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|UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q

                    |X|     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE           SECURITIES EXCHANGE ACT OF 1934
                    

                    For the quarterly period ended March 31, 2009OR




                    |   |      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE            SECURITIES EXCHANGE ACT OF 1934
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For the transition period from _____________ to _____________
|-------------------------------------------------------------

|Commission file number 0-7843
|-----------------------------



|4Kids Entertainment, Inc.
                    (Exact name of registrant as specified in its charter)
|----------------------------------------------------------------------------------------------------

|New York
                    (State or other jurisdiction of
                    incorporation or organization) | 13-2691380
                    (I.R.S. Employer
                    Identification No.)
|--------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------

|1414 Avenue of the Americas
                    New York, New York 10019
                    (212) 758-7666
                    (Address, including zip code, and telephone number, including area code,
                    of registrant’s principal executive offices)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 such filing requirements for the past
                    90 days. Yes |X|    No |_|
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



Large accelerated filer ___

                    Accelerated filer X

                    Non-accelerated filer ___

                    Smaller reporting company ___


|(Do not check if a smaller reporting company)

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

                    As of May 8, 2009, the number of shares outstanding of the registrant’s common stock, par value $.01 per share was 13,227,019.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4Kids Entertainment,Inc. and Subsidiaries  Table of Contents  Page #Part IFINANCIAL INFORMATIONItem 1.
        
        Financial StatementsConsolidated Balance Sheets as of  March 31, 2009  (Unaudited) and December 31, 2008
        
        2Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2009 and 2008
        
        3Consolidated Statements of  Changes in Equity and Comprehensive Loss for the three months ended March 31, 2009 (Unaudited) and the year ended December 31, 2008
        
        4Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2009 and 2008
        
        5Notes to Consolidated Financial Statements (Unaudited)
        
        6Item 2.
        
        Managements Discussion and Analysis of Financial Condition and Results of Operations
        
        24Item 3.
        
        Quantitative and Qualitative Disclosures about Market Risk
        
        34Item 4.
        
        Controls and Procedures
        
        34Part IIOTHER INFORMATIONItem 1.
        
        Legal Proceedings
        
        35Item 1A
        
        Risk Factors
        
        35Item 6.
        
        Exhibits
        
        36Signatures
        
        37
          
  Part I  FINANCIAL INFORMATION Item 1. Financial Statements. 4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2009 and DECEMBER 31, 2008 (In thousands of dollars, except share data)  ASSETS:
        
        2009
        
        2008Current assets:
        
        (Unaudited)Cash and cash equivalents
        
        $
        9,467
        
        $
        13,503Accounts receivable - net
        
        
        14,375
        
        
        22,818Inventories - net
        
        
        5,459
        
        
        4,241Prepaid income taxes
        
        
        100
        
        
        137Prepaid expenses and other current assets
        
        
        3,567
        
        
        1,876Deferred income taxes
        
        
        124
        
        
        127Total current assets
        
        
        33,092
        
        
        42,702Property and equipment - net
        
        
        3,951
        
        
        4,287Long term investments
        
        
        19,454
        
        
        21,617Accounts receivable - noncurrent, net
        
        
        187
        
        
        655Film and television costs - net
        
        
        17,079
        
        
        16,661Other assets - net (includes related party amounts of $7,304 and $6,638, respectively)
        
        
        16,861
        
        
        14,652Total assets
        
        $
        90,624
        
        $
        100,574LIABILITIES AND EQUITY:Current liabilities:Due to licensors
        
        $
        5,822
        
        $
        5,651Accounts payable and accrued expenses
        
        
        12,927
        
        
        16,202Deferred revenue
        
        
        2,696
        
        
        3,270Total current liabilities
        
        
        21,445
        
        
        25,123Deferred rent
        
        
        419
        
        
        460Total liabilities
        
        
        21,864
        
        
        25,583Commitments and contingencies (Note 10)4Kids Entertainment, Inc. shareholders equityPreferred stock, $.01 par value - authorized, 3,000,000 shares; none issued
        
        
        
        
        
        Common stock, $.01 par value - authorized, 40,000,000 shares;
issued, 15,246,579 shares; outstanding 13,227,019 shares in both 2009 and 2008
        
        
        152
        
        
        152Additional paid-in capital
        
        
        65,107
        
        
        65,107Accumulated other comprehensive loss
        
        
        (19,578
        )
        
        (17,396
        )Retained earnings
        
        
        61,464
        
        
        63,504107,145
        
        
        111,367Less cost of 2,019,560 treasury shares in both 2009 and 2008
        
        
        36,376
        
        
        36,376Total shareholders equity of 4Kids Entertainment, Inc.
        
        
        70,769
        
        
        74,991Noncontrolling interests
        
        
        (2,009
        )
        
        Total equity
        
        
        68,760
        
        
        74,991Total liabilities and equity
        
        $
        90,624
        
        $
        100,574
   See notes to consolidated financial statements. 2   
  4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (In thousands of dollars, except share data)  Three Months EndedMarch 31,2009
        
        
        2008Net revenues:Service revenue
        $
        9,755
        
        $
        12,611Product revenue
        
        437
        
        
        2,428Total net revenues
        
        10,192
        
        
        15,039Costs and expenses:Selling, general and administrative
        
        11,799
        
        
        12,608Production service costs
        
        1,092
        
        
        1,545Cost of sales of trading cards
        
        502
        
        
        1,016Amortization of television and film costs
        
        1,191
        
        
        1,708Amortization of 4Kids TV broadcast fee
        
        
        
        
        5,203Total costs and expenses
        
        14,584
        
        
        22,080Loss from operations
        
        (4,392
        )
        
        (7,041
        )Interest income
        
        401
        
        
        670Impairment on investment securities
        
        (89
        )
        
        Total other income
        
        312
        
        
        670Loss before income taxes
        
        (4,080
        )
        
        (6,371
        )(Provision for) benefit from income taxes
        
        
        
        
        (28
        )Net loss
        
        (4,080
        )
        
        (6,399
        )Net loss attributable to noncontrolling interests
        
        2,040
        
        
        Net loss attributable to 4Kids Entertainment, Inc. (Note 11)
        $
        (2,040
        )
        $
        (6,399
        )Per share amounts:Basic loss per share attributable to 4Kids Entertainment Inc. common shareholders
        $
        (0.15
        )
        $
        (0.48
        )Diluted loss per share attributable to 4Kids Entertainment Inc. common shareholders
        $
        (0.15
        )
        $
        (0.48
        )Weighted average common sharesoutstanding - basic
        
        13,227,019
        
        
        13,226,618Weighted average common sharesoutstanding - diluted
        
        13,227,019
        
        
        13,226,618
   See notes to consolidated financial statements.  3   
  4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE LOSS THREE MONTHS ENDED MARCH 31, 2009 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 2008 (In thousands of dollars and shares)  4Kids Entertainment, Inc. ShareholdersCommon Stock
        Additional Paid-In Capital
        Retained Earnings
        Accumulated Other Comprehensive Loss
        Less Treasury Stock
        Total Shareholders Equity
        Non-controlling Interests
        Total EquityShares
        AmountBALANCE, DECEMBER 31, 2007
        15,100
        
        $
        151
        
        $
        63,679
        
        $
        100,323
        
        $
        (2,562
        )
        $
        (33,503
        )
        $
        128,088
        
        
        
        
        $
        128,088Issuance of common stock and stock options exercised
        147
        
        
        1
        
        
        1,428
        
        
        
        
        
        
        
        
        
        
        
        1,429
        
        
        
        
        
        1,429Acquisition of treasury stock, at cost
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (2,873
        )
        
        (2,873
        )
        
        
        
        
        (2,873
        )Comprehensive loss:Net loss
        
        
        
        
        
        
        
        
        
        (36,819
        )
        
        
        
        
        
        
        
        (36,819
        )
        
        
        
        
        (36,819
        )Translation adjustment
        
        
        
        
        
        
        
        
        
        
        
        
        (1,348
        )
        
        
        
        
        (1,348
        )
        
        
        
        
        (1,348
        )Unrealized loss on marketable securities
        
        
        
        
        
        
        
        
        
        
        
        
        (13,486
        )
        
        
        
        
        (13,486
        )
        
        
        
        
        (13,486
        )Total comprehensive loss
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (51,653
        )
        
        
        
        
        (51,653
        )BALANCE, DECEMBER 31, 2008
        15,247
        
        $
        152
        
        $
        65,107
        
        $
        63,504
        
        $
        (17,396
        )
        $
        (36,376
        )
        $
        74,991
        
        $
        
        
        $
        74,991Capital contribution from noncontrolling interests
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        31
        
        
        31Comprehensive loss:Net loss
        
        
        
        
        
        
        
        
        
        (2,040
        )
        
        
        
        
        
        
        
        (2,040
        )
        
        (2,040
        )
        
        (4,080
        )Translation adjustment
        
        
        
        
        
        
        
        
        
        
        
        
        (108
        )
        
        
        
        
        (108
        )
        
        
        
        
        (108
        )Unrealized loss on investment securities
        
        
        
        
        
        
        
        
        
        
        
        
        (2,074
        )
        
        
        
        
        (2,074
        )
        
        
        
        
        (2,074
        )Total comprehensive loss
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (4,222
        )
        
        (2,040
        )
        
        (6,262
        )BALANCE, MARCH 31, 2009
        15,247
        
        $
        152
        
        $
        65,107
        
        $
        61,464
        
        $
        (19,578
        )
        $
        (36,376
        )
        $
        70,769
        
        $
        (2,009
        )
        $
        68,760
     See notes to consolidated financial statements.          4   
  4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (In thousands of dollars)
 2009
        
        
        2008Cash flows from operating activities:Net loss
        $
        (4,080
        )
        $
        (6,399
        )Adjustments to reconcile net loss to net cashprovided by (used in) operating activities:Depreciation and amortization
        
        409
        
        
        357Amortization of television and film costs
        
        1,191
        
        
        1,708Amortization of 4Kids TV broadcast fee
        
        
        
        
        5,203Provision for doubtful accounts
        
        107
        
        
        216Impairment on investment securities
        
        89
        
        
        Changes in operating assets and liabilities:Inventory
        
        (1,218
        )
        
        361Accounts receivable
        
        8,764
        
        
        2,647Film and television costs
        
        (1,609
        )
        
        (1,632
        )Prepaid income taxes
        
        37
        
        
        287Prepaid 4Kids TV broadcast fee
        
        
        
        
        (5,266
        )Prepaid expenses and other current assets
        
        (1,694
        )
        
        1,114Other assets - net
        
        (2,243
        )
        
        (2,186
        )Due to licensors
        
        (319
        )
        
        711Accounts payable and accrued expenses
        
        (3,268
        )
        
        (498
        )Deferred revenue
        
        (574
        )
        
        (534
        )Deferred rent
        
        (41
        )
        
        (40
        )Net cash used in operating activities
        
        (4,449
        )
        
        (3,951
        )Cash flows from investing activities:Proceeds from maturities of investments
        
        
        
        
        15,025Purchase of property and equipment
        
        (73
        )
        
        (338
        )Net cash (used in) provided by investing activities
        
        (73
        )
        
        14,687Cash flows from financing activities:Capital contribution from noncontrolling interests
        
        31
        
        
        Purchase of treasury shares
        
        
        
        
        (2,742
        )Net provided by (cash used) in financing activities
        
        31
        
        
        (2,742
        )Effect of exchange rate changes on cash and cash equivalents
        
        455
        
        
        4Net (decrease) increase in cash and cash equivalents
        
        (4,036
        )
        
        7,998Cash and cash equivalents, beginning of period
        
        13,503
        
        
        24,872Cash and cash equivalents, end of period
        $
        9,467
        
        $
        32,870Supplemental disclosure of cash flow information:Cash paid during period for Income Taxes
        $
        
        
        $
        37Supplemental schedule of non-cash investing and financing activitiesUnrealized loss on marketable securities included in other comprehensive loss
        $
        2,074
        
        $
        9,187
  See notes to consolidated financial statements.  5 
 4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands of dollars, except share and per share data)  1. DESCRIPTION OF BUSINESS  GeneralDevelopment and Narrative Description of Business- 4Kids Entertainment, Inc., together with the subsidiaries through which its businesses are conducted (the Company), is a diversified entertainment and media company specializing in the youth oriented market with operations in the following business segments: (i) Licensing; (ii) Advertising Media and Broadcast; (iii) Television and Film Production/Distribution; and (iv) Trading Card and Game Distribution. The Company was organized as a New York corporation in 1970.  Licensing- The Licensing business segment consists of the results of operations of the following wholly-owned subsidiaries of the Company: 4Kids Entertainment Licensing, Inc. (4Kids Licensing); 4Sight Licensing Solutions, Inc. (4Sight Licensing); 4Kids Entertainment International, Ltd. (4Kids International); and 4Kids Technology, Inc. (4Kids Technology). 4Kids Licensing is engaged in the business of licensing the merchandising rights to popular childrens television series, properties and product concepts (individually, the Property or collectively the Properties). 4Kids Licensing typically acts as exclusive merchandising agent in connection with the grant to third parties of licenses to manufacture and sell all types of merchandise, including toys, videogames, trading cards, apparel, housewares,
footwear, books and other published materials, based on such Properties. 4Sight Licensing is engaged in the business of licensing properties and product concepts to adults, teens and tweens.  4Sight Licensing focuses on brand building through licensing. 4Kids International, based in London, manages Properties represented by the Company in the United Kingdom and European marketplaces. 4Kids Technology develops ideas and concepts for licensing which integrate new and existing technologies with traditional game and toy play patterns.  Advertising Media and Broadcast- The Company, through a multi-year agreement with The CW Network, LLC (The CW), leases The CWs Saturday morning programming block (The CW4Kids) which broadcasts in most markets from 7am to 12pm for an initial term of five years beginning with The CW's 2008-2009 broadcast season.  The Company provides substantially all programming content to be broadcast on The CW4Kids.  4Kids Ad Sales, Inc. (4Kids Ad Sales), a wholly-owned subsidiary of the Company, retains a portion of the revenue from its sale of network advertising time for the five-hour time period.  The Company, through a multi-year agreement (the Fox Agreement) with Fox Broadcasting Corporation (Fox), leased Foxs Saturday morning programming block (4Kids TV) from 8am to 12pm eastern/pacific time (7am to 11am central time) which was terminated on December 31, 2008. The Company provided substantially all programming content to be broadcast on 4Kids TV and 4Kids Ad Sales retained all of the revenue from its sale of network advertising time for the four-hour programming block.  The Advertising Media and Broadcast segment also generates revenues from the sale of advertising on the Companys multiple websites.  These websites also showcase and promote The CW4Kids, as well as its many Properties.  Television and Film Production/Distribution- The Television and Film Production/Distribution business segment consists of the results of operations of the following wholly-owned subsidiaries of the Company:  4Kids Productions, Inc. (4Kids Productions); 4Kids Entertainment Music, Inc. (4Kids Music); and 4Kids Entertainment Home Video, Inc. (4Kids Home Video). 4Kids Productions produces and adapts animated and live-action television programs and theatrical motion pictures for distribution to the domestic and international television, home video and theatrical markets. 4Kids Music composes original music for incorporation into television programming produced by 4Kids Productions and markets and manages such music. 4Kids Home Video distributes home videos associated with television programming produced by 4Kids Productions.  Trading Card and Game Distribution- Through its wholly-owned subsidiary, 4Kids Digital Games, Inc. (4Kids Digital), the Company owns 55% of TC Digital Games LLC, a Delaware limited liability company (TC Digital) that produces, markets and distributes the Chaotic trading card game. In December 2006, 4Kids Digital acquired a 53% ownership interest in TC Digital and entered into TC Digitals operating agreement (the TCD Agreement) with Chaotic USA Digital Games LLC (CUSA LLC), a wholly-owned subsidiary of Chaotic USA Entertainment Group, Inc. (CUSA).   The TCD Agreement contains terms and conditions governing the operations of TC Digital, and entitles 4Kids Digital and CUSA to elect two managers to the entitys Management Committee with 4Kids Digital having the right to break
any dead-locks.  On December 18, 2007, 4Kids Digital purchased an additional 2% membership interest in TC Digital from CUSA increasing  6
  
