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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File No. 0-7843
4Kids Entertainment, Inc. (f/k/a Leisure Concepts, Inc.)
(Exact name of registrant as specified in its charter)
New York 13-2691380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1414 Avenue of the Americas, New York, New York 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 758-7666
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $5,612,078 (based upon the average of the high and low prices
of Registrant's Common Stock, $.01 par value, as of March 22, 1996).
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 2,944,831
(Title of Class) (No. of Shares Outstanding
at March 22, 1996)
DOCUMENTS INCORPORATED BY REFERENCE: None
PART I
Item 1. Business
(a) General Development of Business. 4Kids Entertainment, Inc.,(the
"Company" ) operating through four wholly owned subsidiaries described below,
functions as a vertically integrated entertainment based company. The Company
provides a comprehensive range of services including toy design and development,
domestic and international merchandise licensing, media buying and planning,
international and domestic television distribution and television production. On
November 16, 1995, the shareholders approved a proposal to amend the Certificate
of Incorporation to change its name from Leisure Concepts, Inc. to 4Kids
Entertainment, Inc. to better reflect the nature of the business.
The Company principally operates through four wholly owned subsidiaries, Leisure
Concepts, Inc., Leisure Concepts International, Inc., The Summit Media Group,
Inc.and 4Kids Productions, Inc.
Leisure Concepts is engaged primarily in the business of domestic and
international licensing of the commercial rights to properties, personalities,
and product concepts. Leisure Concepts typically acts as exclusive agent in
connection with the grant to third parties of licenses to manufacture and sell
all types of merchandise based on such properties, personalities and concepts.
The licensing of these rights has been primarily in the areas of toys, games and
other juvenile merchandise, although grants have also been made in other fields,
including the food, toiletries, apparel and footwear industries. These rights
are also licensed in connection with the production of television shows, motion
pictures and publications such as magazines, juvenile books and comic strips.
Leisure Concepts International, based in the Company's London office, provides
hands-on management of properties in the important United Kingdom and European
marketplace.
The Summit Media Group provides media planning, buying and
marketing services primarily for toy and video game companies. Summit Media also
provides television distribution services.
4Kids Productions is a television and home video production company specializing
in youth-oriented entertainment programming.
(b) Financial Information About Industry Segments. For the past three
fiscal years, the Company has been engaged in only one industry segment.
Substantially all its revenue, operating profit or loss and identifiable assets
during such fiscal years were attributable to that segment.
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(c) Narrative Description of the Business.
(1) Licensing (Other Than Product Concepts). The Company's
licensing activities are conducted through its subsidiary, Leisure Concepts,
Inc. ("LCI"). The licenses in this category of activity are typically based upon
well-known personalities, fictional and fanciful characters, and established
properties often from the entertainment field. These rights in some cases may be
licensed from the owners of such properties and sublicensed to others, or LCI
may acquire the right to represent such owners, usually exclusively, in the
granting of such rights to third parties, negotiating licensing arrangements
directly with manufacturers or users and supervising the implementation of the
agreements.
A license agreement offered to manufacturers in the industry or
industries LCI considers appropriate, may provide the right to manufacture and
sell a broad range of toy products of various categories (a "master toy
license") or it may be limited to the right to manufacture and sell a specific
product or product lines. The typical licensing arrangement provides for the
payment of royalties based upon a percentage of the manufacturer's aggregate net
sales, at wholesale, of the products in question. LCI usually retains between
15% and 50% of the owner's licensing royalties, which generally range from 4% to
12% of net wholesale sales.
As part of the standard licensing arrangements, the manufacturer
usually pays LCI a nonrefundable advance which is applied in most cases against
a guaranteed minimum royalty. The percentage of sales or royalty rate, and any
nonrefundable advance on guaranteed minimum payment, are negotiated for each
transaction and vary from industry to industry and from property to property.
Generally the term of the license runs for one to two years, and may be renewed
if certain minimum annual payments are received under the license agreement. In
addition, the agreements usually provide that the rights under license will
revert to the owner unless the manufacturer commences its marketing activities
by a specified date and continues to market the products thereafter on a regular
basis. The average start-up or lead time necessary for product manufacture and
marketing is between approximately six and eighteen months. LCI does not assist
in financing any of these endeavors.
In the case of licenses for motion picture and television productions,
the licensees pay fees for each production, sometimes preceded by option
payments, and, usually in connection with television series, rerun payments for
multiple
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exhibitions in the United States. In some cases LCI participates in the "net
profits" (that is, income less deduction of fees and chargeable expenses and
production costs) that may be realized from the exploitation of the property in
question.
Licensing revenues accounted for approximately 52%, 60% and 75% of
consolidated net revenues for the years ended December 31, 1995, 1994 and 1993,
respectively.
(2) Certain Licensed Properties Represented Exclusively by Leisure
Concepts, Inc. Among the licensed properties represented exclusively by LCI are
the following:
o Nintendo of America Inc. ("Nintendo"), for the various
characters, trademarks, and copyrights arising out of the
software for the video cartridge games developed and owned by
Nintendo. LCI represents Nintendo on a worldwide basis, other
than Japan. These video games ranked among the top toy sellers in
the United States in 1993, 1994 and 1995.
o James Bond 007. In the fourth quarter of 1995 MGM/UA released the
17th motion picture in the series entitled "Goldeneye," starring
Pierce Brosnan as Bond.
o The syndicated weekly TV show, "WMAC Masters", which features the
nation's first live action martial arts competition series.
o The CBS weekly animated show "Santo Bugito," about a small border
town's colorful insect population.
o Carlo Collodi's Pinocchio, a live action theatrical release
scheduled for the summer of 1996 by New Line Cinema and Kusher-
Locke/Savoy.
o Pillow People, a new weekly animated children's show debuting in
the fall of 1996.
o The "Polly Pocket" and "Mighty Max", miniature playsets for girls
and boys distributed by Mattel.
o The Puttermans, prime time's battery-powered family featured on
Duracell's highly rated television commercials.
(3) Company-Owned Properties. World Martial Arts Council ("WMAC") is
an entertainment-based property utilizing skilled martial arts professionals
that was developed and is owned by the Company. The WMAC Masters television
series was
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launched in September of 1995. The Company has entered into a master toy license
agreement under which Bandai will market and distribute toys and video games for
the WMAC.
(4) Product Concepts. The product concepts developed by LCI usually
consist of a novel theme for a line of merchandise. LCI may conceive of an idea
and then develop it at its expense by preparing drawings or models of the
products or examples of various uses of the concepts, including descriptions or
illustrations of plans for the marketing and merchandising of the product lines
in question. LCI will then seek to license the product concept to manufacturers
for which LCI will typically receive a royalty based upon the manufacturer's
wholesale sales. Other times, although LCI has not created the original concept,
it will assist in developing a concept, initially conceived by others, into a
commercially viable product line, in which case LCI may act as the licensor, as
the agent for the rights holder of the concept in question or may simply receive
a royalty for services rendered. LCI does not typically finance the activities
of the manufacturers to which it licenses product concepts. However, LCI
sometimes enters into arrangements under which it defers its royalties until
after the manufacturer has recouped cost of production. Furthermore, because the
overhead associated with the development of product concepts is relatively low,
this activity has generally been profitable for LCI. There can be no assurance,
however, that the development of product concepts will be successful in the
future.
Examples of product concepts are "Quiz Wiz", "2-XL" and "Toby
Terrier", which the Company represents on a worldwide basis. "Quiz Wiz" is an
electronic hand-held computer answer game. "2-XL" is an interactive toy robot
that questions and teaches children about a variety of educational subjects.
"Toby Terrier" is a toy dog which interacts with specially programmed
videotapes. LCI licenses these properties to Tiger Electronics Inc. ("Tiger"),
which is a major shareholder of the Company.
The Company's agreements with Tiger are on substantially similar terms
and conditions as other agreements for similar properties represented by the
Company. For a description of certain agreements among Tiger, Mr. Randy Rissman,
the President and controlling shareholder of Tiger and Alfred R. Kahn, the
Company's Chairman, see "Business Experience", "Executive Compensation",
"Security Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Transactions" below.
(5) Media Buying, Planning and Television Syndication. The Company's
subsidiary The Summit Media Group, Inc. ("Summit Media"), provides clients,
including among others, Tiger, with media planning, buying and marketing
services, and television syndication services. Media buying accounted for 33%,
26% and 7% of consolidated net revenues for the years ended December 31, 1995,
1994 and 1993, respectively. Summit Media's current syndications include " WMAC
Masters", the weekly live action
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martial arts competition and "Mega Man," an animated series based on the popular
video game character. Summit also syndicates the holiday specials "Mr. Magoo's
Christmas Carol" and "Cinderella on Ice".
