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, 1999

                                       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.
             ------------------------------------------------
             (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]

      The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price of the Common Stock on March 27, 2000
as reported on the Nasdaq National Market, was approximately $359,249,142.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded from this
computation in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

      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                           11,857,755
----------------------------       ------------------------------
     (Title of Class)              (No. of Shares Outstanding at March 27, 2000)

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 18, 2000 are incorporated by reference into Part
III of this Form 10-K Report.


<PAGE>

                                     PART I


Item 1. Business

      (a) General Development of Business. 4Kids Entertainment, Inc.,(the
"Company") is 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 and movie  distribution  and television,
music and film production.

The Company operates through four wholly-owned subsidiaries, Leisure Concepts,
Inc., Leisure Concepts International, Inc., The Summit Media Group, Inc. and
4Kids Productions, Inc.

Leisure Concepts, Inc. 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,
electronic games, food, toiletries, apparel, house-wares and footwear
industries. These rights are also licensed in connection with the production of
television shows, motion pictures and publications such as magazines, books and
comic strips.

Leisure Concepts International, Inc. 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, Inc. provides media planning, buying and marketing
services primarily for toy and video game companies. Summit Media also provides
television distribution services.

4Kids Productions, Inc. is a television, film, home video and music production
company specializing in youth-oriented entertainment programming.

      (b) Financial Information About Industry Segments.

Financial information regarding industry segments can be found in note 11 to
Notes to the Company's Consolidated Financial Statements.

      (c)   Narrative Description of the Business.

      (1) Licensing. 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.


                                      -2-
<PAGE>

      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 as a commission between 10% and
40% of the owner's licensing royalties, which generally range from 4% to 15% 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 against 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 three years, and may
be renewed by the licensee 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
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 82%, 60% and 38% of
consolidated net revenues for the years ended December 31, 1999, 1998 and 1997,
respectively.

      (2) Certain Licensed Properties Represented Exclusively by LCI Among the
licensed properties represented exclusively by LCI are the following:

            o     World Championship Wrestling ("WCW"), a division of Turner
                  Sports and Time Warner, televised weekly through popular cable
                  TV programs including "Monday Nitro", and "Thunder". The
                  Company's agreement covers merchandise licensing rights on a
                  worldwide basis and expires December 31, 2002 with one year
                  extensions thereafter. LCI has entered into a long-term
                  agreement with Toy Biz, Inc. for a WCW toy line, Electronic
                  Arts, for WCW based video games, as well as 150 other
                  licensees both domestically and internationally for the
                  production of a broad range of WCW based products including
                  themed restaurants, Master Cards and apparel.

            o     Pokemon, Nintendo's popular Video game. The Company represents
                  all merchandising and


                                      -3-
<PAGE>

                  television and film distribution rights outside Asia. The term
                  of the representation agreement for Pokemon expires December
                  2005 and extends each time new TV episodes are acquired by the
                  Company. Pokemon started in Japan as a Nintendo Game Boy
                  cartridge that involves finding, capturing, collecting and
                  training 150 different Pokemon. LCI has signed Hasbro, Inc. as
                  the master toy licensee and over 100 domestic licensees
                  including Kraft, General Mills, Welch's, Conagra,
                  Colgate-Palmolive, Scholastic and American Greetings for
                  Pokemon

            o     Nintendo of America Inc. ("Nintendo"). The Company has
                  exclusive rights for the various characters, trademarks, and
                  copyrights arising out of the software for the video games
                  developed and owned by Nintendo including, Mario, Donkey Kong,
                  Zelda, GameBoy and Nintendo N64. LCI represents Nintendo on a
                  worldwide basis, other than Japan. The Company has represented
                  Nintendo since 1988 under a one year renewable agreement.
                  These video games ranked among the top toy sellers in the
                  United States in 1997, 1998 and 1999.

            o     Rare is one of Nintendo's most important game developers
                  providing Nintendo with hit video game titles such as
                  Goldeneye and Donkey Kong. The Company's representation of
                  Rare includes the much anticipated release of the video game
                  "Perfect Dark" scheduled for release in the second quarter of
                  2000. The Company represents Rare on a worldwide basis
                  excluding Japan through December 31, 2002 with one year
                  extensions thereafter.

            o     James Bond 007; United Kingdom representation for this classic
                  character of eighteen action films.

            o     Cubix; a new computer animated television series being
                  developed by the Company for estimated release in January
                  2001. The Company is developing Cubix in conjunction with
                  Daiwon Animation of Seoul Korea. The Company's ownership
                  rights are expected to include all television and
                  merchandising rights to Cubix outside of Asia.

            o     Tama and Friends; a Japanese animated television series
                  developed by Sony Creative Products, Inc. Tama was originally
                  broadcast in Japan. It is expected that the Company's 4Kids
                  Productions subsidiary will adapt Tama for broadcast outside
                  Japan and that the Company will represent television and
                  merchandise licensing rights outside of Japan with an initial
                  term expiring March 2007.

            o     Flamehead; a character based on a successful youth apparel
                  line owned by JNCO Inc. is the subject of a new animated
                  television series. The Company will provide television
                  distribution in the United States and have worldwide
                  merchandise licensing rights for Flamehead with an initial
                  term through December 2002.


                                      -4-
<PAGE>

      (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 launched in September of 1995.

      "Charlie Chan" the fictional Asian detective who has been the subject of
numerous films based on the character created by Earl DeBiggers.

      (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 its 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" and "2-XL," 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.

      (5) Media Buying Planning and Television Distribution. The Company's
subsidiary, The Summit Media Group, Inc. ("Summit Media"), provides clients with
media planning, buying and marketing services, and television distribution
services. These services accounted for 5%, 29% and 49% of consolidated net
revenues for the years ended December 31, 1999, 1998 and 1997, respectively.
Summit Media serves as the current television distributor for "Pokemon", and it
is expected that Summit Media will also serve as the television distributor for
"Cubix", "Tama and Friends" and "Flamehead" in the calendar years 2000 and 2001.

      (6) Television, Film, Music and Home Video Production. The Company's
subsidiary, 4Kids Productions, Inc. ("4Kids Productions") is a television, film,
music and home video production company specializing in youth-oriented
entertainment programming. Entertainment production and programming accounted
for 12%, 10% and 12% of consolidated net revenues for the years ended December
31, 1999, 1998 and 1997, respectively. 4Kids Productions is currently producing
the American adaptation of the Japanese hit "Pokemon" which debuted in the
United


                                      -5-
<PAGE>

States in September, 1998. After having adapted episodes 1-104 of the hit
television series and the first "Pokemon" movie, 4Kids is currently adapting
episodes 105-156 and the second full length "Pokemon" feature film to be
released in the summer of 2000. Additionally, it is expected that 4Kids will
produce the American adaptation of "Tama and Friends", a Japanese animated
television program, and the new television production "Cubix".

      (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 payments, some of which are made upon the execution
and delivery of license agreements and others as royalties are reported. Because
of this, the Company must continually seek new properties from which it can
derive revenues.

      One property contributed licensing revenues individually in excess of 10%
of consolidated net revenues for fiscal 1999. The only client/licensee which
contributed revenues individually in excess of 10% of consolidated net revenues
for fiscal 1999 was Hasbro,Inc. and its subsidiaries. In 1999, Hasbro
contributed 39% of consolidated net revenues.