 4Kids Digitals ownership percentage to 55%.  The consideration for the purchase of the additional membership interest was paid through the settlement of certain capital contributions required to be made by CUSA to TC Websites LLC, a Delaware limited liability company and subsidiary of the Company (TC Websites) under TC Websites operating agreement (the TCW Agreement).  Through its wholly-owned subsidiary, 4Kids Websites, Inc. (4Kids Websites), the Company owns 55% of TC Websites, a company that owns and operateswww.chaoticgame.com, the companion website for the Chaotic trading card game which was launched as a public beta version on October 24, 2007. In December 2006, 4Kids Websites purchased a 50% membership interest in TC Websites from CUSA and entered into the TCW Agreement.  The TCW Agreement contains terms and conditions governing TC Websites operations and entitles 4Kids Websites and CUSA to elect two managers to its Management Committee.  On December 18, 2007, 4Kids Websites entered into an agreement pursuant to which it acquired an additional 5% ownership interest in TC Websites from CUSA, and the TCW Agreement was concurrently amended to provide 4Kids Websites with the right to
break any deadlocks on TC Websites Management Committee, including with respect to operational matters. The consideration for the purchase of the additional membership interest was paid through the settlement of certain capital contributions required to be made by CUSA to TC Websites under the TCW Agreement. Prior to the acquisition by 4Kids Websites of the additional 5% ownership interest and amendment of the TCW Agreement, the Company used the equity method to account for its investment in TC Websites, where it did not have control but had significant influence.  As a result of 4Kids Websites increased ownership and operational control, TC Websites is consolidated in the Companys financial statements, subject to a noncontrolling interest.  TC Digital and TC Websites are the exclusive licensees of certain patents covering the uploading of coded trading cards to a website where online game play and community activities occur. Thewww.chaoticgame.comwebsite provides full access to all of its content and is free of charge for all users.  No purchase of trading cards is necessary to play the online version where virtual playing decks are available to users who register on the website.  These two businesses enable the Company to offer traditional trading card game play with an online digital play experience. In addition, it is anticipated that TC Digital and TC Websites will diversify their product lines and will ultimately distribute and sell, and create websites for other trading card games.  Certain of the Companys executive officers have interests in CUSA, CUSA LLC and certain other entities with which TC Digital and TC Websites have engaged in transactions since their formation. Information regarding these relationships can be found in Note 9.  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Basis of Presentation- The consolidated financial statements, except for the December 31, 2008 consolidated balance sheet and the consolidated statement of changes in equity and comprehensive loss for the year ended December 31, 2008, are unaudited and should be read in conjunction with audited consolidated financial statements and notes thereto for the year ended December 31, 2008 as presented in our Annual Report on Form 10-K. All significant intercompany accounts and transactions have been eliminated.  In the opinion of management, the accompanying consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position of the Company as of March 31, 2009 and December 31, 2008, and the results of operations for the three months ended March 31, 2009 and 2008, and changes in
equity and comprehensive loss for the three months ended March 31, 2009 and the year ended December 31, 2008, and cash flows for the three months ended March 31, 2009 and 2008. Because of the inherent seasonality and changing trends of the toy, game, entertainment and advertising industries, operating results for the Company on a quarterly basis may not be indicative of operating results for the full year.  Revenue RecognitionMerchandise licensing revenues: Licensing revenues, net of licensor participations, are recognized when the underlying royalties from the sales of the related products are earned. The Company recognizes guaranteed royalties, net of licensor participations, at the time the arrangement becomes effective if the Company has no significant direct continuing involvement with the underlying Property or obligation to the licensee. Where the Company has significant continuing direct involvement with the underlying Property or obligation to the licensee, guaranteed minimum royalties, net of licensor participations, are recognized ratably over the term of the license or based on sales of the related products, if greater. Licensing advances and guaranteed payments collected but not yet earned by the
Company are classified as deferred revenue in the accompanying consolidated balance sheets.  Broadcast advertising revenues: Advertising revenues are recognized when the related commercials are aired and are recorded net of agency commissions and net of an appropriate reserve when advertising is sold together with a guaranteed audience delivery. Internet advertising revenues are recognized on the basis of impression views in the period the advertising is displayed.  7
  
  Episodic television series revenues: Television series initially produced for networks and first-run syndication are generally licensed to domestic and foreign markets concurrently or licensed to foreign markets with a one year lag from the domestic broadcast of the series. The length of the revenue cycle for episodic television varies depending on the number of seasons a series remains in active exploitation. Revenues arising from television license agreements, net of licensor participations, are recognized in the period that the films or episodic television series are available for telecast.  Production and adaptation costs charged to the licensors of television rights to Properties represented by the Company are included in net revenues and the corresponding costs are included in production service costs in the accompanying consolidated statements of operations. Production service costs included in net revenues amounted to $860 and $1,480 for the three months ended March 31, 2009 and 2008, respectively.  Home video revenues: Revenues from home video and DVD sales, net of a reserve for returns, are recognized, net of licensor participations, on the date that video and DVD units are shipped by the Companys distributor to wholesalers/retailers. Consistent with the practice in the home video industry, the Company estimates the reserve for returns based upon its review of historical returns rates and expected future performance.  Music revenues: Revenues from music sales, net of licensor participations, and net of a reserve for returns, are recognized on the date units are shipped by the Companys distributor to wholesalers/retailers as reported to the Company. In the case of musical performance revenues, the revenue is recognized when the musical recordings are broadcast and/or performed.  Trading card revenues: Emerging Issue Task Force (EITF) Issue No. 00-21 -Accounting for Revenue Arrangements with Multiple Deliverables, provides guidance on how and when to recognize revenues for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Revenue arrangements with multiple deliverables are required to be divided into separate units of accounting if the deliverables in the arrangement meet certain criteria.  Arrangement consideration must be allocated among the separate units of accounting based on their relative fair values.  The Company has determined that because its trading card game is provided with a web component, there is a multiple deliverable arrangement.  However, since no purchase of trading cards is necessary to access the
website and virtual cards are available free of charge to users who register on the website, the Company has determined that the selling price of the trading cards should be fully attributable to the cards.  Revenues from trading card sales, net of a reserve for returns and allowances, are recognized on the date cards are shipped by the Companys distributor to wholesalers/retailers.  Revenue generated from merchandise licensing, broadcast advertising, episodic television series, home video, and music are classified as service revenue on the consolidated statement of operations while revenue generated from the sale of trading cards is classified as product revenue.  Fair Value Measurements-The fair values of the Companys financial instruments reflect the estimates of amounts that would be received from selling an asset in an orderly transaction between market participants at the measurement date.  The fair value estimates presented in this report are based on information available to the Company as of March 31, 2009 and December 31, 2008.  The carrying values of cash and cash equivalents approximate fair value. The Company has estimated the fair value of its investment in auction rate securities (ARS) and other long-term investments using unobservable inputs at March 31, 2009. In accordance with Statement of Financial Accounting Standards (SFAS) No. 157,Fair Value Measurements(SFAS No. 157), the Company applies a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last of which is considered unobservable, that may be used to measure fair value. The three levels are the following:  
        Level 1 - Quoted prices in active markets for identical assets or liabilities.
  
        Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
  
        Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
   8
  
 Investments The Companys long-term investments principally consist of ARS, corporate bonds and preferred shares. ARS are generally rated BBB or better by one or more national rating agencies and have contractual maturities of up to 80 years. Of the aggregate principal amount of $46,930 in investment securities held by the Company as of March 31, 2009, 3% mature within the next 20 years, 21% mature within the next 30 years, 35% mature through 2087 and the remaining 65% have no maturity date.  The Company classifies these investments as available for sale, in accordance with the provisions of SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities.  The ARS that the Company invests in generally had interest reset dates that occurred every 7 or 35 days and despite the
long-term nature of their stated contractual maturity, the historical operation of the ARS market had given the Company the ability to quickly liquidate these securities at ongoing auctions every 35 days or less.  During 2007, liquidity issues began to affect the global credit and capital markets.  In addition, certain individual ARS experienced liquidity issues specific to such securities.  As a result, ARS, which historically have had a liquid market and had their interest rates reset periodically (e.g. monthly) through Dutch auctions, began to fail at auction.  These auction failures have caused ARS to become illiquid, which in turn has caused the fair market values of these securities to decline.  The ARS currently held by the Company are private placement debt securities with long-term nominal maturities and interest rates that typically reset monthly.  The Companys investments in ARS represent interests in debt obligations issued by banks and insurance companies that originally had at least an A credit rating at the time of purchase, including JP Morgan Chase, bond insurers and re-insurers such as MBIA, AMBAC, FGIC, FSA, RAM and Radian, and International Lease Finance Corporation, the aircraft leasing subsidiary of AIG. The collateral underlying these securities consists primarily of commercial paper, but also includes asset-backed and mortgage-backed securities, corporate debt, government holdings, money market funds and other ARS.  As of March 31, 2009, the Company held investment securities having an aggregate principal amount of $46,930.  The estimated fair market value of the investment securities held by the Company had declined by $27,476 ($3,993 during 2007, $21,320 during 2008, and $2,163 during 2009) to $19,454, based upon an analysis of the current market conditions of the Companys securities made by the Company in accordance with SFAS No. 157.  The Company concluded that $89 of the decline in 2009 in the fair value of the investment securities held by the Company were now other than temporarily impaired. The Companys determination that certain of its long-term investments were other than temporarily impaired was based upon the fact that certain of the Companys ARS ceased to pay interest according to their stated terms and that the underlying bond insurers of such securities elected to exercise their put
right against the trusts, thereby exchanging the investment grade collateral in the trust with preferred stock. Accordingly, during 2009, the Company recorded an additional $89 of impairment charges in non-operating expense related to the securities which had previously recorded an other than temporary impairment of $7,834 in 2008. In March 2009, the Company was notified that the underlying bond insurers of one of its ARS elected to exercise their put right against the trusts, thereby exchanging the investment grade collateral in the trust with preferred stock.  Based on the enhanced marketability of this security, the decline in the estimated fair value is considered to be temporarily impaired.  The Company continues to monitor the market for ARS and consider its impact (if any) on the fair value of its investments. If the current market conditions deteriorate further, the Company may be required to record additional impairment charges to non-operating expense in future periods.
Additionally, the Company recorded an unrealized loss of $2,074 during the first quarter of 2009 in addition to the unrealized loss of $17,479 it recorded in prior years, for a total loss of $19,553 over such periods.  As of May 8, 2009, none of the investment securities held by the Company as of March 31, 2009 had been redeemed.   Since the Company has the ability, and presently expects, to hold these investments until recovery of their face value, which may not be prior to the maturity of the applicable security (to the extent such security has a specified maturity date) and based on consideration of all such factors, the Company did not consider these investments to be other than temporarily impaired as such term is defined in the accounting literature as of the filing date. Additionally, the remaining investment securities held by the Company have continued to pay interest according to their stated terms, which the Company believes may create an incentive for the issuers to redeem
these securities once the current liquidity problems in the credit market substantially improve.  In November 2008, one of the Companys ARS experiencing liquidity problems converted to a corporate bond due to a provision in the trust stating that if liquidity ceased for an extended period of time the trust would dissolve and distribute the underlying assets of the trust, which were solely comprised of corporate bonds.  This corporate bond is currently paying interest and the Company does not consider this investment to be other than temporarily impaired.  The credit and capital markets, including the market for ARS, have remained illiquid, and as a result of this and other factors specific to certain investment securities, the Companys unrealized loss on its investment securities may subsequently increase. The Company estimates the fair values of the investment securities quarterly based upon consideration of such  9
  
