UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington, D.C.
20549





FORM 10-Q







x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934For
      the quarter ended July 31, 2009


-OR-


 ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934For
      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)





Indicate
by check mark whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes  x    No   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes   ̈   No   x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
 See the definitions of “large accelerated filer”, “accelerated filer”
and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈
              
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈(Do
      not check if a smaller reporting company)
              
              Smaller
      reporting company  x





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)  ̈ Yes
  x No





As of
September 11, 2009, the registrant had 19,971,493 shares of common stock
outstanding.








KINGS
ROAD ENTERTAINMENT, INC.


FORM
10-Q


Quarter
Ended July 31, 2009





TABLE
OF CONTENTS





PAGEPART
      I - FINANCIAL INFORMATIONItem
      1.
                    Financial
      StatementsConsolidated
      Balance Sheets as of July 31, 2009 and April 30, 2009
                    1Consolidated
      Statements of Operations for the Three Months Ended July 31, 2009 and
      2008
                    2Consolidated
      Statements of Cash Flows for the Three Months Ended July 31, 2009 and
      2008
                    3Notes
      to Consolidated Financial Statements as of July 31, 2009
                    4Item
      2.
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                    9Item
      3.
                    Quantitative
      and Qualitative Disclosures About Market Risk
                    10Item
      4T.
                    Controls
      and Procedures
                    10PART
      II - OTHER INFORMATIONItem
      1.
                    Legal
      Proceedings
                    12Item
      1A.
                    Risk
      Factors
                    12Item
      2.
                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                    12Item
      3.
                    Defaults
      Upon Senior Securities
                    12Item
      4.
                    Submission
      of Matters to a Vote of Security Holders
                    12Item
      5.
                    Other
      Information
                    12Item
      6.
                    Exhibits
                    12SIGNATURES
                    13





PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements





KINGS
ROAD ENTERTAINMENT, INC.


CONSOLIDATED
BALANCE SHEETS


AS
OF JULY 31, 2009 AND APRIL 30, 2009





July
      31, 2009
                                                
                                                
                                                April
      30, 2009(unaudited)
                                                
                                                
                                                (audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                                
                                                $
                                                104,647
                                                
                                                
                                                $
                                                11,416Accounts
      receivable, trade
                                                
                                                
                                                2,697
                                                
                                                
                                                
                                                0Prepayments
      and other current assets
                                                
                                                
                                                6,885
                                                
                                                
                                                
                                                5,190Total
      current assets
                                                
                                                
                                                114,229
                                                
                                                
                                                
                                                16,606Other
      assets:Film
      development costs, net (Note 4)
                                                
                                                
                                                589,842
                                                
                                                
                                                
                                                584,506Total
      other assets
                                                
                                                
                                                589,842
                                                
                                                
                                                
                                                584,506TOTAL
      ASSETS
                                                
                                                $
                                                704,071
                                                
                                                
                                                $
                                                601,112LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
                                                
                                                $
                                                159,087
                                                
                                                
                                                $
                                                99,554Accrued
      expenses
                                                
                                                
                                                306,428
                                                
                                                
                                                
                                                281,528Stockholder
      loans
                                                
                                                
                                                111,063
                                                
                                                
                                                
                                                109,332Deferred
      revenue (Note 5)
                                                
                                                
                                                109,091
                                                
                                                
                                                
                                                109,091Total
      current liabilities
                                                
                                                
                                                685,669
                                                
                                                
                                                
                                                599,505Non-current
      liabilitiesDeferred
      revenue (Note 5)
                                                
                                                
                                                545,454
                                                
                                                
                                                
                                                589,411Total
      non-current liabilities
                                                
                                                
                                                545,454
                                                
                                                
                                                
                                                589,411Total
      liabilities
                                                
                                                
                                                1,231,123
                                                
                                                
                                                