      (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 television producer,
which may expend substantial amounts in developing or promoting the concept.
However, the Company does own the copyrights and trademarks to "Charlie Chan"
and "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.

      (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


                                      -6-
<PAGE>

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 distribution
activities as well as its television, music, film 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 27, 2000, the Company had a total of 72
full-time employees consisting of 47 employees in Licensing, 19 in Media and TV
distribution and 6 in TV and film production.

Item 2. Properties

      The following table sets forth, with respect to properties leased (none
are owned) by the Company at March 27, 2000, the location of the property, the
date on which the lease expires and the use which the Company makes of such
facilities:

<TABLE>
<CAPTION>
                                                                                             Approximate
                                        Expiration                                              Square
Address                                  of Lease                     Use                        Feet
-------                                 ----------                    ---                    -----------
<S>                                    <C>                                                      <C>
1414 Avenue of the Americas            May 31, 2004             Executive and Sales             13,900
New York, New York                                              Office, Media Buying
                                                                and Television
                                                                Production

116 Putney Bridge Road                 January 6, 2005          International Sales              4,000
Alice Court                                                     Office
London, England
</TABLE>

      The Company considers that, in general, its physical properties are well
maintained, in good operating condition and adequate for its purposes.

Item 3. Legal Proceedings

      In September 1999, the Company was named as a defendant in a lawsuit filed
in the United States District Court for the Southern District of California.
Also named as defendants in this lawsuit are Nintendo of America Inc. and
Wizards of the Coast, Inc. The lawsuit purportedly brought on behalf of a class
of all persons who purchased a package of Pokemon trading cards, seeks to
challenge longstanding practices in the trading card industry, including the
practice of randomly inserting premium cards in packages of Pokemon cards. The
lawsuit claims that these practices constitute illegal gambling activity in
violation of California and federal law, including the Federal Racketeer
Influenced and Corrupt Organization Act, and seeks an award of treble damages.
The lawsuit has not specified the amount of damages sought. In January 2000, the
plaintiffs in the lawsuit filed an amended complaint making the same substantive
allegations as in the original complaint. The Company has answered the amended
complaint in the lawsuit denying all liability and all of the amended
complaint's material allegations and asserting various affirmative defenses. The
Company believes that the practices which are subject of this lawsuit are well
accepted business practices in the trading card industry and intends to defend
the lawsuit vigorously. Additionally, the Company is indemnified by Wizards of
the Coast under the Pokemon license Agreement. The Company feels that the
outcome will not have a


                                      -7-
<PAGE>

material effect on its financial position or result of operations. Except for
this lawsuit, as of March 27, 2000, 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, 1999,
there were no matters submitted to a vote of security holders.

                                     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.

      1999                             Low                              High
      ----                             ---                              ----
      First Quarter                    2.417                            12.958

      Second Quarter                   7.813                            12.500

      Third Quarter                    8.500                            37.750

      Fourth Quarter                   24.75                            93.250

      1998                             Low                              High
      ----                             ---                              ----
      First Quarter                    0.917                            1.625

      Second Quarter                   1.000                            3.333

      Third Quarter                    1.667                            2.896

      Fourth Quarter                   0.958                            4.458

      The above-mentioned stock prices have been adjusted to reflect the 3 for 2
      stock split effective for shareholders of record on April 15, 1999 and the
      2 for 1 stock split effective for shareholders of record on September 1,
      1999.

     (b) Number of Holders of Common Stock. The number of holders of record
of the Company's Common Stock on March 27, 2000 was 312, which does not include
individual participants in security position listings.

      (c) Dividends. There were no dividends or other distributions made by the
Company during 1999 or 1998. Future dividend policy will be determined by the
Board of Directors 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 495,000 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 1999.


                                      -8-
<PAGE>

Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                               ---------------------------------------
                                     1999          1998          1997          1996             1995
                                     ----          ----          ----          ----             ----
<S>                              <C>           <C>           <C>            <C>            <C>
Total Net Revenues               $60,482,369   $14,767,429   $10,116,800    $6,977,327     $6,617,279

Net Income (Loss)                 23,638,426     2,743,069       739,135      (239,304)      (947,850)

Net Income (Loss) Per Common            2.20           .31           .08          (.03)          (.11)
Share-Basic

Net Income                              1.91           .27           .08          (.03)          (.11)
(Loss) Per Common Share-
Diluted

Weighted Average Common Shares    10,741,082     8,982,738     8,834,493     8,834,493      8,834,493
Outstanding-Basic

Weighted Average Common Shares    12,366,349    10,227,081     9,509,637     8,834,493      8,834,493
Outstanding-Diluted
</TABLE>

The amounts shown above give effect to the April 1999 three for two and the
September 1999 two for one stock splits described in Note 8 to the financial
statements included herein. The Company did not declare or pay any cash
dividends during the five-year period ended December 31, 1999.

<TABLE>
<CAPTION>
At Year End                1999            1998           1997           1996           1995
-----------                ----            ----           ----           ----           ----
<S>                    <C>             <C>            <C>            <C>            <C>
Total Assets           $127,103,647    $34,961,155    $39,319,077    $30,432,130    $25,968,575

Working Capital          56,982,147     10,823,815      6,823,466      5,342,436      6,894,818

Stockholders' Equity     60,942,916     15,405,255     12,128,739     11,389,604     11,628,908
</TABLE>


                                      -9-
<PAGE>

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 payments, some of
which are made upon the execution and delivery of license agreements.

Results of Operation

Twelve Months Ended December 31, 1999 compared to Twelve Months Ended December
31, 1998.

      Consolidated net revenue for the year ended December 31, 1999 increased
310% or $45,715,000 to $60,482,369 in 1999 from $14,767,429 in 1998. Increased
licensing commission revenue resulted primarily from the strength of the Pokemon
license. Pokemon licensed products were among the best selling toy items during
the 1999 holiday season. Particularly strong were sales of Pokemon cards and
Hasbro toys as well as many new licensees' products involved in a wide array of
licensing activities. Additionally, the Company's licensing commission revenues
from World Championship Wrestling" "WCW/NWO" merchandise increased over 1998 due
to strong toy sales.

      Revenue from the Company's media and television distribution services
decreased from 1998 performance. These activities totaled $3,111,305 or 5% of
total net revenue for 1999 as compared to $4,328,808 or 29% in 1998. Commissions
earned on media placed decreased as a result of the loss of Tiger Electronics'
media business. In April 1998, Tiger Electronics was acquired by Hasbro, which
resulted in the consolidation of Tiger Electronics' media buying into Hasbro's
Media Agency. However, partially offsetting the decreased media buying
commission were increased distribution revenues earned on the license of the
Pokemon television series to Warner Bros. for broadcast on the Kids WB.

      The Company's television, film and home video production activities
comprised approximately 12% and 11% of total net revenue for 1999 and 1998,


                                      -10-
<PAGE>

respectively. This revenue related primarily to the "Pokemon" television
programs and filmed entertainment.

      Selling, general and administrative expenses increased 114% or
approximately $8,798,000 compared to 1998 primarily as a result of increased
costs associated with performance based bonus payments which are tied to pre-tax
earnings of the Company. Additionally, the Company's expanded licensing
activities during 1999 required additional resources including, marketing
creative services, sales, and legal costs. Overall selling, general and
administrative expenses decreased as a percentage of net revenue to 27% in 1999
from 52% in 1998.