 factors as: issuer and insurer credit rating; comparable market data, if available; current market conditions; the credit quality of the investment securities; the rate of interest received since the date the auctions began; yields of securities similar to the underlying investment securities; and, until September 2008, input from broker-dealers statements provided by the investment bank through which the Company held such securities.  These considerations are used to determine a range of values for each security from moderate to highly conservative.  The Company has based its evaluation on the mid-point of that range. Specifically, the Company considers the composition of the collateral supporting the investment securities and the default probabilities of the collateral underlying these securities in our overall valuation of each security.  The Company has also researched the secondary market, and
while such a market may be available, there is no guarantee that such a market will exist at any particular point in time.  Additionally, the Company looks at the probabilities of default, probabilities of successful auctions and probabilities of earning the maximum (failed auction) rate for each period.  Due to the sensitivity of the methodologies and considerations used, the Company continually re-evaluates the investment securities and although the valuation methodologies have remained consistent for each quarter in which these securities were valued, certain inputs may have changed.  The changes in these inputs primarily relate to the changes in the economic environment and the market for such securities.  Given the failed auctions, the Companys investment securities are currently illiquid.  Accordingly, the Company has classified $19,454 of its investment in ARS and the securities into which certain of the ARS have been exchanged, as non-current assets at March 31, 2009 on its balance sheet due to the fact that the Company believes that the liquidity of these securities is unlikely to be restored in a period less than twelve months from such date.  The Company believes that Lehman Brothers, Inc., the securities broker-dealer that purchased the ARS on behalf of the Company that have been classified as other than temporarily impaired based on discretion afforded to it, has violated its legal obligations to the Company.  As a result, the Company has taken various measures to obtain appropriate legal relief, including initiating an arbitration with the Financial Industry Regulatory Authority.  On September 15, 2008, Lehman Brothers Holdings, Inc., the parent company of Lehman Brothers, Inc., filed for bankruptcy.  On September 16, 2008, Barclays PLC announced that it had reached an agreement to purchase the assets of Lehman Brothers Holdings, Inc.s North American operations, including substantial assets of Lehman Brothers, Inc.  The Lehman-Barclays transaction was approved by the United States Bankruptcy Court for the Southern District of New York
on September 20, 2008.  On September 19, 2008, the Securities Investor Protection Corporation (SIPC) filed a proceeding, placing Lehman Brothers, Inc. in liquidation under the Securities Investor Protection Act (SIPA).  SIPC, pursuant to its authority under SIPA, has acted to facilitate the transfer of Lehman Brothers, Inc.s customer accounts (including the Companys accounts) to Barclays, PLC.  In view of the bankruptcy of Lehman Brothers Holdings, Inc. and the liquidation of Lehman Brothers, Inc., the Company is currently assessing what additional steps, if any, to take to pursue legal redress.  If uncertainties in the credit and capital markets continue or the Companys investments experience any rating downgrades on any investments in its portfolio or the value of such investments declines further, the Company may incur additional impairment charges to its investment portfolio, which could negatively affect the Companys financial condition, results of operations and cash flow.  As a result of the current market issues, the Companys surplus cash is invested solely in government securities with a maturity of 90 days or less.  In light of the current lack of liquidity affecting a significant portion of its portfolio of investment securities, based on the Companys projected cash flows, current cash and cash equivalents, and its overall cash position, the Company expects to have adequate liquidity to fund its day-to-day operations.  There is also a secondary market developing for some of the investment securities held by the Company, which might enable the Company to sell a portion of its investment securities at distressed prices should circumstances require the Company to access additional liquidity.  However, the illiquidity affecting a significant portion of the Companys portfolio of investment securities is impacting the Companys ability to make capital investments or expand its operations.  Film and Television Costs The Company accounts for its film and television costs pursuant to American Institute of Certified Public Accountants (AICPA) Statement of Position No. 00-2,Accounting by Producers or Distributors of Films. The cost of production for television programming, including overhead, participations and talent residuals is capitalized and amortized using the individual-film-forecast method under which such costs are amortized for each television program in the ratio that revenue earned in the current period for such program bears to managements estimate of the ultimate revenues to be realized from all media and markets for such program. Management regularly reviews, and revises when necessary, its ultimate revenue estimates on a title-by-title basis, which may result in a change in
the rate of amortization applicable to such title and/or a write-down of the value of such title to estimated fair value. These revisions can result in significant quarter-to-quarter and year-to-year fluctuations in film write-downs and rates of amortization. If a total net loss is projected for a  10
  
 particular title, the associated film and television costs are written down to estimated fair value. All exploitation costs, including advertising and marketing costs are expensed as incurred. Television adaptation and production costs that are adapted and/or produced are stated at the lower of cost, less accumulated amortization, or fair value.  Translation of Foreign Currency-In accordance with SFAS No. 130,Reporting Comprehensive Income(SFAS No. 130), the Company classifies items as other comprehensive income by their nature in the financial statements and displays the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the consolidated balance sheet. The assets and liabilities of the Companys foreign subsidiary, 4Kids International have been recorded in their local currency and translated to U.S. dollars using period-end exchange rates. Income and expense items have been translated at the average rate of exchange prevailing during the period. Any adjustment resulting from translating the financial
statements of the foreign subsidiary is reflected as other comprehensive income, net of related tax. Comprehensive loss for the three months ended March 31, 2009 and 2008 was $6,262 and $15,582, respectively, which included translation adjustments of $108 and $4 for the respective periods.  Recently Issued Accounting Pronouncements-In November 2007, the Financial Accounting Standards Board (the FASB) issued SFAS No. 141R,Business Combinations(SFAS No. 141R), which continues to require that all business combinations be accounted for by applying the acquisition method. Under the acquisition method, the acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, and any contingent consideration and contractual contingencies, as a whole, at their fair value as of the acquisition date. Under SFAS No. 141R, all transaction costs are expensed as incurred. SFAS No. 141R rescinds EITF Issue No. 93-7 (EITF 93-7). Under EITF 93-7, the effect of any subsequent adjustments to uncertain tax positions were
generally applied to goodwill, except for post-acquisition interest on uncertain tax positions, which was recognized as an adjustment to income tax expense. Under SFAS No. 141R, all subsequent adjustments to these uncertain tax positions that otherwise would have impacted goodwill will be recognized in the income statement. SFAS No. 141R is currently effective and its adoption did not have an impact on the Companys consolidated financial position and results of operations.  In November 2007, the FASB issued SFAS No. 160,Accounting and Reporting of Noncontrolling Interest(SFAS No. 160). SFAS No. 160 requires that a noncontrolling interest (previously referred to as a minority interest) be separately reported in the equity section of the consolidated entitys balance sheet. SFAS No. 160 also established accounting and reporting standards for: (i) ownership interests in subsidiaries held by parties other than the parent, (ii) the amount of consolidated net income attributable to the parent and to the noncontrolling interest, (iii) changes in a parents ownership interest and (iv) the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 is currently effective and is included in the Companys consolidated financial position and results of operations, see
Note 11 for further detail.  In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities(SFAS No. 161) an amendment of FASB Statement No.133, Accounting for Derivative Instruments and Hedging Activities(SFAS No. 133).SFAS No. 161 requires companies to provide enhanced disclosures regarding derivative instruments and hedging activities in order to better convey the purpose of derivative use in terms of risk management. Disclosures are required on (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect a companys
financial position, financial performance, and cash flows. This Statement retains the same scope as SFAS No. 133 and is currently effective.  The adoption of SFAS No. 161 did not have an impact on the Companys consolidated financial position and results of operations.  In December 2007, the FASB ratified EITF Issue No. 07-1,Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property(EITF 07-1). The EITF concluded that a collaborative arrangement is one in which the participants are actively involved and are exposed to significant risks and rewards that depend on the ultimate commercial success of the endeavor. Revenues and costs incurred with third parties in connection with collaborative arrangements would be presented gross or net based on the criteria in EITF Issue No. 99-19,Reporting Revenue Gross as a Principal versus Net as an Agent, and other accounting literature. Payments to or from collaborators would be evaluated and presented based on the nature of the arrangement and its terms, the nature of the
entitys business, and whether those payments are within the scope of other accounting literature. The nature and purpose of collaborative arrangements are to be disclosed along with the accounting policies and the classification of significant financial statement amounts related to the arrangements. Activities in the arrangement conducted in a separate legal entity should be accounted for under other accounting literature; however required disclosure under EITF 07-1 applies to the entire collaborative agreement. This Issue is currently effective and its adoption did not have an impact on the Companys consolidated financial position and results of operations.  11
  
 In April 2009, the FASB issued FASB Staff Position (FSP) Issue No. FAS No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are not Orderly(FSP FAS No. 157-4). FSP FAS No. 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 and is effective in reporting periods ending after June 15, 2009. The Company is currently evaluating the impact that FSP FAS No. 157-4 will have on its consolidated financial position and results of operations.  In April 2009, the FASB issued FSP No. FAS No. 107-1 and APB No. 28-1,Interim Disclosures about Fair Value of Financial Instruments(FSP FAS No. 107-1 and APB No 28-1). FSP FAS No. 107-1 and APB No. 28-1 require disclosures about fair value of financial instruments for annual and interim reporting periods of publicly traded companies and are effective in reporting periods ending after June 15, 2009.  The Company is currently evaluating the impact that FSP FAS No. 107-1 and APB No. 28-1 will have on its consolidated financial position and results of operations.  In April 2009, the FASB issued FSP Issue No. FAS No. 115-2 and FAS No. 124-2,Recognition and Presentation of Other-Than Temporary Investments(FSP FAS No. 115-2 and 124-2). FSP FAS No. 115-2 and 124-2 amend the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP No. 115-2 and 124-2 are effective in reporting periods ending after June 15, 2009. The Company is currently evaluating the impact that FSP FAS No. 115-2 and 124-2 will have on its consolidated financial position and results of operations.  3.  FAIR VALUE OF FINANCIAL INSTRUMENTS  The carrying values and estimated fair values of the Companys financial instruments for the periods presented are as follows:  Estimated Fair Value MeasurementsCarryingValue
        
        Quoted
Pricesin
Active
Markets
(Level1)
        
        Significant
Other
Observable
Inputs
(Level2)
        
        Significant
Unobservable
Inputs
(Level3)March 31, 2009:Financial AssetsCash and cash equivalents
        
        $
        9,467
        
        $
        9,467
        
        $
        
        
        $
        Total short-term investments
        
        $
        9,467
        
        $
        9,467
        
        $
        
        
        
        Auction rate securities
        
        $
        16,808
        
        $
        
        
        $
        
        
        $
        16,808Corporate obligations
        
        
        2,095
        
        
        
        
        
        
        
        
        2,095Preferred shares
        
        
        551
        
        
        
        
        
        
        
        
        551Total long-term investments
        
        $
        19,454
        
        $
        
        
        $
        
        
        $
        19,454Total Financial Assets
        
        $
        28,921
        
        $
        9,467
        
        $
        
        
        $
        19,454December 31, 2008:Financial AssetsCash and cash equivalents
        
        $
        13,503
        
        $
        13,503
        
        $
        
        
        $
        Total short-term investments
        
        $
        13,503
        
        $
        13,503
        
        $
        
        
        
        Auction rate securities
        
        $
        18,871
        
        $
        
        
        $
        
        
        $
        18,871Corporate obligations
        
        
        2,430
        
        
        
        
        
        
        
        
        2,430Preferred shares
        
        
        316
        
        
        
        
        
        
        
        
        316Total long-term investments
        
        $
        21,617
        
        $
        
        
        $
        
        
        $
        21,617Total Financial Assets
        
        $
        35,120
        
        $
        13,503
        
        $
        
        
        $
        21,617
  Level 1- The Companys Level 1 assets consist of cash, U.S. Treasury securities with original maturities of three months or less and market quoted corporate obligations.  12
  
 Level 2 - At March 31, 2009 and December 31, 2008, the Company had no investments which were considered to be Level 2 assets.  Level 3  The Companys Level 3 assets consist of the Companys investment in ARS, corporate obligations, and preferred shares. The recent uncertainties in the credit markets have prevented the Company and other investors from liquidating their holdings of these securities for the three months ended March 31, 2009 and the year ended December 31, 2008, because the amount of securities submitted for sale has exceeded the amount of purchase orders.  The carrying value of the Companys investments in its Level 3 assets, as of March 31, 2009 and December 31, 2008, represents the Companys best estimate of the fair value of these investments based on currently available information. The Company estimates the fair values of the investment securities quarterly based upon consideration of such factors as: issuer and insurer credit rating; comparable market data, if available; current market conditions; the credit quality of the investment securities; the rate of interest received since the date the auctions began; yields of securities similar to the underlying investment securities; and, until September 2008, broker-dealers statements provided by the investment bank through which the Company held such securities.  These considerations are used to determine a range of values for each security from moderate to highly conservative.  The Company
has based its evaluation on the mid-point of that range. Specifically, the Company considered the composition of the collateral supporting the investment securities and the default probabilities of the collateral underlying the ARS in its overall valuation of each security.  The Company has also researched the secondary market, and while such a market may be available, there is no guarantee that such a market will exist at any particular point in time.  Additionally, the Company looked at the probabilities of default, probabilities of successful auctions and probabilities of earning the maximum (failed auction) rate for each period.  If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, the Company may be required to further adjust the carrying value of its investment securities through additional devaluations.  The table below provides a summary of changes in fair value for the Companys investments:  March 31, 2009Amortized Cost
        
        Unrealized Loss
        
        Estimated
Fair ValueLong-term investments:Auction-Rate securities
        
        
        $28,680
        
        $(11,872
        )
        
        $16,808Corporate obligations
        
        
        5,400
        
        (3,305
        )
        
        2,095Preferred shares
        
        
        12,850
        
        (12,299
        )
        
        551Total long-term investments
        
        
        $46,930
        
        $(27,476
        )
        
        $19,454December 31, 2008Amortized Cost
        
        Unrealized Loss
        
        
        Estimated
Fair ValueLong-term investments:Auction-Rate securities
        
        
        $33,380
        
        $(14,509
        )
        
        $18,871Corporate obligations
        
        
        5,400
        
        (2,970
        )
        
        2,430Preferred shares
        
        
        8,150
        
        (7,834
        )
        
        316Total long-term investments
        
        
        $46,930
        
        $(25,313
        )
        
        $21,617
  The following table presents additional information about assets measured at fair value using Level 3 inputs for the three months ended March 31, 2009:  Long-TermAuction Rate Securities
        
        
        Corporate Bonds
        
        Preferred Shares
        
        TotalBalance as of January 1, 2009
        $
        18,871
        
        $
        2,430
        $
        316
        $
        21,617Unrealized loss  other than temporarily impaired
        
        (281
        )
        
        (335
        )
        (1,458
        )
        (2,074
        )Unrealized loss   impaired
        
        
        
        
        
        
        (89
        )
        (89
        )Converted to preferred shares
        
        (1,782
        )
        
        
        
        1,782
        
        Balance as of March 31, 2009
        $
        16,808
        
        $
        2,095
        $
        551
        $
        19,454
   13
  
  4. STOCK-BASED EMPLOYEE COMPENSATION  The Company has stock-based compensation plans for employees and non-employee members of the Board of Directors. The plans provide for discretionary grants of stock options, shares of restricted stock, and other stock-based awards. The plans are administered by the Compensation Committee of the Board of Directors, consisting of non-employee directors.  Effective January 1, 2006, the Company adopted SFAS No. 123-R (revised 2004),Share-Based Payments (SFAS No. 123-R), utilizing the modified prospective method whereby prior periods are not restated for comparability. SFAS No. 123-R requires recognition of stock-based compensation expense in the statement of operations over the vesting period based on the fair value of the award at the grant date. The Company did not grant any stock options during the three months ended March 31, 2009 and at January 1, 2006, all of the Companys outstanding options were fully vested. Consequently, the adoption of this pronouncement did not have a material effect on the Companys consolidated financial position or results of operations.  The following table summarizes activity under our stock option plans for the three months ended March 31, 2009:  Shares under
Options
(In thousands)
        