                                                1,188,916Stockholders’
      equity (deficit):Common
      stock; 50,000,000 shares authorized at $0.01 par value; 19,971,493 shares
      issued and outstanding at July 31, 2009 and 19,321,493  at April
      30, 2009
                                                
                                                
                                                199,714
                                                
                                                
                                                
                                                193,214Additional
      paid-in capital
                                                
                                                
                                                25,970,141
                                                
                                                
                                                
                                                25,876,641Accumulated
      deficit
                                                
                                                
                                                (26,696,337
                                                )
                                                
                                                
                                                (26,657,734
                                                )Accumulated
      other comprehensive income
                                                
                                                
                                                (570
                                                )
                                                
                                                
                                                75Total
      stockholders’ equity (deficit)
                                                
                                                
                                                (527,052
                                                )
                                                
                                                
                                                (587,804
                                                )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                                                
                                                $
                                                704,071
                                                
                                                
                                                $
                                                601,112





See
accompanying notes to consolidated financial statements.


1





KINGS
ROAD ENTERTAINMENT, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR
THE THREE MONTHS ENDED JULY 31, 2009 AND 2008


(unaudited)





Three
      months ended July 31,2009
                                          
                                          
                                          2008REVENUESFeature
      films
                                          
                                          $
                                          63,789
                                          
                                          
                                          $
                                          70,794TOTAL
      REVENUE
                                          
                                          
                                          63,789
                                          
                                          
                                          
                                          70,794OPERATING
      EXPENSES:General
      and administrative
                                          
                                          
                                          100,661
                                          
                                          
                                          
                                          144,585Total
      operating expenses
                                          
                                          
                                          100,661
                                          
                                          
                                          
                                          144,585INCOME
      (LOSS) FROM OPERATIONS
                                          
                                          
                                          (36,872
                                          )
                                          
                                          
                                          (73,791
                                          )OTHER
      INCOME (EXPENSE):Interest
      expense
                                          
                                          
                                          (1,731
                                          )
                                          
                                          
                                          (355
                                          )Total
      other income (expense)
                                          
                                          
                                          (1,731
                                          )
                                          
                                          
                                          (355
                                          )INCOME
      (LOSS) BEFORE INCOME TAXES
                                          
                                          
                                          (38,603
                                          )
                                          
                                          
                                          (74,146
                                          )PROVISION
      FOR INCOME TAXES
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -NET
      INCOME (LOSS)
                                          
                                          $
                                          (38,603
                                          )
                                          
                                          $
                                          (74,146
                                          )Net
      income (loss) per share – Basic & Diluted
                                          
                                          $
                                          (0.00
                                          )
                                          
                                          $
                                          (0.01
                                          )Basic
      and diluted weighted average number of shares outstanding during the
      period
                                          
                                          
                                          19,335,623
                                          
                                          
                                          
                                          10,617,362





See
accompanying notes to consolidated financial statements.


2





KINGS
ROAD ENTERTAINMENT, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED JULY 31, 2009 AND 2008


(unaudited)






Three
      months ended July 31,2009
                                      
                                      
                                      2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss from continuing operations
                                      
                                      $
                                      (38,603
                                      )
                                      
                                      $
                                      (74,146
                                      )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesChange
      in operating assets and liabilities:Accounts
      receivable, trade
                                      
                                      
                                      (2,697
                                      )
                                      
                                      
                                      (34
                                      )Film
      development costs
                                      
                                      
                                      (5,336
                                      )
                                      
                                      
                                      (39,279
                                      )Prepayments
      and other current assets
                                      
                                      
                                      (1,695
                                      )
                                      
                                      
                                      -Accounts
      payable
                                      
                                      
                                      59,533
                                      
                                      
                                      
                                      65,394Accrued
      expenses
                                      
                                      
                                      24,900
                                      
                                      
                                      
                                      (23,971
                                      )Deferred
      revenue
                                      
                                      
                                      (43,957
                                      )
                                      