(6) Television and Home Video Production. The Company's subsidiary
4Kids Productions, Inc. ("4Kids Productions") is a television and home video
production company specializing in youth-oriented entertainment programming.
4Kids Productions is currently producing a series of nine one-half hour programs
for the Atlanta Committee for the 1996 Olympic Games which run on the NBC
television network. In addition, 4Kids Productions is co-producing
"WMAC Masters" with Renaissance Atlantic Films.
(7) Dependence on a Few Sources of Licensing Revenues. The Company
typically derives a substantial portion of its licensing revenues from a small
number of properties, which properties usually generate revenues only for a
limited period of time. Because the Company's licensing revenues are highly
subject to changing fashion in the toy and entertainment business, its licensing
revenues from year to year from particular sources are subject to dramatic
increases and decreases. It is not possible to precisely anticipate the length
of time a project will be commercially successful, if at all. Popularity of
properties can vary from months to years. In addition, the Company has little
control over the timing of guarantee and minimum payments, some of which are
made upon the execution and delivery of license agreements. Because of this, the
Company must continually seek new properties from which it can derive revenues.
No individual property contributed licensing revenues in excess of 10%
of consolidated net revenues for fiscal 1995. The only client/licensee which
contributed revenues individually in excess of 10% of consolidated net revenues
for fiscal 1995 was Tiger.
(8) Trademarks and Copyrights. The Company generally does not own any
trademarks or copyrights in properties which it licenses. These rights are
typically owned by the creator or by the entity, such as a master toy licensee
or television producer, which may expend substantial amounts in developing or
promoting the concept. The Company does own the copyrights and trademarks to
"Charlie Chan" and the Company's project "WMAC Masters".
(9) Seasonal Aspects. A substantial portion of the Company's revenues
and net income are subject to the seasonal variations of the toy and game
industry. Typically, a majority of toy orders are shipped in the third and
fourth calendar quarters. As a result, in the Company's usual experience, its
net income during the second half of the year will generally be greater than
during the first half of the year. In addition, Summit Media's business is also
seasonal as the majority of toy and video game advertising occurs in the second
half of the year.
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(10) Competition. The principal competitors of the Company's licensing
activities (including product concepts) are the product development,
merchandising, marketing and advertising departments of toy and other juvenile
merchandise manufacturers and motion picture studios as well as independent
advertising agencies, licensing companies and numerous individuals acting as
licensing representatives. There are also many independent product development
firms with which the Company competes. Many of these companies have
substantially greater resources than the Company and represent properties which
have been commercially successful for longer periods than properties represented
by the Company. The Company believes it would be relatively easy for a potential
competitor to enter its market in light of the relatively small investment
required to commence operations. However, the ultimate success of a new entrant
in the field would depend on its access to toy and other manufacturers, sources
of properties to be licensed, its know-how in the negotiation and subsequent
administration of licenses, and the retail market acceptance of the property in
question.
The Company's media buying, planning and television syndication
activities as well as its television and home video production activities
operate in highly competitive industries and face as competitors many companies
with substantially greater resources and distribution networks than the Company.
(11) Employees. As of March 22, 1996, the Company had a total of 48
full-time employees.
Item 2. Properties
The following table sets forth, with respect to properties leased
(none are owned) by the Company at March 22, 1996, the location of the property,
the date on which the lease expires and the use which the Company makes of such
facilities:
Approximate
Square
Address Expiration of Lease Use Feet
- ------- ------------------- --- ----
1414 Avenue of the Americas May 31, 2004 Executive and 13,900
New York, New York Sales Office,
Media Buying
and Television
Production
11400 West Olympic Boulevard March 18, 1999 Subleased 2,460
Los Angeles, California
403-404 The Plaza November 22, International 1,200
535 Kings Road 1997 Sales Office
London, England
The Company considers that, in general, its physical properties are
well maintained, in good operating condition and adequate for its purposes.
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Item 3. Legal Proceedings
In December 1993, Pop, Inc. and its President commenced an action in
the Supreme Court of the State of New York, County of New York against the
Company, 4Kids Productions and Mr. Kahn alleging breach of contract and
defamation in connection with the production of the "Monster Wars" television
program. In April, 1994, the Court granted the Company's motions to dismiss
several of the causes of action brought by the plaintiffs including the claims
for defamation and unjust enrichment and all claims against Mr. Kahn personally.
The Company believes it has meritorious defenses against the remaining breach of
contract claim and is vigorously defending against such claim which seeks
damages of approximately $942,600. In addition, the Company has filed
counterclaims, including a claim for breach of contract, against the plaintiffs.
In December, 1994 an action was commenced against the Company in Los
Angeles Superior Court by Mark and Richard Striley seeking royalties and other
unspecified damages in connection with the Company's representation of the
"Gumby" property. The owner of the property, Lorimar Merchandising, is also
named in the complaint. The Company has served an answer denying all the
allegations of the Complaint. The Company believes it has meritorious defenses
to such lawsuit which is, however, in a very early stage.
Except for these lawsuits, as of March 22, 1996, there were no legal
proceedings pending against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
During the Company's fiscal quarterly period ended December 31, 1995,
there were four matters submitted to a vote of security holders through the
solicitation of proxies in connection with the Company's 1995 Annual Meeting of
Shareholders held on November 16, 1995 (the "Annual Meeting"). The following is
a description of the matters voted upon at the Annual Meeting, including the
number of affirmative votes and the number of negative votes cast along with the
number of abstentions or votes withheld with respect to such matters:
(a) The election of Alfred R. Kahn, Randy O. Rissman and Gerald
Rissman to serve as directors, subject to the provisions of the By-Laws, until
the next Annual Meeting of Shareholders and until their respective successors
have been duly elected and qualified. There were 2,666,808 votes cast in favor
of the election of each director and 20,995 votes withheld.
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(b) The approval of the Company's 1995 Stock Option Plan. There were
2,416,398 votes for, 249,438 votes against and 21,267 abstentions.
(c) The approval of the proposal to amend the Certificate of
Incorporation to change the Company's name from Leisure Concepts, Inc. to 4Kids
Entertainment, Inc. There were 2,646,103 votes for, 22,850 votes against and
18,850 abstentions.
(d) The approval of the selection of Deloitte & Touche as the
Company's independent auditors for the fiscal year ended December 31, 1995.
There were 2,663,078 votes for, 8,000 votes against and 16,725 abstentions.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
(a) The Company's Common Stock is traded on the NASDAQ National Market
System. The following table indicates high and low sales quotations for the
periods indicated based upon information supplied by NASDAQ, Inc. Such
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
1995 Low High
---- --- ----
First Quarter 2 1/2 4
Second Quarter 2 1/2 4 1/4
Third Quarter 3 4
Fourth Quarter 2 1/8 4 1/4
1994 Low High
---- --- ----
First Quarter 6 1/4 11 1/2
Second Quarter 4 1/4 7
Third Quarter 3 3/8 5 3/4
Fourth Quarter 2 1/2 4 1/2
(b) Number of Holders of Common Stock. The number of holders of record
of the Company's Common Stock on March 22, 1996 was 163, which does not include
individual participants in security position listings.
(c) Dividends. There were no dividends or other distributions made by
the Company during 1995 or 1994. Future dividend policy will be determined by
the Board of Directors
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based on the Company's earnings, financial condition, capital requirements and
other existing conditions. It is anticipated that cash dividends will not be
paid to the holders of the Company's Common Stock in the foreseeable future.
(d) Stock Purchases. The Board of Directors has authorized the Company
to acquire up to 165,000 shares of its Common Stock on NASDAQ or elsewhere. Such
purchases are to be made out of the Company's surplus. No such purchases were
made by the Company during 1995.
Item 6. Selected Financial Data
Year Ended December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
Total Net $ 6,617,279 $ 9,191,582 $10,909,024 $ 8,620,860 $ 7,044,228
Revenues
Income (Loss) (947,850) 135,250 2,524,688 2,254,410 947,673
from Continuing
Operations
Net Income (.32) .04 .77 .73 .33
(Loss) Per
Common Share
from Continuing
Operations
Net Income (.32) .04 .76 .72 .33
(Loss) Per
Common Share
from Continuing
Operations
Assuming Full
Dilution
Weighted 2,990,514 3,070,815 3,273,176 3,099,463 2,903,601
Average Number
of Common
Shares
Outstanding
The Company did not declare or pay any cash dividends during the five-year
period ended December 31, 1995.
