10QSB/A 1 v119095_10qsba.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
FORM 10-QSB/A
(Amendment No. 1)
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended October 31, 2004
-OR-
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from:                 to          
 
Commission File Number 0-14234 
 
KINGS ROAD ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
DELAWARE
  
95-3587522
(State or other jurisdiction of
  
(I.R.S. Employer Identification No.)
incorporation or organization)
    
     
468 N. Camden Drive
Beverly Hills, California
  
90210
(Address of principal executive offices)
  
(Zip Code)
 
310-278-9975
(Registrant’s telephone number, including area code)

(Former name, former address or former fiscal year, if changed since last report)

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 þ     No o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange) oYes   þNo
 
The number of shares outstanding of each of the Registrant’s classes of common stock, as of October 31, 2004 was 3,864,390 shares, all of one class of $0.001 par value Common Stock. As of April 2nd, 2008 the number of shares outstanding of each of the Registrant’s classes of common stock was 10,756,493.
 
KINGS ROAD ENTERTAINMENT, INC.
FORM 10-QSB/A - 1
Quarter Ended October 31, 2004

TABLE OF CONTENTS

   
PAGE
FINANCIAL INFORMATION
  
     
Item 1.
Consolidated Financial Statements
  
     
 
Condensed Consolidated Balance Sheets as of
  
 
October 31, 2004 and April 30, 2004
F-2
     
 
Condensed Consolidated Statements of Operations and Comprehensive
  
 
Income (Loss) for the Three Months Ended October 31, 2004
  
 
and October 31, 2003
F-3
     
 
Condensed Consolidated Statements of Operations and Comprehensive
  
 
Income (Loss) for the Six Months
  
 
Ended October 31, 2004 and October 31, 2003
F-4
 
Condensed Consolidated Statements of Cash Flows for the Six Months
  
 
Ended October 31, 2004 and October 31, 2003
F-5
     
 
Notes to Condensed Consolidated Financial Statements
  
 
as of October 31, 2004
F-6 – F-10
     
Item 2.
Managements Discussion and Analysis or Plan of Operation
13
     
Item 3.
Controls and Procedures
15
     
 
PART II—OTHER INFORMATION
  
     
Item 1.
Legal Proceedings
15
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
19
     
Item 3.
Defaults Upon Senior Securities
19
     
Item 4.
Submission of Matters to a Vote of Security Holders
19
     
Item 5.
Other Information
19
     
Item 6.
Exhibits and Reports on Form 8-K
20
     
SIGNATURES
20
 
 
PART 1: FINANCIAL INFORMATION

KINGS ROAD ENTERTAINMENT INC

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Page
F-2
Condensed Consolidated Statements of Operations And Comprehensive Income (Loss) for the three months ended October 31, 2004 and 2003
F-3
Condensed Consolidated Statements of Operation And Comprehensive Income (Loss) for the six months ended October 31, 2004 and 2003
F-4
Condensed Consolidated Statements of Cash Flows for the six months ended October 31, 2004 and 2003
F-5
F-6 to F-10
 
F-1

KINGS ROAD ENTERTAINMENT INC
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 2004 AND APRIL 30, 2004
(Currency expressed in United States Dollars (“US$”), except for number of shares)

   
October 31, 2004
  
April 30, 2004
  
 
  
 (unaudited)
  
(audited)
  
ASSETS 
          
Current assets:
            
Cash and cash equivalents
  
$
159,087
  
$
21,915
  
Restricted cash
   
60,000
    
60,000
  
Accounts receivable, trade
    
105,957
    
166,906
  
Amounts due from related parties
    
0
    
0
  
Prepayments and other current assets
    
0
    
0
  
Total current assets
    
325,044
    
248,821
  
               
FIXED ASSETS, NET
   
0
    
0
  
               
OTHER ASSETS
              
Film development costs, net
   
69,437
    
69,437
  
Total Other Assets
    
69,437
    
69,437
  
               
TOTAL ASSETS
  
$
394,481
  
$
318,258
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Accounts payable
  
$
173,277
  
$
165,170
  
Accrued expenses
    
299,677
    
247,043
  
Deferred revenue
    
280,054
    
67,327
  
Line of credit
    
60,000
    
60,000
  
Liabilities from discontinued operations
    
4,000
    
4,000
  
               
Total current liabilities
    
817,008
    
543,540
  
               
Stockholders’ equity:
              
Common stock; 12,000,000 shares authorized at $0.01 par value;
3,864,390 shares issued and outstanding at April 30, 2004 and at
October 31, 2004 respectively.
   
