----

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|  ý                                                  |  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  |
|---------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
|  For the quarterly period ended September 30, 2010  |
|  OR                                                      |
|                                                  |  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

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

| New York(State or other jurisdiction ofincorporation or organization) |   | 13-2691380(I.R.S. EmployerIdentification No.) |
|-----------------------------------------------------------------------|--------|-----------------------------------------------|

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4Kids Entertainment, Inc. and Subsidiaries

|                                  |             |                                                                                                                               |                                                                                              | Page #  |
|---------------------------------------|------------------|------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|--------------|
| Part I—FINANCIAL INFORMATION    |             |                                                                                                                               |
|                                  |  Item 1.    |                                                                                                                               |  Financial Statements                                                                        |         |   |
|                                  |             |  Consolidated Balance Sheets as of  September 30, 2010  (Unaudited) and December 31, 2009                 |                                                                                              |  2      |
|                                  |             |  Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2010 and 2009            |                                                                                              | 3            |
|                                  |             |  Consolidated Statements of Changes in Equity and Comprehensive Loss (Unaudited) for the nine months ended September 30, 2010 |                                                                                              | 4            |
|                                  |             |  Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2010 and 2009                      |                                                                                              | 5            |
|                                  |             |  Notes to Consolidated Financial Statements (Unaudited)                                                                       |                                                                                              |  6      |
|                                  |  Item 2.    |                                                                                                                               |  Management’s Discussion and Analysis of Financial Condition and Results of Operations |         |  26 |
|                                  |  Item 3.    |                                                                                                                               |  Quantitative and Qualitative Disclosures about Market Risk                                  |         |  37 |
|                                  |  Item 4.    |                                                                                                                               |  Controls and Procedures                                                                     |         | 37 |
|  Part II—OTHER INFORMATION |             |                                                                                                                               |
|                                  |  Item 1.    |                                                                                                                               |  Legal Proceedings                                                                           |         |  38 |
|                                  |  Item 1A    |                                                                                                                               |  Risk Factors                                                                                |         |  39 |
|                                  |  Item 6.    |                                                                                                                               |  Exhibits                                                                                    |         |  40 |
|                                  |  Signatures |                                                                                                                               |                                                                                              | 41           |
|                                  |             |                                                                                                                               |                                                                                              |         |   |