                                      
                                      (27,273
                                      )NET
      CASH USED IN OPERATING ACTIVITIES
                                      
                                      
                                      (7,855
                                      )
                                      
                                      
                                      (99,309
                                      )CASH
      FLOWS FROM FINANCING ACTIVITIES:Common
      stock issued for cash
                                      
                                      
                                      100,000
                                      
                                      
                                      
                                      -Common
      stock repurchased for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (84,000
                                      )Proceeds
      from stockholder loans
                                      
                                      
                                      1,731
                                      
                                      
                                      
                                      90,355NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                                      
                                      
                                      101,731
                                      
                                      
                                      
                                      6,355Foreign
      currency translation
                                      
                                      
                                      (645
                                      )
                                      
                                      
                                      (479
                                      )NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                                      
                                      
                                      93,231
                                      
                                      
                                      
                                      (93,433
                                      )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                      
                                      
                                      11,416
                                      
                                      
                                      
                                      149,765CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                      
                                      $
                                      104,647
                                      
                                      
                                      $
                                      56,332


See
accompanying notes to consolidated financial statements.


3




KINGS
ROAD ENTERTAINMENT, INC.





Notes
to Consolidated Financial Statements


As
of July 31, 2009





NOTE
1 – NATURE OF OPERATIONS





Kings
Road Entertainment, Inc., and its wholly-owned subsidiaries (collectively, the
"Company"), have been engaged primarily in the development, financing and
production of motion pictures for subsequent distribution in movie theaters, to
pay-TV, network and syndicated television, on home video and in other ancillary
media in the United States and all other countries and territories of the world.
Kings Road Entertainment, Inc., incorporated in Delaware in 1980, began active
operations in January 1983 and released its first motion picture in 1984. The
Company has theatrically released 17 additional pictures in the domestic market
and released seven pictures directly to the domestic home video or pay
television market.





NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES





a. Basis
of Presentation





The
accompanying audited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America. In the opinion of the Company's management, all adjustments necessary
to present fairly the Company's financial position at July 31, 2009 and April
30, 2009 and the results of operations and cash flows for the three month
periods ending July 31, 2009 and 2008 have been included. All material
inter-company activity and transactions have been eliminated in the preparation
of the condensed consolidated financial statements. The unaudited condensed
consolidated financial statements have been prepared in accordance with the
requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Some information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations. In the opinion of management,
the accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. The consolidated balance sheet at April 30, 2009 was
derived from the Company’s audited financial statements included in the
Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2009.
The unaudited condensed consolidated financial statements included herein should
be read in conjunction with the audited consolidated financial statements and
the notes thereto included in that Annual Report on Form 10-K and the Company’s
other SEC filings. Results for the interim period are not necessarily indicative
of the results for any other period.





b.
Accounting Method





The
Company's consolidated financial statements are prepared using the accrual
method of accounting. The Company has elected an April 30 fiscal
year-end.





c.
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.





Film
development costs are expensed or capitalized in accordance with the criteria
contained in SOP 00-2 Accounting by Producers or
Distributors of Films. The amortization of film and participation costs
is calculated according to the individual- film-forecast-computation method,
which amortizes or accrues (expenses) such costs in the same ratio that current
period actual revenue (numerator) bears to estimated remaining unrecognized
ultimate revenue as of the beginning of the current fiscal year
(denominator).





The
Company periodically reviews its capitalized film costs and where it determines
that a property will not be used (i.e. will be disposed of) or where a date for
production has not been set within 3 years from the time of the first
capitalized transaction, a loss by a charge to the income statement is made
where the carrying amount of the project exceeds its fair
value.


