ROK Entertainment: An investigation | Mobile Entertainment

ROK Entertainment: An investigation

ROK Entertainment: An investigation
Tim Green

by

General / February 23rd 2010 at 5:48PM

The activities of UK-based ROK are coming under scrutiny. Find out why here?

Why are so many people so angry with ROK Entertainment Group Inc? ME has been aware of speculation surrounding the mobile video and TV specialist for many months now. But in recent weeks the calls and emails from unhappy former associates have become more frequent.

Two high profile rows have figured heavily in the news over the last three months.

In December ROK declared its anger that Player One, which it bought two months earlier, was going into administration.

However, ME has learned that Player One was closed by its original directors only when they learned that ROK wanted to move its most valuable IP into a new company called Player One Marketing, which was registered by ROK on October 28th 2009.

ROK doesn’t appear to have given up on this case even though Player One has since been re-launched by its original directors.

Bruce Renny, marketing director of ROK, told ME: “Firstly, Player One owes ROK in excess of £3 million and no attempt was made by Player One to repay that and, secondly, ROK did not have control of the board of Player One at any time.

"As such, the suggestion of moving its assets into another company was purely that – a suggestion – which would require board approval. The management of Player One decided to place the company into administration without advising ROK, and we are taking action to recover this debt."

The £3 million owed would appear to relate to the money invested by Fleming, from which ROK bought its stake in Player One rather than by any funding put in by ROK itself.
 
In January, ROK lost another battle when the UK High Court upheld a claim made by Field Fisher Waterhouse (FFW) in a bid to recover £73,000 plus interest in alleged unpaid fees from ROK to advise on the acquisition of Inter Credit Group.
 
In addition to these cases, ME has also discovered that a former employee fought ROK for a year over an unpaid debt of £7,000. He issued a third party debt order (which freezes the defendant’s bank account until the court makes its judgement) to get his money paid.
 
Many more individuals have spoken to ME about their legal battles with ROK. Most would not be named. However, the Mobile Entertainment Forum continues to pursue ROK for over £3,000 in unpaid membership fees and legal costs for 2007 and 2008 invoices.

And UK computer specialist Capella Professional Services claims it has never been paid £32,000 for supplying servers to ROK. It has so far paid £10,000 in legal fees chasing the payment.

Renny said: “ROK is investigating this (MEF) and the Capella issue.”
 
ME has also learned the full story behind the closure of Blubox, in which ROK bought a majority stake in 2007. 

Blubox’s founders bought their shares back from ROK for £500,000 in March 2009. They paid £110,000 but then found that it was not possible to raise equity investment against these shares because they had been moved out of the (insolvent) ROK Entertainment on the day it went into administration and into a new ROK investment vehicle.

As a result the new Blubox was moved into administration. It was only bought back from the administrators last month.
 
In general, ROK claims that any negativity directed towards it comes from employees of ROK companies that have been closed down. So the question is, why has ROK closed so many subsidiaries?

ME has looked into the financials of ROK, and they make intriguing reading.

Here’s the full chronology:
 
On November 14th, 2007, ROK completed a reverse takeover in order to achieve a quotation on the US exchange – specifically the OTC Bulletin Board. It did this by acquiring a shell company called Cyberfund, which was based in Delaware.
 
Cyberfund then acquired all the shares of ROK Entertainment Group Limited. Shortly after, on December 31st, the merged entity was renamed ROK Entertainment Group Inc (REGI) and incorporated in the State of Delaware.
 
ROK’s re-invention as a US company, and its initially positive outlook, impressed investors enough to drive the share price up to $28 by March 2008.

This valued the company at $700 million. However, the high valuation didn’t last – and by December 2008 shares had plummeted to $0.01, for a total valuation of $5 million. At time of writing they hover around $0.1.
 
Its June 2008 SEC filings can’t have helped. These showed company’s sales of $1.032 million and a net loss of $20.88 million.
 