At Year End 1995 1994 1993 1992 1991
- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets $25,968,575 $29,376,396 $20,933,958 $13,556,781 $13,380,859
Working Capital 6,894,818 8,159,128 8,713,842 8,780,095 7,214,065
Stockholders Equity 11,628,908 12,576,758 12,367,458 9,334,335 7,438,839
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The Company receives revenues from a number of sources, principally
licensing and media buying. The Company typically derives a substantial portion
of its licensing revenues from a small number of properties, which properties
usually generate revenues only for a limited period of time. Because the
Company's licensing revenues are highly subject to changing fashion in the toy
and entertainment business, its licensing revenues from year to year from
particular sources are subject to dramatic increases and decreases. It is not
possible to precisely anticipate the length of time a project will be
commercially successful, if at all. Popularity of properties can vary from
months to years. As a result, the Company's revenues and net income may
fluctuate significantly between comparable periods. The Company's revenues have
historically been primarily derived from the license of toy and game concepts.
Thus, a substantial portion of the Company's revenues and net income are subject
to the seasonal variations of the toy and game industry. Typically, a majority
of toy orders are shipped in the third and fourth calendar quarters. In
addition, the Company's media buying subsidiary concentrates its activities on
the youth oriented market. As a result, most of its revenue is earned in the
third and fourth quarters when the majority of toy and video game advertising
occurs. In the Company's usual experience, its net income during the second half
of the year will generally be greater than during the first half of the year.
However, the Company has little control over the timing of guarantee and minimum
payments, some of which are made upon the execution and delivery of license
agreements.
Results of Operation
Twelve Months Ended December 31, 1995 compared to Twelve Months Ended December
31, 1994.
Consolidated net revenue for the year ended December 31, 1995
decreased 28% ($2,574,303) as compared to the year ended December 31, 1994.
Decrease in revenue was recognized from the James Bond 007 and "WMAC Masters"
properties. In 1994, the Company recognized approximately $1.6 million from the
master toy and video game license agreement for the WMAC to be marketed and
distributed by Bandai. Bandai is expected to begin shipping WMAC toys and
related products in the 2nd quarter of 1996. Additionally, in 1994 the Company
recognized $600,000 from a licensing agreement with Nintendo which acquired the
video game
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rights in connection with James Bond 007. In addition, there were substantial
decreases in the Swan Princess and Shadow properties. Both the Swan Princess and
the Shadow were tied to the success of theatrical motion pictures in 1994 which
were not sufficiently successful to provide sustained interest in associated
merchandise. This decline in licensing revenue was partially offset by licensing
revenue from new licensing agreements related to the properties Polly Pocket,
Santo Bugito and Carlo Collodi's Pinocchio.
Revenue from the Company's media and television syndication services
decreased over 1994 performance. These activities comprised 33% of total net
revenue for 1995 as compared to 26% in 1994. Commissions earned on the media
placed for the theatrical releases, the Swan Princess and Street Fighter in 1994
were non recurring in 1995. These reduced commissions were partially offset by
increased commissions earned from Happiness Express and Tiger Electronics. The
Company's television and home video production activities comprised 15% of total
net revenue for 1995 as compared to 7% in 1994. This revenue related primarily
to the 1996 Olympic specials produced for the Atlanta Committee for the Olympic
games to run on the NBC television network and the "WMAC Masters" syndicated
television program which began airing in September 1995.
Selling, general and administrative expenses remained relatively
stable during the two fiscal years, although a higher percentage of such
expenses were attributable to the Company's media and syndication operations
which accounted for a increasing percentage of revenue. Overall selling, general
and administrative expenses increased as a percentage of net revenue from 82.7%
in 1994 to 114.5% in 1995 due to the decline in net revenues. The Company will
continue to seek to effect cost reductions without adversely impacting the
Company's business.
At December 31, 1995 there were approximately $3,742,641 of
capitalized film production costs, which relate to "WMAC Masters," a weekly
syndicated television program which began airing in September, 1995, and is
produced by the Company's 4Kids Productions subsidiary in cooperation with
Renaissance Atlantic Films and "Monster Wars" a syndicated television show which
began airing in October 1993.
Amortization of capitalized film costs decreased by approximately 34% ($559,000)
for the year ended December 31, 1995 as compared to the prior year. The decrease
is primarily due to amortization charges in 1994 related to "Monster Wars".
Included in amortization expense for 1995 is an additional expense in the fourth
quarter of $280,000 relating to the "Monster Wars" weekly television show. The
charge occurred as a result of the Company's periodic evaluation of net
realizable value of its capitalized costs. Amortization rates may change as a
result of changes in estimated future revenue. At December 31, 1995 the
percentage of unamortized film cost expected to be amortized within the next
three years exceeds 70%.
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As a result of the above, the Company reported a net loss for 1995 of
$947,850, as opposed to the reported net income in 1994 of $135,250.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993.
Net revenue for the year ended December 31, 1994 decreased 16%
($1,717,442) as compared to the year ended December 31, 1993. The decrease in
revenue was primarily due to a decline in licensing revenue from the "World
Wrestling Federation", the "Incredible Crash Dummies" and pre-existing Nintendo
properties. In addition, revenue in fiscal 1993 included approximately
$1,500,000 from a licensing agreement for video games on the "World Wrestling
Federation" property. This decline in licensing revenue was partially offset by
licensing revenue recognized in the fourth quarter of approximately $1.6 million
relating to the toy and video game rights for the WMAC to be marketed and
distributed by Bandai. In addition, licensing revenue benefitted from new
properties such as "The Swan Princess", an animated feature film released in
November 1994 and available on home video in summer 1995 and the new James Bond
007 film "Goldeneye," which will be released in the fourth quarter of 1995 as
the 17th in the series of James Bond motion pictures. Licensing revenue of
approximately $600,000 was recognized in the third quarter of 1994 from a
licensing agreement with Nintendo which acquired the video game rights in
connection with James Bond 007.
The Company's media and television syndication services, contributed
incremental revenue over 1993 performance. These activities comprised 26% of
total net revenue for 1994 as compared to 7% in 1993. The Company's television
and home video production activities comprised 7% of total net revenue for 1994
as compared to 5.4% in 1993. This revenue related primarily to the "Monster
Wars" syndicated television program which began airing in October 1993.
Selling, general and administrative expenses increased by 15%
($900,667) for the year ended December 31, 1994 as compared to the year ended
December 31, 1993. The higher level of expenditures for the year are principally
due to increased costs associated with expanding the Company's media and
television syndication services and the marketing of the Company's licensed
properties. The balance of the increase is primarily attributable to costs
associated with the Company's international operations. The increase in selling,
general and administrative expenses was partially offset by a decline in
officers' salaries and bonuses of 34% for the year ended December 31, 1994 as
compared to the prior year. The decrease is attributable to lower bonus amounts
which are based on pretax income levels.
- 13 -
At December 31, 1994 there were approximately $2,212,500 of capitalized
film production costs, which relate to "Monster Wars" a syndicated television
show which began airing in October, 1993, "Toby Terrier" a series of children's
home video cassettes co- produced with Tiger Electronics, Inc. and "WMAC
Masters" planned syndicated television show currently in production.
Amortization of capitalized film costs increased by approximately 60% ($615,000)
for the year ended December 31, 1994 as compared to the prior years. Included in
amortization expense for 1994 is an additional expense in the fourth quarter of
$271,000 relating to "Monster Wars" weekly television show, for which the
Company previously reported an expense of $500,000 in the first half of 1994. In
addition, the Company had $223,000 additional expense in the fourth quarter in
connection with "Toby Terrier." Both charges occurred as a result of the
Company's periodic evaluation of net realizable value of its capitalized costs.
Amortization rates may change as a result of changes in estimated future
revenue. At December 31, 1994 the percentage of unamortized film cost expected
to be amortized within the next three years exceeds 70%.
As a result of the above, the Company reported net income for 1994 of
$135,250, as opposed to the reported net income in 1993 of $2,254,688.
Liquidity and Capital Resources
At December 31, 1995, the Company had working capital of $6,894,818, as
compared to working capital of $8,159,128 at December 31, 1994. The decrease in
working capital of $1,264,310 is primarily due to the cost of funding the
operating loss of the Company for the year ended December 31, 1995 offset to
some extent by lower media payables.
Cash and cash equivalents decreased by $3,865,534 from December 31,
1994. The decrease in cash and cash equivalents is due to cash expenditures
associated with funding the production of "WMAC Masters" which had completed
production of the first thirteen episodes by December 31, 1995. This reduction
in cash produced an increase in film inventory-net. Additionally, cash
expenditures were required to fund the operating losses for the year ended
December 31, 1995.
Accounts receivable, net (current and non-current) decreased from
$17,963,280 at December 31, 1994 to $16,986,468 at December 31, 1995. This
decrease is primarily due to the lower revenue in the licensing business. Media
payable primarily represents obligations to television stations for advertising
time purchased on behalf of clients. Media payable decrease from $13,107,185 at
December 31, 1994 to $11,428,185 at December 31, 1995. This decrease is due to
the timing of receipts and subsequent payments to television stations. Amounts
due to licensor, which represent the owners share of royalties collected,
decreased by $186,430 to $1,613,606 from December 31, 1994. The decrease is
primarily due to lower royalties collected
- 14 -
during the fourth quarter as compared to the prior year which are paid to
licensors after the close of the quarter.