      At December 31, 1999 there were approximately $915,935 of capitalized film
production costs, which primarily relates to 26 episodes of "WMAC Masters" and
episodes 105-156 of "Pokemon" which are currently in production. Amortization of
capitalized film costs increased by $1,185,106 for the year ended December 31,
1999 as compared to the prior year. Included in amortization expense for 1999 is
an additional expense of approximately $2,031,000($919,000 in the fourth
quarter) relating to the "WMAC Masters" television program. The 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, 1999 the percentage of unamortized
film cost expected to be amortized within the next three years is over 70%.

      As a result of the above, the Company had net income for 1999 of
$23,638,426 as compared to the reported net income in 1998 of $2,743,069.

Twelve Months Ended December 31, 1998 compared to Twelve Months Ended December
31, 1997.

      Consolidated net revenue for the year ended December 31, 1998 increased
46% or $4,650,629 as compared to the year ended December 31, 1997. Increased
licensing commission revenue was recognized primarily from the "World
Championship Wrestling" "WCW/NWO" as well as revenue from the "Pokemon" property
as a result of the master toy agreement signed with Hasbro, Inc. for the Pokemon
property. Licensing commission revenue from the "WCW/NWO" property increased due
to licenses granted to Electronic Arts for the video game rights as well as many
new licensees involved in a wide array of licensing activities. The Company also
recognized increased licensing commission revenue from continued strong sales of
the Nintendo James Bond 007 "Golden Eye" video game licensed to Nintendo.
Offsetting these gains were decreased licensing commission revenue from some of
the Company's more mature properties licensed through the Company's
international office in London.

      Revenue from the Company's media and television syndication services
decreased over 1997 performance. These activities comprised 29% of total net
revenue for 1998 as compared to 49% in 1997. Commissions earned on media placed
increased as a result of adding new clients including Nintendo. Additionally,
fewer programs distributed by the Company as well as lower than anticipated
Nielsen ratings on television properties distributed by the Company in 1997
lowered distribution revenues compared to the prior year. The Company's
television distribution revenues are generally calculated as a percentage of
advertising revenues generated by the television programs. Such advertising
revenues are directly impacted by the Nielsen ratings.


                                      -11-
<PAGE>

      The Company's television and home video production activities comprised
approximately 11% and 12% of total net revenue for 1998 and 1997 respectively.
This revenue related primarily to the "Pokemon" and "WMAC Masters" syndicated
television programs.

      Selling, general and administrative expenses increased 6.6% or
approximately $476,000 compared to 1997 as a result of increased costs
associated with expanded activity in the Company's licensing activities.
Additionally, bonus amounts, which are based on pre-tax income levels, increased
in 1998 due to the increased level of pre-tax income. Overall selling, general
and administrative expenses decreased as a percentage of net revenue from 71% in
1997 to 52% in 1998.

      At December 31, 1998 there were approximately $2,954,000 of capitalized
film production costs, which primarily relates to 26 episodes of "WMAC Masters".

Amortization of capitalized film costs increased $1,067,482 for the year ended
December 31, 1998 as compared to the prior year. Included in amortization
expense for 1998 is an additional expense of approximately $1,528,000($702,000
in the fourth quarter)relating to the "WMAC Masters" television program as well
as certain other charges related to television projects which the Company
determined it will not be pursuing. The 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, 1998 the percentage of unamortized film cost expected
to be amortized within the next three years is approximately 70%.

      As a result of the above, the Company reported a net income for 1998 of
$2,743,069, as compared to the reported net income in 1997 of $739,135.

Liquidity and Capital Resources

      At December 31, 1999, the Company had working capital of $56,982,147 as
compared to working capital of $10,823,844 at December 31, 1998. Cash and cash
equivalents increased by $64,677,170 to $74,427,126 from December 1998. The
increase in cash equivalents is primarily due to the increased levels of
royalties collected from the Company's licensing businesses. Accordingly, the
increased royalty collections also increase the amounts due to licensors as
described below.

      Accounts receivable, net (current and non-current) increased to
$47,329,385 at December 31, 1999 from $20,321,942 at December 31, 1998. This
increase is primarily due to higher amounts of earned royalties representing the
Company's share of royalties due for the fourth quarter of 1999 which are
payable by licensees in the first quarter of 2000.

      Amounts due to licensors, which represent the owners share of royalties
collected at December 31,1999, increased by $53,344,409 to $57,034,991 from
December 31, 1998. The increase is primarily due to higher royalties collected
during the fourth quarter of 1999 as compared to the prior year, which are paid
to licensors in the first quarter of 2000.

      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 The Chase Manhattan Bank, discussed in Note 10
to the financial statements. As of March 21, 2000 there were no amounts
outstanding under this facility. As the Company explores new and expanded
opportunities in the youth oriented entertainment market, including television
production, it may seek additional financing alternatives.


                                      -12-
<PAGE>

Forward-looking Statements

      Sections of this Annual Report contain forward-looking statements,
including, without limitation, statements concerning possible or assumed future
results of operations of the Company preceded by, followed by or that include
the words "believes," "expects," "anticipates," "estimates," "intends," "plans"
or similar expressions. For those statements, we claim the protection of the
safe harbor for forward-looking statements contained in the U.S. Private
Securities Litigation Reform Act of 1995.

      Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. Due to the fact that the Company
faces competition from toy companies, motion picture studios and other licensing
companies, and the uncertainty of the public's response to the Company's
properties, actual results or outcomes may differ materially from any such
forward-looking statements.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

      Not applicable

Item 8. Financial Statements and Supplementary Data

      Financial Statements and Supplementary Data are attached hereto.

Item 9. Changes in and Disagreements With Accountants in
        Accounting and Financial Disclosure

      None

                                    PART III

Item 10. Directors and Executive Officers of the Company

      Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year for information concerning
directors and officers of the Company.

Item 11. Executive Compensation

      Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year for information concerning
executive compensation.

Item 12. Security Ownership of Certain Beneficial Owners
         and Management

      Incorporated by reference to the Company's Definitive Proxy Statement on
      Schedule 14A to be filed with the Securities and Exchange Commission
      within 120 days after the end of the Company's fiscal year for information
      concerning security ownership of each person known by the Company to own
      beneficially more than 5% of the outstanding shares of Common Stock, of
      each director of the Company and all officers and directors as a group.


                                      -13-
<PAGE>

Item 13. Certain Relationships and Related Transactions

Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A to be filed with the Securities and Exchange Commission within 120
days after the end of the Company's fiscal year for information concerning
certain relationships and related transactions.

                                     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 -December 31, 1999 and 1998              F-2

Consolidated Statements of Income - Years Ended
  December 31, 1999, 1998 and 1997                                   F-3

Consolidated Statements of                                           F-4
Stockholders' Equity - Years
Ended December 31, 1999, 1998
and 1997

Consolidated Statements of                                           F-5
Cash Flows - Years Ended
December 31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements                           F-6 to F-16

(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 filed a Current Report on Form 8-K on October 22, 1999.


                                      -14-
<PAGE>

                                   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: March 30, 2000     4KIDS ENTERTAINMENT, INC.