38,644
    
38,644
  
Additional paid-in capital
    
24,932,655
    
24,932,655
  
Accumulated deficit
    
(25,196,581
)
  
(25,196,581
)
Net Profit (Loss) for Period
    
(197,245
)
  
0
  
Total stockholders’ equity (deficit)
    
(422,527
)
  
(225,282
)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  
$
394,481
  
$
318,258
  

See accompanying notes to condensed consolidated financial statements.

F-2

KINGS ROAD ENTERTAINMENT INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED OCTOBER 31, 2004 AND 2003
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
   
Three months ended October 31,
  
   
2004
  
2003
  
REVENUES
           
Feature films
  
$
69,697
  
$
81,261
  
TOTAL REVENUE
    
69,697
    
81,261
  
               
               
OPERATING EXPENSES:
              
Depreciation
    
0
    
0
  
General and administrative
   
144,274
    
129,181
  
Total operating expenses
    
144,274
    
129,181
  
               
INCOME (LOSS) FROM OPERATIONS
    
(74,577
)
  
(47,920
)
               
OTHER INCOME (EXPENSE):
              
Other income (expense)
    
0
    
(363
)
Interest income
   
128
    
118
  
Interest expense
    
(138
)
  
0
  
Total Other Income (Expense)
    
(10
)
  
(245
)
               
INCOME (LOSS) BEFORE INCOME TAXES
    
(74,587
)
  
(48,165
)
               
PROVISION FOR INCOME TAXES
    
0
    
0
  
               
NET INCOME (LOSS)
   
(74,587
)
  
(48,165
)
               
Net income (loss) per share – Basic
  
$
(0.02
)
$
(0.01
)
Net income (loss) per share – Diluted
  
$
(0.02
)
$
(0.01
)
               
Basic weighted average number of shares outstanding during the period
    
3,864,390
    
3,864,390
  
Diluted weighted average number of shares outstanding during the period
    
3,864,390
    
3,864,390
  

See accompanying notes to consolidated financial statements.

F-3

KINGS ROAD ENTERTAINMENT INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED OCTOBER 31, 2004 AND 2003
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)

   
Six months ended October 31,
  
   
2004
  
2003
  
REVENUES
           
Feature films
  
$
135,891
  
$
217,195
  
TOTAL REVENUE
    
135,891
    
217,195
  
               
OPERATING EXPENSES:
              
Depreciation
    
0
    
0
  
General and administrative
   
333,143
    
235,445
  
Total operating expenses
    
333,143
    
235,445
  
               
INCOME (LOSS) FROM OPERATIONS
    
(197,252
)
  
(18,250
)
               
OTHER INCOME (EXPENSE):
              
Other income (expense)
    
0
    
(1,697
)
Interest income
   
145
    
270
  
Interest expense
    
(138
)
  
0
  
Total Other Income (Expense)
    
7
    
(1,409
)
               
INCOME (LOSS) BEFORE INCOME TAXES
    
(197,245
)
  
(19,659
)
               
PROVISION FOR INCOME TAXES
    
0
    
0
  
               
NET INCOME (LOSS)
   
(197,245
)
  
(19,659
)
               
Net income (loss) per share – Basic
  
$
(0.05
)
$
(0.01
)
Net income (loss) per share – Diluted
  
$
(0.05
)
$
(0.01
)
               
Basic weighted average number of shares outstanding during the period
    
3,864,390
    
3,864,390
  
Diluted weighted average number of shares outstanding during the period
    
3,864,390
    
3,864,390
  

See accompanying notes to consolidated financial statements.

F-4

KINGS ROAD ENTERTAINMENT INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2004 AND 2003
(Currency expressed in United States Dollars (“US$”))
(Unaudited)

 
Six months ended October 31,
 
2004
  
2003
CASH FLOWS FROM OPERATING ACTIVITIES:
        
Income (loss) from continuing operations
$
(197,245)
  
$
(19,659)
Adjustments to reconcile income (loss) from continuing operations to net
cash (used in) provided by operating activities:
      
Depreciation and amortization
  
0
    
0
Change in operating assets and liabilities:
          
Accounts receivable, trade
  
60,949
    
62,437
Prepayments and other current assets
  
0
    
0
Accounts payables
  
8,107
    
14,345
Accrued expenses
  
52,634
    
7,132
Income tax payable
  
0
    
0
Deferred revenue
  
212,727
    
(10,000)
Net cash (used in) provided by operating activities
  
137,172
   
(54,255)
           
CASH FLOWS FROM INVESTING ACTIVITIES:
          
Gross additions to film development costs
  
0
    
(11,300)
           
Net cash used in investing activities
  
0
    
(11,300)
           
NET CHANGE IN CASH AND CASH EQUIVALENTS 
  
137,172
    
42,955
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  
21,915
    
50,679
           
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
159,087
  
$
93,634
 
See accompanying notes to condensed consolidated financial statements.