4





d.
Principals of Consolidation





The
consolidated financial statements include the accounts of the Company and of its
wholly-owned subsidiaries. As of July 31, 2009, the Company had three
wholly-owned subsidiaries: Ticker, Inc., (a California corporation), which was
inactive during the three months ending July 31, 2009, The Big Easy II Film, LLC
(a California limited liability corporation), which was also inactive during the
period ending July 31, 2009 and Kings Road Entertainment Europe GmbH (a limited
liability company incorporated under the laws of Germany), which facilitates
international co-productions.





e. 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. Newly
Issued Accounting Pronouncements





In
September 2006, the Financial Accounting Standards Board
(“FASB”)  issued SFAS No. 157, “Fair Value Measurements” (SFAS
157). SFAS 157 provides enhanced guidance for using fair value to measure assets
and liabilities. It does not require any new fair value measurements, but does
require expanded disclosures to provide information about the extent to which
fair value is used to measure assets and liabilities, the methods and
assumptions used to measure fair value, and the effect of fair value measures on
earnings. In February 2008, the FASB issued FASB Staff Position FAS 157-2,
“Effective Date of FASB Statement No. 157” (the FSP). The FSP delayed, for
one year, the effective date of SFAS 157 for all nonfinancial assets and
liabilities, except those that are recognized or disclosed in the financial
statements on at least an annual basis. This statement is effective for the
Company beginning May 1, 2008. The deferred provisions of SFAS 157 were
effective for the Company’s fiscal year ending April 30, 2009. Adoption of this
standard by the Company has not had a material impact on its financial position
and results of operation.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (SFAS 160). This Statement amends Accounting
Research Bulletin No. 51, “Consolidated Financial Statements” to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective
for fiscal years beginning after December 15, 2008. Adoption of this
standard by the Company has not had a material impact on its financial position
and results of operation.





In
December 2007, the FASB issued SFAS No. 141-R, “Business Combinations”
(revised 2007) (SFAS 141-R). This Statement provides greater consistency in the
accounting and financial reporting of business combinations. It requires the
acquiring entity in a business combination to recognize all assets acquired and
liabilities assumed in the transaction, establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed and requires the acquirer to disclose the nature and financial effect of
the business combination. SFAS 141-R is effective for fiscal years beginning
after December 15, 2008. Adoption of this standard by the Company has not
had a material impact on its financial position and results of
operation.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (SFAS No. 165). SFAS No.
165 is effective for financial statements ending after June 15, 2009. SFAS No.
165 establishes general standards of accounting for and disclosure of subsequent
events that occur after the balance sheet date. Entities are also required to
disclose the date through which subsequent events have been evaluated and the
basis for that date. The Company has adopted SFAS No. 165 beginning in the first
quarter of fiscal 2010 and has evaluated subsequent events through September 11,
2009.





In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles (a replacement of
FASB Statement No. 162)” (SFAS No. 168). This statement establishes the FASB
Accounting Standards Codification as the source of accounting principles and the
framework for selecting the principles to be used in the preparation of
financial statements. The provisions of SFAS No. 168 will be applied
prospectively beginning in the second quarter of fiscal 2010 and is not expected
to have a material impact on the Company’s consolidated financial
statements.


5





g.
Earnings (Net Loss) Per Share





In
accordance with FASB Statement No. 128, “Earnings Per Share”, we calculate basic
net loss per share using the weighted average number of common shares
outstanding during the periods presented. We do not have any potentially
dilutive common stock equivalents, such as options or warrants and we have not
issued any preferred shares.





h.
Foreign Currency Translation





Monetary
assets and liabilities denominated in currencies other than the functional
currency of U.S. Dollars are translated at exchange rates in effect at the
balance sheet date. Foreign company assets and liabilities in foreign currencies
are translated into U.S. Dollars at the exchange rate in effect at the
balance sheet date. Foreign company revenue and expense items are translated at
the average exchange rate for the period. Unrealized gains or losses arising on
the translation of the accounts of foreign companies are included in accumulated
other comprehensive income (loss), a separate component of stockholders’
equity.





NOTE
3 – CURRENT ASSETS





a. Cash
and Cash Equivalents




Cash
equivalents consist of cash on hand and cash on deposit at financial
institutions. 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.
Accounts Receivable





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, 2009, the Company had a total of $2,697 in accounts receivable from one U.S.
distributor.