                                                     By
                                                              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: March 30, 2000
                                                        Alfred R. Kahn,
                                                    Chairman of the Board,
                                                   Chief Executive Officer and
                                                            Director

Date: March 30, 2000
                                                           Jay Emmett,
                                                            Director

Date: March 30, 2000
                                                           Joel Cohen,
                                                            Director

Date: March 30, 2000
                                                       Joseph P. Garrity,
                                                    Executive Vice President,
                                                  Treasurer, Principal Financial
                                                 Officer, Principal Accounting
                                                       Officer and Director


<PAGE>

                                INDEX OF EXHIBITS

Exhibit                                                                   Page
Number                             Description                            Number
------                             -----------                            ------

(3) (a)     Certificate of Incorporation of the Registrant, as amended (13)

    (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)     1996 Stock Option Plan (*)(15)

    (i)     Stock Option Agreement, dated June 10, 1992, between the Registrant
            and Randy O. Rissman (*)(7)

    (j)     Stock Option Agreement, dated June 10, 1992, between the Registrant
            and Gerald Rissman (*)(7)

    (k)     Agreement between Nintendo of America, Inc. and the Registrant dated
            December 17, 1987 (4)

    (l)     Agreement of Lease, dated March 28, 1988, between the Registrant and
            1414 Americas Company (2)

    (m)     Amendment, dated July 8, 1994, to Agreement of Lease between the
            Registrant and 1414 Americas Company. (12)

    (n)     Agreement of Lease, dated June 30, 1991, between the Registrant and
            Olympic Purdue Associates (the "Olympic Lease") (7)

    (o)     First Amendment, dated January 3, 1994, to the Olympic Lease (7)

    (p)     Agreement of Lease, dated March 23, 1993, between Leisure Concepts
            International, Inc. and Svenska Handelsbanken (7)

    (q)     Employment Agreement, dated March 12, 1991 between the Registrant
            and Alfred R. Kahn(*)(8)

    (r)     Employment Agreement, dated June 3, 1991, between the Registrant and
            Joseph Garrity (*)(9)

    (s)     Amendment, dated as of October 17, 1994, to the Employment Agreement
            between the Registrant and Joseph Garrity (*)(12)


<PAGE>

Exhibit                                                                   Page
Number                             Description                            Number
------                             -----------                            ------

    (t)     Employment Agreement, dated January 1, 1995 between The Summit Media
            Group, Inc. and Sheldon Hirsch.(*)(13)

    (u)     Employment Agreement, dated January 1, 1995 between The Summit Media
            Group, Inc. and Thomas J. Kenney. (*)(13)

    (v)     Employment Agreement, dated January 9, 1996 between 4 Kids
            Productions, Inc. and Norman Grossfeld. (*)(13)

    (w)     Note, dated May 29, 1997, between the Registrant and Chemical Bank.
            (16)

    (x)     Security Agreement, dated May 29, 1996, by and between Leisure
            Concepts, Inc. and Chemical Bank (16)

    (y)     Security Agreement, dated May 29, 1996, by and between 4Kids
            Productions, Inc. and Chemical Bank (16)

    (z)     Security Agreement, dated May 29, 1996, by and between The Summit
            Media Group, Inc. and Chemical Bank (16)

    (aa)    Amendment, dated as of January 1, 1997, to the Employment Agreement
            between the Registrant and Joseph P. Garrity(*)(16)

    (bb)    Amendment, dated as of January 1, 1997, to the Employment Agreement
            between The Summit Media Group, Inc. and Sheldon Hirsch(*)(16)

    (cc)    Amendment, dated as of January 1, 1997, to the Employment Agreement
            between The Summit Media Group, Inc. and Thomas Kenney(*)(16)

    (dd)    Amendment, dated as of February, 1997, to the Employment Agreement
            between the Registrant and Alfred R. Kahn(*)(16).

    (ee)    1998 Stock Option Plan(*)(17)

    (21)    List of Subsidiaries of the Registrant

    (24)    Consent of Deloitte & Touche LLP, Certified Public Accountants

    (27)    Financial Data Schedule

----------

      (*) 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.


<PAGE>

      (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.

      (13) Incorporated by reference to Annual Report on Form 10-K for the year
ended December 31, 1995.

      (14) Incorporated by reference to Current Report on Form 8-K dated May 29,
1997.

      (15) Incorporated by reference to 1997 Proxy Statement.

      (16) Incorporated by reference to Annual Report on Form 10-K for the year
ended December 31, 1996.

      (17) Incorporated by reference to Proxy Statement for Annual Meeting of
Shareholders held April 30, 1998.


<PAGE>

                          INDEPENDENT AUDITORS' CONSENT

      We hereby consent to the incorporation by reference in Registration
Statement Nos. 33-11718, 33-60928, 333-02289, 333-58555 and 333-83153 of 4Kids
Entertainment, Inc. on Form S-8 of our report dated March 29, 2000 appearing in
this Annual Report on Form 10-K of 4Kids Entertainment, Inc. for the year ended
December 31, 1999.

Deloitte & Touche LLP
New York, New York

March 27, 2000


<PAGE>

4Kids Entertainment,
Inc. and Subsidiaries

Consolidated Financial Statements for the
Years Ended December 31, 1999, 1998 and 1997,
and Independent Auditors' Report


<PAGE>

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 (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1999. 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, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with generally accepted accounting principles.

Deloitte & Touche, LLP
New York, New York

March 27, 2000


                                       F-1
<PAGE>

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>                    <C>
ASSETS                                                                                                1999                   1998

CURRENT ASSETS:
  Cash and cash equivalents                                                                      $ 74,427,126           $  9,749,956
  Accounts receivable - net (Notes 2 and 6)                                                        45,543,575             17,694,262
  Film inventory - net (Note 3)                                                                       155,353              1,079,677
  Prepaid/refundable income taxes (Note 5)                                                          1,815,434                324,864
  Prepaid expenses and other current assets                                                         1,201,390              1,151,974
                                                                                                 ------------           ------------
           Total current assets                                                                   123,142,878             30,000,733

FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS -
  Net of accumulated depreciation and amortization
  of $1,484,020 and $1,384,137                                                                        217,025                174,783

ACCOUNTS RECEIVABLE - Noncurrent, net (Notes 2 and 6)                                               1,785,810              2,627,680

FILM INVENTORY - Noncurrent, net (Note 3)                                                             760,582              1,875,000

DEFERRED INCOME TAXES - Noncurrent (Note 5)                                                           535,553                     --

SECURITY DEPOSITS AND OTHER ASSETS                                                                    661,799                282,959
                                                                                                 ------------           ------------
TOTAL ASSETS                                                                                     $127,103,647           $ 34,961,155
                                                                                                 ============           ============


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Due to licensors (Note 2)                                                                      $ 57,034,991           $  3,690,582
  Media payable (Note 2)                                                                            2,353,732             11,460,913
  Accounts payable and accrued expenses                                                             5,564,361              1,285,624
  Income Taxes payable                                                                                 34,841              1,750,799
  Deferred tax liability (Note 5)                                                                   1,172,806                989,000
                                                                                                 ------------           ------------
           Total current liabilities                                                               66,160,731             19,176,918
DEFERRED INCOME TAXES - Noncurrent (Note 5)                                                                --                379,012
                                                                                                 ------------           ------------
           Total liabilities                                                                       66,160,731             19,555,930
                                                                                                 ------------           ------------

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY (Notes 7, 8 and 10):
  Preferred stock, $.01 par value - authorized, 3,000,000 shares;
    none issued                                                                                            --                     --
  Common stock, $.01 par value - authorized, 20,000,000 shares;
    issued, 11,857,755 and 9,188,205 shares                                                           118,578                 91,882
  Additional paid-in capital                                                                       26,773,458              4,900,889
  Retained earnings                                                                                34,050,880             10,412,454
                                                                                                 ------------           ------------
           Total stockholders' equity                                                              60,942,916             15,405,225
                                                                                                 ------------           ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                       $127,103,647           $ 34,961,155
                                                                                                 ============           ============
</TABLE>

                See notes to consolidated financial statements.