F-5

KINGS ROAD ENTERTAINMENT, INC.
Notes to Condensed Consolidated Financial Statements
As of October 31, 2004

NOTE 1 – NATURE OF OPERATIONS

Kings Road Entertainment, Inc, and its two wholly-owned subsidiaries (the "Company" or "Registrant"), have 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"). Kings Road Entertainment, Inc., incorporated in Delaware in 1980, began active operations in January 1983 and released its first motion picture in 1984. 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.

The Company’s two wholly-owned subsidiaries include Ticker, Inc., (a California corporation), and KRTR, Inc., (a New York corporation), both of which were inactive during the three month period ending October 31, 2004. The consolidated financial statements include those of Kings Road Entertainment, Inc. and its subsidiaries.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements. Accordingly, they do not include all of the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended April 30, 2004, included in the Kings Road Entertainment, Inc. annual report on Form 10-KSB for that period.

In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position at October 31, 2004, and the results of operations and cash flows for the three and six month periods ended October 31, 2004 have been included. The results of operations for the three and six month periods ended October 31, 2004, are not necessarily indicative of the results to be expected for the full fiscal year. All inter-company items and transactions have been eliminated in consolidation.

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. 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-6

NOTE 3 – CURRENT ASSETS

a. Cash and Cash Equivalents
 
Cash equivalents consist of cash on hand and cash due from banks. For purposes of the statements of cash flows, the Company considers all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents. The Company maintains its cash balances at financial institutions that are federally insured. However, at times, these balances could exceed federally insured limits.

b. Restricted Cash

As of October 31, 2004, restricted cash totaled $60,000, which was associated with the Company’s line of credit. During 2004, the Company entered into a certificate of deposit to secure a revolving line of credit. This certificate of deposit had a beginning principal balance of $60,000 and interest accrued at a rate two percent below the rate on the line of credit it secured. During the three month period ending October 31, 2004, the interest on the certificate of deposit accrued at rate of 0.85% per annum. Funds contained in this CD are classified as restricted as long as the related line of credit is outstanding.

c. 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 October 31, 2004, none of the Company's accounts receivable was from foreign distributors.

NOTE 4 – FIXED & OTHER ASSETS

a. Fixed Assets

Fixed assets of the Company at October 31, 2004, consisted of various items of office equipment with a historical cost of $5,993 and a net book value of $0. All of these items were fully depreciated at October 31, 2004.

b. 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.

c. Film Development Costs

Film development costs are costs incurred for movie projects not yet in production. Film development costs, including any related interest and overhead, are capitalized as incurred.

F-7

Profit participations and residuals, if any, are accrued in the proportion that revenue for a period bears to the estimated future revenues. Costs are amortized using the individual film forecast method set forth in FASB Statement No. 53 ("SFAS 53"), which bases the costs 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.

At October 31, 2004, film development costs totaled $69,437, which was net after an allowance of $30,000. During the three month period ended October 31, 2004, no film development costs were determined to be impaired.

NOTE 5 – LIABILITIES

a. Deferred Revenue

As of October 31, 2004, the Company has deferred revenue totaling $280,054. The Company is following the guidelines of SOP 00-02 for film production and distribution.

b. Line of Credit 

On March 4, 2004, the Company entered into a revolving line of credit loan with a beginning principal balance of $60,000, secured by a $60,000 certificate of deposit (see Note 3). During the period ending October 31, 2004, the line of credit accrued interest at a rate of 2.85% per annum. The Company’s credit line will expire on March 1, 2005 unless renewed.

c. Discontinued Operations

The Company has discontinued operations of its KRTR subsidiary. KRTR has been inactive and had no operations for the past two years. As of October 31, 2004, the Company has $4,000 of accrued liabilities outstanding.

In August 2001, the Board of Directors of the Company elected to discontinue the catalog sales operations of its Animal Town subsidiary, and on August 15, 2002 the Company sold the Animal Town subsidiary. 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 of Animal Town had been transferred to and/or or assumed by the new owner. No income tax benefit has been attributed to the loss from discontinued operations.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

a. Rent

In October, 2004, the Company renewed a one-year lease on a three-room apartment located in Beverly Hills, California. The Company elected to relocate its registered office to this location in November, 2003. Additionally, the Company rents a 3-unit storage facility for its archives. Rent expense for the Company's office and archive storage space was $7,043 and $4,390 during the three months ending October 31, 2004, respectively.