Accounts payable and accrued expenses were comparable to the prior
year.
In the opinion of management, the Company will be able to finance its
business as currently conducted from its current working capital and the
$5,000,000 credit facility with Chemical Bank discussed in Note 8 to the
financial statements. As of March 22, 1996 there have been no borrowings under
this credit facility. As the Company explores new and expanded opportunities in
the youth oriented entertainment market, including television production, it
will seek additional financing alternatives.
Item 8. Financial Statements and Supplementary Data
Financial Statements and Supplementary Data are attached hereto.
PART III
Item 10. Directors and Executive Officers of the Company
As of March 22, 1996, the Company's directors and executive
officers were as follows:
Position With the Company Held Office
Name and Age and Principal Occupation Since
------------ ------------------------- -----------
Alfred R. Kahn, 49 Chairman (Chief Executive 1987
Officer) and
Director
Randy Rissman, 48 Director, President 1991
of Tiger
Gerald Rissman, 75 Director, Employee of Tiger 1991
Joseph P. Garrity, 40 Executive Vice President 1991
(Chief Operating Officer)
and Treasurer (Chief
Financial Officer)
William J. Baron, 59 Vice President and Secretary 1991
Norman Grossfeld, 32 President, 4Kids Productions 1994
Sheldon Hirsch, 48 Chief Executive Officer, 1992
Summit Media
Thomas Kenney, 37 President, Summit Media 1993
- 15 -
Business Experience
Mr. Alfred R. Kahn has been Chairman (Chief Executive Officer) of the
Company since March 1991. Mr. Kahn was Vice Chairman of the Company from July
1987 until he became Chairman. With a brief interruption in 1991, Mr. Kahn has
served as a director of the Company since 1987.
Mr. Randy Rissman has been the president of Tiger, a
manufacturer and distributor of toys and related items, for the
past 15 years.
Mr. Gerald Rissman is employed by Tiger to perform various
executive functions. Prior to January 1987 he was also an
executive officer and director of Tiger. Mr. Rissman also serves
as a consultant in the electronics industry.
Mr. Joseph P. Garrity became Executive Vice President (Chief
Operating Officer) in October 1994. Prior to then, he served as
Senior Vice President. Mr. Garrity has also served as Treasurer
(Chief Financial Officer) since June 1991. For more than five
years prior to such time, Mr. Garrity was a Senior Audit Manager
for Deloitte & Touche.
Mr. William J. Baron has been Vice President and Secretary of the
Company since March 1991. He is in charge of the Company's research and
development activities.
Mr. Norman J. Grossfeld has been President of 4Kids Productions since
February 1994. Prior to such time, Mr. Grossfeld was President of Gold Coast
Television Entertainment from 1992 through February 1994 and Coordinating
Director for NBC Sports from 1991 through 1992.
Mr. Sheldon Hirsch has been Chief Executive Officer of Summit Media
since November 1992. Prior to such time he served as President of Sachs Family
Entertainment, a television program distribution company, from 1989 through
November 1992.
Mr. Thomas J. Kenney has been President of Summit Media
since February 1993. Prior to such time he was Senior Vice
President-Advertising of Tiger from 1991 through February 1993.
Mr. Randy Rissman is Mr. Gerald Rissman's son.
Tiger, Mr. Kahn and Mr. Randy Rissman have agreed to use their best
efforts to cause the Board of Directors to consist of three persons, two
recommended by Tiger and one recommended by Mr. Kahn. If Tiger sells any of its
shares of the Company's Common Stock, Tiger, Mr. Kahn and Mr. Randy Rissman will
use their best efforts to cause a majority of the Board of Directors to consist
of persons recommended by Mr. Kahn.
- 16 -
Item 11. Executive Compensation
The following table sets forth compensation paid to the Company's Chief
Executive Officer and the three most highly compensated executive officers for
the three fiscal years ended December 31, 1995:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Award
Name and Stock Options
Principal Position Year Salary ($) Bonus ($) (Shares)
- ------------------ ---- ---------- --------- -------------
1995 $395,000 $ -0- 100,000
Alfred R. Kahn 1994 395,000 40,408 100,000
Chairman of the Board 1993 395,000 432,305 100,000
1995 235,000 $ 6,750 25,000
Sheldon Hirsch, Chief 1994 165,000 42,916 -0-
Executive Officer, 1993 165,000 43,230 10,000
Summit Media Group, Inc.
Thomas Kenney, President 1995 200,000 $ 6,750 25,000
Summit Media Group, Inc. 1994 135,000 42,916 -0-
1993 135,000 43,230 10,000
Norman Grossfeld, President 1995 150,000 $ 50,000 20,000
4Kids Productions 1994 150,000 50,000 -0-
1993 -0- -0- -0-
- 17 -
The following table sets forth information concerning the grants of
stock options made during fiscal 1995:
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Individual Grants Price Appreciation
- ----------------------------------------------------------------------------------------- for Option Term (1)
% of Total Exercise ----------------------
Number of Options Granted or Base
Options to Employees in Price Expiration
Name Granted Fiscal Year ($/Sh) (2) Date 5% 10%
- ---- --------- --------------- ---------- ---------- ----------------------
Alfred R. Kahn 100,000 (3) 29% $3.625 1/01/05 $228,000 $578,000
Sheldon Hirsch 15,000 4 2.625 1/25/05 25,000 63,000
10,000 3 3.183 9/26/05 20,000 51,000
Thomas Kenney 15,000 4 2.625 1/25/05 25,000 63,000
10,000 3 3.183 9/26/05 20,000 51,000
Norman Grossfeld 10,000 3 2.625 1/25/05 17,000 42,000
10,000 3 3.183 9/26/05 20,000 51,000
(1) The Company used such method as it is one of the alternative methods of
option valuation suggested by the Commission's rules on executive
compensation disclosure. The Company does not advocate or necessarily agree
that such method can properly determine the value of an option.
(2) Based upon the fair market value of the Company's Common Stock on the date
of grant.
(3) All such options are currently exercisable.
- 18 -
None of the named executive officers exercised their options to
acquire shares during fiscal 1995. The following table sets forth information
concerning the fiscal year end value of unexercised options:
Value of Unexercised In-
Number of Unexercised Options at the-Money Options at
Name December 31, 1995 (1) December 31, 1995 (2)
Alfred R. Kahn 600,000 $ -0-
Sheldon Hirsch 35,000 -0-
Norman Grossfeld 20,000 -0-
Thomas Kenney 35,000 -0-
Joseph P. Garrity 80,000 -0-
William J. Baron 20,000 -0-
(1) All Mr. Kahn's options are currently exercisable. Of the remaining
unexercised options, 192,500 are currently exercisable and 20,000 will be
exercisable after September 7, 1996.
(2) Calculation based upon the average of the high and low prices of the
Company's Common Stock on NASDAQ on December 29, 1995 of $2.3125 per share.
Compensation of Directors
No director of the Company receives any cash compensation for his
services as such. Currently, the Company has two directors who are not
employees, Messrs. Randy Rissman and Gerald Rissman (the "Non-Employee
Directors"). Pursuant to the Company's 1994 Stock Option Plan (the "1994 Plan"),
on January 1, 1995, the Non-Employee Directors were each granted options to
purchase 50,000 common shares at a purchase price of $3.625. In addition,
pursuant to the 1994 Plan, on January 1, 1996 the Non-Employee Directors were
each granted options to purchase 50,000 common shares at a purchase price of
$2.3125. All such options were granted at the fair market value on the date of
grant, are currently exercisable in full and terminate ten years from the date
of grant. See "Security Ownership of Certain Beneficial Owners and Management"
below as to the number of common shares beneficially owned by each of the
Non-Employee Directors.
Employment Contracts and Termination of
Employment and Change-in-Control Arrangements
Mr. Kahn has an employment agreement with the Company pursuant to
which he receives a fixed salary of $395,000 per year. The agreement expires on
March 12, 1998. The agreement
- 19 -
also provides that for a period of six months after termination of employment,
Mr. Kahn will not "compete" with the Company. Under the employment agreement, if
Mr. Kahn is terminated without cause, he will be entitled to receive a payment
equal to 2.99 times his average annual compensation paid by the Company
(including bonuses, if any) during the five years preceding the date of
termination ("Severance Payment"). If a majority of the directors of the Company
consists of individuals who have not been recommended by either Tiger or Mr.
Kahn (a "Change of Control"), Mr. Kahn can terminate the agreement within six
months of such Change of Control, in which event he would be entitled to receive
the Severance Payment.