                                      F-2
<PAGE>

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
------------------------------------------------------------------------------------------------------------------------------------

                                                                                  1999                 1998                 1997
<S>                                                                            <C>                  <C>                  <C>
REVENUES:
  Net revenues (Notes 4 and 6)                                                 $60,482,369          $14,767,429          $10,116,800
                                                                               -----------          -----------          -----------

COSTS AND EXPENSES:
  Selling, general and administrative (Note 10)                                 16,483,390            7,685,887            7,209,817
  Amortization of capitalized film costs (Note 3)                                3,887,350            2,702,244            1,634,762
                                                                               -----------          -----------          -----------

           Total costs and expenses                                             20,370,740           10,388,131            8,844,579
                                                                               -----------          -----------          -----------

                                                                                40,111,629            4,379,298            1,272,221

INTEREST INCOME                                                                  1,159,797              335,771               70,914
                                                                               -----------          -----------          -----------

INCOME BEFORE INCOME TAX
  PROVISION                                                                     41,271,426            4,715,069            1,343,135

INCOME TAX PROVISION (Note 5)                                                   17,633,000            1,972,000              604,000
                                                                               -----------          -----------          -----------

NET INCOME                                                                     $23,638,426          $ 2,743,069          $   739,135
                                                                               ===========          ===========          ===========

PER SHARE AMOUNTS (Note 9):
  Basic earnings per common share                                              $      2.20          $      0.31          $      0.08
                                                                               ===========          ===========          ===========

  Diluted earnings per common share                                            $      1.91          $      0.27          $      0.08
                                                                               ===========          ===========          ===========

  Weighted average common shares
      outstanding - basic (Note 10)                                             10,741,082            8,982,738            8,834,493
                                                                               ===========          ===========          ===========

  Weighted average common share
      outstanding - diluted (Note 10)                                           12,366,349           10,227,081            9,509,637
                                                                               ===========          ===========          ===========
</TABLE>

                See notes to consolidated financial statements.


                                       F-3
<PAGE>

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
------------------------------------------------------------------------------------------------------------------------------------

                                                                                      Additional
                                                         Common Stock                 Paid-in            Retained
                                                    Shares           Amount           Capital            Earnings           Total

<S>                                               <C>            <C>               <C>                <C>               <C>
BALANCE, DECEMBER 31, 1996                        2,944,831      $     29,448      $  4,429,906       $  6,930,250      $ 11,389,604

  Net income                                             --                --                --            739,135           739,135
                                               ------------      ------------      ------------       ------------      ------------

BALANCE, DECEMBER 31, 1997                        2,944,831            29,448         4,429,906          7,669,385        12,128,739
  Proceeds from exercise of
    stock options                                   117,904             1,179           230,568                 --           231,747
  Tax benefit from exercise of
    stock options                                        --                --           301,670                 --           301,670
  Net income                                             --                --                --          2,743,069         2,743,069
                                               ------------      ------------      ------------       ------------      ------------

BALANCE, DECEMBER 31, 1998                        3,062,735            30,627         4,962,144         10,412,454        15,405,225
  3 for 2 and 2 for 1
    stock splits                                  6,125,470            61,255           (61,255)                --                --
  Proceeds from exercise of
    stock options                                 2,669,550            26,696         3,472,655                 --         3,499,351
  Tax benefit from exercise of
    stock options                                        --                --        18,399,914                 --        18,399,914
  Net income                                             --                --                --         23,638,426        23,638,426
                                               ------------      ------------      ------------       ------------      ------------

BALANCE, DECEMBER 31, 1999                       11,857,755      $    118,578      $ 26,773,458       $ 34,050,880      $ 60,942,916
                                               ============      ============      ============       ============      ============
</TABLE>

                See notes to consolidated financial statements.

                                       F-4
<PAGE>

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
------------------------------------------------------------------------------------------------------------------------------------

                                                                               1999                   1998                    1997
<S>                                                                        <C>                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                               $ 23,638,426          $  2,743,069          $    739,135
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                                               108,699               124,514               107,742
    Amortization of capitalized film costs                                    3,887,350             2,702,244             1,634,762
    Provision for losses on accounts receivable                                 827,840               352,500                    --
    Deferred income taxes                                                      (892,759)              484,598                84,000
    Changes in operating assets and liabilities:
      Accounts receivable - net                                             (27,835,283)            9,768,664           (10,553,753)
      Film inventory - net                                                   (1,848,608)           (1,140,912)             (453,332)
      Prepaid/refundable income taxes                                        (1,490,570)             (321,585)              519,484
      Prepaid expenses and other current assets                                 (49,416)              (89,975)              (53,699)
      Security deposits and other assets                                       (378,840)                8,503               (44,683)
      Due to licensors                                                       53,344,409               209,814             2,063,809
      Media payable                                                          (9,107,181)          (10,130,259)            5,552,598
      Income taxes payable                                                   (1,715,958)            1,443,769               307,030
      Accounts payable and accrued expenses                                   4,278,737               357,670               140,375
                                                                           ------------          ------------          ------------

           Net cash provided by operating activities                         42,766,846             6,512,614                43,468
                                                                           ------------          ------------          ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                           (150,941)             (101,648)              (68,165)
                                                                           ------------          ------------          ------------

           Net cash used in investing activities                               (150,941)             (101,648)              (68,165)
                                                                           ------------          ------------          ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from short-term bank note                                                 --                    --               400,000
  Repayment of short-term bank note                                                  --                    --              (400,000)
  Proceeds from exercise of stock options
    and related tax benefit                                                  22,061,265               533,417                    --
                                                                           ------------          ------------          ------------

           Net cash provided by financing activities                         22,061,265               533,417                    --
                                                                           ------------          ------------          ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         64,677,170             6,944,383               (24,697)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                  9,749,956             2,805,573             2,830,270
                                                                           ------------          ------------          ------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                     $ 74,427,126          $  9,749,956          $  2,805,573
                                                                           ============          ============          ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

CASH PAID DURING THE YEAR FOR:
  Interest                                                                 $         --          $       --            $      5,806
                                                                           ============          ============          ============
  Income Taxes                                                             $  3,324,329          $     17,000          $      7,091
                                                                           ============          ============          ============
</TABLE>

                See notes to consolidated financial statements.

                                       F-5
<PAGE>

4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED December 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------

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 - Through the Company's wholly-owned subsidiaries of
      Leisure Concepts, Inc. and Leisure Concepts International, Inc., the
      Company's licensing subsidiaries are 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, houseware, 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
      commission revenue its proportionate share of the minimum guarantee when
      all material terms or contingencies 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 commission
      revenue based upon its share of earned royalties from the sales of the
      related property.

