certain extinguishments as provided in APB Opinion No. 30. SFAS 145 also amends Statement of Financial Accounting Standards No. 13 to require certain modifications to capital leases be treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor). SFAS 145 is effective for financial statements issued after May 15, 2002, and with respect to the impact of the reporting requirements of changes made to SFAS 4 for fiscal years beginning after May 15, 2002. The adoption of the applicable provisions of SFAS 145 did not have an effect on our consolidated financial statements. In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 nullifies Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS 144. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier application encouraged. The adoption of the applicable provisions of SFAS 146 did not have an effect in our consolidated financial statements. F - 10 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued) e. Newly Issued Accounting Pronouncements (Continued) In October 2002, the FASB issued Statement No. 147 "Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9" (SFAS 147). SFAS 147 removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of this Statement. In addition, this Statement amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that Statement 144 requires for other long-lived assets that are held and used. SFAS 147 is effective October 1, 2002. The adoption of the applicable provisions of SFAS 147 did not have an effect on our consolidated financial statements. In December 2002, the FASB issued Statement No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123" (SFAS 148). SFAS 148 provides alternate methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reporting results. SFAS 148 is effective for fiscal years beginning after December 15, 2003. We are currently reviewing SFAS 148. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" which is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. This statement amends and clarifies financial accounting for derivative instruments embedded in other contracts (collectively referred to as derivatives) and hedging activities under SFAS 133. The adoption of SFAS No. 149 did not have a material effect on the financial statements of the Company. f. Use of Estimates 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 period. Actual results could differ from those estimates. F - 11 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued) g. Depreciation and Amortization Depreciation of fixed assets is computed by the straight-line method over the estimated useful lives of the assets ranging from three to five years. Leasehold improvements are amortized over the useful life of the improvements or the term of the applicable lease, whichever is less. h. Concentration of Credit Risk The Company licenses various rights in its films to distributors throughout the world. Generally, payment is received in full or in part prior to the Company's delivery of the film to the applicable distributor. As of April 30, 2003, none of the Company's accounts receivable were from foreign distributors. i. Cash Concentration The Company maintains its cash balances at financial institutions that are federally insured, however, at times such balances may exceed federally insured limits. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. j.Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of The Company has adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of and SFAS No. 142 "Goodwill and other intangible assets". These statements require that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed their respective fair values. Assets to be disposed of are reported at the lower of the carrying amount of fair value less the costs to sell. F - 12 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 2 - FILM DEVELOPMENT COSTS Film development costs relate to projects not yet in production and totaled $47,345 at April 30, 2003, net of an allowance of $30,000. No interest or overhead was capitalized to film or development costs during the years ended April 30, 2003 and 2002, as no new motion pictures were produced during those periods. The script for one of the projects currently under development was acquired from a current officer and director of the Company. NOTE 3 - INVESTMENTS On November 9, 1998, the Company acquired 2,393,235 shares of Immediate Entertainment Group, Inc. ("Immediate"), approximately 19% of Immediate's then outstanding common stock, for an aggregate of $2,300,000 in cash, 1,477,567 newly issued shares of the Company's common stock and notes payable to the sellers of the stock for $210,803. At the time the transaction was executed, a director and shareholder of the Company who was also serving as the Company's president and CEO, was also an officer, director and major shareholder of Immediate. During the year ended April 30, 2000, the Company agreed to convert the Note plus applicable accrued interest, after deduction of certain advances made by the Company to the sellers or to third parties affiliated with the sellers, into shares of the Company's common stock. However, prior to the issuance of the shares during the year ended April 30, 2001, the conversion was cancelled by a revised agreement between the parties. At April 30, 2000, an aggregate of approximately $240,000 was due to the Company from Immediate. In order to repay these advances, the Company reached an agreement with Immediate whereby Immediate transferred to the Company, ownership of a certain film project being developed by Immediate. The basis for determining the value of this project was the historical costs paid by Immediate for development of the projects that reduced, on a dollar-for-dollar basis, the amount due from Immediate. The Company subsequently recorded a writedown of approximately $185,000 to reflect the difference between the historical cost for the project and the amount due to the Company from Immediate. The Company reached an agreement during the year ended April 30, 2001 with certain shareholders, who were also the holders of the above-referenced notes payable of the Company, to cancel