F-8

b. Contingent Losses & Litigation

We have previously disclosed our material litigation and regulatory issues in our Annual Report on Form 10-KSB, for the period ended April 30, 2004, and in our other filings with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. At October 31, 2004, we were involved with various legal matters, including litigation with former officers, directors, and related parties. Although the ultimate resolution of certain matters cannot be determined at this time, we do not believe that such matters, individually or in the aggregate, will have a material adverse effect on our future consolidated results of operations, cash flows or financial condition.

Legal fees associated with litigation are recorded in the period in which they occur. The company has not created, and does not intend to create any reserves for contingent losses resulting from an unfavorable outcome from any of these legal matters.

c. Other Commitments and Contingencies

In the ordinary course of business, the Company has or may become involved in matters of dispute which in the aggregate are not believed by management to be material to its financial position or results of operations.

NOTE 7 - COMMON STOCK

At October 31, 2004, the Company had 12,000,000 authorized shares of common stock, of which 3,864,390 shares were issued and outstanding. During the three month period ended October 31, 2004, no new stock was either issued or authorized.

NOTE 8 – RECOGNITION OF REVENUES

The Company’s revenues are derived primarily from distribution agreements in the US domestic market place and are amortized during the reporting period for which the revenue is applicable. Revenues derived from purchase option agreements are amortized over the period of the option granted. 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
Initial Release
  
Approximate
Release Period
Domestic theatrical
      
3-6 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-n years
 
F-9

N0TE 9 – 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.

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 October 31, 2004, the Company has a deficit in working capital of $491,964, has an accumulated deficit of approximately $25,394,000, and has sustained recent losses from operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company has discontinued certain operations that historically produced negative cash flow and plans to raise capital through equity-based investment instruments, which will provide funding for the development of future projects and operating expenses.
 
NOTE 11 - SUBSEQUENT EVENTS

a. Equity Activity

On January 16, 2005, the Company's Board of Directors resolved to issue an aggregate of 1,600,000 shares of its previously unissued common stock to various parties in order to reduce the Company's total debt. The common shares issued were valued at $0.10 per share, representing the 90-day weighted-average value of the shares. Of the 1,600,000 shares issued, a total of 500,000 were issued to service providers, 200,000 to a private contractor, 100,000 to a director as consideration for past services, and 800,000 to Company officers for accrued deferred salaries.

b. Stock Purchase Agreement

On February 4, 2005, the Company entered into a Stock Purchase Agreement with several entities, such that the entities agreed to purchase an aggregate of 1.5 million shares of the Company's common stock at $0.10 per share. On February 8, 2005 the Company's Board of Directors approved the transaction, and on February 11, 2005, the Company received the $150,000 and the Agreement was consummated.

c. Option/Purchase Agreement

Subsequent to the period covered by this report, on August 16, 2005, the Company received $90,000 (less 10% agency commission of $9,000) from New Line Cinema, as an option fee, applicable against the $900,000 purchase price, pertaining to the Company's rights to the movie production, All of Me. The option fee entitles New Line Cinema to the film rights of the remake of All of Me, for a 16-month option period from June 16, 2005 and expiring on October 11, 2006. Should New Line Cinema elect to move forward with the remake, it will be required to pay the Company an additional $810,000 (less an agency fee commission of 10 %) within the 16-month option period. New Line has the right to extend this option period for an additional 18-month period upon payment of a further $90,000, which shall be non-applicable against the purchase price. In accordance with the agreement, the Company shall be granted an official producer credit.

F-10

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following review concerns the periods ended October 31, 2004 and October 31, 2003, which should be read in conjunction with the financial statements and notes thereto presented in the Form 10-QSB/A -1 and the Form 10-KSB for the fiscal year ending April 31, 2004.

Forward Looking Statements

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", “estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

- the volatile and competitive nature of the film industry,
- the uncertainties surrounding the rapidly evolving markets in which the Company competes,
- the uncertainties surrounding technological change of the industry,
- the Company's dependence on its intellectual property rights,
- the success of marketing efforts by third parties,
- the changing demands of customers and
- the arrangements with present and future customers and third parties.

Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.
 