      Television, Film and Video Productions - Through the Company's
      wholly-owned subsidiary, 4Kids Productions, Inc., 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 Distribution Services - Through the Company's
      wholly-owned subsidiary, The Summit Media Group, Inc. ("Summit Media"),
      the Company provides media planning 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 distribution services for which it
      receives a fee based on a percentage of the license fee paid by the
      broadcaster or, in the case of syndicated programming, a percentage of the
      advertising sales generated by the related program. Such revenue is
      recognized at the time the distribution services are completed and the
      license fee or the advertising sales of the related program


                                       F-6
<PAGE>

      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 advertising media
      commitments.

      Furniture, Fixtures and Computer Equipment - Furniture, equipment and
      leasehold improvements 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% for 1999 and 1998.

      Cash and Cash Equivalents - At December 31, 1999 and 1998, the Company had
      cash equivalents consisting primarily of funds invested in A-1, P-1 rated
      commercial paper and Treasury bills of approximately $73,918,572 and
      $9,251,340 respectively, with original maturities of 90 days or less.
      Included in cash and cash equivalents are accounts in various banks which
      maintain balances in excess of the FDIC insured limit of $100,000 per
      bank. At December 31, 1999 and 1998 respectively, the excess cash amounted
      to a total of $408,554 and $398,616.

      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.

      New Accounting Pronouncements - In June 1998, the FASB issued SFAS No.
      133, "Accounting for Derivative Instruments and Hedging Activities". This
      statement establishes accounting and reporting standards for derivative
      instruments and requires recognition of all derivatives as assets or
      liabilities in the statement of position and measurement of these
      instruments at fair value. The statement is effective for fiscal years
      beginning after June 15, 2000. Management believes that adopting this
      Statement will not have a material impact on the financial position,
      results of operations or cash flows of the Company.

2. ACCOUNTS RECEIVABLE AND 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,
                                                 1999                  1998

Gross accounts receivable                       $ 47,650,180       $ 20,838,613
Allowance for doubtful accounts                     (320,795)          (516,671)
                                                ------------       ------------

                                                  47,329,385         20,321,942

Less long-term portion                             1,785,810          2,627,680
                                                ------------       ------------

                                                $ 45,543,575       $ 17,694,262
                                                ============       ============


                                       F-7
<PAGE>

3. FILM INVENTORY

      At December 31, 1999, there was $915,935 of capitalized film costs, which
      relate to two completed works and two works in progress. Amortization of
      capitalized film cost was $3,887,350, $2,702,244 and $1,634,762 in 1999,
      1998 and 1997, respectively. Inclusive in the amortization above, the
      Company recorded charges of approximately $2,031,000, $1,424,000 and
      $702,000, respectively, to reduce the carrying value of film inventory
      primarily related to producing "WMAC Masters" and "Monster Wars"
      television programs. These reductions of carrying values were 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:

                                                       December 31,
                                                1999                 1998

      Opening balance                        $ 2,954,677          $ 4,516,009

      Additions                                1,848,608            1,140,912
                                             -----------          -----------

                                               4,803,285            5,656,921
      Amortization                            (3,887,350)          (2,702,244)
                                             -----------          -----------

      Ending Balance                             915,935            2,954,677
      Less noncurrent portion                   (760,582)          (1,875,000)
                                             -----------          -----------

                                             $   155,353          $ 1,079,677
                                             ===========          ===========

4. REVENUES/MAJOR CUSTOMERS

      Licensing commission revenues included on the Statements of Income are net
      of licensor participations of approximately $142,433,000 in 1999,
      $26,473,000 in 1998 and $7,232,000 in 1997.

      The percentages of revenue from major properties and customers/licensees
are as follows:

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                       1999     1998     1997
<S>                                                                                     <C>      <C>      <C>
      Percentage of revenue derived from major properties (revenue in
          excess of 10 percent of total revenue)                                        82%      52%      10%

        Number of major properties                                                       1        3        1

        Percentage of revenue derived from major customers/licensees
          (revenue in excess of 10 percent of total revenue)                            39%      14%      25%

        Number of major customers/licensees                                              1        1        1
</TABLE>

      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 $673,000, $446,000 and
      $841,000 in net revenue from international sources, primarily in Europe,
      for 1999, 1998 and 1997, respectively.


                                       F-8
<PAGE>

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 resulting from a difference between the tax basis of
      an asset or liability and its reported amount in the financial statements.

      The income tax provision includes the following:

                                            Years Ended December 31,
                                  1999                1998               1997

     Current:
       Federal                $ 13,507,000       $  1,120,000      $    490,000
       State and local           5,019,000            367,000            30,000
                              ------------       ------------      ------------
                                18,526,000          1,487,000           520,000
                              ------------       ------------      ------------
     Deferred:
       Federal                    (727,000)           383,000           (82,000)
       State and local            (166,000)           102,000           166,000
                              ------------       ------------      ------------
                                  (893,000)           485,000            84,000
                              ------------       ------------      ------------
                              $ 17,633,000       $  1,972,000      $    604,000
                              ============       ============      ============

      The provision for taxes as reported is different than the tax provision
      computed by applying the statutory Federal rate of 35 percent. The
      differences are as follows:

<TABLE>
                                                                   Years Ended December 31,
                                                               1999          1998           1997

<S>                                                        <C>           <C>           <C>
Income before income tax provision                         $41,271,426   $ 4,715,069   $ 1,343,135
                                                           ===========   ===========   ===========

Provision at the statutory Federal rate                    $14,445,000   $ 1,603,000   $   457,000

Provision for state and local income taxes net of
  Federal income tax benefit                                 3,154,000       310,000       129,000

Other                                                           34,000        59,000        18,000
                                                           -----------   -----------   -----------
                                                           $17,633,000   $ 1,972,000   $   604,000
                                                           ===========   ===========   ===========
</TABLE>

      Income tax benefits, which related to the exercise of non-qualified stock
      options reduced current taxes payable and increased additional paid-in
      capital by approximately $18,400,000 and $302,000 in 1999 and 1998,
      respectively.


                                       F-9
<PAGE>

      The Company's deferred tax liabilities are net of deferred tax assets of
      approximately $1,557,000 and $783,000 at December 31, 1999 and 1998,
      respectively. The components of the deferred tax balances at December 31,
      1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                                    1999            1998
<S>                                                              <C>            <C>
Commissions on guarantees not currently recognized for
  tax reporting purposes                                         $(2,032,000)   $(2,151,000)

Tax benefit of state and local tax loss carryforwards               (162,000)             --

Provision for doubtful accounts not currently deductible
  for tax reporting purposes                                         138,000        222,000

Film inventory valuation adjustment not currently
  deductible for tax reporting purposes                            1,419,000        561,000
                                                                 -----------    -----------
                                                                 $  (637,000)   $(1,368,000)
                                                                 ===========    ===========
</TABLE>

6. RELATED PARTY TRANSACTIONS

      In April 1998, Tiger Electronics, Inc., a major customer of the Company
      and a Related Party was acquired by Hasbro, Inc. In addition, in
      anticipation of the acquisition on March 4, 1998, a director and major
      beneficial shareholder of the Company, who was also a principal
      stockholder of Tiger, announced his resignation from the Company's Board
      of Directors.