Mr. Garrity has an employment agreement with the Company which
currently provides for an annual salary of $200,000 (the "Fixed Salary") plus an
annual bonus equal to 2% of the Company's Income Before Income Tax Provision as
stated on the Company's financial statements in it's Annual Report on Form 10-K.
The agreement automatically renews on a year-to-year basis unless terminated by
either party at least 90 days prior to the June 3 anniversary date thereof.
There was no such termination and the agreement was automatically renewed until
June 2, 1997. The agreement may be terminated by the Company in the event of Mr.
Garrity's disability or for cause. If during the term of Mr. Garrity's agreement
there shall occur a Change of Control, Mr. Garrity can terminate the agreement
within six months of such Change of Control, in which event he would be entitled
to receive a payment equal to the Fixed Salary remaining to be paid for the year
during which such termination occurs.
Mr. Grossfeld has an agreement with the Company which currently
provides for an annual salary of $200,000 (the "Fixed Salary") plus an annual
bonus equal to 10% of 4Kids Productions Income Before Income Tax Provision as
stated on 4Kids Productions books and records, with an annual advance against
bonus of $50,000.
Each of Mr. Hirsch and Mr. Kenney has an employment agreement with
Summit Media for the period January 1, 1995 through August 31, 1998. Mr.
Hirsch's agreement currently provides for an annual salary of $250,000 while Mr.
Kenney's currently provides for an annual salary of $225,000 (the "Fixed
Salary"). Each agreement currently provides for an annual bonus equal to 6% of
Summit Media's Income Before Income Tax Provision as stated on Summit Media's
books and records. The agreements automatically renew on a year-to-year basis
unless terminated by either party at least 90 days prior to the August 31, 1998
anniversary date thereof. The respective agreements may be terminated by the
Company in the event of either of Mr. Hirsch's or Mr. Kenney's respective
disability or for cause. If during the term of the agreements there shall occur
a Change of Control, each of Mr. Hirsch and Mr. Kenney can terminate his
respective agreement within six months of such Change of Control, in which event
he would be entitled to receive a payment equal to the
- 20 -
Fixed Salary remaining to be paid for the year during which such termination
occurs.
Compensation Committee Interlocks and Insider Participation
The Company has a Compensation Committee, the current members of which
are Messrs. Randy and Gerald Rissman. Neither of such individuals has ever been
an officer or employee of the Company or any of its subsidiaries. During fiscal
1995, no executive officers of the Company served as a member of the
compensation committee or board of directors of another entity, one of whose
executive officers served on the Board of Directors of the Company.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
(a) - (c) The following table sets forth, as of March 22, 1996,
certain information concerning stock ownership of the Company by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
common shares of the Company, (ii) each of the Company's directors and (iii) all
directors and officers of the Company as a group. Except as otherwise indicated,
all such persons have both sole voting and investment power over the shares
shown as being beneficially owned by them.
Percent
Number of Shares of
Name and Address (1) Beneficially Owned Class
- -------------------- ------------------ -------
Randy Rissman 1,700,000 (2) 43.1%
Alfred R. Kahn 1,050,000 (3) 28.8%
Tiger Electronics Inc. 350,000 11.9%
Gerald Rissman 300,000 (4) 7.9%
Various Reporting 186,000 6.3%
Persons (5)
All directors and 2,250,919 (6) 43.3%
officers as a group
(8 persons)
(1) The address for Messrs. Randy Rissman and Gerald Rissman, and
Tiger, is 980 Woodlands Parkway, Vernon Hills, Illinois 60061; and the address
for Mr. Kahn is 1414 Avenue of the Americas, New York, New York 10019.
(2) Mr. Randy Rissman's beneficial ownership of the Company's Common
Stock is comprised of (i) Mr. Kahn's currently exercisable options to acquire
700,000 shares, over which Mr. Randy Rissman would have the sole power to vote
if exercised by Mr. Kahn pursuant to an irrevocable Proxy dated as of March 11,
1991 (the "Irrevocable Proxy"), (ii) 350,000 shares owned by
- 21 -
Tiger, which Mr. Randy Rissman, as President and controlling shareholder of
Tiger, has the right to direct the voting and disposition of, (iii) 350,000
shares owned by Mr. Kahn which Mr. Randy Rissman has the sole power to vote
pursuant to the Irrevocable Proxy and (iv) currently exercisable options to
acquire 300,000 shares.
(3) Includes currently exercisable options to acquire 700,000 shares.
(4) Mr. Gerald Rissman has the right to acquire the number of shares
shown pursuant to currently exercisable stock options.
(5) According to a Schedule 13D filed in April, 1994 (the "Schedule
13D"), EGS Associates, L.P., EGS Partners, L.P., BEV 21 Partners, L.P., Jonas
Partners, L.P., William Ehrman, Frederic Greenberg, Frederick Ketcher, Salvatore
P. DiFranco, Jr. and Jonas Gerstl (collectively, the "Reporting Persons") have
various interests in the shares shown. The address of the principal business and
principal office of the Reporting Persons is 300 Park Avenue, New York, New York
10022. According to the Schedule 13D, the purpose of the acquisition of the
shares shown by the Reporting Persons is for investment. In addition, the
Schedule 13D states that there are no contracts, arrangements, understandings or
relationships (legal or otherwise) among the Reporting Persons or between the
Reporting Persons and any other person with respect to any securities of the
Company.
(6) Includes an additional 212,500 shares which five executive
officers have the right to acquire pursuant to stock options. 192,500 of such
options are currently exercisable.
Mr. Kahn borrowed a total of $711,582 from Tiger in connection with
three purchases of a total of 191,426 shares. As of March 1, 1996, the
outstanding principal balance of such loans was approximately $340,000. The
loans are partially due in 1996 and 1997 with the balance due in April 1999 and
bear interest on part at the rate of 8% per annum and on the balance at 1% over
prime rate, payable annually. Mr. Kahn has agreed that he will use 40% of his
annual performance bonuses, if any, toward the repayment of his indebtedness to
Tiger.
Tiger, Mr. Randy Rissman and Mr. Kahn are parties to an agreement
which provides that neither Tiger nor Mr. Kahn nor any of their respective
affiliates, shall directly or indirectly acquire any other shares of the Company
without the consent of Mr. Kahn or Tiger, as the case may be. In the event Tiger
desires to sell any of its shares, it shall first provide Mr. Kahn an
opportunity to purchase the shares subject to such offer on the same terms and
conditions. In the event Mr. Kahn desires to sell any of his shares, he must
provide Tiger the right to sell a proportional number of shares on the same
terms and conditions. In the event Mr. Kahn shall terminate his employment with
the Company, Tiger shall have the right to buy all of Mr. Kahn's shares at the
lower of a specified price or the market
- 22 -
value prior to such termination, unless Mr. Kahn shall concurrently sell his
shares as set forth above.
Item 13. Certain Relationships and Related Transactions
In 1995, the Company provided to Tiger representation for licensing of
properties, product development and design services and media buying, planning
and syndication services. In connection with these activities, the Company
realized approximately $2,111,820 of net revenue from Tiger in fiscal 1995.
In connection with its media buying activities, the Company incurs
obligations to television stations for advertising time purchased on behalf of
Tiger. Consequently, the Company had an account receivable from Tiger of
approximately $10,343,000 at December 31, 1995.
The agreements under which the Company provides certain services
to Tiger are on substantially similar terms and conditions as other agreements
the Company has with clients for which it provides similar services.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) 1. Financial Statements:
The following Consolidated Financial Statements of 4Kids
Entertainment, Inc. and Subsidiaries are included in Item 8:
Page
Number
------
Independent Auditors' Report F-1
Consolidated Balance Sheets - F-2
December 31, 1995 and 1994
Consolidated Statements of F-3
Operations - Years Ended
December 31, 1995, 1994
and 1993
Consolidated Statements of F-4
Stockholders' Equity - Years
Ended December 31, 1995, 1994
and 1993
Consolidated Statements of F-5
Cash Flows - Years Ended
- 23 -
December 31, 1995, 1994
and 1993
Notes to Consolidated F-6 to F-14
Financial Statements
(a) 2. and (d) Financial Statement Schedules:
All schedules have been omitted because they are inapplicable, not
required, or the information is included in the financial statements or notes
thereto.
(a) 3. and (c) Exhibits. See Index of Exhibits annexed hereto.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the
quarterly period ended December 31, 1995.
- 24 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 1, 1996 4Kids Entertainment, INC.