        WeightedAverageExercisePrice
        
        Remaining
Contractual
Life
(in years)
        
        AggregateIntrinsicValueOutstanding at beginning of period
        
        
        1,301
        
        $
        20.76Granted
        
        
        
        
        
        Exercised
        
        
        
        
        
        Forfeited
        
        
        (36
        )
        
        21.52Outstanding at end of period
        
        
        1,265
        
        $
        20.74
        
        
        1.00
        
        $
        Exercisable at end of period
        
        
        1,265
        
        $
        20.74
        
        
        1.00
        
        $
        
  The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing price of the Companys common stock on the date of determination for those awards that have an exercise price currently below the closing price.  As of March 31, 2009, there were no options outstanding to purchase shares with an exercise price below the quoted price of its common stock.  During the three months ended March 31, 2009 and 2008, the aggregate intrinsic value of options exercised under its stock option plans was $0, determined as of the date of exercise.  Restricted Stock Awards  The Company granted restricted stock awards of approximately 311,000 shares on May 23, 2008 under its 2007 long-term incentive compensation plan (LTICP), 162,000 shares on May 25, 2007 under its 2006 LTICP and 145,000 and 4,000 shares on May 23, 2006 and June 15, 2006, respectively, under its 2005 LTICP. The restricted stock awards were granted to certain employees, including officers and members of the Board of Directors, at grant prices of $7.85, $16.79, $16.52 and $15.78 (in each case, the average of the high and low stock price from the previous day of trading) for the May 23, 2008, May 25, 2007, the May 23, 2006 and the June 15, 2006 grants, respectively.  The restricted stock awards vest annually over a period of three years from the date of grant for the awards made under the 2007 LTICP and over a period of four years for the awards made under the 2006 and 2005 LTICPs, with accelerated
vesting upon a change of control of the Company (as defined in the applicable plan). During the restriction period, award holders do not have the rights of stockholders and cannot transfer ownership. Additionally, nonvested shares of award holders are subject to forfeiture. These awards are forfeited and revert to the Company in the event of employment termination, except in the case of death, disability, retirement or other specified events.      14
  
 A summary of restricted stock award activity under the Companys LTICPs as of March 31, 2009 and changes during the three months then ended is presented as follows:  Number of Shares
(in thousands)
        
        Weighted- Average Grant Date Fair ValueOutstanding at January 1, 2009
        
        
        465
        
        $
        11.11Granted
        
        
        
        
        
        Vested
        
        
        
        
        
        Forfeited
        
        
        (2
        )
        
        7.85Outstanding at March 31, 2009
        
        
        463
        
        $
        11.13
  During the three months ended March 31, 2009 and 2008, the Company recognized $462 and $298, respectively, of compensation costs related to the LTICPs.  Additionally, as of March 31, 2009, there was approximately $1,633, $1,322 and $584 of unrecognized compensation cost related to restricted stock awards granted under the Companys 2007, 2006 and 2005 LTICPs, respectively.  The cost is expected to be recognized over a remaining weighted-average period of 2.2, 2.2 and 1.1 years under the 2007, 2006 and 2005 LTICPs, respectively.  There were no shares of restricted stock that vested during the three months ended March 31, 2009.  Availability for Future Issuance -As of March 31, 2009, (i) options to purchase approximately 1,265,000 shares of the Companys common stock were available for future issuance under the Companys stock option plans and (ii) options to purchase a maximum of approximately 1,007,000 shares of the Companys common stock were available for future issuance under the Companys LTICPs, reduced by four shares for each share of restricted stock awarded under the 2006 and 2005 LTICPs, under which an aggregate of 89,000 shares of the 1,007,000 total shares were available for issuance as options, and reduced by two shares for each share of restricted stock awarded under the 2008 and 2007 LTICPs, under which an aggregate of 918,000 of the 1,007,000 total shares were available for issuance as options.  5. DEFERRED REVENUE  Music- In July 2002, 4Kids Music granted a right to receive a 50% interest in the Companys net share of music revenues from currently existing music produced by the Company for television programs produced by the Company other than Pokémon (Current Music Assets) to an unaffiliated third party in an arms length transaction for $3,000. Further, the Company agreed to grant a right to receive a 50% interest in the Companys net share of music revenues from future music to be produced by the Company for its television programs (excluding Pokémon) (Future Music Assets) to the same third party for $2,000. In consideration of the grant of Future Music Assets, the Company received $750 in June 2003, $750 in June 2004 and $500 in June 2005.  The Company has deferred all amounts received under the contract, and recognizes revenue as the Current Music Assets and Future Music Assets generate revenue over the contract term.  The Company expects and continues to produce additional new music which, based on the success of the administrative service, continues to supply the unaffiliated third party with this content. Since the Company continues to deliver more than the amount of music required to be delivered under the Music Agreement, there is no way to appropriately record the fair value of the future amounts to be delivered.  Based on EITF 00-21, the Companys inability to fair value the future portion of the music deliverables results in the entire amount recorded as deferred revenue.  The most appropriate and systematic method of accounting for this revenue relating to the deferred portion would be to reduce this deferred amount dollar for
dollar based on the actual music earnings of the Company.  Pursuant to the above, the Company recognized revenues of $107 and $90 for the three months ended March 31, 2009 and 2008, respectively.  The Company has included $1,253 and $1,360 as deferred revenue on the accompanying consolidated balance sheets as of March 31, 2009 and December 31, 2008, respectively.  Home Video- At various dates since May 2002, 4Kids Home Video entered into various agreements with an unaffiliated third party home video distributor (the Video Distributor) pursuant to which 4Kids Home Video provides ongoing advertising, marketing and promotional services with respect to certain home video titles that are owned or controlled by the Company and which are distributed by the Video Distributor. The Video Distributor has paid the Company cumulative advances of $4,119 against 4Kids Home Videos share of the distribution and service fee proceeds to be realized by 4Kids Home Video from such titles. Pursuant to the above, the Company recognized revenue of $100 and $171 for the three months ended March 31, 2009 and 2008, respectively. The Company has included $111 and $211 as deferred revenue on the accompanying consolidated balance sheets as of March 31,
2009 and December 31, 2008, respectively.  15
  
 Other Agreements- In addition, the Company entered into other agreements for various Properties and advertising time on 4Kids TV in which the Company has received certain advances and/or minimum guarantees. As of March 31, 2009 and December 31, 2008, the unearned portion of these advances and guaranteed payments was $1,332 and $1,699, respectively, and is included in deferred revenue on the accompanying consolidated balance sheets.  6. INCOME TAXES  The benefit from (provision for) income taxes consisted of the following:  Three Months EndedMarch 31,2009
        
        2008Current
        
        $
        
        
        $
        2,352Deferred
        
        
        2,695
        
        
        (70
        )$
        2,695
        
        $
        2,282Less: Valuation allowance
        
        
        (2,695
        )
        
        (2,310
        )Total
        
        $
        
        
        $
        (28
        )
  The Company adopted the provisions of the FASBs Interpretation No. 48,Accounting for Uncertainty in Income Taxes  an interpretation of FAS Statement No. 109(FIN 48), effective January 1, 2007.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS No. 109,Accounting for Income Taxes.FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on the derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption of this interpretation did not have a material effect on the
Companys consolidated financial position or results of operations.  The Company and its wholly-owned subsidiaries file income tax returns in the United States and in the United Kingdom. The Company is no longer subject to examinations by income tax authorities in most jurisdictions for years prior to 2004.  The Companys 2006 U.S. Federal Income Tax Return is currently under examination by the Internal Revenue Service.  7. EARNINGS PER SHARE  The Company applies 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 months ended March 31, 2009 and 2008:  Three Months EndedMarch 31, 2009
        
        Net Loss
        
        Weighted Average Shares
        
        Per ShareBasic loss per share attributable to 4Kids Entertainment Inc. common shareholders
        $
        (2,040
        )
        13,227,019
        $
        (0.15
        )Effect dilutive security  Stock options
        
        
        
        
        
        Diluted loss per share attributable to 4Kids Entertainment Inc. common shareholders
        $
        (2,040
        )
        13,227,019
        $
        (0.15
        )
  Three Months EndedMarch 31, 2008
        
        Net Loss
        
        Weighted Average Shares
        
        Per ShareBasic loss per share Loss available to common shareholders
        $
        (6,399
        )
        13,226,618
        $
        (0.48
        )Effect dilutive security  Stock options
        
        
        
        
        
        Diluted loss per share
        $
        (6,399
        )
        13,226,618
        $
        (0.48
        )
   16
  
  For the three months ended March 31, 2009 and 2008, 1,265,000 and 1,460,425 shares, respectively, attributable to the exercise of outstanding options, were excluded from the calculation of diluted EPS because the effect was antidilutive.  8. LEGAL PROCEEDINGS  The Company, from time to time, is involved in litigation arising in the ordinary course of its business. The Company does not believe that such litigation to which the Company or any subsidiary of the Company is a party or of which any of their Properties is the subject will, individually or in the aggregate, have a material adverse affect on the Companys financial position or the results of its operations.  9. RELATED PARTY TRANSACTIONS  National Law Enforcement and Firefighters Childrens Foundation- The Companys Chairman and Chief Executive Officer is the founder and President of The National Law Enforcement and Firefighters Childrens Foundation (the Foundation). The Foundation is a not-for-profit organization dedicated to helping the children of law enforcement and firefighting personnel and working with law enforcement and firefighting organizations to provide all children with valuable social and life skill programs. The Company contributed approximately $0 and $31 to the Foundation for the three months ended March 31, 2009 and 2008, respectively.  Chaotic USA Entertainment Group, Inc. (CUSA)- On December 11, 2006, 4Kids Digital and CUSA LLC, entered into the TCD Agreement with respect to the operation of TC Digital as a joint venture, with 4Kids Digital owning 53% of TC Digitals membership interests and CUSA LLC owning 47% of TC Digitals membership interests.  On December 18, 2007, 4Kids Digital purchased an additional 2% membership interest in TC Digital from CUSA LLC increasing 4Kids Digitals ownership percentage to 55%. Pursuant to the provisions of SFAS No. 160 (see Note 11), TC Digital is treated as a consolidated subsidiary of the Company as a result of its majority ownership in TC Digital and its right to break any dead-locks within the TC Digital Management Committee. Bryan Gannon (Gannon), President and Chief Executive Officer of CUSA and John Milito (Milito),
Executive Vice President and Chief Operating Officer of CUSA, each own an interest of approximately 32% in CUSA. Additionally, on December 11, 2006, Gannon and Milito became officers of TC Digital.  As of March 31, 2009, the Company has entered into the following transactions with CUSA and CUSA LLC, or parties related to Gannon and Milito that are summarized below:  °
        Employment Agreements On December 11, 2006, TC Digital entered into employment agreements through December 31, 2009, with Gannon, to serve as its President and Chief Executive Officer and Milito, to serve as its Executive Vice President. Under the terms of the employment agreements, each of Gannon and Milito will receive an annual base salary of $350 and are eligible to receive additional bonuses at the sole discretion of TC Digitals Management Committee, on which they serve with minority voting rights. As of March 31, 2009, no bonus had been paid with respect to the employment agreements.
  °
        Chaotic Property Representation Agreement On December 11, 2006, 4Kids Licensing, CUSA and Apex Marketing, Inc. (Apex), a corporation in which Gannon holds 60% of the outstanding capital stock and Milito owns 39% of the outstanding capital stock, entered into an amended and restated Chaotic Property Representation Agreement (CPRA) replacing the original Chaotic Property Representation Agreement entered into by the parties in April 2005. Under the terms of the CPRA, 4Kids Licensing is granted exclusive television broadcast and production, merchandising licensing, and home video rights to the Chaotic Property worldwide in perpetuity, subject to certain limited exceptions. Under the terms of the CPRA, all Chaotic related income less approved
merchandising and other expenses shall be distributed 50% to the Company and 50% to CUSA and Apex, excluding trading card royalties which are distributed 55% to 4Kids Digital and 45% to CUSA. Additionally, all approved production expenses for television episodes based on the Chaotic property are allocated 50% to 4Kids Licensing and 50% to CUSA and Apex. As of March 31, 2009 and 2008, there were no distributions and approximately $7,604 and $4,914, respectively, of production, merchandising and other general expenses were owed to 4Kids Licensing by CUSA and Apex, collectively.
  °
        Patent License Agreements On December 11, 2006, TC Digital and TC Websites each entered into an agreement (the Patent License Agreements) with Cornerstone Patent Technologies, LLC (Cornerstone), a limited liability company, in which Gannon and Milito each hold a 25% membership interest. Pursuant to the Patent License Agreements, TC Digital and TC Websites obtained exclusive licenses (subject to certain exceptions) to use certain
  17
  