      The Company provided certain services to Tiger during 1998 and 1997. These
      transactions accounted for approximately $2,080,000 and $2,550,000 of net
      revenue in 1998 and 1997, respectively.

7. STOCK OPTIONS

      The Company applies Accounting Principles Board Opinion No. 25, Accounting
      for Stock Issued to Employees, and related interpretations in accounting
      for its stock option plans. Accordingly, no compensation expense has been
      recognized for its stock-based compensation plans. Had compensation cost
      for the Company's stock option plans been determined based upon the fair
      value at the grant date for awards under these plans consistent with the
      methodology prescribed under Statement of Financial Accounting Standards
      No. 123, Accounting for Stock-Based Compensation, the Company's net income
      and net income per share would have been decreased by approximately
      $2,745,000, 518,000 and $239,000, or $.23 , $.06 and $.04 basic earnings
      per share for 1999, 1998 and 1997, respectively. The weighted average fair
      value of options granted was $20.77, $1.05 and $.38 during 1999,1998 and
      1997, respectively. The fair value of the options granted during 1999,
      1998 and 1997 are estimated on the date of grant using the Black-Scholes
      option-pricing model with the following assumptions: dividend yield 0% for
      all years, volatility of 114%, 85% and 70% for 1999, 1998 and 1997,
      respectively, risk-free interest rate of 6.55%, 5.14% and 7% for 1999,
      1998 and 1997, respectively, and an expected life of three years based on
      the estimated holding period giving consideration to past experience and
      current stock price levels.

      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,


                                      F-10
<PAGE>

      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 Company has outstanding stock options as follows:

<TABLE>
<CAPTION>
                                                                                                         Weighted
                                                                                                          Average
                                                                                      Exercise Price     Exercise
                                                                 Options                Per Share          Price

<S>                                                             <C>                <C>        <C>         <C>
Outstanding at December 31, 1996                                3,747,000          $0.771  -  $ 3.417     $1.710
                                                                =========          ======     =======     ======

Options granted                                                 1,252,500           0.458  -    0.528      0.463
Options expired                                                  (600,000)          1.667  -    1.917      1.793
                                                                ---------          ------  -  -------     ------

Outstanding at December 31, 1997                                4,399,500           0.458  -    3.417      1.367
                                                                =========          ======     =======     ======

Options granted                                                   993,000           0.917  -    3.104      1.923
Options expired                                                   (94,500)          2.042  -    3.250      2.617
Options exercised                                                (353,712)          0.458  -    0.875      0.653
                                                                ---------          ------  -  -------     ------

Outstanding at December 31, 1998                                4,944,288           0.458  -    3.104      1.433
                                                                =========          ======     =======     ======

Options granted                                                   265,000          10.313  -   33.280     29.380
Options expired                                                   (15,000)          3.250  -    3.250      3.250
Options exercised                                              (2,669,550)          0.528  -    3.104      1.310
                                                                ---------          ------  -  -------     ------

Outstanding at December 31, 1999                                2,524,738           0.458  -   33.281      4.500
                                                                =========          ======     =======     ======

Exercisable at December 31, 1999                                2,442,238          $0.458  -  $33.281     $3.740
                                                                =========          ======     =======     ======
</TABLE>

      Under the Company's various stock option plans, 260,000 of the Company's
      common stock were available at December 31, 1999 for future issuance.

      At December 31, 1999, there were 2,784,738 shares of the Company's common
      stock reserved for stock options. The following table summarizes
      information about fixed-price stock options outstanding at December 31,
      1999:

<TABLE>
<CAPTION>
                                                       Options Outstanding                            Options Exercisable
                                    --------------------------------------------------------       ---------------------------
                                                                                    Weighted                          Weighted
                                       Number            Weighted Average            Average           Number          Average
              Range of              Outstanding              Remaing                Exercise       Exercisable        Exercise
           Exercise Prices          at 12/31/99         Contractual Life              Price         at 12/31/99         Price
<S>                                  <C>                    <C>                     <C>              <C>               <C>
        $ 0.4583 - $  1.8958         1,653,238              4 years                 $  1.03          1,653,238         $ 1.03
        $ 2.6875 - $ 10.3125           651,500              5 years                 $  3.59            629,000         $ 3.35
        $33.2813 - $ 33.2813           220,000              7 years                 $ 33.28            160,000         $ 33.28
                                     ---------                                                       ---------
                                     2,524,738                                                       2,442,238
                                     =========                                                       =========
</TABLE>


                                      F-11
<PAGE>

8. STOCK SPLITS

      On March 29, 1999 the Company's Board of Directors approved the
      declaration of a 3 for 2 stock split effective for shareholders of record
      on April 15, 1999. On August 12, 1999, the Company's Board of Directors
      approved the declaration of a 2 for 1 stock split effective for
      shareholders of record on September 1, 1999.

      The effect of the stock splits have been recognized retroactively in the
      shareholders' equity accounts on the balance sheets as of December 31,
      1999 and in all share and per share data in the accompanying consolidated
      financial statements, notes to financial statements and supplemental
      financial data. Shareholders' equity accounts have been restated to
      reflect the reclassification of an amount equal to par value of the
      increase in issued common shares from the additional paid-in capital
      account.

9. EARNINGS PER SHARE

      The Company applies Statement of Accounting Standards ("SFAS") No. 128
      "Earnings per Share" which requires the computation and presentation of
      earnings per share ("EPS") to include basic and diluted EPS. Basic EPS is
      computed based solely on the weighted average number of common shares
      outstanding during the period. Diluted EPS reflects all potential dilution
      of common stock. The following table reconciles Basic EPS with Diluted EPS
      for the three years ended December 31, 1999.


                                      F-12
<PAGE>

<TABLE>
<CAPTION>
                                                                        For the Year Ended 1999
                                                               Income             Shares         Per Share
<S>                                                          <C>                 <C>              <C>
Basic earnings per share:
  Income available to common shareholders                    $ 23,638,426        10,741,082       $   2.20

Effect of dilutive security:
  Stock options                                                        --         1,625,267             --
                                                             ------------        ----------       --------

Diluted earnings per share                                   $ 23,638,426        12,366,349       $   1.91
                                                             ============        ==========       ========


<CAPTION>
                                                                        For the Year Ended 1998
                                                               Income             Shares         Per Share
<S>                                                             <C>               <C>             <C>
Basic earnings per share:
  Income available to common shareholders                    $  2,743,069         8,982,738       $   0.31

Effect of dilutive security:
  Stock options                                                        --         1,244,343             --
                                                             ------------        ----------       --------

Diluted earnings per share                                   $  2,743,069        10,227,081       $   0.27
                                                             ============        ==========       ========

<CAPTION>
                                                                        For the Year Ended 1997
                                                               Income             Shares         Per Share
<S>                                                          <C>                  <C>             <C>
Basic earnings per share:
  Income available to common shareholders                    $    739,135         8,834,493       $   0.08

Effect of dilutive security:
  Stock options                                                        --           675,144             --
                                                             ------------        ----------       --------

Diluted earnings per share                                   $    739,135         9,509,637       $   0.08
                                                             ============        ==========       ========
</TABLE>

      Options to purchase 0, 1,080,000 and 2,520,000 shares of common stock at
      prices ranging from $.7708 - $3.42 per share were outstanding in 1999,
      1998 and 1997 respectively, but were not included in the computation of
      diluted earnings per share because their effect would have been
      antidilutive.