By /s/ Alfred R. Khan
--------------------------------
Alfred R. Kahn,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: April 1, 1996 /s/ Alfred R. Kahn
--------------------------------
Alfred R. Kahn
Chairman of the Board,
Chief Executive Officer and
Director
Date: April 1, 1996 /s/ Randy O. Rissman
--------------------------------
Randy O. Rissman,
Director
Date: April 1, 1996 /s/ Gerald Rissman
--------------------------------
Gerald Rissman,
Director
Date: April 1, 1996 /s/ Joseph P. Garrity
--------------------------------
Joseph P. Garrity,
Executive Vice President,
Treasurer, Principal Financial
Officer and Principal Accounting
Officer
- 25 -
4KIDS ENTERTAINMENT, INC.
AND SUBSIDIARIES
Consolidated Financial Statements for the
Years Ended December 31, 1995, 1994 and 1993, and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
4Kids Entertainment, Inc. and subsidiaries
We have audited the accompanying consolidated balance sheets of 4Kids
Entertainment, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of 4Kids Entertainment, Inc. and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
New York, New York
March 25, 1996
F - 1
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ---------------------------------------------------------------------------------------------
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 3,505,777 $ 7,371,311
Accounts receivable - net (Notes 2 and 6) 14,668,829 14,908,245
Film inventory - net (Note 3) 1,210,918 764,259
Prepaid refundable income taxes (Note 5) 448,442 565,493
Prepaid expenses and other current assets 704,215 416,142
Current deferred tax asset (Note 5) 34,445 --
----------- -----------
Total current assets 20,572,626 24,025,450
FURNITURE , FIXTURES AND COMPUTER EQUIPMENT -
Net of accumulated depreciation of $1,060,065 and $905,089 347,772 392,481
ACCOUNTS RECEIVABLE - Noncurrent, net
(Notes 2 and 6) 2,317,639 3,055,035
FILM INVENTORY - Noncurrent (Note 3) 2,531,703 1,448,307
SECURITY DEPOSITS AND OTHER ASSETS 198,835 455,123
----------- -----------
TOTAL ASSETS $25,968,575 $29,376,396
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to licensors (Note 2) $ 1,613,606 $ 1,800,036
Media payable (Note 2) 11,428,185 13,107,185
Accounts payable and accrued expenses 636,017 632,751
Current deferred tax liability (Note 5) -- 326,350
----------- -----------
Total current liabilities 13,677,808 15,866,322
NONCURRENT DEFERRED TAX LIABILITY (Note 5) 661,859 933,316
----------- -----------
Total liabilities 14,339,667 16,799,638
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Notes 7, 8 and 9):
Preferred stock, $.01 par value - authorized, 3,000,000 shares;
none issued
Common stock, $.01 par value - authorized, 10,000,000 shares;
issued 2,944,831 shares 29,448 29,448
Additional paid-in capital 4,429,906 4,429,906
Retained earnings 7,169,554 8,117,404
----------- -----------
Total stockholders' equity 11,628,908 12,576,758
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,968,575 $29,376,396
=========== ===========
See notes to consolidated financial statements.
F - 2
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------------------
1995 1994 1993
REVENUES:
Net revenues (Notes 4 and 6) $ 6,617,279 $ 9,191,582 $10,909,024
----------- ----------- -----------
COSTS AND EXPENSES:
Selling, general and administrative (Note 8) 7,573,643 7,602,063 6,611,396
Amortization of capitalized film cost (Note 3) 1,080,889 1,640,234 1,025,146
----------- ----------- -----------
Total costs and expenses 8,654,532 9,242,297 7,636,542
----------- ----------- -----------
(2,037,253) (50,715) 3,272,482
INTEREST INCOME 334,403 334,965 325,206
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX
PROVISION (BENEFIT) (1,702,850) 284,250 3,597,688
INCOME TAX PROVISION (BENEFIT) (Note 5) (755,000) 149,000 1,073,000
----------- ----------- -----------
NET INCOME (LOSS) $ (947,850) $ 135,250 $ 2,524,688
=========== =========== ===========
PER SHARE AMOUNTS:
Earnings (loss) per common and dilutive common
equivalent share $ (0.32) $ 0.04 $ 0.77
=========== =========== ===========
=========== =========== ===========
Earnings (loss) per common share assuming full
dilution $ (0.32) $ 0.04 $ 0.76
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 2,990,514 3,070,815 3,273,176
=========== =========== ===========
See notes to consolidated financial statements.
F - 3
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------------------
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
BALANCE, DECEMBER 31, 1992 2,842,831 $28,428 $3,848,441 $5,457,466 $ 9,334,335
Proceeds from exercise of stock options 82,000 820 306,367 -- 307,187
Tax benefit from exercise of stock options -- -- 201,248 -- 201,248
Net income -- -- -- 2,524,688 2,524,688
--------- ------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1993 2,924,831 29,248 4,356,056 7,982,154 12,367,458
Proceeds from exercise of stock options 20,000 200 62,300 -- 62,500
Tax benefit from exercise of stock options -- -- 11,550 -- 11,550
Net income -- -- -- 135,250 135,250
--------- ------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1994 2,944,831 29,448 4,429,906 8,117,404 12,576,758
Net loss -- -- -- (947,850) (947,850)
--------- ------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1995 2,944,831 $29,448 $4,429,906 $7,169,554 $11,628,908
========= ======= ========== ========== ===========
See notes to consolidated financial statements.
F - 4
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 , 1994 AND 1993
- ----------------------------------------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (947,850) $ 135,250 $ 2,524,688
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 216,514 207,803 146,684
Amortization of capitalized film cost 1,080,889 1,640,234 1,025,146
Provision for losses on accounts receivable 183,420 (106,398) (284,167)
Deferred income taxes (632,252) 596,949 136,846
Changes in operating assets and liabilities (using)
providing cash:
Cash - restricted -- -- 250,000
Accounts receivable 793,392 (8,128,754) (6,223,504)
Film inventory (2,610,944) (1,487,859) (3,059,204)
Prepaid refundable income taxes 117,051 1,223,899 (1,705,040)
Prepaid expenses and other current assets (288,073) (281,628) 8,679
Security deposits and other assets 194,750 (221,102) 90,610
Due to licensors (186,429) (1,515,298) 34,395
Media payable (1,679,000) 8,930,715 4,176,470
Accounts payable and accrued expenses 3,266 220,773 (3,657)
----------- ----------- -----------
Net cash (used in) provided by operating activities (3,755,266) 1,214,584 (2,882,054)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures and computer equipment (110,268) (192,469) (202,517)
----------- ----------- -----------
Net cash used in investing activities (110,268) (192,469) (202,517)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and
related tax benefit -- 74,050 508,435
----------- ----------- -----------
Net cash provided by financing activities -- 74,050 508,435
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (3,865,534) 1,096,165 (2,576,136)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,371,311 6,275,146 8,851,282
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,505,777 $ 7,371,311 $ 6,275,146
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for income taxes $ -- $ -- $ 2,065,500
=========== =========== ===========
See notes to consolidated financial statements.
F - 6
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of all wholly-owned subsidiaries. All related
significant intercompany balances and transactions have been eliminated in
consolidation.
Description and Accounting Basis for Revenues
4Kids Entertainment, Inc. and subsidiaries (the "Company") is an
integrated entertainment and media company specializing in the youth
oriented market.
Licensing Business - The Company's licensing business is engaged primarily
in the business of licensing the commercial rights to properties,
personalities, and product concepts. The Company typically acts as
exclusive agent in connection with the grant to third parties of licenses
to manufacture and sell all types of merchandise based on properties,
personalities and concepts. The licensing of these rights has been
primarily in the area of toys, games and other juvenile merchandise.
Grants have also been made in other fields, including the food,
toiletries, apparel and footwear industries. Additionally, these rights
are licensed in connection with the production of television shows, motion
pictures and publications such as magazines, juvenile books and comic
strips.
These license agreements often include nonrefundable minimum guaranteed
royalties which are payable by the licensee. The Company records as
revenue its proportionate share of the minimum guarantee when all material
terms of the contracts have been agreed to by the parties and a cash
payment or reasonable assurance of collectability is received. It is at
this point that the Company has substantially performed all of its
obligations under the contract.
For contracts not providing minimum guaranteed royalties and for royalty
amounts in excess of the minimum guarantee, the Company records revenue
based upon its share of earned royalties from the sales of the related
property.
Television and Video Productions - The Company accounts for its activities
associated with the production of entertainment programming in accordance
with Statement of Financial Accounting Standards No. 53 ("SFAS No. 53"),
Financial Reporting by Producers and Distributors of Motion Picture Films.
Under SFAS No. 53, the Company capitalizes costs associated with each
individual production. The capitalized costs are classified into current
and noncurrent assets depending on an estimate of when revenues associated
with those costs are anticipated to be recognized. Such costs are
amortized against the related revenue as such revenue is recognized.
