10QSB 1 v120277_10qsb.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarter ended July 31, 2005

-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 July 31, 2005 was 6,957,740 shares, all of one class of $0.01 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

Quarter Ended July 31, 2005

TABLE OF CONTENTS

		PAGE
FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of July 31, 2005 and April 30, 2005	F-2

	Consolidated Statements of Operations for the Three Months Ended July 31, 2005 and 2004	F-3

	Consolidated Statements of Cash Flows for the Three Months Ended July 31, 2005 and 2004	F-4

	Notes to the Consolidated Financial Statements as of July 31, 2005	F-5 – F-9

Item 2.	Managements Discussion and Analysis or Plan of Operation	12

Item 3.	Controls and Procedures	13

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	14

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults upon Senior Securities	16

Item 4.	Submission of Matters to a Vote of Security Holders	16

Item 5.	Other Information	16

Item 6.	Exhibits and Reports on Form 8-K	16

SIGNATURES		16

Page 2 of 16

PART 1: FINANCIAL INFORMATION

KINGS ROAD ENTERTAINMENT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Page

Consolidated Balance Sheets as of July 31, 2005 and April 30, 2005	F-2

Consolidated Statements of Operations for the three months ended July 31, 2005 and 2004	F-3

Consolidated Statements of Cash Flows for the three months ended July 31, 2005 and 2004	F-4

Notes to Consolidated Financial Statements as of July 31, 2005	F-5 to F-9

F-1

KINGS ROAD ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

AS OF JULY 31, 2005 AND APRIL 30, 2005

	July 31, 2005			April 30, 2005
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	66,286		$	112,114
Restricted cash		61,162			60,386
Accounts receivable, trade		56,317			69,764
Prepayments and other current assets		0			4,500
Total current assets		183,765			246,764

OTHER ASSETS
Film development costs, net		70,037			70,037
Total Other Assets		70,037			70,037

TOTAL ASSETS	$	253,802		$	316,801

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	201,099		$	187,786
Accrued expenses		287,799			256,077
Deferred revenue		182,576			215,508
Line of credit		60,000			60,000
Liabilities from discontinued operations		4,000			4,000
Total current liabilities		735,474			723,371

Stockholders’ equity:
Common stock; 12,000,000 shares authorized at $0.01 par value; 6,957,740 shares issued and outstanding at July 31and April 30, 2005		69,577			69,577
Additional paid-in capital		25,211,655			25,211,655
Accumulated deficit		(25,687,802	)		(25,687,802	)
Net Profit (Loss) for Period		(75,102	)		0
Total stockholders’ equity (deficit)		(481,672	)		(406,570	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	253,802		$	316,801

See accompanying notes to condensed consolidated financial statements.

F-2

KINGS ROAD ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JULY 31, 2005 AND 2004

(Unaudited)

	Three months ended July 31,
	2005			2004
REVENUES
Feature films	$	96,213		$	66,194
TOTAL REVENUE		96,213			66,194

OPERATING EXPENSES:
General and administrative		185,215			188,869
Total operating expenses		185,215			188,869

INCOME (LOSS) FROM OPERATIONS		(89,002	)		(122,675	)

OTHER INCOME (EXPENSE):
Other income		13,910			0
Interest income		890			17
Interest expense		(900	)		0
Total Other Income (Expense)		13,900			17

INCOME (LOSS) BEFORE INCOME TAXES		(75,102	)		(122,658	)

PROVISION FOR INCOME TAXES		0			0

NET INCOME (LOSS)	$	(75,102	)	$	(122,658	)

Net income (loss) per share – Basic	$	(0.01	)	$	(0.03	)

Basic weighted average number of shares outstanding during the period		6,957,740			3,864,390

See accompanying notes to consolidated financial statements.

F-3

KINGS ROAD ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JULY 31, 2005 AND 2004

(Unaudited)

	Three months ended July 31,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations	$	(75,102	)	$	(122,658	)
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		13,447			50,346
Prepayments and other current assets		4,500			0
Accounts payables		13,313			81,640
Accrued expenses		31,722			23,285
Deferred revenue		(32,932	)		(5,000	)
Net cash provided by (used in) operating activities		(45,052	)		27,613

CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) decrease in restricted cash		(776	)		0
Net cash provided by (used in) financing activities		(776	)		0

NET CHANGE IN CASH AND CASH EQUIVALENTS		(45,828	)		27,613
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		112,114			21,915

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	66,286		$	49,528

See accompanying notes to condensed consolidated financial statements.

