Jill Kelly Productions Tries to Block Takeover

WOODLAND HILLS, Calif. — Jill Kelly Productions attorneys are asking a bankruptcy court judge to deny a motion that would effectively allow a pair of adult veteran operators to take over 375 Jill Kelly titles, as well as 300,000 units of DVD inventory and $500,000 in accounts receivable, according to court papers obtained by XBiz.

The New Jersey operators, Michael and Frank Koretsky, own several adult companies including Pleasure Productions, Al Borda Videos and Effexmedia.com, a webmaster affiliate program.

The Koretskys are attempting to foreclose on a note that they purchased from Alliance Financial Capital Inc. three weeks prior to JKP’s Chapter 11 filing in August. The pair purchased the debt for an undisclosed price through their company XGen LLC.

North Hollywood, Calif.-based JKP, which maintains a variety of cable, satellite, video-on-demand and Internet operations, listed about 85 creditors, more than $3 million in liabilities and assets of $1.5 million. Its larger creditors include Nasty Pixx, American Express Co. and AVN Publications Inc.

The hearing on the latest motion, scheduled for Wednesday, seeks to determine the nature and extent of the lien, according to a court filing.

“XGen obviously purchased the Alliance loan not to be in the lending business but to acquire significant assets they can use in their businesses,” JKP said in its filing.

JKP attorneys said that XGen is “overwhelmingly oversecured” with its note.

“XGen will be able to demand payment of all of its attorney’s fees and costs … and therefore it is the benefit of XGen to hurl every possible pleading and objection at JKP trying to short circuit the bankruptcy and proceed with foreclosure,” the filing said.

JKP attorneys are asking that the court deny XGen’s request for the lien because “the property is obviously needed for an effective reorganization.”

“XGen is adequately protected by the equity cushion and by the monthly adequate protection payments being made by [JKP] in the amount of $7,000 per month,” JKP attorneys said.

But XGen, in an earlier filing, said that they haven’t been paid anything since the Chapter 11 filing and that they are owed $453,000, including $13,000 in interest and $55,000 in late fees.

JKP attorneys contend the value of the 375 videos alone is far higher than the what is owed on the loan.

One witness to XGen’s case is former JKP salesperson Jeffrey Krull, who disputes that. In a sworn declaration to the court that JKP’s inventory isn’t worth its value and that the company has “essentially become a catalog company.”

Krull, an industry veteran, also has worked for PHE Inc.’s Adam & Eve division, as well Don Goo Productions and Maximum Grind.

With the latest motion, JKP attorneys are seeking damages against XGen for its “clear interference with JKP’s attempts to license its titles.”

Since August, JKP’s Chapter 11 case has been a turbulent one.

Shortly after its filing, JKP asked the court to serve injunctions against a number of distribution companies from selling several of its masters. Court documents named International Video Innovation Inc., L&M Optical Disc West LLC, DVD Concepts, Direct Video, Dara Distributors, Easy Bay Inc., Mallcom Inc., Triple A Video, Zeev Lavy, Danni Skura and Alon Notea as defendants.

Additionally, a court order required International Video Innovation to turn over 6,000 copies of JKP videos to the U.S. Marshal.

The company is named after adult actress Jill Kelly, who served as president under her real name, Adrianne D. Moore, and reportedly quit last year prompted by a pay dispute.

JKP also was involved in a number of mergers and distribution agreements in the last two years, including signing New York-based Bizarre Video Unlimited to an exclusive licensing and distribution agreement, securing a Romanian television agreement with S.C. Folitexxx Video SRL, and inking a deal with Japanese distributors Max-A Co. and Japan Home Video Co. In addition, it rolled out its BLU and Collateral Damage XXX lines to expand its film library.

The company also relocated all of its operations and sales force to a new warehouse in North Hollywood, Calif., from its Sunset Strip location in West Hollywood, Calif.

Attorneys for JKP and XGen did not respond to calls Friday for comment on the latest motion.

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