Amortization rates may change as a result of changes in estimated future
revenue. Periodically, the Company evaluates the anticipated future
revenue against the net realizable value of the capitalized costs and,
where appropriate, reduces the carrying value of such costs to their
estimated net realizable amount which would result in a corresponding
charge to earnings.
Media Buying, Planning and Syndication Services - Through the Company's
wholly-owned subsidiary, The Summit Media Group, Inc. ("Summit Media"),
the Company provides media planning
F - 8
and buying services for both print and broadcast. Summit Media is
compensated based on a percentage of the media it places. Such revenue is
recognized at the time the related media runs. Summit Media also provides
television syndication services for which it receives a fee based on a
percentage of the advertising sales generated by the related program. Such
revenue is recognized at the time the syndication services are completed
and the advertising sales of the related program are reasonably known.
Summit Media will reflect a liability for media payable and a
corresponding receivable from its clients in circumstances where Summit
Media assumes the payment obligation for media commitments.
Furniture, Fixtures and Computer Equipment - Furniture, fixtures and
computer equipment are recorded at cost. Depreciation is computed using
various methods over the estimated lives of the assets.
Imputed Interest - The Company imputes interest on the noncurrent portion
of accounts receivable at an average rate of 7%.
Per Share Amounts - Earnings per common and dilutive common equivalent
share are based on the weighted average number of shares and common
equivalent shares outstanding during the period. Common shares issuable
upon the exercise of options are included as common equivalent shares when
their inclusion is dilutive using the treasury stock method.
Cash and Cash Equivalents - At December 31, 1995 and 1994, the Company had
cash equivalents consisting primarily of funds invested in Treasury bills
of approximately $2,386,998 and $6,023,103, respectively, with original
maturities of 90 days or less.
Long-term assets - In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Assets to be Disposed of
("SFAS 121"). SFAS 121 requires impairment losses to be recorded on long
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying value. SFAS 121 is effective for fiscal
years beginning after December 15, 1995. The impact of the adoption of
SFAS 121 is not anticipated to be material.
Stock-based compensation - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123
established a fair value based method of accounting for compensation
plans; however, Companies can continue to measure compensation costs for
those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees, if certain pro forma disclosures are provided. SFAS 123 is
effective for fiscal years beginning after December 15, 1995. The impact
of the adoption of SFAS 123 is not known at this time.
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 - 9
2. ACCOUNTS RECEIVABLE - MEDIA PAYABLE/DUE TO LICENSORS
Generally, licensing contracts provide for the Company to collect, on
behalf of the licensor, royalties including minimum guarantees from the
licensees. The Company records as accounts receivable its proportionate
share of such minimum guarantees and its share of earned royalties in
excess of guarantees.
Due to licensors represents amounts collected by the Company on behalf of
licensors, which are generally payable to such licensors after the close
of the quarter.
Additionally, accounts receivable include amounts due from clients for
earned commissions and the cost of related media placed on their behalf in
circumstances where the Company has assumed the payment obligation for
such media. In such circumstances, the Company will record a corresponding
liability for media payable. Accounts receivable consist of the following:
December 31,
1995 1994
Gross accounts receivable $17,423,625 $18,217,017
Allowance for doubtful accounts (437,157) (253,737)
----------- -----------
16,986,468 17,963,280
Less long-term portion 2,317,639 3,055,035
----------- -----------
$14,668,829 $14,908,245
=========== ===========
3. FILM INVENTORY
At December 31, 1995, there were $3,742,621 of capitalized film costs,
which relate to two completed works in release and one in progress.
Amortization of capitalized film cost was $1,080,889, $1,640,234 and
$1,025,146 in 1995, 1994 and 1993, respectively. During 1995, 1994 and
1993, the Company recorded charges of approximately $280,000 (in the
fourth quarter), $910,000, ($271,000 in the fourth quarter), and $600,000,
(all in the fourth quarter) to reduce the carrying value of film inventory
primarily related to producing the "Monster Wars" television program. This
reduction of the carrying value was based on the Company's periodic
evaluation of anticipated future revenue against the net realizable value
of capitalized cost. Film inventory consists of the following components:
F - 10
December 31,
1995 1994
Opening balance $ 2,212,566 $ 2,364,941
Additions 2,610,944 1,487,859
----------- -----------
4,823,510 3,852,800
Amortization (1,080,889) (1,640,234)
----------- -----------
3,742,621 2,212,566
Less noncurrent portion (2,531,703) (1,448,307)
----------- -----------
$ 1,210,918 $ 764,259
=========== ===========
4. REVENUES/MAJOR CUSTOMERS
Licensing revenue included on the Statements of Operations are net of
licensor participations of approximately $6,068,880 in 1995, $11,114,000
in 1994 and $18,960,000 in 1993.
The percentages of revenue from major properties and customers/licensees
are as follows:
Year Ended December 31,
1995 1994 1993
Percentage of revenue derived from major
properties (revenue in excess of 10
percent of total revenue) -- 18% 55%
Number of major properties -- 1 3
Percentage of revenue derived from major
customers/licensees (revenue in excess
of 10 percent of total revenue) 32% 35% 39%
Number of major customers/licensees 1 2 3
Additionally, through the Company's London office and network of
international subagents, which allow it to license its properties through
the world, the Company recognized approximately $972,000, $982,000 and
$1,489,000 in net revenue from international sources, primarily in Europe,
for 1995, 1994 and 1993, respectively.
5. INCOME TAXES
The Company has provided for deferred income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes," whereby deferred income taxes are determined based upon
the enacted income tax rates for the years in which these taxes are
estimated to be payable or recoverable. Deferred income taxes arise from
temporary differences
F - 11
resulting from a difference between the tax basis of an asset or liability
and its reported amount in the financial statements.
The income tax (benefit) provision includes the following:
Year Ended December 31,
1995 1994 1993
Current:
Federal $(295,000) $(324,000) $ 685,000
State and local 31,000 (124,000) 251,000
--------- --------- ----------
(264,000) (448,000) 936,000
--------- --------- ----------
Deferred:
Federal (195,000) 546,000 112,000
State and local (296,000) 51,000 25,000
--------- --------- ----------
(491,000) 597,000 137,000
--------- --------- ----------
$(755,000) $ 149,000 $1,073,000
========= ========= ==========
The provision for taxes as reported is different than the tax provision
computed by applying the statutory Federal rate of 34 percent. The
differences are as follows:
Year Ended December 31,
1995 1994 1993
Income (loss) before income tax provision $(1,702,850) $284,250 $3,597,688
=========== ======== ==========
Provision (benefit) at the statutory Federal rate $ (579,000) $ 97,000 $1,223,000
Provision for state and local income taxes net of
Federal income tax benefit (175,000) 29,000 182,000
Decrease in Federal taxes resulting from the
recognition of failed merger and settlement
costs -- -- (330,000)
Other (1,000) 23,000 (2,000)
----------- -------- ----------
$ (755,000) $149,000 $1,073,000
=========== ======== ==========
During 1993, the Company's provision for income taxes was materially
affected by certain expenditures which were recognized in different
periods for financial reporting and tax reporting. Certain expenditures
related to a 1990 failed merger and settlement did not provide a tax
benefit for financial reporting purposes until realized for tax purposes.
F - 12
The Company's deferred tax liabilities are net of deferred tax assets of
approximately $1,109,000 and $654,000 at December 31, 1995 and 1994,
respectively. The components of the deferred tax balances at December 31,
1995 and 1994 are as follows:
Year Ended December 31,
1995 1994
Commissions on guarantees not currently recognized for
tax reporting purposes $(1,475,000) $(1,666,000)
Tax benefit of state and local tax loss carryforwards 445,000 179,000
Provision for doubtful accounts not currently deductible
for tax reporting purposes 188,000 109,000
Film inventory valuation adjustment not currently
deductible for tax reporting purposes 476,000 366,000
Depreciation, amortization and other charges deducted
for tax reporting purposes (261,000) (248,000)
----------- -----------
$ (627,000) $(1,260,000)
=========== ===========
The Company has a capital loss carryforward for both financial and tax
reporting purposes of approximately $933,000 which expires in 1996. The
Company's Federal tax returns through 1991 have been examined by the
Internal Revenue Service with no significant adjustments.
6. RELATED PARTY TRANSACTIONS
The Company provided certain services to Tiger Electronics, Inc.,
("Tiger") a corporation controlled by an individual who is a director and
major beneficial shareholder of the Company. These transactions totaled
approximately $2,111,820, $1,659,000 and $1,955,000 of net revenue in
1995, 1994 and 1993, respectively.
The Company had receivables from Tiger of approximately $11,712,304 and
$6,595,000 at December 31, 1995 and 1994, respectively.
7. STOCK OPTIONS
The Company has various stock option plans (the "Plans"). Options may be
exercised for a period of not more than ten years after the date of grant.
