Exhibit 99.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
June 20, 2005
Mail Stop 03-05
Via US Mail and Facsimile
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Mr. H. Martin DeFrank
President and Chief Financial Officer
447B Doheny Drive
Beverly Hills, California 90210
Re: Kings Road Entertainment, Inc.
Form 10-KSB for the year ended December 31,2004
Commission file #: 000-14234
Dear Mr. DeFrank:
We have reviewed the above referenced filing and have the following comments.
Where indicated, we think you should revise your document in response to these
comments. If you disagree, we will consider your explanation as to why our
comment is inapplicable or a revision is unnecessary. Please be as detailed as
necessary in your explanation. In some of our comments, we may ask you to
provide us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose or our review process it to assist you in
your compliance with the applicable disclosure requirements and to enhance the
overall disclosure in your filing. We look forward to working with you in these
respects. We welcome any questions you may have about our comments or any other
aspect of our review. Feel free to call us at the telephone numbers listed at
the end of this letter.
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Form 10-KSB for the year ended December 31, 2004
Financial Statements
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Statements of Cash Flows
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1. We note that your statements of cash flow present the change in film
development costs as an operating activity in 2003 and an investing
activity in 2004. In future filings, please classify all outflows of
cash related to film development costs as an operating activity. See
paragraph 55 of SOP 00-02.
Mr. H. Martin DeFrank
Kings Road Entertainment, Inc.
June 20, 2005
Page 2
Notes to Financial Statements
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Note 1. Significant Accounting Policies
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- -General
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2. We note that your accounts receivable balance is a significant portion
of total assets. Please tell us, and include in future filings, your
accounting policy for establishing as allowance for doubtful accounts,
determining past due or delinquency status and charging off
uncollectible receivables. Additionally, please tell us if there is an
allowance for doubtful accounts established as of December 31, 2004.
See paragraph 13 a-c of SOP 01-6. Also, tell us your basis for your
conclusion that you net accounts receivable aggregating $166,906 at
December 31, 2004 are collectible.
- -Film Development Costs
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3. We note that you refer to the accounting guidance set forth in FASB
Statement No. 53 as applicable for the accounting for film development
costs. In future filings, please refer to, and ensure you are
following SOP 00-2,the accounting literature that is applicable based
on SFAS 139,which superceded SFAS No.53 in June 2000.
Note 2. Film development Costs
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4. Tell us and explain in detail in the notes to your financial
statements in future filings your basis for your conclusion that
capitalized film development costs aggregating $69,437 are realizable
at December 31,2004. As part of your response and your revised
disclosure, please explain in further detail how you evaluated these
capitalized costs for impairment. We may have further comment upon
receipt of your response.
Note 6. Commitments and Contingencies, page F-15
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5. We note from your disclosure that you filed suit against Messrs.
Berresheim, Ottens, the Florida entities, et al, for the sum of
$103,517. Please tell us, and disclose in future filings, if this
amount is included as a receivable on the balance sheet at December
31, 2004. If it is included in receivables, please tell us if there is
a reserve established against the receivable. If not, please explain
why.
Mr. H. Martin DeFrank
Kings Road Entertainment, Inc.
June 20,2005
Page 3
Note 8. Discontinued Operations
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6. Please tell us the nature and amount of the consideration received in
connection with the sale of the Animal Town subsidiary and explain how
the gain on the sale of this subsidiary during 2003 of $33,043 was
calculated or determined.
Forms 10-QSB for the quarters ended July 31, 2004, October 31, 2004, and January
31, 2005
7. Comply with the comments on the Form 10-KSB for the year ended April
30, 2004 as they apply to filings on Form 10-QSB. Also, please file
your delinquent Quarterly Reports on Form 10-QSB as soon as possible
or explain why this cannot be done.
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As appropriate, please respond to these comments with 10 business days or tell
us when you will provide us with a response. Please furnish a cover letter that
keys your response to our comments and provides any requested supplemental
information. Please understand that we may have additional comments after
reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filings reviewed by the staff to be certain that they have
provided all information investors require for an informed decision. Since the
company and its management are in possession of all facts relating to a
company's disclosure, they are responsible for the accuracy and adequacy of the
disclosures they have made.
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure
in the filings;
staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to
the filing; and
the company may not assert comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
Mr. H. Martin DeFrank
Kings Road Entertainment, Inc.
June 20, 2005
Page 4
In addition, please be advised that the Division of Enforcement has access to
all information you provide to the staff of the Division of Corporation Finance
in our review of your filing or in response to our comments on your filing.
You may contact Claire Lamoureux at 202-551-3301 or me at 202-551-3813 if you
have questions.
Sincerely,
/s/ Linda Cvrkel
Linda Cvrkel
Branch Chief