----

|                                                                                                                                                                                                                                                                                                    |   | September 30, 2010 |    |   | December 31, 2009 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
| ASSETS:                                                                                                                                                                                                                                                                                                 |   | (Unaudited)        |    |   |              |   |
| Current assets:                                                                                                                                                                                                                                                                                         |   |               |    |   |              |   |
|    Cash and cash equivalents                                                                                                                                                                                                                                                             |   | $                  | 3,977   |   |              | $      | 3,621 |   |
|    Accounts receivable - net                                                                                                                                                                                                                                                             |   |               | 5,773   |   |              |   | 13,843 |   |
|    Income taxes receivable                                                                                                                                                                                                                                                               |   |               | 414     |   |              |   | 4,044 |   |
|    Prepaid expenses and other current assets                                                                                                                                                                                                                                             |   |               | 2,066   |   |              |   | 2,111 |   |
|    Current assets of discontinued operations                                                                                                                                                                                                                                             |   |               | 65      |   |              |   | 2,401 |   |
| Total current assets                                                                                                                                                                                                                                                                                    |   |               | 12,295  |   |              |   | 26,020 |   |
|                                                                                                                                                                                                                                                                                                    |   |               |    |   |              |   |   |   |
|    Property and equipment - net                                                                                                                                                                                                                                                          |   |               | 1,384   |   |              |   | 1,663 |   |
|    Long term investments                                                                                                                                                                                                                                                                 |   |               | 10,936  |   |              |   | 14,180 |   |
|    Accounts receivable - noncurrent, net                                                                                                                                                                                                                                                 |   |               | 82      |   |              |   | 153 |   |
|    Film and television costs - net                                                                                                                                                                                                                                                       |   |               | 4,970   |   |              |   | 6,832 |   |
|    Non-current assets of discontinued operations                                                                                                                                                                                                                                         |   |               | — |   |              |   | 1,721 |   |
|    Other assets - net (includes related party amounts of $679 and $1,215,respectively)                                                                                                                                                                                                   |   |               | 4,860   |   |              |   | 6,084 |   |
| Total assets                                                                                                                                                                                                                                                                                            |   | $                  | 34,527  |   |              | $      | 56,653 |   |
|                                                                                                                                                                                                                                                                                                    |   |               |    |   |              |   |   |   |
| LIABILITIES AND EQUITY:                                                                                                                                                                                                                                                                                 |   |               |    |   |              |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                                    |   |               |    |   |              |   |   |   |
|    Due to licensors                                                                                                                                                                                                                                                                      |   | $                  | 5,249   |   |              | $      | 6,578 |   |
|    Accounts payable and accrued expenses                                                                                                                                                                                                                                                 |   |               | 10,081  |   |              |   | 9,566 |   |
|    Current liabilities of discontinued operations                                                                                                                                                                                                                                        |   |               | 2,272   |   |              |   | 2,738 |   |
|    Deferred revenue                                                                                                                                                                                                                                                                      |   |               | 1,632   |   |              |   | 2,279 |   |
| Total current liabilities                                                                                                                                                                                                                                                                               |   |               | 19,234  |   |              |   | 21,161 |   |
|                                                                                                                                                                                                                                                                                                    |   |               |    |   |              |   |   |   |
| Deferred rent                                                                                                                                                                                                                                                                                           |   |               | 396     |   |              |   | 375 |   |
| Total liabilities                                                                                                                                                                                                                                                                                       |   |               | 19,630  |   |              |   | 21,536 |   |
|                                                                                                                                                                                                                                                                                                    |   |               |    |   |              |   |   |   |
| Commitments and contingencies (Note 12)                                                                                                                                                                                                                                                                 |   |               |    |   |              |   |   |   |
| 4Kids Entertainment, Inc. shareholders’ equity                                                                                                                                                                                                                                                    |   |               |    |   |              |   |   |   |
|       Preferred stock, $.01 par value – authorized 3,000,000 shares; none issued                                                                                                                                                                                    |   |               | — |   |              |   | — |   |
|       Common stock, $.01 par value - authorized 40,000,000 shares;       issued 15,652,845 and 15,411,099 shares; outstanding       13,528,958 and 13,352,053 shares in 2010 and 2009, respectively |   |               | 157     |   |              |   | 154 |   |
|       Additional paid-in capital                                                                                                                                                                                                                                          |   |               | 68,699  |   |              |   | 66,991 |   |
|       Accumulated other comprehensive loss                                                                                                                                                                                                                                |   |               | (2,730  | )      |              |   | (4,644 | ) |
|       Retained (deficit) earnings                                                                                                                                                                                                                                         |   |               | (491    | )      |              |   | 19,298 |   |
|                                                                                                                                                                                                                                                                                                    |   |               | 65,635  |   |              |   | 81,799 |   |
| Less cost of 2,123,887 and 2,059,046 treasury shares in 2010 and 2009, respectively                                                                                                                                                                                                                     |   |               | (36,488 | )      |              |   | (36,434 | ) |
| Total shareholders’ equity of 4Kids Entertainment, Inc.                                                                                                                                                                                                                                           |   |               | 29,147  |   |              |   | 45,365 |   |
| Noncontrolling interests related to discontinued operations                                                                                                                                                                                                                                             |   |               | (14,250 | )      |              |   | (10,248 | ) |
| Total equity                                                                                                                                                                                                                                                                                            |   |               | 14,897  |   |              |   | 35,117 |   |
| Total liabilities and equity                                                                                                                                                                                                                                                                            |   | $                  | 34,527  |   |              | $      | 56,653 |   |