 patent rights in connection with Chaotic and other trading card games which are uploaded to websites owned and operated by each such entity. Additionally, each of TC Digital and TC Websites agreed to pay Cornerstone a royalty of 1.5% of the Manufacturers Suggested Retail Price for the sale of trading cards, which amounted to $0 and $64 for each such entity for the three months ended March 31, 2009 and 2008, respectively.  On September 10, 2007, the Company purchased a 25% interest in such patents from Cornerstone for $750.  During the three months ended March 31, 2009 and 2008, the Company earned royalties of $0 and $42, respectively, associated with its portion of the patents relating to the sales of Chaotic trading cards which is eliminated in the Companys consolidated financial statements.  °
        TCD Agreement Under the terms of the TCD Agreement, TC Digital is obligated to pay the following fees and/or royalties to: (i) 4Kids Digital equal to 3% of TC Digitals gross revenues up to $350 per year for management services performed; (ii) 4Kids Digital and CUSA equal to 3% of net sales of each pack of trading cards sold; and  (iii) the Company equal to (x) 10% of the net sales of Chaotic trading cards and (y) an additional 1% of net sales of Chaotic trading cards above $50 million during a calendar year.  The Company acquired its rights to receive royalties of 10% in respect to net sales of Chaotic trading cards under the TCD Agreement through purchases from Dracco Company Ltd. (Dracco) of a 5% royalty stream on October 17, 2007, a 1%
royalty stream, previously allocated to CUSA from Dracco, on December 18, 2007, a 4% royalty stream on March 17, 2008 in exchange for one-time payments of $2,250, $450 and $1,100, respectively.  The consideration for the purchase of the 1% royalty stream for $450 was satisfied through the settlement of certain capital contributions required to be made by CUSA to TC Websites under the TCW Agreement.  During the three months ended March 31, 2009 and 2008, the Company earned royalties and or fees of $182 and $438, respectively, and CUSA earned royalties and/or fees of $45 and $76, respectively, relating to the sales of Chaotic trading cards under the TCD agreement.  The Companys portion of royalties and its management fee were eliminated in its consolidated financial statements.
  4Kids Digital is required under the terms of the TCD Agreement and the related loan and line of credit agreements to provide loans to TC Digital from time to time with a maturity date of December 31, 2010.   On September 15, 2008, 4Kids Digital and TC Digital agreed to reduce the interest payable on any such loans from 12% to 9% retroactive to December 11, 2006.  Any transaction resulting in the sale of more than 50% of TC Digitals membership interests or in the sale of all or substantially all of TC Digitals assets occurring while there is no debt owed from TC Digital to 4Kids Digital under the loan and line of credit or occurring prior to August 31, 2009 requires the consent of members of TC Digital holding two-thirds of its membership interests (as opposed to a majority of its membership interests).  °
        Chaotic Merchandise License Agreement On December 11, 2006, 4Kids Licensing, CUSA and TC Digital entered into a merchandise licensing agreement pursuant to which 4Kids Licensing and CUSA granted TC Digital exclusive rights to manufacture, produce and license Chaotic trading cards and related accessories through December 31, 2016. Under the terms of the agreement, TC Digital is obligated to pay a royalty on trading cards and all related accessories equal to (i) 4% of net sales to 4Kids Licensing while any amounts are outstanding to 4Kids Digital under the loan agreement or line of credit agreement or (ii) 8% of net sales of such cards and accessories, 55% of which will be paid to 4Kids Licensing and 45% of which will be paid to CUSA.  During the three months ended March 31, 2009 and
2008, no royalties had been earned under this agreement.
  °
        Operating Agreement of TC Websites LLC On December 11, 2006, 4Kids Websites entered into the TCW Agreement with CUSA to purchase a 50% membership interest in TC Websites, which was amended on December 18, 2007 in connection with 4Kids Websites acquisition of an additional 5% ownership interest in TC Websites.  On September 15, 2008, the terms of the TCW Agreement were further amended to eliminate TC Websites obligation to pay fees to each of the following: (i) 4Kids Websites equal to 3% of gross revenues of TC Websites with a minimum fee of $100 and a maximum fee of $200 per year for management services; (ii) Gannon equal to $100 for services as a senior executive; and (iii) Milito equal to $100 for services as a senior executive. Under the terms of the TCW Agreement, each member of TC
Websites is obligated to make capital contributions on a pro-rata basis to the extent determined by its Management Committee to be necessary to fund the operation of the Website. Any transaction resulting in the sale of more than 50% of TC Websites membership interests or in the sale of all or substantially all of TC Digitals assets requires the consent of members of TC Websites holding two-thirds of its membership interests (as opposed to a majority of its membership interests).
  °
        Right of First Negotiation AgreementOn December 11, 2006, the Company entered into a letter agreement with TC Digital providing TC Digital with a right of first negotiation for the license of trading card rights represented by the Company as merchandise licensing agent for any third party property and for any property developed and wholly
  18
  
 owned by the Company, through December 31, 2009, subject to the terms of the Companys obligations to third parties and to other limitations. If the Company and TC Digital are unable to reach an agreement with respect to trading card rights within a specified period, the Company will be free to license such trading card rights to third parties on terms no less favorable to the Company as the last offer made to TC Digital during such negotiations.  °
        Interest Purchase AgreementOn March 2, 2009, TC Digital, 4Kids Entertainment, Inc. (the "Company") and Home Focus Development Ltd. (Home Focus) entered into various agreements pursuant to which TC Digital and Home Focus agreed to form TC Digital International Ltd. (TDI), an Irish Private Corporation, for the purpose of distributing Chaotic trading cards principally in Europe and the Middle East (TDI Territory) and the Company agreed to purchase a 25% interest in TDI from Home Focus (the "TDI Interest"). As a result, TDI will be owned 50% by TC Digital, 25% by the Company and 25% by Home Focus.   As permitted by Accounting Research Bulletin No. 51,Consolidated Financial Statements(ARB No. 51) and SFAS No. 160, based on the Companys controlling interest and operational control, TDIs financial statements are included in the Companys consolidated financial statements for the three months ended March 31, 2009. The purchase price for the TDI Interest is an initial price amount of $1,575. The Company is obligated to pay up to an additional $1,000 to Home Focus (the "Conditional Payments") conditioned upon the Chaotic television series being telecast in the five largest European television markets (the United Kingdom, France, Germany, Spain and Italy) and/or TDI selling in excess of $10,000 of Chaotic trading cards. To date, the Company has entered into agreements for the telecast of the Chaotic television series in the UK, France and Germany, requiring the Company to make $600 of the Conditional Payments to Home Focus.
The Company has paid or will be paying Home Focus the consideration for the TDI interest as follows: the Company has paid $475 upon execution of the various agreements and has paid its first and second monthly installments of $125 on each of April 1, 2009 and May 1, 2009; the Company is required to continue to pay the monthly installments of $125 through September 1, 2009, and beginning on October 1, 2009, $150 per month until such time as the balance due has been paid.
  °
        TDI Shareholders AgreementOn March 2, 2009, TC Digital, the Company and Home Focus entered into the TDI Shareholders Agreement (TDI Agreement) under which the Board of Directors of TDI will consist of four directors. TC Digital has the right to elect two directors and the Company and Home Focus each have the right to elect one director. There are a number of extraordinary actions that require the consent by shareholders holding at least 80% of the voting stock of TDI in addition to approval of the Board of Directors. The TDI Agreement requires the shareholders to provide TDI with additional capital on a pro rata basis in exchange for additional equity. Under the TDI Agreement, TDI is required to pay or reimburse TC Digital for the costs
and expenses associated with the printing, advertising, marketing and promotion of the Chaotic trading card game in the TDI Territory. In addition, TDI is responsible for reimbursing TC Digital and TC Websites for the cost of translating the Chaotic trading cards and Chaotic website into the European languages and for bandwidth and equipment charges associated with making the Chaotic website operational in the TDI Territory. TDI is also required to pay TC Digital and TC Websites a design fee equal to 3% and 1.5%, respectively, of net sales of Chaotic trading cards in the TDI Territory.
  10. COMMITMENTS AND CONTINGENCIES  a.The CW Broadcast Agreement- On October 1, 2007, the Company and The CW entered into the CW Agreement, under which The CW granted to the Company the exclusive right to program The CW's Saturday morning children's programming block (The CW4Kids) that is broadcast in most markets between 7am and 12pm for an initial term of five years beginning with The CW's 2008-2009 broadcast season.  Under the CW Agreement, the Company is obligated to make quarterly minimum guaranteed payments which are subject to reduction under certain circumstances. The Company and The CW share advertising revenues earned from the sale of national commercial time during The CW4Kids with The CW's share to be applied against such quarterly guarantee payments.  In addition, The CW is entitled under the CW Agreement to participate in the Company's merchandising revenue from certain content broadcast on The CW4Kids, if such merchandising revenues exceed a certain annual minimum.  4Kids Ad Sales, Inc. manages and accounts for the ad revenue and costs associated with The CW4Kids.    19
  
 As of March 31, 2009, the minimum guaranteed payment obligations under the CW Agreement are as follows:  Year Ending
December 31,
        
        Amount2009
        $
        12,0002010
        
        15,0002011
        
        15,0002012
        
        15,0002013
        
        8,250Total
        $
        65,250
  The Companys ability to recover the cost of its minimum guarantee due to The CW will depend on the popularity of the television programs the Company broadcasts on The CW4Kids and the general market demand and pricing of advertising time for Saturday morning childrens broadcast television.  The popularity of the programs broadcast by the Company on The CW4Kids impacts audience levels and the level of the network advertising rates that the Company can charge.  Additionally, the success of the merchandise licensing programs and home video sales based on the television programs broadcast on The CW4Kids is dependent on consumer acceptance of such television programs.  If the Company estimates that it will be unable to generate sufficient future revenue from advertising sales, home video sales and merchandising licensing at levels to cover the cost of its contractual obligation to
The CW, the Company would record a charge to earnings to reflect an expected loss on The CW agreement in the period in which the factors negatively affecting the recoverability of the fee payable become known.  The Company will be required to make certain assumptions and estimates about future events such as advertising rates and audience viewing levels in evaluating its ability to recover the cost of the minimum guarantee payments.  Such estimates and assumptions are subject to market forces and factors beyond the control of the Company and are inherently subject to change.  There can be no assurance that the Company will be able to recover the full cost of the minimum guarantee payments and in the event it cannot, it would record a charge to earnings to reflect an expected loss on the minimum guarantee payments, which could be significant.  In addition to the minimum guarantee paid to The CW, the Company incurs additional costs to program each broadcast block and sell the related network advertising time.  These costs include direct programming costs to acquire, adapt and deliver programming for the broadcast during the weekly broadcast block as well as additional indirect expenses of advertising sales, promotion and administration.  b.  Fox Settlement Agreement-On November 9, 2008, the Company entered into an agreement with Fox to settle a pending litigation between the parties (the Settlement Agreement).  As of March 31, 2009, the Companys remaining financial obligation to Fox under the Settlement Agreement was approximately $1,900, of which $380 was paid on April 15, 2009 and remaining payments of $380 are scheduled to be paid on or before May 15, 2009, June 15, 2009, July 15, 2009 and August 15, 2009. In order to secure payment by the Company to Fox of the installments of this settlement amount, the Company granted Fox a security interest in the sale of the national advertising time sold by the Company during the fourth quarter of 2008 and the first quarter of 2009.  As of March 31, 2009, the remaining payment obligations under the Settlement Agreement are as follows:  Year Ending
December 31,
        
        Amount2009
        $
        1,903Total
        $
        1,903
  c.  Contractual Arrangements- During the normal course of business, the Company may enter into various agreements with third parties to license, acquire, distribute, broadcast, develop and/or promote Properties. The terms of these agreements will vary based on the services and/or Properties included within the agreements, as each of these agreements also have specific provisions relating to rights granted, territory and the term of the agreements.   20
  
 11. NONCONTROLLING INTEREST  Effective January 1, 2009, the Company adopted the provisions of SFAS No. 160.  SFAS No. 160 provides that all earnings and losses of a subsidiary should be attributed to the parent and the noncontrolling interests, even if the losses attributable to the noncontrolling interest result in a deficit noncontrolling interest balance.  Previously, any losses exceeding the noncontrolling interests investment in the subsidiaries were attributed to the parent.  Pursuant to SFAS No. 160, this provision was applied prospectively as of January 1, 2009.  The following table reflects the Companys net loss and loss per share had the Company not applied the provisions of SFAS No. 160 and remained under the previous requirements of ARB No. 51.  Three Months EndedMarch 31, 2009
        
        Net Loss
        
        Weighted Average Shares
        
        Per ShareNet loss
        $
        (4,080
        )Capital contribution from noncontrolling interest
        
        31Basic loss per common share
        $
        (4,049
        )
        13,227,019
        $
        (0.31
        )Effect dilutive security  Stock options
        
        
        
        
        
        Diluted loss per common share
        $
        (4,049
        )
        13,227,019
        $
        (0.31
        )
  a)TC Digital Games LLC -On December 11, 2006, 4Kids Digital and CUSA LLC entered into the TCD Agreement with respect to the operation of TC Digital as a joint venture, with 4Kids Digital owning 53% of TC Digitals membership interests and CUSA LLC owning 47% of TC Digitals membership interests. On December 18, 2007, 4Kids Digital purchased an additional 2% membership interest in TC Digital from CUSA for approximately $200, increasing 4Kids Digitals ownership percentage to 55%. The consideration for the purchase of this additional membership interest was paid through the settlement of capital contributions required to be made by CUSA to TC Websites under the TCW Agreement. TC Digital is treated as a consolidated subsidiary of the Company as a result of its majority ownership and its right to break any dead-locks within the TC Digital Management Committee.  Noncontrolling interest of membership units in TC Digital represents the noncontrolling  members proportionate share of the equity in the entity. Income is allocated to the membership units noncontrolling interest based on the ownership percentage throughout the year. As of March 31, 2009, the noncontrolling member continued to hold 45% of the equity in the entity.  The following table summarizes the noncontrolling interest loss attributable to the noncontrolling equity interest in TC Digital:  Three Months EndedMarch 31,2009
        
        2008TC Digital net loss before common units noncontrolling interest
        $
        (3,365
        )
        $
        (2,395
        )Noncontrolling interest percentage
        
        45
        %
        
        45
        %Noncontrolling interest loss allocation
        
        (1,514
        )
        
        (1,078
        )Less: Capital contribution from noncontrolling interest
        
        
        
        
        Loss attributable to noncontrolling interest
        $
        (1,514
        )
        $
        (1,078
        )
  As of March 31, 2009, the loss in excess of noncontrolling interest for TC Digital absorbed by 4Kids Digital in the aggregate since the formation of such entity is $9,207.  b)TC Websites LLC -Under the terms of the TCW Agreement, 4Kids Websites and CUSA are each entitled to elect two managers to TC Websites Management Committee.  On December 18, 2007, 4Kids Websites entered into an agreement with CUSA and TC Websites pursuant to which 4Kids acquired an additional 5% ownership interest in TC Websites from CUSA for approximately $650 and the TCW Agreement was amended to provide 4Kids Websites with the right to break any  21
  
 deadlocks on TC Websites' Management Committee with respect to operational matters.  The consideration for the purchase of this additional membership interest was paid through the settlement of certain capital contributions required to be made by CUSA to TC Websites under the TCW Agreement.  While the Company maintained a 50% ownership interest in TC Websites and did not control, but had significant influence, over such entity, the Companys investment in TC Websites had been accounted for using the equity method.  As permitted by ARB No. 51and SFAS No. 160, due to the increased membership interest and the additional operational control, TC Websites financial statements are now included in the Companys consolidated financial statements, pursuant to the provisions of SFAS No. 160, for the three months ended March 31, 2009 and 2008 and for the year ended December 31, 2008.  As of March 31, 2009, the noncontrolling member continued to hold 45% of the equity in the entity.  The following table summarizes the noncontrolling interest loss attributable to the noncontrolling equity interest in TC Websites:  Three Months EndedMarch 31,2009
        