NOTE
4 - 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 Statement of Position 00-2 Accounting by Producers or
Distributors of Films (“SOP 00-2”) which bases the costs amortized 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.
Management’s periodical review of unamortized film costs resulted in no
impairment during the three month period ending July 31, 2009.





At July
31, 2009, film development costs totaled $589,842 compared to $584,506 at April
30, 2009. The increase of $5,336 reflects the continued active development of
the Company’s film development projects.





Subject
to the closing of financing for the production budgets of three films, the
Company expects to amortize approximately $240,000 of its film development costs
during the next twelve months. This represents production of two complete movies
and partial production of one further movie. The components of the Company’s
film costs at July 31, 2009 relate entirely to movies in development for
theatrical release.





Regarding
the Company’s released films, there are no unamortized film costs capitalized on
the balance sheets.





The
Company does not have any accrued participation liabilities for its projects in
development. The Company accrues costs for participation liabilities primarily
for existing movies in distribution in the period and amount in which they
occur.  The Company’s cash flows for film costs, participation costs,
exploitation costs and manufacturing costs are classified as operating
activities in the Statement of Cash Flows.


6





NOTE
5 – LIABILITIES





Deferred
Revenue





Deferred
revenue represents the unamortized portion of royalty advances from
distributors. The Company amortizes a royalty advance across the applicable
period of each distribution agreement.  Current liabilities disclose
the amount expected to be amortized during the subsequent 12 month period and
the balance is disclosed as a non-current liability. As of July 31, 2009 and
April 30, 2009, the Company had deferred revenue totaling $654,545 and $698,502,
respectively. The decrease is primarily due to the regular amortization of
royalty advances but also includes amortization of $16,684 due to early
termination of a distribution contract. The Company is following the guidelines
of SOP 00-02 for film production and distribution (See Note 4).





NOTE
6 - COMMITMENTS AND CONTINGENCIES





a.
Rent





The
Company rents its registered office space at 468 N. Camden Drive, Beverly Hills
and additional office space in Santa Monica, California. The Company also rents
flexible storage space for its archives. Rent expense for the Company's offices
and archive storage space was $12,795 and $11,743 during the three months ended
July 31, 2009 and 2008, respectively. All rental agreements may be terminated
upon one month’s notice.





b.
Writing Agreement





As a
result of a writing agreement signed on February 19, 2008, in connection with a
currently untitled feature length motion picture remake/sequel of one of the
films in the Company’s library, the Company is obligated to pay the writer a
further $66,667 in installments upon completion of certain writing milestones
which may occur during the course of the agreement. As these milestones occur,
the amounts due will be paid or accrued.





c.
Stockholder Loans





As of
July 31, 2009, the Company had borrowed the principal sum of
$103,977 ($111,063 including accrued interest) from its two largest
stockholders under the terms of an arrangement dated July 15, 2008, which
authorized the borrowing of up to $500,000 from stockholders of the Company to
fund working capital and other needs (the “Stockholder Loans”). The loans will
bear interest at 3 % above the WSJ Prime Rate on the lending date. The rate will
apply to the end of the next calendar quarter at which time the interest rate
will be reset for the next calendar quarter by the same measure. The term of
each loan will be for a maximum of one year from the end of the month in which
the loan is made. At the end of this term, the Company will either repay the
loan with interest or renegotiate the loan with the lending party. The lenders
may require that the Company issue shares at the value of the 90-day rolling
average share price of the Company’s common stock as quoted on the Pink Sheets
at the lower price at the day of lending or date of renewal upon default or
failure to negotiate a mutual extension. The value shall include the principal
and accumulated interest. The accrued interest charge is recognized on the
balance sheet together with the principal amount of the loans and the annual
interest charge is expensed on the statement of operations.  As of
July 31, 2009 the accumulated interest for the loans totaled
$7,086.  The Company disclosed this transaction in a Form 8-K
filed on July 21, 2008.  On July 22, 2009, the board unanimously
resolved to extend and clarify the terms to include amounts due to stockholders
for services and to provide for the conversion of those loans to equity at any
time during the term of the loan at the 90 day rolling average stock price for
transactions.  As the loans and accrued interest are convertible at
the option of the lender, the Company has classified the stockholder loans as a
current liability. Of the principal sum of $103,977 outstanding as of July 31,
2009, an amount of $90,000 plus accrued interest was due for re-negotiation
according to the original terms and a 12 month extension of the loan term was
agreed by the stockholders and the Company on July 31, 2009.