----

|                                                                                                    |   | Three Months Ended |       |   | Nine Months Ended |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                                                                                    |   | September 30,      |       |   | September 30,     |   |
|                                                                                                    |   | 2010               |       |   | 2009              |   |   | 2010 |   |   | 2009 |   |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |
| Net revenues:                                                                                           |   |               |       |   |              |   |   |   |   |   |   |   |
|    Service revenue                                                                       |   | $                  | 2,986      |   |              | $      | 5,312 |   |   | $ | 9,672 |   |   | $ | 17,989 |   |
|           Total net revenues                          |   |               | 2,986      |   |              |   | 5,312 |   |   |   | 9,672 |   |   |   | 17,989 |   |
| Costs and expenses:                                                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
|    Selling, general and administrative                                                   |   |               | 7,086      |   |              |   | 7,329 |   |   |   | 20,362 |   |   |   | 22,531 |   |
|    Amortization of television and film costs                                             |   |               | 2,719      |   |              |   | 1,438 |   |   |   | 4,804 |   |   |   | 3,695 |   |
|           Total costs and expenses                    |   |               | 9,805      |   |              |   | 8,767 |   |   |   | 25,166 |   |   |   | 26,226 |   |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                                                    |   |               | (6,819     | )      |              |   | (3,455 | ) |   |   | (15,494 | ) |   |   | (8,237 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                         |   |               | 95         |   |              |   | 178 |   |   |   | 288 |   |   |   | 925 |   |
| Impairment of investment securities                                                                     |   |               | (1,552     | )      |              |   | (71 | ) |   |   | (1,973 | ) |   |   | (169 | ) |
| Loss on sale of investment securities                                                                   |   |               | (212       | )      |              |   | — |   |   |   | (212 | ) |   |   | (7,250 | ) |
|          Total other expense                               |   |               | (1,669     | )      |              |   | 107 |   |   |   | (1,897 | ) |   |   | (6,494 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes                                                                                |   |               | (8,488     | )      |              |   | (3,348 | ) |   |   | (17,391 | ) |   |   | (14,731 | ) |
| Benefit from income taxes                                                                               |   |               | —    |   |              |   | — |   |   |   | — |   |   |   | — |   |
| Loss from continuing operations                                                                         |   |               | (8,488     | )      |              |   | (3,348 | ) |   |   | (17,391 | ) |   |   | (14,731 | ) |
| Loss from discontinued operations                                                                       |   |               | (3,162     | )      |              |   | (3,764 | ) |   |   | (6,410 | ) |   |   | (12,672 | ) |
| Net Loss                                                                                                |   |               | (11,650    | )      |              |   | (7,112 | ) |   |   | (23,801 | ) |   |   | (27,403 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loss attributable to noncontrolling interests                                                           |   |               | 1,806      |   |              |   | 2,109 |   |   |   | 4,012 |   |   |   | 6,610 |   |
| Net loss attributable to 4Kids Entertainment, Inc.                                                      |   | $                  | (9,844     | )      |              | $      | (5,003 | ) |   | $ | (19,789 | ) |   | $ | (20,793 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Per share amounts:                                                                                      |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per share attributable to 4Kids Entertainment, Inc. common shareholders          |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
|      Continuing operations                                                     |   | $                  | (0.63      | )      |              | $      | (0.25 | ) |   | $ | (1.29 | ) |   | $ | (1.11 | ) |
|      Discontinued operations                                                   |   |               | (0.10      | )      |              |   | (0.12 | ) |   |   | (0.18 | ) |   |   | (0.45 | ) |
| Basic and diluted loss per share attributable to 4Kids Entertainment, Inc. common shareholders          |   | $                  | (0.73      | )      |              | $      | (0.37 | ) |   | $ | (1.47 | ) |   | $ | (1.56 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares      outstanding – basic and diluted |   |               | 13,528,958 |   |              |   | 13,352,053 |   |   |   | 13,437,048 |   |   |   | 13,286,726 |   |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net loss attributable to 4Kids Entertainment, Inc.:                                                     |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loss  from continuing operations                                                              |   | $                  | (8,488     | )      |              | $      | (3,348 | ) |   | $ | (17,391 | ) |   | $ | (14,731 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Loss from discontinued operations                                                                       |   |               | (3,162     | )      |              |   | (3,764 | ) |   |   | (6,410 | ) |   |   | (12,672 | ) |
| Loss attributable to noncontrolling interests                                                           |   |               | 1,806      |   |              |   | 2,109 |   |   |   | 4,012 |   |   |   | 6,610 |   |
| Net loss from discontinued operations                                                         |   |               | (1,356     | )      |              |   | (1,655 | ) |   |   | (2,398 | ) |   |   | (6,062 | ) |
| Net loss attributable to 4Kids Entertainment, Inc.                                                      |   | $                  | (9,844     | )      |              | $      | (5,003 | ) |   | $ | (19,789 | ) |   | $ | (20,793 | ) |
|                                                                                                    |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |

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|                                                 |   | 4Kids Entertainment, Inc. Shareholders |    |   |                       |   |    |                        |   |
|------------------------------------------------------|--------|----------------------------------------|---------|--------|----------------------------|--------|---------|-----------------------------|--------|
|                                                 |   | Common Stock                           |    |   | Additional Paid-In Capital |   |    | Retained Earnings (Deficit) |   |   | Accumulated Other Comprehensive Loss |   |   | Less Treasury Stock |   |   | Total Shareholders’ Equity |   |   | Non-controlling Interests |   |   | Total Equity |   |
|                                                 | Shares |                                   |    | Amount |                       |
|                                                 |   |                                   |    |   |                       |   |    |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, DECEMBER 31, 2009                           |   |                                   | 15,411  |   |                       | $      | 154     |                        |   | $ | 66,991 |   |   | $ | 19,298 |   |   | $ | (4,644 | ) |   | $ | (36,434 | ) |   | $ | 45,365 |   |   | $ | (10,248 | ) |   | $ | 35,117 |   |
| Issuance of common stock and stock options exercised |   |                                   | 242     |   |                       |   | 3       |                        |   |   | 1,708 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 1,711 |   |   |   | — |   |   |   | 1,711 |   |
| Capital contribution from noncontrolling interests   |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 10 |   |   |   | 10 |   |
| Acquisition of treasury stock, at cost               |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (54 | ) |   |   | (54 | ) |   |   | — |   |   |   | (54 | ) |
| Comprehensive loss:                                  |   |                                   |    |   |                       |   |    |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                             |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | (19,789 | ) |   |   | — |   |   |   | — |   |   |   | (19,789 | ) |   |   | (4,012 | ) |   |   | (23,801 | ) |
| Translation adjustment                               |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | — |   |   |   | (122 | ) |   |   | — |   |   |   | (122 | ) |   |   | — |   |   |   | (122 | ) |
| Unrealized loss reclassified to earnings             |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | — |   |   |   | 2,134 |   |   |   | — |   |   |   | 2,134 |   |   |   | — |   |   |   | 2,134 |   |
| Unrealized loss on investment securities             |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | — |   |   |   | (98 | ) |   |   | — |   |   |   | (98 | ) |   |   | — |   |   |   | (98 | ) |
| Total comprehensive loss                             |   |                                   | — |   |                       |   | — |                        |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (17,875 | ) |   |   | (4,012 | ) |   |   | (21,887 | ) |
|                                                 |   |                                   |    |   |                       |   |    |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE, SEPTEMBER 30, 2010                          |   |                                   | 15,653  |   |                       | $      | 157     |                        |   | $ | 68,699 |   |   | $ | (491 | ) |   | $ | (2,730 | ) |   | $ | (36,488 | ) |   | $ | 29,147 |   |   | $ | (14,250 | ) |   | $ | 14,897 |   |