                                      F-13

<PAGE>

10. COMMITMENTS AND CONTINGENCIES

a.    Bonus Plan - Bonuses under the Bonus Plan 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 Bonus Plan. For 1999, 1998
      and 1997, the Board of Directors, under the Bonus Plan, awarded the
      Chairman and Chief Executive Officer of the Company approximately
      $4,671,000, $557,000 and $177,000, respectively. An additional amount of
      approximately $1,168,000, $139,000 and $35,000 under the Bonus Plan was
      granted to two employees, one of which was an officer, in 1999, 1998 and
      1997, respectively.

b.    Leases - The Company leases certain office and administrative facilities.
      Commitments for minimum rentals under noncancellable leases at the end of
      1999 are as follows:

      Year Ending
      December 31,                                 Amount

        2000                                    $  408,080
        2001                                       408,080
        2002                                       408,080
        2003                                       408,080
        2004                                       195,714
      Thereafter                                    44,024
                                                ----------
                                                $1,872,058
                                                ==========

      Rent expense for all operating leases charged against earnings amounted to
      $438,534, $421,024 and $445,136 in 1999, 1998 and 1997, respectively.

c.    Litigation - In September 1999, the Company was named as a defendant in a
      lawsuit filed in the United States District Court for the Southern
      District of California. Also named as defendants in this lawsuit are
      Nintendo of America Inc. and Wizards of the Coast, Inc. The lawsuit
      purportedly brought on behalf of a class of all persons who purchased a
      package of Pokemon trading cards, seeks to challenge longstanding
      practices in the trading card industry, including the practice of randomly
      inserting premium cards in packages of Pokemon cards. The lawsuit claims
      that these practices constitute illegal gambling activity in violation of
      California and federal law, including the Federal Racketeer Influenced and
      Corrupt Organization Act, and seeks an award of treble damages. The
      lawsuit has not specified the amount of damages sought. The Company
      believes that the practices which are subject of this lawsuit are well
      accepted business practices in the trading card industry and intends to
      defend the lawsuit vigorously. Additionally, the Company is indemnified by
      Wizards of the Coast under the Pokemon License Agreement. Except for this
      lawsuit, as of March 23, 2000, there were no other legal proceedings
      pending against the Company. The Company feels that the outcome will not
      have a material effect on their financial position or result of
      operations.


                                      F-14
<PAGE>

d.    Credit Facility -The Company's line of credit (the "Credit Facility") from
      Chase Bank expires in June 2000. Under the terms of the agreement, the
      Company may borrow from time to time for general working capital purposes
      up to $5,000,000. Any borrowings under the credit facility would be
      secured by the Company's receivables. The Credit Facility provides for
      interest at the bank's prime rate and an annual commitment fee of 1/2%. As
      of December 31, 1999 and 1998, the Company had no borrowings under the
      Credit Facility.

e.    Employment Contracts - The Company has employment agreements and
      arrangements with its executive officers and certain management personnel.
      The agreements generally continue until terminated by the executive or the
      Company, and provide for severance payments under certain circumstances.
      The majority of the agreements and arrangements provide the employees with
      certain additional rights after a Change of Control (as defined) of the
      Company occurs. The agreements include a covenant against competition with
      the Company, which extends for a period of time after termination for any
      reason. As of December 31, 1999, if all of the employees under contract
      were terminated by the Company without good cause or following a Change of
      Control, (as defined) under these contracts, the Company's liability would
      be approximately $5,224,000.

      These employment agreements provide for an aggregate minimum annual base
      compensation of $1,395,000 expiring on various dates through 2003.

f.    Master Toy Licensee- The master toy licensee ("Licensee") for Nintendo's
      Pokemon property and Nintendo of America Inc. ("Nintendo") have entered
      into a new agreement (the "Agreement") dated September 30, 1999 modifying
      certain terms of their Merchandise License Agreement, dated as of May 14,
      1998. Leisure Concepts, Incorporated, a wholly owned subsidiary of the
      Company, is Nintendo's exclusive Merchandise Licensing Agent for Pokemon
      outside Asia.

      Under the Agreement, the parties have agreed among other things that
      Licensee will pay a minimum royalty for the period starting January 1,
      2000 and ending December 31, 2001. This minimum guaranteed royalty is
      subject to reduction if certain conditions are not met. Because of the
      conditions and contingencies contained in the Agreement, the Company will
      only recognize revenue from the Agreement as royalties are earned and
      reported by Licensee. If all of the conditions under the Agreement are met
      and the full amount of the minimum guaranteed royalties are paid by
      Licensee, the Company's share would be approximately $30,000,000, which
      would be paid in two advances, one-half of which would be received on or
      before April 1, 2000 and one-half of which would be received on or before
      April 1, 2001.


                                      F-15
<PAGE>

11. SEGMENT AND RELATED INFORMATION

      The Company applies Statement of Financial Accounting Standards No. 131
      ("SFAS No. 131"), "Disclosures About Segments of an Enterprise and Related
      Information". The Company has three reportable segments; Licensing, Media
      Buying Planning and Television Distribution and Television and Film
      Production.

      The accounting policies of the segments are the same as those described in
      the summary of significant accounting policies. The Company does not have
      any inter-segment sales or transfers.

      The Company's reportable segments are strategic business units which,
      while managed separately, work together as a vertically integrated
      Entertainment Company.

      The Company's headquarters and major sales office are located in the
      United States, with one sales office located in the United Kingdom.
      Substantially all consolidated revenue and assets are derived and held
      within the United States operations.

      Financial information by business segments follows:

<TABLE>
<CAPTION>
                                                             MEDIA &               TV & FILM
                                     LICENSING           TV DISTRIBUTION           PRODUCTION               TOTAL
                                     ---------           ---------------           ----------               -----
<S>                                <C>                     <C>                    <C>                   <C>
1999
  Revenues                         $ 49,892,732            $ 3,111,305            $ 7,478,332           $ 60,482,369
  Amortization                               --                     --              3,887,350              3,887,350
  Segment Profit                     38,613,609                234,809              2,423,008             41,271,426
  Segment Assets                    110,752,722              5,132,882             11,218,043            127,103,647
  Interest Income                       959,589                200,206                      2              1,159,797

1998
  Revenues                          $ 8,837,224            $ 4,328,808            $ 1,601,397           $ 14,767,429
  Amortization                               --                105,179              2,597,065              2,702,244
  Segment Profit                      4,825,136              1,158,319             (1,268,386)             4,715,069
  Segment Assets                     14,213,786             17,290,624              3,456,745             34,961,155
  Interest Income                       169,640                166,092                     39                335,771

1997
  Revenues                          $ 3,924,609            $ 4,969,519            $ 1,222,672           $ 10,116,800
  Amortization                               --                     --              1,634,762              1,634,762
  Segment Profit                        736,463              1,604,158               (997,486)             1,343,135
  Segment Assets                      8,940,470             25,072,439              5,306,168             39,319,077
  Interest Income                        31,795                 39,046                     73                 70,914
</TABLE>

                                     ******

                                      F-16