d.
Contingent Losses & Litigation





Legal
fees associated with litigation are recorded or accrued in the period in which
they occur.  In the ordinary course of business, the Company 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. As
of July 31, 2009, the Company was not involved in any
litigation.


7


NOTE
7 - COMMON STOCK
 
 At July
31, 2009, the Company had 50,000,000 authorized shares of common stock, $0.01
par value, of which 19,971,493 were issued and outstanding and 2,000,000
authorized shares of “blank check” preferred stock, $0.01 par value, of which no
preferred shares were issued or outstanding.  At April 30, 2009, the
Company had 50,000,000 authorized shares of which 19,321,493 were issued and
outstanding. The following common stock transaction transpired in the three
months ended July 31, 2009:
 
 On July
26, 2009, the Company entered into a Securities Purchase Agreement (“Agreement”)
with a European entity (“Investor”), for the purchase of a total of 650,000
shares of the Company’s common stock for the purchase price of $100,000. The
transaction closed on July 29, 2009. The investment was based on a price per
common share of approximately $0.154. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933. The
Investor was introduced to the Company by ISBC GmbH, a German limited liability
company managed by Philip Holmes and therefore an affiliate. The Company has
agreed to compensate ISBC GmbH for its work involved in the successful
introduction of the Investor with a flat fee of $5,000.
 
 NOTE
8 – RECOGNITION OF REVENUES
 
 Revenue
from the sale or licensing of films is recognized in accordance with SOP 00-2.
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, video-on-demand, 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
                    
                    ApproximateMarketplace
                    
                    InitialRelease
                    
                    ReleasePeriodDomestic
      theatrical
                    
                    
                    
                    0-3
      monthsAll
      international markets
                    
                    
                    
                    1-12
      yearsDomestic
      home video/DVD/Video
      on Demand
                    
                    3-6
      months
                    
                    3-12
      monthsDomestic
      cable/pay television
                    
                    12-18
      months
                    
                    18
      monthsDomestic
      syndicated/free television
                    
                    24-48
      months
                    
                    1-n
      years
 
 These
periods are dynamic and as new media, distribution platforms and consumer
demands dictate, they will continue to change.
 
 The
Company also derives revenues from service production contracts. Third parties
engage the Company to develop or produce film projects on a consulting
basis. These revenues will generally be recognized in the period in which
the work is performed. In a given accounting period, where a timing difference
results in the cash received exceeding the actual work performed, the difference
between the cash flows and the recognition of revenue is recorded as deferred
revenue. Conversely, where work performed exceeds the payments received then the
difference is recorded as accounts receivable.
 
 NOTE
9 - GOING CONCERN
 
 The
Company's consolidated financial statements are prepared using generally
accepted accounting principles in the United States of America applicable to a
going concern which contemplates the realization of assets and payment of
liabilities in the normal course of business. However at July 31, 2009, the
Company has limited revenues and a deficit in working capital of $571,440 and
has an accumulated deficit of approximately $26,697,000. 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 is in the process of raising capital through equity-based
investment instruments, which will provide funding for the development of future
projects and operating expenses.
  8
 
 ITEM
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
 The
following discussion concerns the periods ended July 31, 2009 and July 31, 2008,
which should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this document as well as the Form 10-K for the
fiscal year ended April 30, 2009.
 