Unless otherwise determined by the Company's Stock Option Committee, each
option will be immediately exercisable with respect to 50 percent of the
shares subject to the option and will become exercisable with respect to
the other 50 percent on the first anniversary of the date of grant.
Certain of the Plans permit the Committee to grant nonqualified options,
with an exercise price of not less than 85 percent of the fair market
value of the common stock; all other options must be at 100 percent of the
fair market value.
The 1994 and 1992 Plans specified that in the each of the two years
following the adoption of the plan, the Company's chairman would be
granted options to purchase 100,000 shares and each outside director would
be granted options to purchase 50,000 shares. See Note 9 for options
granted subsequent to December 31, 1995.
F - 13
The Company has outstanding employee stock options as follows:
Exercise Price
Options Per Share
Outstanding at December 31, 1992 432,000 $2.6250 - $ 5.75
Options exercised (77,000) 3.1250 - 4.25
Options expired (10,000) 3.1250
Options granted 349,000 5.6875 - 9.75
--------- ------- ------
Outstanding at December 31, 1993 694,000 $2.6250 - $ 9.75
Options exercised (20,000) 3.1250
Options granted 207,500 9.7500 - 10.25
Options expired (65,000) 6.1250 - 9.75
--------- ------- ------
Outstanding at December 31, 1994 816,500 $2.6250 - $10.25
========= ======= ======
Options granted 349,500 2.6250 3.81
Options expired (10,000) 3.1250 - 9.75
--------- ------- ------
Outstanding at December 31, 1995 1,156,000 $2.6250 - $10.25
========= ======= ======
Exercisable at December 31, 1995 1,081,250 $2.6250 $10.25
========= ======= ======
Under the Company's various stock option plans, 325,500 shares of the
Company's common stock were available at December 31, 1995 for future
issuance.
In addition, in November 1991 and June 1992, the Board of Directors
granted to its outside directors, who receive no cash compensation,
options to purchase a cumulative total of 200,000 shares of the Company's
common stock at $4.25 and $5.75, respectively, the market price of the
Company's common stock on the date of grant. Such options, which were
immediately exercisable, expire five years from the date of grant.
At December 31, 1995, there were 1,681,500 shares of the Company's common
stock reserved for stock options.
8. COMMITMENTS AND CONTINGENCIES
a. Bonus Plan (the "Plan") - Bonuses are based upon an amount up to 14
percent of pretax profits. Key officers and employees, as designated
by the Board of Directors, can be included in the Plan. For 1994 and
1993, the Board of Directors, under the Bonus Plan, awarded the
Chairman and Chief Executive Officer of the Company approximately
$40,000 and $432,000, respectively. An additional $9,000 and
$173,000, respectively under the Bonus Plan was granted to several
employees, including one officer in 1994 and two officers in 1993.
Due to the loss in 1995, no bonuses were granted under the Plan.
F - 14
b. Leases - The Company is obligated for future leases for office
space. Certain leases provide for escalation clauses and renewal
options.
At December 31, 1995, future minimum lease payments were as follows:
Year Ending Amount
1996 $ 402,244
1997 400,100
1998 376,518
1999 367,172
2000 364,056
Thereafter 897,127
----------
$2,807,217
==========
Rent expense approximated $487,544, $497,000 and $381,000 in 1995,
1994 and 1993, respectively.
c. Litigation - In connection with the Company's television producing
activities, the Company and its Chairman, Alfred R. Kahn, were named
as defendants in a lawsuit alleging breach of contract and
defamation. On April 1, 1994, the Court granted each of the
Company's motions to dismiss several of the causes of action brought
by the plaintiffs against the Company and Mr. Kahn individually. In
particular, the Court rejected the plaintiff's defamation claim and
unjust enrichment claim and all claims against Mr. Kahn personally.
The Company believes it has meritorious defenses against the
remaining breach of contract claim and is vigorously defending
against such claim. The Company has filed counterclaims, including a
claim for breach of contract against the plaintiffs. Additionally,
the Company believes the outcome of such litigation will not have a
material effect on the financial statements of the Company.
d. Credit Facility - In April 1994, the Company obtained an unsecured
$5,000,000 line of credit (the "Credit Facility") from Chemical
Bank. It is intended that the proceeds of any borrowing under the
Credit Facility will be used for general working capital purposes.
The outside maturity date for any such borrowing is June 30, 1996.
The Credit Facility provides for an interest rate of 1/2% over the
bank's prime rate. As of December 31, 1995, the Company had no
borrowings under the Credit Facility.
9. SUBSEQUENT EVENTS
In accordance with the provisions of the 1994 stock option plan, on
January 1, 1996 options to purchase 100,000 shares of the Company's common
stock were granted to the Chairman and Chief Executive Officer of the
Company and options to purchase 50,000 shares were granted to each outside
director. All such options were at an exercise price of $2.3125, the
market price of the Company's common stock at that time.
******
F - 15
INDEX OF EXHIBITS
Exhibit Page
Number Description Number
(3) (a) Certificate of Incorporation of the Registrant,
as amended
(b) By-Laws of the Registrant adopted by the Board
of Directors on March 28, 1991 (2)
(c) Resolution of the Board of Directors of the
Registrant adopted March 12, 1991 reducing the
size of the Board from six directors to three
directors (2)
(4) (a) Form of Common Stock Certificate (3)
(10) (a) Bonus Plan of the Registrant (*)(4)
(b) 1985 Non-Qualified Stock Option Plan, as
amended (*)(4)
(c) 1986 Stock Option Plan, as amended (*)(4)
(d) 1992 Stock Option Plan (*)(5)
(e) 1993 Stock Option Plan (*)(6)
(f) 1994 Stock Option Plan (*)(10)
(g) 1995 Stock Option Plan (*)(11)
(h) Stock Option Agreement, dated June 10, 1992,
between the Registrant and Randy O. Rissman (*)(7)
(i) Stock Option Agreement, dated June 10, 1992,
between the Registrant and Gerald Rissman (*)(7)
(j) Stock Option Agreement, dated November 12, 1991,
between the Registrant and Randy O. Rissman (*)(7)
(k) Stock Option Agreement, dated November 12, 1991,
between the Registrant and Gerald Rissman (*)(7)
(l) Agreement between Nintendo of America, Inc. and
the Registrant dated December 17, 1987 (4)
(m) Agreement of Lease, dated March 28, 1988, between
the Registrant and 1414 Americas Company (2)
(n) Amendment, dated July 8, 1994, to Agreement of
Lease between the Registrant and 1414 Americas
Company. (12)
(o) Agreement of Lease, dated June 30, 1991, between
the Registrant and Olympic Purdue Associates (the
"Olympic Lease") (7)
(p) First Amendment, dated January 3, 1994, to the
Olympic Lease (7)
(q) Agreement of Lease, dated March 23, 1993, between
Leisure Concepts International, Inc. and Svenska
Handelsbanken (7)
(r) Employment Agreement, dated March 12, 1991
between the Registrant and Alfred R. Kahn(*)(8)
(s) Employment Agreement, dated June 3, 1991, between
the Registrant and Joseph Garrity (*)(9)
Exhibit Page
Number Description Number
(t) Amendment, dated as of October 17, 1994, to the
Employment Agreement between the Registrant and
Joseph Garrity (*)(12)
(u) Employment Agreement, dated January 1, 1995 between
The Summit Media Group, Inc. and Sheldon Hirsch.(*)
(v) Employment Agreement, dated January 1, 1995 between
The Summit Media Group, Inc. and Thomas J. Kenney. (*)
(w) Employment Agreement, dated January 9, 1996 between 4
Kids Productions, Inc. and Norman Grossfeld. (*)
(x) Note, dated April 5, 1994, between the Registrant and
Chemical Bank. (12)
(y) Agreement of Sublease, dated August 2, 1995 between the Registrant
and Third Wave Corporation.
(21) List of Subsidiaries of the Registrant
(24) Consent of Deloitte & Touche, Certified Public
Accountants
- -------------------------------------------------------------------------------
(*) Denotes a management contract or compensatory plan, contract or
arrangement.
(1) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1989.
(2) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1990.
(3) Incorporated by reference to Registration Statement on Form S-1
(File No. 33-3056) declared effective March 7, 1986.
(4) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1987.
(5) Incorporated by reference to 1992 Proxy Statement.
(6) Incorporated by reference to 1993 Proxy Statement.
(7) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1992.
(8) Incorporated by reference to Amendment No. 1 to Schedule 13D of
Alfred Kahn, Tiger Electronics Inc. and Owen Randall Rissman dated February
22, 1991.
(9) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1991.
(10) Incorporated by reference to 1994 Proxy Statement.
(11) Incorporated by reference to 1995 Proxy Statement.
(12) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1994.