        2008TC Websites net loss before common units Noncontrolling interest
        $
        (1,169
        )
        $
        (848
        )Noncontrolling percentage
        
        45
        %
        
        45
        %Noncontrolling loss allocation
        
        (526
        )
        
        (382
        )Less: Capital contribution from noncontrolling interest
        
        31
        
        
        Loss attributable to noncontrolling interest
        $
        (495
        )
        $
        (382
        )
  As of March 31, 2009, the loss in excess of noncontrolling interest for TC Websites absorbed by 4Kids Websites in the aggregate since the formation of such entity is $4,275.  12. SUBSEQUENT EVENTS  The Company has recently become aware that some of its larger distributors, who service mass market retailers, are migrating over to a point-of-sale (POS) model in response to the demands from the applicable retailers.  The Company has entered into an agreement subsequent to March 31, 2009 with one of its larger trading card distributors that reflects such a change.  Under the POS model, sales are recorded and paid for by the retailer and distributors once the sales are made to the ultimate consumer, while under the currently prevailing FOB shipping point model, sales are recorded and paid for upon shipment to distributor.  In anticipation of the migration to the POS model, certain of the Companys retailers and distributors have been significantly reducing inventory levels over the last several months. As the Companys distributors migrate to the POS model, the Companys recognition
of revenue in this segment will be modified accordingly.             22
  
 13. SEGMENT AND RELATED INFORMATION  The Company applies SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information.The Company has four reportable segments: (i) Licensing; (ii) Advertising Media and Broadcast; (iii) Television and Film Production/Distribution; and (iv) Trading Card and Game Distribution. The Companys reportable segments are strategic business units, which, while managed separately, work together as a vertically integrated entertainment company.  The Companys management regularly evaluates the performance of each segment based on its net revenues, profit and loss after all expenses, including amortized film and television costs and the 4Kids TV broadcast fee and interest income.  The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Companys Television and Film Production/Distribution segment records inter-segment revenues and the Companys Advertising Media and Broadcast segment records inter-segment charges related to the estimated acquisition costs of episodic television series for broadcast. In the opinion of management, such acquisition costs represent the estimated fair value which would have been incurred in a transaction between unaffiliated third parties on an arms-length basis. All inter-segment transactions have been eliminated in consolidation.  Licensing
        
        Advertising Media and Broadcast
        
        TV and Film Production/ Distribution
        
        Trading Card and Game Distribution
        
        TotalThree months Ended March 31,2009:Net revenues from external customers
        
        $
        5,596
        
        $
        842
        
        $
        3,317
        
        $
        437
        
        $
        10,192Amortization of television and film costs
        
        
        
        
        
        
        
        
        1,191
        
        
        
        
        
        1,191Interest income
        
        
        388
        
        
        13
        
        
        
        
        
        
        
        
        401Impairment on investment securities
        
        
        (89
        
        )
        
        
        
        
        
        
        
        
        
        (89
        )Segment profit (loss)
        
        
        1,595
        
        
        (970
        )
        
        (591
        )
        
        (4,114
        )
        
        (4,080
        )Segment assets
        
        
        50,315
        
        
        6,351
        
        
        23,709
        
        
        10,249
        
        
        90,6242008:Net revenues from external customers
        
        $
        5,573
        
        $
        3,568
        
        $
        3,470
        
        $
        2,428
        
        $
        15,039Amortization of television and film costs
        
        
        
        
        
        
        
        
        1,708
        
        
        
        
        
        1,708Amortization of 4Kids TV broadcast fee
        
        
        
        
        
        5,203
        
        
        
        
        
        
        
        
        5,203Interest income
        
        
        645
        
        
        19
        
        
        6
        
        
        
        
        
        670Segment profit (loss)
        
        
        1,735
        
        
        (3,572
        )
        
        (1,621
        )
        
        (2,913
        )
        
        (6,371
        )Segment assets
        
        
        87,780
        
        
        8,457
        
        
        25,218
        
        
        10,876
        
        
        132,331
  Through the Companys London office and network of international subagents, which allow it to license its Properties throughout the world, the Company recognized net merchandise licensing revenues from international sources, primarily in Europe, of $2,370 and $2,608 for the three months ended March 31, 2009 and 2008, respectively.  As of March 31, 2009 and 2008, net assets of the Companys London office were $4,972 and $6,669, respectively.  ******         23
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (In thousands of dollars unless otherwise specified)  Overview  The Companys operating results for the three months ended March 31, 2009 were negatively impacted by the global economic downturn which continued to gain increasing downward momentum throughout the first quarter of 2009, as well as a continuing decline in the popularity of our significant Properties.  As a result of the downturn, many retailers decided to reduce inventory on hand and the Companys Trading Card and Game Distribution segment was negatively impacted by the resulting cut back by the Companys distributors on their own orders placed with TC Digital.  The overall decrease in revenues was partially offset by decreased expenses relating to the operations of the Company.  General  The Company receives revenues from the following four business segments: (i) Licensing; (ii) Advertising, Media and Broadcasting; (iii) Television and Film Production/Distribution; and (iv) Trading Card and Game Distribution. The Company typically derives a substantial portion of its licensing revenues from a small number of Properties, which usually generate revenues for only a limited period of time. The Companys revenues are highly subject to changing trends in the toy, game and entertainment businesses, potentially causing dramatic increases and decreases from year to year due to the popularity of particular Properties. It is not possible to accurately predict the length of time a Property will be commercially successful and/or if a Property will be commercially successful at all. Popularity of Properties can vary from months to years. As a result, the Companys revenues from particular
Properties may fluctuate significantly between comparable periods.  The Companys licensing revenues have historically been derived primarily from the licensing of toy and game concepts. As a result, 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 resulting in increased royalties earned by the Company during such calendar quarters. The Company recognizes revenues from the sale of advertising time on the leased Saturday morning programming block from The CW (The CW4Kids), as more fully described in Note 2 of the notes to the Companys consolidated financial statements. The Companys advertising sales subsidiary, 4Kids Ad Sales, sells advertising time on The CW4Kids at higher rates in the fourth quarter due to the increased demand for commercial time by childrens
advertisers during the holiday season. As a result, much of the revenues of 4Kids Ad Sales are earned in the fourth quarter when the majority of toy and video game advertising occurs. As a result of the foregoing, the Company has historically experienced greater revenues during the second half of the year than during the first half of the year.  Critical Accounting Policies  The Companys accounting policies are fully described in Note 2 of the notes to the Companys consolidated financial statements. Below is a summary of the critical accounting policies, among others, that management believes involve significant judgments and estimates used in the preparation of its consolidated financial statements.  Accounting for Film and Television Costs-  In accordance with accounting principles generally accepted in the United States and industry practice, the Company amortizes the costs of production for film and television programming using the individual-film-forecast method under which such costs are amortized for each film or television program in the ratio that revenue earned in the current period for such title bears to managements estimate of the total revenues to be realized from all media and markets for such title. All exploitation costs, including advertising and marketing costs, are expensed as incurred.  Management regularly reviews, and revises when necessary, its total revenue estimates on a title-by-title basis, which may result in a change in the rate of amortization and/or a write-down of the film or television asset to estimated fair value. The Company determines the estimated fair value for individual film and television Properties based on the estimated future ultimate revenues and costs in accordance with Statement of Position  No. 00-2,Accounting by Producers and Distributors of Film(SOP No. 00-2).  Any revisions to ultimate revenues can result in significant quarter-to-quarter and year-to-year fluctuations in film and television write-downs and amortization. A typical film or television series recognizes a substantial portion of its ultimate revenues within the first three years of release. By then, the film or television series has been exploited in the domestic and international television (network and cable) and home video markets.  In addition, a significant portion of licensing revenues associated with the film or television series will have been realized.  A similar portion of the films or television series capitalized costs should be expected to be amortized accordingly, assuming the film or television series is profitable.  24
  
  The commercial potential of individual films and television programming varies dramatically, and is not directly correlated with production or acquisition costs. Therefore, it is difficult to predict or project the impact that individual films or television programming will have on the Companys results of operations.  However, the likelihood that the Company will report losses, particularly in the year of a television series initial release, is increased as the applicable accounting literature requires the immediate recognition of all of the production or acquisition costs (through increased amortization) in instances where it is estimated that the ultimate revenues of a film or television series will not recover those costs. Conversely, the profit from a film or television series must be deferred and recognized over the entire revenue stream generated by that film or television series. As a result,
significant fluctuations in reported income or loss can occur, particularly on a quarterly basis, depending on release schedules and broadcast dates, the timing of advertising campaigns and the relative performance of individual film or television series.  Other Estimates-   The Company estimates reserves for future returns of product in the trading card and home video markets as well as provisions for uncollectible receivables. In determining the estimate of trading card and home video product sales that will be returned, the Company performs an analysis that considers historical returns, changes in customer demand and current economic trends. Based on this information, a percentage of each sale is reserved provided that the customer has the right to return unsold trading card and home video inventory. The Company estimates the amount of uncollectible receivables for licensing and advertising by monitoring delinquent accounts and estimating a reserve based on contractual terms and other customer specific issues.  Revenue Recognition- The Companys revenue recognition policies for its four business segments are appropriate to the circumstances of each segments business.  See Note 2 of the Notes to the Companys consolidated financial statements for a discussion of these revenue recognition policies.  Managements Discussion and Analysis of Financial Condition and Results of Operations discusses the Companys consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company continually evaluates the policies and estimates that it uses to prepare its consolidated financial statements.  In general, managements estimates and assumptions are based on historical experience, known trends or events, information from third-party professionals and other factors that are believed
to be reasonable under the circumstances, the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.  Recently Issued Accounting Pronouncements-In November 2007, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) SFAS No. 141R,Business Combinations(SFAS No. 141R), which continues to require that all business combinations be accounted for by applying the acquisition method. Under the acquisition method, the acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, and any contingent consideration and contractual contingencies, as a whole, at their fair value as of the acquisition date. Under SFAS No. 141R, all transaction costs are expensed as incurred. SFAS No. 141R rescinds Emerging Issues Task Force (EITF) Issue No. 93-7 (EITF
93-7). Under EITF 93-7, the effect of any subsequent adjustments to uncertain tax positions were generally applied to goodwill, except for post-acquisition interest on uncertain tax positions, which was recognized as an adjustment to income tax expense. Under SFAS No. 141R, all subsequent adjustments to these uncertain tax positions that otherwise would have impacted goodwill will be recognized in the income statement. SFAS No. 141R is currently effective and its adoption did not have an impact on the Companys consolidated financial position and results of operations.  In November 2007, the FASB issued SFAS No. 160,Accounting and Reporting of Noncontrolling Interest(SFAS No. 160). SFAS No. 160 requires that a noncontrolling interest (previously referred to as a minority interest) be separately reported in the equity section of the consolidated entitys balance sheet. SFAS No. 160 also established accounting and reporting standards for: (i) ownership interests in subsidiaries held by parties other than the parent, (ii) the amount of consolidated net income attributable to the parent and to the noncontrolling interest, (iii) changes in a parents ownership interest and (iv) the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 is currently effective and is included in the Companys consolidated financial position and results of operations, see
Note 11 to the notes to the Companys consolidated financial statements for further detail.  In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities(SFAS No. 161) an amendment of FASB Statement No.133, Accounting for Derivative Instruments and Hedging  25
  
 Activities(SFAS No. 133).SFAS No. 161 requires companies to provide enhanced disclosures regarding derivative instruments and hedging activities in order to better convey the purpose of derivative use in terms of risk management. Disclosures are required on (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect a companys financial position, financial performance, and cash flows. This Statement retains the same scope as SFAS No. 133 and is currently effective.  The adoption of SFAS No. 161 did not have an impact on the Companys consolidated financial position and results of operations.  In December 2007, the FASB ratified EITF Issue No. 07-1,Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property(EITF 07-1). The EITF concluded that a collaborative arrangement is one in which the participants are actively involved and are exposed to significant risks and rewards that depend on the ultimate commercial success of the endeavor. Revenues and costs incurred with third parties in connection with collaborative arrangements would be presented gross or net based on the criteria in EITF Issue No. 99-19,Reporting Revenue Gross as a Principal versus Net as an Agent, and other accounting literature. Payments to or from collaborators would be evaluated and presented based on the nature of the arrangement and its terms, the nature of the
entitys business, and whether those payments are within the scope of other accounting literature. The nature and purpose of collaborative arrangements are to be disclosed along with the accounting policies and the classification of significant financial statement amounts related to the arrangements. Activities in the arrangement conducted in a separate legal entity should be accounted for under other accounting literature; however required disclosure under EITF 07-1 applies to the entire collaborative agreement. This Issue is currently effective and its adoption did not have an impact on the Companys consolidated financial position and results of operations.  In April 2009, the FASB issued FASB Staff Position (FSP) Issue No. FAS No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are not Orderly(FSP FAS No. 157-4). FSP FAS No. 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 and is effective in reporting periods ending after June 15, 2009. The Company is currently evaluating the impact that FSP FAS No. 157-4 will have on its consolidated financial position and results of operations.  In April 2009, the FASB issued FSP No. FAS No. 107-1 and APB No. 28-1,Interim Disclosures about Fair Value of Financial Instruments(FSP FAS No. 107-1 and APB No 28-1). FSP FAS No. 107-1 and APB No. 28-1 require disclosures about fair value of financial instruments for annual and interim reporting periods of publicly traded companies and are effective in reporting periods ending after June 15, 2009.  The Company is currently evaluating the impact that FSP FAS No. 107-1 and APB No. 28-1 will have on its consolidated financial position and results of operations.  In April 2009, the FASB issued FSP Issue No. FAS No. 115-2 and FAS No. 124-2,Recognition and Presentation of Other-Than Temporary Investments(FSP FAS No. 115-2 and 124-2). FSP FAS No. 115-2 and 124-2 amend the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP No. 115-2 and 124-2 are effective in reporting periods ending after June 15, 2009. The Company is currently evaluating the impact that FSP FAS No. 115-2 and 124-2 will have on its consolidated financial position and results of operations.           26
  