Recent Developments

Subsequent to the fiscal year ended April 30, 1995, the Company has produced no new films and has derived its film revenues almost exclusively from the exploitation of films produced in prior years. The Company continues to fund and develop motion picture projects, with the intention of either producing the motion picture, establishing a partnership or joint venture with another film production company to develop and/or produce the project or an outright sale of the project.

On September 30, 2004, the Company executed an Amendment Agreement with Lions Gate Films, Inc., ("LGF"), extending and amending the original Agreement dated August 1, 1998. This Agreement, effective August 20, 2004 through August 30, 2015, stipulates that LGF pay the Company a guarantee (in the form of an advance against royalties) of $1.2 million; $250,000 of which was payable upon execution of the Agreement, and the remaining $950,000 payable on September 1, 2005. In addition, the Company is entitled to certain royalties related to home video distribution. The Company received the initial $250,000 in September, 2004, and the final $950,000 in September, 2005.

13

Results of Operations

The Three Months Ended October 31, 2004 vs. the Three Months Ended October 31, 2003

For the quarter ended October 31, 2004, feature film revenues were $69,697 as compared to $81,261 for the quarter ended October 31, 2003. The decrease of $11,564 results primarily from decreased royalties on the Company's feature film library.

Costs and expenses amounted to $144,274 for the quarter ended October 31, 2004 as compared to $129,181 during the quarter ended October 31, 2003. This increase of $15,093 is primarily due to an increase in officers’ compensation.

The Company had a net loss of $74,587 for the quarter ended October 31, 2004 as compared to the net loss of $48,165 for the quarter ended October 31, 2003. This increase of the net loss of $26,422 results primarily from a decrease in film revenues and an increase in officers’ compensation.

The Six Months Ended October 31, 2004 vs. the Six Months Ended October 31, 2003

For the six month period ended October 31, 2004, feature film revenues were $135,891 as compared to $217,195 for the six month period ended October 31, 2003. The decrease of $81,304 results primarily from decreased royalties on the Company's feature film library.

Costs and expenses increased to $333,143 for the six months ended October 31, 2004 as compared to $235,445 during the six months ended October 31, 2003. This increase of $97,698 is due primarily to an increase in professional fees and officers’ compensation.

The Company had a net loss of $197,245 for the six month period ended October 31, 2004 as compared to net loss of $19,659 for the comparable period ended October 31, 2003. This increased net loss of $177,586 results primarily from a decrease in film revenues, coupled with increases in professional fees and officers’ compensation.

Liquidity and Capital Resources

The Company's principal source of working capital during the three and six month periods ended October 31, 2004 was motion picture royalty income. The Company does not currently have sufficient capital to fund its operations. If the Company fails to raise additional capital, increase revenues, or sell certain of its assets, the Company will, in all likelihood, be forced to significantly reduce its operations or liquidate.

For the six months ended October 31, 2004, the Company's net cash flow provided by operating activities was $137,172 compared to net cash provided by operating activities of $54,255 during the comparable period in 2003. At October 31, 2004, the Company had cash of $159,087 as compared to $93,634 at October 31, 2003. The increase in cash flow for the reporting period compared to the comparable period in 2003 was primarily due to the initial payment of $250,000 pertaining to the Distribution Agreement with Lions Gate Films.

Subsequent to the date of this report, the Company received a further cash inflow of $950,000 pertaining to its Distribution Agreement with Lions Gate Films. Management believes this inflow will be instrumental in allowing the Company to implement its business plan, as well as fund existing operations and service its debt requirements.

Future Commitments

The Company does not have, nor is it aware of, any other material future commitments.

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ITEM 3. CONTROLS AND PROCEDURES.

Evaluation of Disclosure, Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer performed an evaluation of our disclosure controls and procedures, which have been designed to permit us to effectively identify and timely disclose important information. They concluded that the controls and procedures were effective as of October 31, 2004 to provide reasonable assurance that the information required to be disclosed by the Company in reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. While our disclosure controls and procedures provide reasonable assurance that the appropriate information will be available on a timely basis, this assurance is subject to limitations inherent in any control system, no matter how well it may be designed or administered.
 
Changes in Internal Controls. There was no change in our internal control over financial reporting during the quarter ended October 31, 2004, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Demands 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.

On November 10, 2003, the Company received a letter from the Chairman of the Kings Road Shareholders Action Committee inquiring as to the status of the Independent Counsel's investigation as formally requested by such Shareholders Action Committee in its letter to the Board of April 17, 2003. The inquiry as conducted by the independent counsel at that time was proceeding at an unsatisfactory pace and therefore the Board removed this first independent counsel.

The Board thereupon appointed a new independent counsel to investigate these transactions and report to the Board, the Shareholders Action Committee and the Shareholders.