In fact, these were the last financials ROK would file. Not filing accounts contravenes OTC rules, so ROK chose to go ‘delinquent’ and downgrade from an OTC listing to the so-called ‘Pink Sheets’.

This lists ultra-low priced shares that, according to the SEC “tend to be closely held, extremely small and/or thinly traded. Most do not meet the minimum listing requirements for trading on a national securities exchange… and do not file periodic reports or audited financial statements with the SEC, making it very difficult for investors to find reliable, unbiased information about those companies.”

Renny said this was a cost-saving strategy: “As part of our re-structuring in late 2008, we were advised that going dark is an accepted practice – not least as a cost saving measure. Many companies listed on US markets did the same thing in late 2008/early 2009.”
 
In Autumn 2008, ROK began ridding itself of loss-making subsidiaries. It placed several ‘non-core’ UK-based subsidiaries – Jalipo, Brenten Trading Limited, Brenten Services, Brenten Industrial and Brenten Limited – into administration.
 
In case the name Brenten sounds unfamiliar, it’s because ROK re-named its key ROK subsidiaries just weeks before they were wound up. This would certainly have made it easy to miss the notification of ROK’s demise in the London Gazette, which lists company closures. Thus:
 
* ROK Entertainment Group Limited became Brenten Services
* ROK Media became Brenten Trading
* ROK Productions became Brenten Ltd
* ROK Corp became Brenten Industrial
 
Renny explained this strategy thus: “It is common practice to change company names in these circumstances to protect the parent brand. We did so based upon professional advice. “

On October 8th 2008, ROK made an SEC filing detailing these closures, starting that:

“ROK Entertainment Group Inc is experiencing growth in a large number of its core businesses and the board of ROK Entertainment has conducted a review of its subsidiary businesses aimed at achieving significant cost savings.
 
“As part of this cost-saving initiative, ROK Entertainment has placed three of its non-core U.K.-based subsidiaries, Brenten Trading Limited, Jalipo Media Limited and Brenten Limited, into administration.”

“ROK Entertainment believes this initiative will have no material impact upon revenues or the overall growth of ROK Entertainment and is in the best interests of both ROK Entertainment and its shareholders.

These companies may have been ‘non-core’ but they folded owing several million dollars – with ROK Entertainment Group Inc (REGI) the main creditor. Indeed, Brenten Services owed REGI £15 million (in an ‘intercompany loan account’), while Brenten Industrial was owed £5 million.

Ultimately, this was a pre-pack administration, a UK process wherein ‘the assets of a company are sold immediately after it has entered administration. It is most likely that the previous directors or management purchase the assets of the company from the administrator and set up a new company.”
 
And so it proved in this case, with a new company – ROK Investment Group (owned by the ROK shareholders) – moving in to buy up the assets of Brenten Services in December 2008.

It paid £25,000 for the failed company (payable in monthly instalments), although documents seen by ME state that it had paid just £15.656 by October 2009.

This was enough to prompt the solicitors to chase payment.

ROK appears to be a company that creates and closes new subsidiaries extremely frequently. Among the companies listed as dissolved on Companies House are ROK Global Gaming, ROK Mobile Media, ROK Star, ROK Wasp and ROK NRG.

Overall, for all the many press releases issued about contract wins in developing countries like Nigeria and Uganda, it’s difficult to see how ROK makes money. Mobile TV has been relatively unsuccessful in the West, so making it pay in the emerging nations would seem a big ask.

ME has also learned that a major operator in South Africa withdrew the ROK TV service in October 2009, while another operator in Tanzania cancelled its contract with ROK before ROK TV was launched because of technical problems.

Renny counters that the prospects for ROK are excellent. He said: “ROK is growing and developing its own core products and we are very well placed after re-structuring.”

* Sorry, we had to disable the comments option on this story. If you have any information you wish to share please email tim.green@intentmedia.co.uk