 Results
of Operations
 
 The
Three Months Ended July 31, 2009 vs. the Three Months Ended July 31,
2008
 For the
quarter ended July 31, 2009, operating revenues were $63,789 as compared to
$70,794 for the quarter ended July 31, 2008. The decrease of $7,005 results
primarily from a decrease in royalties from distribution of the Company's
feature film library which was partially offset by an increase in the
amortization of deferred revenue.  The Company has licensed its films
to various third party distributors and revenue is reported by these
distributors on a regular basis and is based on actual sales for a preceding
period. Revenue fluctuations from distribution are therefore mainly influenced
by consumer demand and the activities of the distributor and the Company has
generally no further influence on the sales success of those movies and the
resulting fluctuations in revenue. Deferred revenue is the amortization of
royalty advances from distributors across the period of each distribution
agreement and is adjusted when applicable changes to an agreement are made.
During the three month period ended July 31, 2009, the Company terminated a
distribution agreement at which time $16,684 of related deferred revenue was
amortized.
 
 Operating
expenses amounted to $100,661for the quarter ended July 31, 2009 as compared to
$144,585 during the quarter ended July 31, 2008. This decrease of $43,924 is
primarily due to a decrease in legal expenses of approximately $18,000
associated with the settlement of litigation during the calendar year 2008, a
decrease in management and staff compensation of approximately $10,000, a
decrease in accounting and audit fees of approximately $5,000, a decrease in
consulting fees of approximately $4,000 and a decrease in travel expenses
of approximately $5,000.
 
 Interest
expenses increased to $1,731 for the quarter ended July 31, 2009 as compared to
$355 during the quarter ended July 31, 2008. The increase of $1,376 is primarily
attributable to two factors: (i) The increase in the interest period as the
loans were advanced in July 2008, and (ii) the increase in our outstanding debt
from $90,000 to $111,063 (including accrued interest).
 
 The
Company had an operating loss of $38,603 for the quarter ended July 31,
2009 as compared to $74,146 for the quarter ended July 31, 2008. The decrease in
operating loss of $35,543 results primarily from the decrease in operating costs
which were only partially offset by the decrease in revenues described in the
previous paragraphs.
 
 Liquidity
and Capital Resources
 
 The
production of motion pictures requires substantial working capital. The Company
must expend substantial sums for development as well as for the production and
distribution of a picture, before that picture generates any revenues. The
Company's principal source of working capital during the three months ended July
31, 2009, was motion picture distribution and licensing income. Additionally, on
July 29, 2009, the Company received $100,000 from an investor for the sale of
650,000 shares of common stock. In general, cash flows resulting from the
distribution of the Company’s existing film library have declined and are
expected to continue to decline over the long term. The Company is taking
measures to renew expiring licenses and ensure its library is continuously
distributed in all major world markets to slow down this trend. It is unlikely
that the Company's existing distribution and licensing income will be sufficient
to fund its ongoing operations. For this reason, the Company is developing new
movies and seeking equity funding for these movies in order to fully implement
its business planning as a movie production and distribution company. The
Company anticipates that its films will primarily be financed by external
sources including tax and location incentives, sales made in advance to
distributors and TV companies as well as the receipt of minimum guarantee
payments from sales companies. External financing will likely significantly
reduce the equity required to fund the balance of the production budget as well
as the inherent risk in movie financing. In order to fully implement the
Company’s business planning, the Company’s liquidity requirements include
amounts for screenplay acquisition and development as well as the hiring of
creative personnel. The Company currently estimates that it requires a total of
approximately $1 million to fully implement its business plan assuming that the
budgets for initial projects are financed principally from external
sources.
 