 Results of Operations  The following table sets forth our results of operations expressed as a percentage of total net revenues for the three months ended March 31, 2009 and 2008:  March 31,2009
        
        2008Net revenues
        
        
        100
        %
        
        100
        %Costs and expenses:Selling, general and administrative
        
        
        116
        
        
        84Production service costs
        
        
        11
        
        
        10Cost of sales of trading cards
        
        
        5
        
        
        7Amortization of television and film costs
        
        
        11
        
        
        11Amortization of 4Kids TV broadcast fee
        
        
        
        
        
        35Total costs and expenses
        
        
        143
        
        
        147Loss from operations
        
        
        (43
        )
        
        (47
        )Interest income
        
        
        4
        
        
        4Impairment of investment securities
        
        
        (1
        )
        
        Total other income
        
        
        3
        
        
        4Loss before income taxes
        
        
        (40
        )
        
        (43
        )(Provision for) benefit from income taxes
        
        
        
        
        
        Net loss
        
        
        (40
        )
        
        (43
        )Net loss attributable to noncontrolling interests
        
        
        20
        
        
        Net loss attributable to 4Kids Entertainment, Inc
        
        
        (20
        )%
        
        (43
        )%
  Three months ended March 31, 2009 as compared to three months ended March 31, 2008.  Revenues  Revenues by reportable segment and for the Company as a whole were as follows:  For the three months ended March 31, 2009 and 20082009
        
        2008
        
        $ Change
        
        % ChangeLicensing
        
        $
        5,596
        
        $
        5,573
        
        $
        23
        
        ―
        %Advertising, Media and Broadcast
        
        
        842
        
        
        3,568
        
        
        (2,726
        )
        (76
        )%Television and Film Production/Distribution
        
        
        3,317
        
        
        3,470
        
        
        (153
        )
        (4
        )%Trading Card and Game Distribution
        
        
        437
        
        
        2,428
        
        
        (1,991
        )
        (82
        )%Total
        
        $
        10,192
        
        $
        15,039
        
        $
        (4,847
        )
        (32
        )%
  The decrease in consolidated net revenues for the three months ended March 31, 2009, as compared to the same period in 2008, was due to a number of factors.  In the Licensing segment, the slight increase in revenues for the three months ended March 31, 2009, as compared to the same period in 2008, was primarily attributable to:  (i)
        increased domestic licensing revenues from the Monster Jam Property of approximately $1,380; partially offset by
 (ii)
        decreased domestic licensing revenues attributable to the Yu-Gi-Oh! and Shaman King Properties of approximately $910 and $380, respectively.
  27
  
 The Monster Jam, Yu-Gi-Oh!, and Cabbage Patch Kids Properties are the largest contributors with approximately 70% of the Companys revenues in this business segment for the three months ended March 31, 2009.  In the Advertising Media and Broadcast segment, the significant decrease in revenues for the three months ended March 31, 2009, as compared to the same period in 2008, was primarily attributable to:  (i)
        The CWs $3,000 minimum guaranteed share of revenue which was offset against the Companys revenues from the sale of network advertising time on The CW4Kids as compared to the same period in the prior year in which the Fox broadcast fee was amortized and classified as an expense; partially offset by(ii)
        increased revenue from the sale of internet advertising time on the Companys websites.
  In the Television and Film Production/Distribution segment, the decrease in revenues for the three months ended March 31, 2009, as compared to the same period in 2008, was primarily attributable to:  (i)
        decreased production service revenue from the Viva Piñata and  Teenage Mutant Ninja Turtles television series of approximately $650 and $301, respectively; partially offset by
 (ii)
        increased international broadcast sales from the Dinosaur King television series of approximately $820.
  The Trading Card and Game Distribution segment began to record significant revenues in the first quarter of 2008 as a result of the launch of the Chaotic trading card game to retail and mass market distribution.  During the three months ended March 31, 2009, retail sales were negatively impacted by the continued global economic downturn.  As a result of the downturn, many retailers maintained reduced inventory levels, and the Companys Trading Card and Game Distribution segment was negatively impacted by the resulting cut back by the Companys distributors on their orders placed with TC Digital.  The Company has recently become aware that some of its larger distributors, who service mass market retailers, are migrating over to a point-of-sale (POS) model in response to the demands from the applicable retailers.  The Company has entered into an agreement subsequent to March
31, 2009 with one of its larger trading card distributors that reflects such a change.  Under the POS model, sales are recorded and paid for by the retailer and distributors once the sales are made to the ultimate consumer, while under the currently prevailing FOB shipping point model, sales are recorded and paid for upon shipment to distributors.  In anticipation of the migration to the POS model, certain of the Companys retailers and distributors have been significantly reducing inventory levels over the last several months, causing the Company to record reduced revenue and higher inventory levels for the three months end March 31, 2009. As the Companys distributors migrate to the POS model, the Companys recognition of revenue in this segment will be modified accordingly.  Selling, General and Administrative Expenses  Selling, general and administrative expenses decreased 6%, or $809, to $11,799 for the three months ended March 31, 2009, when compared to the same period in 2008.  The decrease was primarily attributable to:  (i)
        decreased international selling expenses of approximately $270;(ii)
        decreased advertising and marketing costs of approximately $250;(iii)
        decreased travel and entertainment costs of approximately $180;(iv)
        decreased website costs of approximately $160;(v)
        decreased recruiting costs of approximately $140; as well as(vi)
        decreased bad debt expense of approximately $110; partially offset by(vii)
        increased foreign exchange losses associated with currency fluctuations of approximately $430.
  Cost of Sales of Trading Cards  Cost of sales of trading cards represents finished goods inventory costs relating to the Chaotic trading card game.  Cost of sales decreased 51%, or $514, to $502 for the three months ended March 31, 2009, when compared to the same period in 2008.  The decrease was primarily attributable to the overall decrease in trading card revenue.  In an effort to increase future trading card sales, additional promotional monies were given to retailers and distributors causing trading card revenues to fall below current quarter cost of sales.  28
  
 Production Service and Capitalized Film Costs  Production service and capitalized film costs were as follows:  For the three months ended March 31, 2009 and 2008  2009
        
        2008
        
        $ Change
        
        % ChangeProduction Service Costs
        
        $
        1,092
        
        $
        1,545
        
        $
        (453
        )
        (29
        )%Amortization of Television and Film Costs
        
        
        1,191
        
        
        1,708
        
        
        (517
        )
        (30
        )
  The decrease in production service costs during the three months ended March 31, 2009, as compared to the same period in 2008, was primarily due to decreased production costs for the Viva Piñata and Teenage Mutant Ninja Turtles television series, partially offset by increased production costs for the work performed on the Chaotic television series.  When the respective costs are incurred, the Company categorizes them as production service costs and reflects a corresponding amount in revenues for the amounts billed back to the property owners.  The decrease in amortization of television and film costs for the three months ended March 31, 2009 when compared to the same period in 2008, was primarily due to the decreased amortization of the Teenage Mutant Ninja Turtles and Viva Piñata television series.  As of March 31, 2009, there were $17,079 of capitalized film production costs in the Companys consolidated balance sheet relating primarily to various stages of production on 437 episodes of animated programming. Based on managements ultimate revenue estimates as of March 31, 2009, approximately 38% of the total completed and unamortized film and television costs are expected to be amortized during the next year, and over 90% of the total completed and unamortized film and television costs are expected to be amortized during the next three years.  4Kids TV Broadcast Fee  For the three months ended March 31, 2009 and 20082009
        
        2008
        
        $ Change
        
        % ChangeAmortization of 4Kids TV Broadcast Fee
        
        $
        
        
        $
        5,203
        
        $
        (5,203
        )
        (100
        )%
  Due to the termination of the Fox Agreement on December 31, 2008, there is no longer amortization of the 4Kids TV broadcast fee, as the fee has been fully amortized.  Interest Income  Interest income decreased 40%, or $269, to $401 for the three months ended March 31, 2009, as compared to the same periods in 2008, primarily as a result of lower cash balances and the Company investing its surplus cash in U.S. Treasury securities typically yielding lower interest rates than other investments.  Income (Loss) Before Income Taxes  For the three months ended March 31, 2009 and 20082009
        
        2008
        
        $ Change
        
        % ChangeLicensing
        
        $
        1,595
        
        $
        1,735
        
        $
        (140
        )
        (8
        )%Advertising, Media and Broadcast
        
        
        (970
        )
        
        (3,572
        )
        
        2,602
        
        73Television and Film Production/Distribution
        
        
        (591
        )
        
        (1,621
        )
        
        1,030
        
        64Trading Card and Game Distribution
        
        
        (4,114
        )
        
        (2,913
        )
        
        (1,201
        )
        (41
        )Total
        
        $
        (4,080
        )
        $
        (6,371
        )
        $
        2,291
        
        36
        %
  In the Licensing segment, the decrease in segment income for the three months ended March 31, 2009, as compared to the same period in 2008, was primarily attributable to lower interest income allocated to this segment, partially offset by an increase in licensing revenue.  29
  
  In the Advertising Media and Broadcast segment, the decrease in segment loss for the three months ended March 31, 2009, as compared to the same period in 2008, resulted from the amortization of the 4Kids TV broadcast fee which was greater than the minimum guaranteed payment made for The CW4Kids broadcast block.  In the Television and Film Production/Distribution segment, the decrease in segment loss for the three months ended March 31, 2009, as compared to the same period in 2008, was primarily due to decreased amortization of television and film costs and production service costs.  In the Trading Card and Game Distribution segment, the increase in segment loss for the three months ended March 31, 2009, as compared to the same period in 2008, was primarily attributable to decreased revenues, partially offset by decreased cost of goods sold.  Income Taxes  The Company regularly reviews its deferred tax assets for recoverability taking into consideration such factors as historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. SFAS No. 109,Accounting for Income Taxes(SFAS No. 109), requires the Company to record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In view of the level of deferred tax assets as of March 31, 2009 and the Companys historical losses from operations, the Company has determined that the application of SFAS No. 109 requires the Company to record a full valuation allowance against its net deferred tax assets.  The Company did not record a benefit from income taxes for the three months ended March 31, 2009, as compared to a provision for income taxes of $28, for the same periods in 2008.  In the event that the Company earns pre-tax income in the future such that it will be able to use some or all of its deferred tax assets, SFAS No. 109 permits the Company to reduce or eliminate the valuation allowance.  If the Company were to reverse the valuation allowance, in whole or in part, the Companys income statement for such reporting period would record a reduction in income tax expense and an increase in net income, to the extent of the reversal of the valuation allowance.  Our effective tax rate for 2009 and 2008 would have been a benefit of 40% had the Company not taken a valuation allowance. This rate differs slightly from the Federal statutory rate of 35% primarily due to the mix of income and losses, which have tax rates that differ from the statutory rate, and due to permanent differences and tax rate differences on subsidiaries.  Net Loss  As a result of the above, the Company had a net loss for the three months ended March 31, 2009 of $4,080, as compared to a net loss of $6,399 for the same period in 2008.  Liquidity and Capital Resources  Financial Position  Cash and cash equivalents as of March 31, 2009 and December 31, 2008 were as follows:   2009
        
        2008
        
        $ ChangeCash and cash equivalents
        
        $
        9,467
        
        $
        13,503
        
        $
        (4,036
        )
  Long-term investments as of March 31, 2009 and December 31, 2008 were as follows:  2009
        
        2008
        
        $ ChangeInvestments
        
        $
        19,454
        
        $
        21,617
        
        $
        (2,163
        )
  The Companys long-term investments principally consist of ARS, corporate bonds and preferred shares. ARS are generally rated BBB or better by one or more national rating agencies and have contractual maturities of up to 80 years. Of the aggregate principal amount of $46,930 in investment securities held by the Company as of March 31, 2009, 3% mature  30
  
 within the next 20 years, 21% mature within the next 30 years, 35% mature through 2087 and the remaining 65% have no maturity date.  The Company classifies these investments as available for sale, in accordance with the provisions of SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities.  The ARS that the Company invests in generally had interest reset dates that occurred every 7 or 35 days and despite the long-term nature of their stated contractual maturity,
the historical operation of the ARS market had given the Company the ability to quickly liquidate these securities at ongoing auctions every 35 days or less.  During 2007, liquidity issues began to affect the global credit and capital markets.  In addition, certain individual ARS experienced liquidity issues specific to such securities.  As a result, ARS, which historically have had a liquid market and had their interest rates reset periodically (e.g. monthly) through Dutch auctions, began to fail at auction.  These auction failures have caused ARS to become illiquid, which in turn has caused the fair market values of these securities to decline.  The ARS currently held by the Company are private placement debt securities with long-term nominal maturities and interest rates that typically reset monthly.  The Companys investments in ARS represent interests in debt obligations issued by banks and insurance companies that originally had at least an A credit rating at the time of purchase, including JP Morgan Chase, bond insurers and re-insurers such as MBIA, AMBAC, FGIC, FSA, RAM and Radian, and International Lease Finance Corporation, the aircraft leasing subsidiary of AIG. The collateral underlying these securities consists primarily of commercial paper, but also includes asset-backed and mortgage-backed securities, corporate debt, government holdings, money market funds and other ARS.  As of March 31, 2009, the Company held investment securities having an aggregate principal amount of $46,930.  The estimated fair market value of the investment securities held by the Company had declined by $27,476 ($3,993 during 2007, $21,320 during 2008, and $2,163 during 2009) to $19,454, based upon an analysis of the current market conditions of the Companys securities made by the Company in accordance with SFAS No. 157.  The Company concluded that $89 of the decline in 2009 in the fair value of the investment securities held by the Company were now other than temporarily impaired. The Companys determination that certain of its long-term investments were other than temporarily impaired was based upon the fact that certain of the Companys ARS ceased to pay interest according to their stated terms and that the underlying bond insurers of such securities elected to exercise their put
right against the trusts, thereby exchanging the investment grade collateral in the trust with preferred stock. Accordingly, during 2009, the Company recorded an additional $89 of impairment charges in non-operating expense related to the securities which had previously recorded an other than temporary impairment of $7,834 in 2008. In March 2009, the Company was notified that the underlying bond insurers of one of its ARS elected to exercise their put right against the trusts, thereby exchanging the investment grade collateral in the trust with preferred stock.  Based on the enhanced marketability of this security, the decline in the estimated fair value is considered to be temporarily impaired.  The Company continues to monitor the market for ARS and consider its impact (if any) on the fair value of its investments. If the current market conditions deteriorate further, the Company may be required to record additional impairment charges to non-operating expense in future periods.
Additionally, the Company recorded an unrealized loss of $2,074 during the first quarter of 2009 in addition to the unrealized loss of $17,479 it recorded in prior years, for a total loss of $19,553 over such periods.  As of May 8, 2009, none of the investment securities held by the Company as of March 31, 2009 had been redeemed.   Since the Company has the ability, and presently expects, to hold these investments until recovery of their face value, which may not be prior to the maturity of the applicable security (to the extent such security has a specified maturity date) and based on consideration of all such factors, the Company did not consider these investments to be other than temporarily impaired as such term is defined in the accounting literature as of the filing date. Additionally, the remaining investment securities held by the Company have continued to pay interest according to their stated terms, which the Company believes may create an incentive for the issuers to redeem
these securities once the current liquidity problems in the credit market substantially improve.  In November 2008, one of the Companys ARS experiencing liquidity problems converted to a corporate bond due to a provision in the trust stating that if liquidity ceased for an extended period of time the trust would dissolve and distribute the underlying assets of the trust, which were solely comprised of corporate bonds.  This corporate bond is currently paying interest and the Company does not consider this investment to be other than temporarily impaired.  The credit and capital markets, including the market for ARS, have remained illiquid, and as a result of this and other factors specific to certain investment securities, the Companys unrealized loss on its investment securities may subsequently increase. The Company estimates the fair values of the investment securities quarterly based upon consideration of such factors as: issuer and insurer credit rating; comparable market data, if available; current market conditions; the credit quality of the investment securities; the rate of interest received since the date the auctions began; yields of securities similar to the underlying investment securities; and, until September 2008, input from broker-dealers statements provided by the  31
  