Subsequent to the period covered by this report, on November 3, 2004, the Board received a preliminary report from Mr. Leonard Machtinger of Kenoff & Machtinger, LLP, its independent counsel, with respect to some of the transactions of November 1998 through April 2001, that concerned former a former President & Director. After consultation with counsel, the Company’s management decided not to pursue this matter further due primarily to the expected cost of such action vs. possible benefits.

Demand and Notice For Annual Meeting

On November 17, 2003 the Board received a Letter 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, the Rigel lawsuit had been resolved, and the Company had received the report back from the independent counsel pertaining to the demand of the Shareholders Action Committee.

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On May 12, 2004 and in accordance with the Board Resolution of May 10, 2004, the Company issued a press release and filed a Form 8-K, announcing that the Annual Meeting of the Shareholders shall be held on September 15, 2004, at such time and place to be determined by the Board prior to the filing of the Proxy Statement. The Board further resolved to set the Record Date at the close of business of July 15, 2004. The Board further resolved that any proposal of shareholders to be included in the Proxy Statement for the Annual Meeting must be received by the Corporation no later than June 15, 2004, along with all information required to be provided by such proposing shareholder in accordance with the By-laws of the Corporation, the Delaware General Corporation Law and Regulation 14A of the SEC Act of 1934. The Board further resolved to appoint HJ & Associates, LLC, as the Company's auditors for the fiscal year ending April 30, 2004/5.

On July 15, 2004 and in accordance with the Board Resolution of the same date, the Company issued a Press Release and filed a Form 8-K, announcing the record date of for stockholders entitled to notice and to vote at the meeting has been changed to July 30, 2004, in order to reconcile a conflict between the provisions of the Delaware General Corporation Law and the Company's by-laws.

On August 27, 2004, and in accordance with its Board Resolution of August 26, 2004, the Company issued a Press Release and filed a Form 8-K, announcing the postponement of the annual meeting of stockholders from September 15, 2004 to November 30, 2004. The record date for stockholders entitled to notice and to vote at the meeting and any postponements and adjournments thereof, was also changed to October 15, 2004.

On October 21, 2004, and in accordance with the Board Resolution of October 18, 2004, the Company issued a Press Release and filed a Form 8-K, announcing that the Company has postponed and changed the date of the Annual Meeting of Stockholders which was scheduled for November 30, 2004 to a date which shall be determined upon completion of its Annual Report.

In conjunction with the change of the meeting date, the record date for stockholders entitled to notice and to vote at such meeting shall likewise be changed from October 15, 2004 to such date as shall be determined upon the setting of the meeting date.

Kings Road Entertainment, Inc. vs. Michael Berresheim, Eric Ottens, et al.

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 (earned by the Company and Regal Productions) as part of its joint venture on the film "Fastbreak"), were deposited into accounts of Kings Road Entertainment, Inc., (Florida Corporation P03000042628) and Kings Road to Fame, Inc. (Florida Corporation P03000043121) doing business as Regal Productions, corporations controlled by Michael Berresheim and Eric Ottens, without the consent or knowledge of the Company.

The Company's investigation 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) doing business as Regal Productions, corporations controlled by Messrs. Berresheim and Ottens.

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).

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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 totalling $103,517, belonging to the Company and Regal Productions were deposited into accounts of Kings Road Entertainment, Inc., (Florida Corporation P03000042628) and Kings Road to Fame, Inc. (Florida Corporation P03000043121) doing business as Regal Productions.

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) doing business as Regal Productions, and Messrs. Berresheim and Ottens, to pay the Company the sum of $103,517 plus interest and attorneys fees.

On August 9, 2004, the Company retained the services of Weiss Serota Helfman Pastoriza Cole & Bonsike, P.A., Attorneys at Law, of 2665 S. Bayshore Drive, Suite 420, Miami, FL 33133, in order to file a complaint in the State of Florida and perform other legal services seeking to recover the funds, in accordance with a Board Resolution of August 10, 2004.

On September 9, 2004, the Company filed suit in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, Case No. 04-14356 CACE 13, against Messrs. Berresheim, Ottens, the Florida entities, et al, "seeking the return of money illegally obtained and converted from the Company, an accounting and an injunction from further use of its trade name." Defendants Ottens and Berresheim have since been served with the Complaint. Discovery has commenced.

Subsequent to the period covered by this report, on July 26, 2005, the defendant filed his answer, affirmative defenses, and counterclaims. The defendant in his counterclaim is seeking to recover approximately $500,000 for money allegedly lent to the Company beginning back in the year 2000 and for libelous statements made by the Company.