 At July
31, 2009, the Company had cash of $104,647 as compared to $11,416 at April 30,
2009.  The Company’s increase in cash is primarily attributable to an
equity investment of $100,000 on July 29, 2009 (refer to Note 7) partially
offset by operating losses.
  9
 
 Contractual
Obligations
 
 As a
result of a writing agreement signed on February 19, 2008, in connection with a
currently untitled feature length motion picture remake/sequel of one of the
films in the Company’s library, the Company is obligated to pay the writer a
further $66,667 in installments upon completion of certain writing milestones
which may occur during the course of the agreement. As these milestones occur,
the amounts due will be either paid or accrued.
 
 The
Company does not have, nor is it aware of, any other material contractual
obligations.
 
 Cautionary
Note on Forward-Looking Statements
 
 This
Quarterly Report on Form 10-Q 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.
 
 Forward-looking
statements 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.   We
disclaim any obligation to publicly update these statements, or disclose any
difference between its actual results and those reflected in these
statements.
 
 ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 We are a
“smaller reporting company” as defined by Regulation S-K and as such, are not
required to provide the information contained in this item pursuant to
Regulation S-K.
 
 ITEM
4T. CONTROLS AND PROCEDURES.
 
 a.
Evaluation of Disclosure Controls and Procedures
 
 Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report as required by Rule 13a-15 and Rule 15d-15.
 
 The term
“disclosure controls and procedures” is defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934 as amended (the “Exchange
Act”). These rules refer to the controls and other procedures of a company that
are designed to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within required time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
 Based on
the foregoing evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are not
effective as of July 31, 2009.
  10
 
 b.
Changes in Internal Control over Financial Reporting
  There
have been no material changes in our internal control over financial reporting
during the fiscal quarter ended July 31, 2009, that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting. We continue to have material weaknesses in our internal
control over financial reporting as described in Item 9A in our Annual Report on
Form 10-K for our fiscal year ended April 30, 2009 and those deficiencies have
not yet been remediated by us.
  11
 
 PART
II - OTHER INFORMATION
 
 ITEM 1.
              LEGAL
      PROCEEDINGS
 
 As of
September 11, 2009, the Company was not aware of any pending claims or
assessments, which may have a material adverse impact on the Company's financial
position or results of operations.
 
 ITEM
      1A.
              RISK
      FACTORS
 
 There
have been no material changes from the risk factors disclosed in Part 1, Item 1A
- Risk Factors in our Annual Report on Form 10-K for the year ended April 30,
2009.
 
 ITEM 2.
              UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF
PROCEEDS
 
 On July
26, 2009 the Company entered into a Securities Purchase Agreement with a
European entity (“Investor”), for the purchase of a total of 650,000 shares of
the Company’s common stock for the purchase price of $100,000. The transaction
closed on July 29, 2009. The investment was based on a price per common share of
approximately $0.154. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933. The Investor was introduced to the
Company by ISBC GmbH, a German limited liability company managed by Philip
Holmes and therefore an affiliate. The Company has agreed to compensate ISBC
GmbH for its work involved in the successful introduction of the Investor with a
flat fee of $5,000.
 
 The
proceeds of the investment will be used for general working capital
purposes.
 
 ITEM 3.
              DEFAULTS UPON SENIOR
      SECURITIES
 
 None.
 
 ITEM 4.
              SUBMISSIONOF MATTERS TO A VOTE OF SECURITY
      HOLDERS
 
 None.
  ITEM 5.
              OTHER
      INFORMATION
 
 None.
 
 ITEM 6.
              EXHIBITS
 
 31.1
              Rule 13a-14(a)/15d-14(a)
      Certification of Chief Executive
Officer.
 
 31.2
              Rule 13a-14(a)/15d-14(a)
      Certification of Chief FinancialOfficer.
 
 32
              Certifications of Chief Executive
      Officer and Chief Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.
  12
 
 SIGNATURES
 
 Pursuant
to the requirements of the Exchange Act, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  KINGS
      ROAD ENTERTAINMENT, INC.Date:  September
      11, 2009
                        By:
                        /s/ Philip HolmesPhilip
      Holmes, Chief Executive Officer
  13