the indebtedness in exchange for a reimbursement of the writedown attribute to the Immediate obligation. The Company evaluated the recoverability of its investment in Immediate and recorded a valuation allowance of $404,074 during the year ended April 30, 1999 and $1,794,926 during the year ended April 30, 2000, collectively reducing the remaining carrying value of this investment to $0. The Company does not expect to recover any portion of its investment in Immediate. F - 13 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 4 - FIXED ASSETS Fixed assets of the Company at April 30, 2003 consist of office equipment with a cost of $5,993 and accumulated depreciation of $5,993. NOTE 5 - COMMON STOCK In May of 2002, the Company issued 100,000 shares of common stock each to two officers and directors of the Company for services rendered. The shares were valued at their fair market value. NOTE 6 - INCOME TAXES Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax assets consist of the following components as of April 30, 2003 and 2002:
2003 2002 ------------------ ------------------ Deferred tax assets: NOL Carryover $ 5,919,000 $ 5,993,092 Depreciation - 137 Deferred tax liabilities: Depreciation - - Valuation allowance (5,919,000) (5,993,229) ------------------ ------------------ Net deferred tax asset $ - $ - ================== ==================
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended April 30, 2003 and 2002 due to the following:
2003 2002 ------------------ ------------------ Book income (loss) $ 83,989 $ (140,631) Meals and entertainment 115 147 State tax (5,087) (1,600) Loss on sale of assets - (27) Depreciation - 237 NOL utilization (96,672) - Stock for services/options expense 10,920 - Foreign subsidiary 6,735 - Valuation allowance - 141,874 ------------------ ------------------ $ - $ - ================== ==================
F - 14 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 6 - INCOME TAXES (Continued) At April 30, 2003, the Company had net operating loss carryforwards of approximately $15,000,000 that may be offset against future taxable income from the year 2002 through 2023. No tax benefit has been reported in the April 30, 2003 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years. NOTE 7 - COMMITMENTS AND CONTINGENCIES The Company leases approximately 500 square feet of office space and various film element and general storage space on a month-to-month basis. Rent expense for the Company's office and storage space was $17,560 and $23,389 in 2003 and 2002, respectively. In the ordinary course of business, the Company has or may become involved in dispute or litigation which in the aggregate are not believed by management to be material to its financial position or results of operations. On April 17, 2003, the Company received a formal request by a Shareholders Action Committee for the Board to investigate a series of Related Party Transactions, which occurred during the period of November 1998 through April 2001. The Company received an additional letter dated November 10, 2003 from the Chairman of the Shareholders Action Committee inquiring as to the status of the investigation. The Board has appointed independent counsel to investigate these transactions and report to the Board, the Shareholders Action Commttee and the Shareholders. On July 31, 2003, Rigel USA, Inc. filed a complaint in the Superior Court of California, County of Los Angeles, California against Kings Road Entertainment and others, including a former officer and director. The complaint alleges breach of contract regarding the option agreement between Rigel Entertainment, Inc. and the Company regarding "The Kickboxer" series of television movies. The complaint sought compensation in an unspecified amount. On or about June 3, 2004, the Company entered into a Settlement Agreement with Rigel providing for the settlement of the matter and other possible claims of the parties. Pursuant to the terms of the Settlement Agreement, Rigel and the Company have each agreed to release the other from any and all claims arising out of the lawsuit. Additionally, as part of the settlement the Company and Rigel executed an Option and License Agreement, whereby in considration of $10,000 paid by Rigel to the Company, the Company granted Rigel two exclusive options to use the word "Kickboxer" in the title of up to two live-action feature length motion pctures. The first option period shall commence on August 1, 2004 and end on October 31, 2006, and shall be exercised by commencement of prinipal photography and the payment of $90,000 to the Company. The option for the second motion picture shall commence on November 1, 2005 and end on July 31, 2006, and shall be exercised by the commencement of principal photography and the payment of $75,000 to the Company. If either or both motion pictures are produced, the Company shall also be entitled to 10% of the net proceeds. F - 15 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued) In April 2004, the Company became aware that between April 2003 and December 2003, certain funds intended for the Company and others related to screenplay royalties totaling $103,517 had been diverted by a former officer and director of the Company and an associate, both of whom have denied that the funds were taken without the Company's knowledge. The Company has requested immediate return of the funds and has been notified that the funds will be returned during July 2004. The individuals have also denied malfeasance and in addition to returning the funds, have expressed the intention to undertake other actions to resolve the situation. Respective legal counsel representing the Company and the individuals are negotiating a full resolution to this matter. Repayment of the funds and resolution to related matters has not yet been reached. The consolidiated financial statements have been restated to reflect the additional revenue, receivable and payable associated with this matter for the periods presented. See Note 11 for further discussion. NOTE 8 - RELATED PARTY TRANSACTIONS During the year ended April 30, 2001, the Company advanced $28,000 to a former President