F-4

KINGS ROAD ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements

As of July 31, 2005

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 KRTR, Inc., (a New York corporation), and Ticker, Inc., (a California corporation). KRTR, Inc. had ceased operations in 2001 and was dissolved during the quarter ending July 31, 2005. Ticker, Inc. was inactive during the three months ending July 31, 2005. 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, 2005, 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 July 31, 2005, and the results of operations and cash flows for the three months ended July 31, 2005 have been included. The results of operations for the three months ended July 31, 2005, 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-5

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 July 31, 2005, restricted cash totaled $61,162, 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. 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. Once calculated royalties from actual sales have exceeded such an advance, the Company receives royalty income at the end of a specific reporting period (usually three, six or twelve months) based on actual sales from the preceding reporting period. As of July 31, 2005, 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 July 31, 2005, consisted of various items of office equipment with a historical cost of $5,993 and a $0 net book value. All of these items were fully depreciated at July 31, 2005.

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. 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.

F-6

At July 31, 2005, film development costs totaled $70,037, which was net after an allowance of $30,000. During the three month period ended July 31, 2005, no film development costs were determined to be impaired.

NOTE 5 – LIABILITIES

a. Deferred Revenue

As of July 31, 2005, the Company has deferred revenue totaling $182,576. The Company is following the guidelines of SOP 00-02 for film production and distribution.

b. Line of Credit

On March 8, 2005, the Company renewed its 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 July 31, 2005, the line of credit accrued interest at a rate of 4.55% per annum. The Company’s credit line will expire on March 1, 2006 unless renewed.

c. Discontinued Operations

During the period ending July 31, 2005, the Company dissolved its KRTR subsidiary. KRTR has been inactive and had no operations for the past two years. As of July 31, 2005, the Company has $4,000 of accrued liabilities outstanding for its discontinued operations.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

a. Rent

The Company rents a three-room apartment located on Doheny Drive, Beverly Hills, California as its registered office. From June 1, 2005 the rent for this facility increased by 4.5%. Additionally, the Company rents flexible storage space for its archives. Rent expense for the Company's office and archive storage space was $7,078 and $7,043 during the three months ending July 31, 2005 and 2004, respectively.

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, 2005, and in our other filings with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. At July 31, 2005, 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.

F-7

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 July 31, 2005, the Company had 12,000,000 authorized shares of common stock, of which 6,957,740 shares were issued and outstanding. During the three month period ended July 31, 2005, 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		Approximate
Marketplace	Initial Release		Release Period
Domestic theatrical		3-6 months
All international markets		1-10 years
Domestic home video		6 months		3-12 months
Domestic cable/pay television		12-18 months		18 months
Domestic syndicated/free television		24-48 months		1-n years

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 July 31, 2005, the Company has a deficit in working capital of $551,709, has an accumulated deficit of approximately $25,688,000, 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.

F-8

NOTE 11 - SUBSEQUENT EVENTS

a. Distribution Agreement

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.

Subsequent to the period covered by this report, in September, 2005, the Company received the remaining $950,000 due pursuant to this distribution agreement.

b. 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 an additional $90,000, which shall be non-applicable against the purchase price. As per the Company’s letter of agreement with Eclectic Filmworks, LLC of July 1, 2005, all net proceeds are to be equally shared with Eclectic Filmworks, LLC., and the Company shall be granted an official producer credit.

c. Settlement of Certain Lawsuits and Entry into a Material Definitive Agreement

Subsequent to the period covered by this report, on March 19, 2007, the Company entered into a Settlement Agreement and Mutual General Release with Michael Berresheim, Eric Ottens, et al., and various entities, including, but not limited to MBO Media GmbH, and other individuals and/or entities that may or may not have had a connection to Michael Berresheim, Eric Ottens, et al. For further detail s refer to Part II, Item 1- Legal Proceedings. The settlement was published in an 8-K filing on April 23, 2007.

F-9

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following review concerns the periods ended July 31, 2005 and July 31, 2004, which should be read in conjunction with the financial statements and notes thereto presented in the Form 10-QSB and the Form 10-KSB for the fiscal year ending April 30, 2005.

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 following discussion should be read in conjunction with the Company's financial statements and related notes. Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:

- 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, 1996, 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 July 1, 2005, the Company executed an agreement with Eclectic Filmworks LLC. to market the rights to produce a remake of All of Me to New Line Cinema. Per the terms of this agreement, all net proceeds would be shared equally between the Company and Eclectic Film Works.

Subsequent to the period covered by this report, on October 6, 2006, New Line Cinema paid the Company $90,000 to extend its option to develop a remake of All of Me for an additional 18-month period, ending April 11, 2008. The $90,000 option extension fee was split equally with Eclectic Filmworks LLC, as per a letter of agreement executed on July 1, 2005.

Page 12 of 16

Results of Operations

The Three Months Ended July 31, 2005 vs. the Three Months Ended July 31, 2004

For the quarter ended July 31, 2005, feature film revenues were $96,213 as compared to $66,194 for the quarter ended July 31, 2004. The increase of $30,019 results primarily from increased revenue from distribution of the Company's feature film library.

Costs and expenses decreased to $185,215 for the quarter ended July 31, 2005 as compared to $188,869 during the quarter ended July 31, 2004. This decrease of $3,654 primarily results from a slight decrease in professional fees.