On August 15, 2005, Plaintiff filed a motion to strike portions of the Defendant's Affirmative Answer and Counterclaim, which have no bearing on this case, together with its response to Defendant's counterclaim, demanding proof of such. Defendant likewise sent out a request for production and a set of interrogatories.
 
On March 10, 2006, after the defendant had failed to comply with two court orders, the Company’s motion for sanctions was granted and the defendant’s answer, affirmative defenses and counterclaim were stricken. An entry of default was entered against the defendant.
 
On April 18, 2006, the court ordered and adjudged on the plaintiff’s motion for final default judgment to recover the total sum of $332,553.57 from the defendant, as well as to provide full accounting of the Paramount funds and the defendant was also enjoined by permanent injunction to cease and desist all use of the name “Kings Road” in any capacity, as well as the name “Regal Productions”.
 
On March 19, 2007, the Company entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”) with the following parties: MBO Musikverlage, GmbH, a German limited liability company (“MBO Musikverlage”); MBO Media GmbH, a German limited liability company (“MBO Media”) and its new owner, as of March 2006, Tacitus Treuhand, Switzerland (“Tacitus”); Fabulous AG, a Nevada corporation (“Fabulous”), formerly Kings Road Entertainment Corp. (“KREC”), and prior to that Parkland AG (“Parkland”); Metropolitan Worldwide, Inc., a Nevada corporation (“Metropolitan”); Donal C. Tunnell (“Tunnell”); William E. Ottens (“Ottens”); and Lothar Michael Berresheim (“Berresheim”) individually and in his capacity as an officer, director, manager, member and/or shareholder of MBO Musikverlage, MBL Media, Tacitus, Fabulous/KREC/Parkland, KRFame, Florida and KREN Flordia, including any affiliates, subsidiaries, parents and other entities controlled, directly or indirectly by Berresheim, (collectively the “Berresheim Entities”).

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The Settlement Agreement calls for Berresheim to deliver to the Company three (3) original certificate representing One Million Four Hundred Fifty-One Thousand Two Hundred Forty-Seven (1,451,247) shares of the Company’s Common Stock (“Settlement Shares”), these being all the shares held or beneficially owned by Berresheim. Further, the parties agreed to the following: the discharges and releases of Berresheim, Tunnell, Ottens, the Berrsheim Entities, and their officers, directors, managers, members, shareholders, assigns, attorneys, agents, representatives, principals, predecessors and successors in interest (collectively, the “Berresheim Parties”), from any and all claims, demands, obligations, or causes of action of whatever nature or description; Dismissal of the Fourth DCA Litigation Appeal; Dismissal of the MBO Litigation; Dismissal of the Tunnell Litigation; Dissolution of KREFame Florida and KREN Florida; Withdrawal of Fictitious Name Filing of Regal Productions; Acknowledgement and Agreement to Refrain from Use of Kings Road Name by Berresheim; Transfer and Assignments of any Rights to the Kingsroadentertainment.com Website Ownership and Content; Agreement to Refrain from Acquiring Shares of Kings Road Stock by Berresheim Entities and Berresheim; Agreement to Refrain from Soliciting, Enticing, Encouraging or Assisting Claims of Litigation Against Kings Road by Berresheim and Berresheim Entities; and Non Solicitation of Vendors, Customers or Employees of Kings Road by Berresheim.

For consideration of the above, including the surrender of the Settlement Shares, the Company will pay Mr. Berresheim Sixty Thousand Dollars ($60,000) upon the receipt of the Settlement Shares by the Company’s Stock Transfer Agent, U.S. Stock Transfer Corporation; the transfer and quitclaim from the Company to Berresheim of the rights to the script entitled “Babylon Blues;” Agreement to refrain from opposing Berresheim’s motion to vacate the KREN Litigation; Dismissal of the MBO Litigation; Agreement to Refrain from Acquiring Shares of Metropolitan; Agreement to Refrain from Soliciting, Enticing, Encouraging or Assisting Claims of Litigation Against Berresheim.

The Settlement Agreement was filed as Exhibit 10.1 to Form 8-K filed with the Commission on April 23, 2007.

Claim on the Company from MBO Media GmbH

Subsequent to the period covered by this report, on March 29, 2005, the Company received a German language fax communication from attorney at law Ms. Beate C. Mueller, on behalf of her client MBO Media GmbH and its managing director Mr. Michael Berresheim (a former director and officer of the Company), demanding the Company's repayment of leasing costs of Euro 179,884.37 for the video and film editing suite Avid Symphony V 2.0 as ostensibly paid by her client MBO Media GmbH (formerly MBO Musikverlags GmbH). According to this letter her client made the initial claim for the reimbursement of this sum on May 18, 2000.