of the Company. As part of the acquisition of Kings Road Productions (Europe) GmbH, the former President of the Company advanced $47,374 to the Company during the year ended April 30, 2001. During the year ended April 30, 2002, the Company repaid $40,154 of the advances from the former Company President, leaving a remaining balance of $7,220. These amounts have been netted together in the accompanying consolidated financial statements leaving a net balance due from the former President of the Company of $20,780 as of April 30, 2002. This individual also has a controlling interest in the major Company shareholder. There were no payments received during the year ended April 30, 2003 or subsequently thereafter and there are no repayment arrangements. Accordingly, the Company fully provided for the uncollectibility of this balance due in the amount of $20,780. NOTE 9 - DISCONTINUED OPERATIONS The Company has discontinued operations of its subsidiary KRTR. KRTR has been inactive and had no operations for the past two years. The Company has $4,000 of accrued liabilities still outstanding. In August 2001, the Board of Directors of the Company decided to discontinue the business which included the catalog sales of Animal Town Inc., and sold the subsidiary on August 15, 2002. F - 16 KINGS ROAD ENTERTAINMENT, INC. AND SUBSIDIARIES Notes to the Restated Consolidated Financial Statements April 30, 2003 and 2002 NOTE 9 - DISCONTINUED OPERATIONS (Continued)
For the Years Ended April 30, 2003 2002 ----------------- ----------------- REVENUES Sales, net $ - $ 81,642 Cost of sales - 49,223 ----------------- ----------------- Gross Margin - 32,419 ----------------- ----------------- EXPENSES General and administrative - 113,004 ----------------- ----------------- Total Expenses - 113,004 ----------------- ----------------- LOSS FROM OPERATIONS - (80,585) ----------------- ----------------- OTHER INCOME Gain on forgiveness of debt - 9,287 ----------------- ----------------- Total Other Income - 9,287 ----------------- ----------------- NET LOSS BEFORE INCOME TAXES (71,298) INCOME TAXES - - ----------------- ----------------- NET LOSS FROM DISCONTINUED OPERATIONS $ - $ (71,298) ================= =================
The Company recorded a gain on the sale of Animal Town of $33,043 during the year ended April 30, 2003 when it was determined that the liabilities had been transferred or assumed by the new owner. No income tax benefit has been attributed to the loss from discontinued operations. NOTE 10 - GOING CONCERN The Company's consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However at April 30, 2003, the Company has a deficit in working capital of $565, has an accumulated deficit of $24,924,519, and has sustained recent losses from operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. It is the intent of the Company to generate cash flow by increasing project development for future revenue and has discontinued certain operations that produce a negative cash flow. In addition, the Company anticipates it will raise funds through equity based investment instruments to provide funding for the development of the projects and fund operating costs. NOTE 11 - RESTATEMENT The accompanying consolidated financial statements have been restated to correct an error in the previously issued financial statements. The change was made to properly reflect the ending balance of accounts receivable and accounts payable as of April 30, 2003, and revenues for the year then ended. As originally issued, the April 30, 2003 financial statements did not include the impact of the diverted funds discussed in Note 4 above related to screenplay royalties. Accordingly, the consolidated financial statements of and for the year ended April 30, 2003 were understated with respect to receivables, accounts payable and revenues. As a result, receivables increased by $48,232, accounts payable increaed by $26,166 and revenues increased by $22,065. Basic and fully diluted net income per share increased from $0.05 to $0.06. F - 17 EX-31 2 ceocert.txt CEO CERTIFICATION Exhibit 31 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 annual report on Form 10-KSB Of Kings Road Entertainment, Inc., a Delaware corporation (the "registrant"); 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other information included in this annual 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 annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures 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 annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: July 15, 2004 /Geraldine Blecker/ _________________________________ By: Geraldine Blecker Its: Chief Executive Officer EX-31 3 cfocert.txt CFO CERTIFICATION Exhibit 31 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 annual report on Form 10-KSB of Kings Road Entertainment, Inc., a Delaware corporation (the "registrant"); 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures 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 annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: July 15, 2004 /H. Martin DeFrank/ _________________________________ By: H. Martin DeFrank Its: Chief Financial Officer EX-32 4 cert906.txt 906 CERTIFICATION Exhibit 32 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 Annual Report of Kings Road Entertainment, Inc. (the "Company") on Form 10-KSB for the year ended April 30, 2003 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. A signed original of this written statement required by Section 906, or other document authentication, acknowledging, or otherwise adopting the signature that appears in typed from within the electronic version of this written statement required by Section 906, has been provided to Kings Road Entertainment, Inc., and will be retained by Kings Road Entertainment, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Dated: July 15, 2004 /Geraldine Blecker/ _________________________________ By: Geraldine Blecker Its: Chief Executive Officer Dated: July 15, 2004 /H. Martin DeFrank/ _________________________________ By: H. Martin DeFrank Its: President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----