The Company had a net loss of $75,102 for the quarter ended July 31, 2005 as compared to a net loss of $122,658 for the quarter ended July 31, 2004. This decreased loss of $47,556 results primarily from a marked increase in film revenues and a slight decrease in professional fees.

Liquidity and Capital Resources

For the three months ended July 31, 2005, the Company's net cash used in operating activities was $45,052 compared to net cash provided by operating activities of $27,613 during the comparable period in 2004. At July 31, 2005, the Company had cash of $66,286 as compared to $49,528 at July 31, 2004.

The Company's principal source of working capital during the three month period ended July 31, 2005 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.

Subsequent to the date of this report, the Company received a 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.

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 July 31, 2005 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. On June 9, 2005, in order to clarify and limit individual Officer’s authority, the Company’s Board of Directors unanimously adopted a policy wherein no individual officer or employee of the Company shall be authorized to commit to any material binding liability and/or contractual obligation without full prior disclosure to and the prior consent and approval of the Board. This policy shall include, but is not limited to, such transactions as a sale or disposal of Company assets, entering into any employment and/or retainer agreement, authorizing exclusive representation of the Company and/or its properties by any third party, any material purchase or financial commitment to a third party. Other than the implementation of this policy, there were no other changes in our internal control over financial reporting during the quarter ended July 31, 2005, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Page 13 of 16

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Claim Against Michael Berresheim, Eric Ottens, et al.

On September 9, 2004, the Company filed suit in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, against Mr. Michael Berresheim, a former officer and director of the Company, Mr. Eric Ottens, and two company’s under the control of Messrs Berresheim and Ottens (Kings Road Entertainment, Inc., a Florida Corporation and Kings Road to Fame, Inc.). The suit filed by the Company, was seeking the return of money illegally obtained and converted from the Company, an accounting, and an injunction from further use of its trade name.

Subsequent to this report, on April 18, 2006, the Court entered a final default judgment in favor of the Company, awarded damages in the amount of $332,534 and entered a permanent injunction requiring Berresheim to cease and desist all use of the name Kings Road in any capacity. The Court also issued a Writ of Execution on July 13, 2006, and the Defendant filed an appellate brief to appeal the judgment on October 25, 2006.

Subsequent to this report, on March 19, 2007, this matter was resolved with the execution of a Settlement Agreement and Mutual General Release (see below: “Settlement of Certain Lawsuits and Entry into a Material Definitive Agreement“).

Claim on the Company from MBO Media GmbH

On March 29, 2005, the Company received a communication from an attorney- representing MBO Media GmbH and its managing director Mr. Michael Berresheim (former director and officer of the Company) demanding the Company's repayment of leasing costs of 179,884 Euro for the video and film editing suite Avid Symphony V 2.0 as allegedly paid by her client MBO Media GmbH (formerly MBO Musikverlags GmbH). 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 counsel, who repudiated this claim on April 4, 2005. Subsequent to this report, this claim was included in the counterclaims filed by defendant Berresheim with his affirmative defenses filed on July 26, 2005 (see above Claim against Michael Berresheim, Eric Ottens, et al.).

Shareholder Demand for Inspection of Company Records

On March 30, 2005 the Company received a letter dated March 22, 2005 an attorney representing Kings Road Enterprises Corp. (formerly Parkland AG, an entity controlled by a former Director and Officer of the Company), seeking to inspect the Corporation's stock ledger, list of its stockholders, and its other books and records and to make copies or extracts there from, all as provided in Section 220 of the Delaware General Corporation Law , which states that the purpose of the demand and the inspection is (i) to make a determination as to the value of the Stockholder's stock in the Corporation, (ii) 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. The Company's counsel has complied with this demand.

Page 14 of 16

Settlement of Certain Lawsuits and Entry into a Material Definitive Agreement

Subsequent to the period covered by this report, on March 19, 2007, the Company entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”) with the following parties: MBO Musikverlags GmbH, a German limited liability company (“MBO Musikverlag”); 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 Musikverlag, MBO Media, Tacitus, Fabulous/KREC/Parkland, KRFame, Florida and KREN Florida, including any affiliates, subsidiaries, parents and other entities controlled, directly or indirectly by Berresheim, (collectively the “Berresheim Entities”). A Settlement and Mutual Release was also concluded with Ms. Beate C. Mueller.

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: 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 KRFame 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 foregoing event was reported in an 8-K filed on April 23, 2007

Other litigation

As of July 31, 2005, the Company was not aware of any pending claims or assessments, other than as described above or related to the matters described above, which may have a material adverse impact on the Company's financial position or results of operations.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None in the three month period ending July 31, 2005

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

No matter was submitted to a vote of our shareholders during the quarter ended July 31, 2005.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

INDEX TO EXHIBITS

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.

32	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: July 17, 2008	By:	/s/ Philip Holmes
		Philip Holmes, President

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