The Company has no record of any such claim, invoice, or corresponding leasing/repayment agreement between the parties in its files and has passed this correspondence on to its German counsel, who repudiated this claim on April 4, 2005.

Please see the above “Berresheim and Eric Ottens Matters” which discusses the settlement with MBO Media GmbH.

Shareholder Demand for Inspection of Company Records

Subsequent to the period covered by this report, on March 30, 2005, the Company received a registered letter dated March 22, 2005 from Georgia based attorney at law Daniel D. Dinur, Esq., on behalf of his client Kings Road Enterprises Corp. (formerly Parkland AG, an entity controlled by Mr. Michael Berresheim a former Director and Officer of the Company), together with a power of attorney signed on March 16, 2005 by that Company's President Mr. Evert Wilbrink and a demand under oath likewise dated March 22, 2005. The agent for the stockholder pursuant to such power of attorney made a "Demand under oath to inspect the Corporation's stock ledger, list of its stockholders, and its other books and records and to make copies or extracts therefrom, all as provided in Section 220 of the Delaware General Corporation Law and states that the purpose of the demand and the inspection is (a) to make a determination as to the value of the Stockholder's stock in the Corporation, (b) to investigate the Corporation's compliance with applicable laws, including but not limited to applicable corporate and securities laws and its own organizational and operational requirements as may be set forth in the books and records, based upon a reasonable suspicion of mismanagement and/or self-dealing due, among other things, to the apparent sale of stock to certain stockholders for less than its actual value." Company's counsel has been in contact with Mr. Dinur and the Company has complied with this demand.

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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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Subsequent to the period covered by this report, on February 4, 2005, the Company entered into a Stock Purchase Agreement with three investors under which the Company would sell 1,500,000 restricted shares of common stock at a price of $0.10 per share for an aggregate purchase price of $150,000 in cash.

Geraldine Blecker, the Chief Executive Officer and a director of the Company, agreed to purchase 350,000 shares for $35,000. ISBC GmbH, a German company of which Philip Holmes, a director of the Company, is sole managing director, agreed to purchase 800,000 shares for $80,000. And, The People Helpers, Inc., an unaffiliated third party, agreed to purchase 350,000 shares for $35,000.

Said transaction was disclosed in an 8-K filed on February 15, 2005 and a copy of the agreement attached as an exhibit to that filing.

Said shares were issued pursuant to an exemption from registration provided by Section 4(2) and 4(6) of the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 

No matters were submitted to security holders for a vote as of October 31, 2004.

ITEM 5. OTHER INFORMATION

On July 15, 2007, the Company filed with the Commission a Form 8-K stating that the Company had issued a press release announcing a change in the Company’s annual meeting date from September 15, 2004 to July 31, 2004, in order to reconcile a conflict between the provisions of the Delaware General Corporation Law and the Company’s By-Laws.

The press release was attached to the Form 8-K as Exhibit 99.1

On August 27, 2004, the Company filed with the Commission a Form 8-K stating that the Company had issued a press release announcing a change in the Company’s annual meeting date from July 31, 2004 to November 30, 2004. The record date for stockholders entitled to notice and to vote at the meeting and any postponements and adjournments thereof, was also changed to October 15, 2004.

The press release was attached to the Form 8-K as Exhibit 99.1

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On October 21, 2004, the Company field with the Commission a Form 8-K stating that the Company had issued a press release announcing a further change in the Company’s annual meeting date from November 30, 2004 to a date to be determined upon completion of the Company’s Annual report. Accordingly, the Record Date for the Annual Meeting of Shareholders shall likewise be postponed from October 15, 2004 to such date as shall be determined upon completion of the Company’s Annual Report and scheduling of its Annual Meeting of Shareholders.

The press release was attached to the Form 8-K as Exhibit 99.1

ITEM 6. EXHIBITS

INDEX TO EXHIBITS
OF
KINGS ROAD ENTERTAINMENT INC.

31.1
Rule 13a-14 (a)/15d-14 (a) Certification of President.
31.2
Rule 13a-14 (a)/15d-14 (a) Certification of Chief Financial Officer.
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Section 1350 Certifications.
 
SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities and 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.
 
(Registrant)
     
Date: June 30, 2008
By:
/s/ Philip Holmes
   
Philip Holmes, President
 
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