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|                                                                                 |   | 2010   |    |   | 2009   |   |
|--------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cash flows from operating activities:                                                |   |   |    |   |   |   |
| Net loss                                                                             |   | $      | (23,801 | )      |   | $      | (27,403 | ) |
| Adjustments to reconcile net loss to net cash                                        |   |   |    |   |   |   |   |   |
| provided by (used in) operating activities:                                          |   |   |    |   |   |   |   |   |
| Depreciation and amortization                                                        |   |   | 504     |   |   |   | 574 |   |
| Amortization of television and film costs                                            |   |   | 4,804   |   |   |   | 3,695 |   |
| Provision for doubtful accounts                                                      |   |   | 1,076   |   |   |   | 71 |   |
| Impairment of investment securities                                                  |   |   | 1,973   |   |   |   | 169 |   |
| Loss on sale of investment securities                                                |   |   | 212     |   |   |   | 7,250 |   |
| Changes in operating assets and liabilities:                                         |   |   |    |   |   |   |   |   |
| Accounts receivable                                                                  |   |   | 6,993   |   |   |   | 12,476 |   |
| Income taxes receivable                                                              |   |   | 3,630   |   |   |   | 10 |   |
| Prepaid expenses and other current assets                                            |   |   | 53      |   |   |   | (774 | ) |
| Film and television costs                                                            |   |   | (2,942  | )      |   |   | (3,933 | ) |
| Other assets - net                                                                   |   |   | 1,224   |   |   |   | (2,572 | ) |
| Due to licensors                                                                     |   |   | (1,333  | )      |   |   | 613 |   |
| Accounts payable and accrued expenses                                                |   |   | 2,239   |   |   |   | (50 | ) |
| Deferred revenue                                                                     |   |   | (647    | )      |   |   | (1,719 | ) |
| Deferred rent                                                                        |   |   | 21      |   |   |   | (104 | ) |
| Net cash used in continuing operating activities                                     |   |   | (5,994  | )      |   |   | (11,697 | ) |
| Net cash provided by (used in) discontinued operating activities                     |   |   | 3,591   |   |   |   | (1,138 | ) |
| Net cash used in operating activities                                                |   |   | (2,403  | )      |   |   | (12,835 | ) |
|                                                                                 |   |   |    |   |   |   |   |   |
| Cash flows from investing activities:                                                |   |   |    |   |   |   |   |   |
| Proceeds from sale of investments                                                    |   |   | 3,095   |   |   |   | 2,750 |   |
| Proceeds from disposal of property and equipment                                     |   |   | 32      |   |   |   | — |   |
| Purchase of property and equipment                                                   |   |   | (257    | )      |   |   | (283 | ) |
| Net cash provided by investing activities                                            |   |   | 2,870   |   |   |   | 2,467 |   |
|                                                                                 |   |   |    |   |   |   |   |   |
| Cash flows from financing activities:                                                |   |   |    |   |   |   |   |   |
| Capital contribution from noncontrolling interests                                   |   |   | 10      |   |   |   | 105 |   |
|     Purchase of treasury shares                                  |   |   | (54     | )      |   |   | (58 | ) |
| Net cash (used in) provided by financing activities                                  |   |   | (44     | )      |   |   | 47 |   |
|                                                                                 |   |   |    |   |   |   |   |   |
| Effect of exchange rate changes on cash and cash equivalents                         |   |   | (67     | )      |   |   | 391 |   |
|                                                                                 |   |   |    |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                 |   |   | 356     |   |   |   | (9,930 | ) |
|                                                                                 |   |   |    |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                       |   |   | 3,621   |   |   |   | 13,503 |   |
|                                                                                 |   |   |    |   |   |   |   |   |
| Cash and cash equivalents, end of period                                             |   | $      | 3,977   |   |   | $      | 3,573 |   |
|                                                                                 |   |   |    |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                    |   |   |    |   |   |   |   |   |
| Cash paid during period for income taxes                                             |   | $      | 16      |   |   | $      | 70 |   |
| Supplemental schedule of non-cash investing and financing activities                 |   |   |    |   |   |   |   |   |
| Unrealized (loss) gain on marketable securities included in other comprehensive loss |   | $      | (98     | )      |   | $      | 2,731 |   |
| Vesting of restricted shares                                                         |   | $      | 1,711   |   |   | $      | 1,886 |   |