 investment bank through which the Company held such securities.  These considerations are used to determine a range of values for each security from moderate to highly
conservative.  The Company has based its evaluation on the mid-point of that range. Specifically, the Company considers the composition of the collateral supporting the investment securities and the default probabilities of the collateral underlying these securities in our overall valuation of each security.  The Company has also researched the secondary market, and while such a market may be available, there is no guarantee that such a market will exist at any particular point in time.  Additionally, the Company looks at the probabilities of default, probabilities of successful auctions and probabilities of earning the maximum (failed auction) rate for each period.  Due to the sensitivity of the methodologies and considerations used, the Company continually re-evaluates the investment securities and although the valuation methodologies have remained consistent for each quarter in which these securities were valued, certain inputs may have changed.  The changes in these inputs primarily relate to the changes in the economic environment and the market for such securities.  Given the failed auctions, the Companys investment securities are currently illiquid.  Accordingly, the Company has classified $19,454 of its investment in ARS and the securities into which certain of the ARS have been exchanged, as non-current assets at March 31, 2009 on its balance sheet due to the fact that the Company believes that the liquidity of these securities is unlikely to be restored in a period less than twelve months from such date.  The Company believes that Lehman Brothers, Inc., the securities broker-dealer that purchased the ARS on behalf of the Company that have been classified as other than temporarily impaired based on discretion afforded to it, has violated its legal obligations to the Company.  As a result, the Company has taken various measures to obtain appropriate legal relief, including initiating an arbitration with the Financial Industry Regulatory Authority.  On September 15, 2008, Lehman Brothers Holdings, Inc., the parent company of Lehman Brothers, Inc., filed for bankruptcy.  On September 16, 2008, Barclays PLC announced that it had reached an agreement to purchase the assets of Lehman Brothers Holdings, Inc.s North American operations, including substantial assets of Lehman Brothers, Inc.  The Lehman-Barclays transaction was approved by the United States Bankruptcy Court for the Southern District of New York
on September 20, 2008.  On September 19, 2008, the Securities Investor Protection Corporation (SIPC) filed a proceeding, placing Lehman Brothers, Inc. in liquidation under the Securities Investor Protection Act (SIPA).  SIPC, pursuant to its authority under SIPA, has acted to facilitate the transfer of Lehman Brothers, Inc.s customer accounts (including the Companys accounts) to Barclays, PLC.  In view of the bankruptcy of Lehman Brothers Holdings, Inc. and the liquidation of Lehman Brothers, Inc., the Company is currently assessing what additional steps, if any, to take to pursue legal redress.  If uncertainties in the credit and capital markets continue or the Companys investments experience any rating downgrades on any investments in its portfolio or the value of such investments declines further, the Company may incur additional impairment charges to its investment portfolio, which could negatively affect the Companys financial condition, results of operations and cash flow.  As a result of the current market issues, the Companys surplus cash is invested solely in governmental securities with a maturity of 90 days or less.  In light of the current lack of liquidity affecting a significant portion of its portfolio of investment securities, based on the Companys projected cash flows, current cash and cash equivalents, and its overall cash position, the Company expects to have adequate liquidity to fund its day-to-day operations.  There is also a secondary market developing for some of the investment securities held by the Company which might enable the Company to sell a portion of its investment securities at distressed prices should circumstances require the Company to access additional liquidity.  However, the illiquidity affecting a significant portion of the Companys portfolio of investment securities is impacting the Companys ability to make capital investments or expand its operations.  Sources and Uses of Cash  Cash flows for the three and three months ended March 31, 2009 and 2008 were as follows:  Sources (Uses)
        
        2009
        
        2008Operating Activities
        
        $
        (4,449
        )
        $
        (3,951
        )Investing Activities
        
        
        (73
        )
        
        14,687Financing Activities
        
        
        31
        
        
        (2,742
        )
  Working capital, consisting of current assets less current liabilities, was $11,647 as of March 31, 2009 and $17,579 as of December 31, 2008.  The decrease in working capital relates primarily to the cash used to fund the Companys operations.  32
  
  Operating Activities 2009 Net cash used in operating activities for the three months ended March 31, 2009 of $4,449 primarily reflects a decrease in the Companys overall business performance.  2008 Net cash used in operating activities for the three months ended March 31, 2008 of $3,951 primarily reflected a decrease in the Companys overall business performance.  This decrease was partially offset by amortization of television and film costs.  Investing Activities 2009 Net cash used in investing activities for the three months ended March 31, 2009 of $73 reflects the Companys purchase of property and equipment.  2008 Net cash provided by investing activities for the three months ended March 31, 2008 of $14,687 reflected a shift in the Companys investments for the period, from auction-rate securities to U.S. Treasury securities which are short in duration and are classified as cash and cash equivalents.  Financing Activities 2009 Net cash provided by financing activities for the three months ended March 31, 2009 reflects cash contributions from noncontrolling interests.  2008 Net cash used in financing activities for the three months ended March 31, 2008 of $2,742 reflected the Companys purchase of shares of its common stock classified as treasury stock on the consolidated financial statements.  During 2009, the Company's cash flow from operations was impacted by reduced consumer demand for a limited number of its licensed Properties.  While the Company strives to further diversify its revenue streams, management remains cognizant of changing trends in the toy, game and entertainment business and the difficulty in predicting the length of time a property will be commercially successful.  As a result, the Company's revenues, operating results and cash flow from operations may fluctuate significantly from year to year and present operating results are not necessarily indicative of future performance.  Historically, the majority of the television-based Properties that the Company represented were existing episodes of foreign programming that were adapted for the United States and other markets.  The Companys strategic focus shifted towards producing and owning, in whole or in part, new content, such as the animated television episodes for Chaotic and Teenage Mutant Ninja Turtles, where the Company is a joint copyright owner of the episodes.  Therefore, the Company had previously allocated a larger portion of its capital resources to the production costs associated with developing original animated programming resulting in increased capitalized film and television costs.  Following the commercial release of a Property, its overall market acceptance and resulting revenues will directly impact the Companys amortization of these capitalized film and television costs.  To
the extent a Property performs at a level lower than the Companys expectations, the ratio of amortization expense to revenues realized will increase.  While the Company expects that the revenues associated with such Properties will be sufficient to maintain its historical operating margins, there can be no assurance that the marketing plans designed to achieve those revenues can be executed in a manner to achieve its objectives.  The Company has now elected to reduce substantially, the number of original episodes which the Company is producing.  This reduction will result in a decline of amortizable film costs and the allocation of fewer Company resources to original production.  This shift in strategy has also enabled the Company to reduce personnel and other costs associated with the production of a greater number of original episodes.  Broadcast Agreements  The CW Broadcast Agreement- On October 1, 2007, the Company and The CW entered into the CW Agreement, under which The CW granted to the Company the exclusive right to program The CW's Saturday morning children's programming block (The CW4Kids) that is broadcast in most markets between 7am and 12pm for an initial term of five years beginning with The CW's 2008-2009 broadcast season.  33
  
 Under the CW Agreement, the Company is obligated to make quarterly minimum guaranteed payments which are subject to reduction under certain circumstances. The Company and The CW share advertising revenues earned from the sale of national commercial time during The CW4Kids with The CW's share to be applied against such quarterly guarantee payments.  In addition, The CW is entitled under the CW Agreement to participate in the Company's merchandising revenues from certain content broadcast on The CW4Kids, if such merchandising revenues exceed a certain annual minimum.  4Kids Ad Sales, Inc. manages and accounts for the ad revenue and costs associated with The CW4Kids.  In addition to the minimum guarantee to be paid to The CW, the Company incurs additional costs to program each broadcast block and sell the related network advertising time. These costs include direct programming costs to acquire, adapt and deliver programming for the broadcast during the weekly broadcast blocks as well as additional indirect expenses of advertising sales, promotion and administration.  Fox Settlement Agreement -On November 9, 2008, the Company entered into an agreement with Fox to settle a pending litigation between the parties (the Settlement Agreement).  As of March 31, 2009, the Companys remaining financial obligation to Fox under the Settlement Agreement was approximately $1,900 of which $380 was paid on April 15, 2009 with remaining payments of $380 scheduled to be paid on or before May 15, 2009, June 15, 2009, July 15, 2009 and August 15, 2009. In order to secure payment by the Company to Fox of the installments of this settlement amount, the Company granted Fox a security interest in the sale of the national advertising time sold by the Company during the fourth quarter of 2008 and the first quarter of 2009.  The Company believes that the settlement has enabled the Company to focus its resources on the five hour block of childrens
Saturday morning television on The CW Network.  Contractual Commitments  The Companys contractual obligations and commitments are detailed in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.  As of March 31, 2009, the Companys contractual obligations and commitments have not materially changed since December 31, 2008.  Forward Looking Information and Risk Factors That May Affect Future Results  This Quarterly Report on Form 10-Q, including the section titled Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that relate to future events or our future financial performance. We may also make written and oral forward-looking statements in our Securities and Exchange Commission (SEC) filings and otherwise. We have tried, where possible, to identify such statements by using words such as believe, expect, intend, estimate, anticipate, will, project, plan and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statements are and will be based upon our then-current expectations, estimates and assumptions regarding future events and are
applicable only as of the dates of such statements. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in any forward-looking statements. Such risks and uncertainties include those described in this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC, as well as other factors. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Item 3. Quantitative and Qualitative Disclosures About Market Risk.  Foreign Currency Exchange Rate Fluctuations  From time to time, the Company may be exposed to the risk of future currency exchange rate fluctuations which is accounted for as an adjustment to shareholders equity and changes in the exchange rates between various foreign currencies and the U.S. dollar may, as a result, have an impact on the accumulated other comprehensive loss component of shareholders equity reported by the Company, and such effect may be material in any individual reporting period. The Company is currently not a party to any market risk sensitive instruments, or any derivative contracts or other arrangements that may reduce such market risk.  Item 4. Controls and Procedures.  Evaluation of Disclosure Controls and Procedures  (a) We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in our filings and submissions under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  34
  
 We completed an evaluation under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, such disclosure controls and procedures were effective to provide the reasonable assurance described above.  (b) There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) during the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.  Part II -OTHER INFORMATION  Item 1. Legal Proceedings.  The Company, from time to time, is involved in litigation arising in the ordinary course of its business. The Company does not believe that such litigation to which the Company or any subsidiary of the Company is a party or of which any of their property is the subject will, individually or in the aggregate, have a material adverse effect on the Companys financial position or the results of its operations.  Item 1A. Risk Factors.  In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors of the Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Annual Report), which could materially affect our business, financial condition or future results.  The risks described in the 2008 Annual Report are not the only risks facing us.  Additional risks and uncertainties not currently known to us or that we currently do not consider material also may materially adversely affect our business, financial condition and/or operating results.  There have been no material changes from the risk factors disclosed in the 2008 Annual Report except for the following:  If we are not able to maintain our listing with the New York Stock Exchange the liquidity and market price of our common stock, and our ability to obtain financing, could be adversely affected.  On April 7, 2009, we received written notice from NYSE Regulation, Inc. that we had fallen below the continued listing standard of the New York Stock Exchange, Inc. (NYSE) set forth in Section 802.01B of the NYSE Listed Corporation Manual because over a 30 trading-day period our total market capitalization was less than $75,000 and at the same time our shareholders equity was less than $75,000.  As of March 31, 2009, our 30 trading-day average market capitalization was approximately $16,500 and our shareholders equity was $68,760.  Under NYSE rules, we have 45 calendar days from receipt of the notice to submit a plan that demonstrates our ability to achieve compliance with the continued listing standard within 18 months and we have notified the NYSE of our intention to do so.  The plan we submit will be subject to the review of the Listings and Compliance Committee of the NYSE (the Committee).  While we intend to submit a plan that will sufficiently demonstrate our ability to achieve compliance with the continued listing standard within the specified time period, there can be no assurance that the Committee will accept our plan.  If our plan is not accepted by the Committee, we will be subject to suspension and delisting procedures.  Based on our recent market capitalization, we are also at risk of falling below the $15 million minimum average market capitalization threshold for continued listing set forth in Section 802.01B of the NYSE Listed Corporation Manual, which would pre-empt the plan/cure process described above and result in immediate initiation of suspension and delisting procedures.  A delisting of our common stock could negatively impact us by reducing the liquidity and market price of our common stock, reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing. 35
  
 Item 6.Exhibits.  (a)
        Exhibits
  31.1
        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2
        Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1
        Joint Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                         36
  
   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.  4KIDS ENTERTAINMENT, INC.  Date: May 8, 2009  By:
        /s/Alfred R. Kahn
 ___________________________ Alfred R. Kahn,
 Chairman of the Board,
 Chief Executive Officer and
 Director
   By:
        /s/Bruce R. Foster
 ___________________________ Bruce R. Foster,
 Executive Vice President,
 Treasurer, Chief Financial
 Officer and Principal Accounting
 Officer
                  37