----

----

----

| ·   | 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. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                         |   | Estimated Fair Value Measurements |   |
|------------------------------|--------|-----------------------------------|--------|
|                         |   | Carrying Value               |   |   | QuotedPrices inActiveMarkets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
| September 30, 2010:          |   |                              |   |   |   |   |   |   |   |   |   |   |
|  Financial Assets       |   |                              |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents    |   | $                                 | 3,977  |   |   | $ | 3,977 |   |   | $ | — |   |   | $ | — |   |
| Total short-term investments |   | $                                 | 3,977  |   |   | $ | 3,977 |   |   | $ | — |   |   | $ | — |   |
|                         |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Auction rate securities      |   | $                                 | 7,065  |   |   | $ | — |   |   | $ | — |   |   | $ | 7,065 |   |
| Corporate obligations        |   |                              | 3,834  |   |   |   | — |   |   |   | — |   |   |   | 3,834 |   |
| Preferred shares             |   |                              | 37     |   |   |   | — |   |   |   | — |   |   |   | 37 |   |
| Total long-term investments  |   | $                                 | 10,936 |   |   | $ | — |   |   | $ | — |   |   | $ | 10,936 |   |
|                         |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Financial Assets       |   | $                                 | 14,913 |   |   | $ | 3,977 |   |   | $ | — |   |   | $ | 10,936 |   |
|                         |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009:           |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Assets             |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents    |   | $                                 | 3,621  |   |   | $ | 3,621 |   |   | $ | — |   |   | $ | — |   |
| Total short-term investments |   | $                                 | 3,621  |   |   | $ | 3,621 |   |   | $ | — |   |   | $ | — |   |
|                         |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Auction rate securities      |   | $                                 | 9,050  |   |   | $ | — |   |   | $ | — |   |   | $ | 9,050 |   |
| Corporate obligations        |   |                              | 3,689  |   |   |   | — |   |   |   | — |   |   |   | 3,689 |   |
| Preferred shares             |   |                              | 1,441  |   |   |   | — |   |   |   | — |   |   |   | 1,441 |   |
| Total long-term investments  |   | $                                 | 14,180 |   |   | $ | — |   |   | $ | — |   |   | $ | 14,180 |   |
|                         |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Financial Assets       |   | $                                 | 17,801 |   |   | $ | 3,621 |   |   | $ | — |   |   | $ | 14,180 |   |
|                         |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                              |   | September 30, 2010 |   |
|-------------------------------------------------------------------|--------|--------------------|--------|
|                                                              |   | Amortized Cost     |   |   | Unrealized Loss |   |   | EstimatedFair Value |   |
| Long-term investments:                                            |   |               |   |   |   |   |   |   |   |
|        Auction rate securities |   | $                  | 12,300 |   |   | $ | (5,235 | ) |   | $ | 7,065 |   |
|        Corporate obligations   |   |               | 5,400  |   |   |   | (1,566 | ) |   |   | 3,834 |   |
|        Preferred shares        |   |               | 6,150  |   |   |   | (6,113 | ) |   |   | 37 |   |
| Total long-term investments                                       |   | $                  | 23,850 |   |   | $ | (12,914 | ) |   | $ | 10,936 |   |
|                                                              |   |               |   |   |   |   |   |   |   |   |   |   |

|                                                              |   | December 31, 2009 |   |
|-------------------------------------------------------------------|--------|-------------------|--------|
|                                                              |   | Amortized Cost    |   |   | Unrealized Loss |   |   | EstimatedFair Value |   |
| Long-term investments:                                            |   |              |   |   |   |   |   |   |   |
|        Auction rate securities |   | $                 | 17,300 |   |   | $ | (8,250 | ) |   | $ | 9,050 |   |
|        Corporate obligations   |   |              | 5,400  |   |   |   | (1,711 | ) |   |   | 3,689 |   |
|        Preferred shares        |   |              | 12,850 |   |   |   | (11,409 | ) |   |   | 1,441 |   |
| Total long-term investments                                       |   | $                 | 35,550 |   |   | $ | (21,370 | ) |   | $ | 14,180 |   |
|                                                              |   |              |   |   |   |   |   |   |   |   |   |   |

|                                                                                   |   | Long-Term               |   |   |            |   |
|----------------------------------------------------------------------------------------|--------|-------------------------|--------|--------|-----------------|--------|
|                                                                                   |   | Auction Rate Securities |   |   | Corporate Bonds |   |   | Preferred Shares |   |   | Total |   |
| Balance as of January 1, 2010                                                          |   | $                       | 9,050  |   |            | $      | 3,689 |   |   | $ | 1,441 |   |   | $ | 14,180 |   |
|                                                                                   |   |                    |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized  net gain  – included in other comprehensive loss |   |                    | 325    |   |            |   | 1,711 |   |   |   | — |   |   |   | 2,036 |   |
|                                                                                   |   |                    |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized loss - included in earnings                                                 |   |                    | (328   | )      |            |   | (1,566 | ) |   |   | (79 | ) |   |   | (1,973 | ) |
|                                                                                   |   |                    |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Realized (loss) / gain from sales or settlements                                       |   |                    | (342   | )      |            |   | — |   |   |   | 130 |   |   |   | (212 | ) |
|                                                                                   |   |                    |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sales or settlements                                                     |   |                    | (1,640 | )      |            |   | — |   |   |   | (1,455 | ) |   |   | (3,095 | ) |
|                                                                                   |   |                    |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Balance as of September 30, 2010                                                       |   | $                       | 7,065  |   |            | $      | 3,834 |   |   | $ | 37 |   |   | $ | 10,936 |   |

----

|                              |   | Shares underOptions(in thousands) |    |   | WeightedAverageExercisePrice |   |    | RemainingContractualLife (in years) |   |   | AggregateIntrinsicValue |   |
|-----------------------------------|--------|-----------------------------------|---------|--------|------------------------------|--------|---------|------------------------------------------|--------|--------|-------------------------|--------|
| Outstanding at January 1, 2010    |   |                              | 770     |   |                         | $      | 18.28   |                                     |   |   |                    |   |   |   |
| Granted                           |   |                              | — |   |                         |   | — |                                     |   |   |                    |   |   |   |
| Exercised                         |   |                              | — |   |                         |   | — |                                     |   |   |                    |   |   |   |
| Forfeited                         |   |                              | (480    | )      |                         |   | 20.56   |                                     |   |   |                    |   |   |   |
| Outstanding at September 30, 2010 |   |                              | 290     |   |                         | $      | 14.29   |                                     |   |   | 0.7                     |   |   | $ | — |   |
| Exercisable at September 30, 2010 |   |                              | 290     |   |                         | $      | 14.29   |                                     |   |   | 0.7                     |   |   | $ | — |   |

|                              |   | Number of Shares(in thousands) |    |   | Weighted- Average Grant Date Fair Value |   |
|-----------------------------------|--------|--------------------------------|---------|--------|-----------------------------------------|--------|
| Outstanding at January 1, 2010    |   |                           | 594     |   |                                    | $      | 5.58 |   |
|   Granted               |   |                           | — |   |                                    |   | — |   |
|   Vested                |   |                           | (242    | )      |                                    |   | 7.09 |   |
|   Forfeited             |   |                           | (90     | )      |                                    |   | 4.50 |   |
| Outstanding at September 30, 2010 |   |                           | 262     |   |                                    | $      | 4.55 |   |

----

|                                 | Three Months Ended |   | Nine Months Ended |   |
|--------------------------------------|--------------------|--------|-------------------|--------|
|                                 | September 30,      |   | September 30,     |   |
|                                 | 2010               |   | 2009              |   | 2010 |   | 2009 |   |
| Current                              |               | $      | —           |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |
| Deferred                             |               |   | 3,882             |   |   |   | 3,772 |   |   |   | 7,582 |   |   |   | 11,214 |   |
|                                 |               | $      | 3,882             |   |   | $ | 3,772 |   |   | $ | 7,582 |   |   | $ | 11,214 |   |
| Less: Changes in Valuation allowance |               |   | (3,882            | )      |   |   | (3,772 | ) |   |   | (7,582 | ) |   |   | (11,214 | ) |
| Total                                |               | $      | —           |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |

|                                                                                |   | Three Months Ended |    |   | Nine Months Ended       |   |
|-------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------------|--------|
| September 30, 2010                                                                  |   | Net Loss           |    |   | Weighted Average Shares |   |   | Per Share |   |   | Net Loss |   |   | Weighted Average Shares |   |   | Per Share |   |
| Basic loss per share attributable to 4Kids Entertainment Inc. common shareholders   |   | $                  | (9,844  | )      |                    |   | 13,528,958 |   |   | $ | (0.73 | ) |   | $ | (19,789 | ) |   |   | 13,437,048 |   |   | $ | (1.47 | ) |
|                                                                                |   |               |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of dilutive security – Stock options                                   |   |               | — |   |                    |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                                                                                |   |               |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted loss per share attributable to 4Kids Entertainment Inc. common shareholders |   | $                  | (9,844  | )      |                    |   | 13,528,958 |   |   | $ | (0.73 | ) |   | $ | (19,789 | ) |   |   | 13,437,048 |   |   | $ | (1.47 | ) |

----

|                                                                                |   | Three Months Ended |    |   | Nine Months Ended       |   |
|-------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------------|--------|
| September 30, 2009                                                                  |   | Net Loss           |    |   | Weighted Average Shares |   |   | Per Share |   |   | Net Loss |   |   | Weighted Average Shares |   |   | Per Share |   |
| Basic loss per share attributable to 4Kids Entertainment Inc. common shareholders   |   | $                  | (5,003  | )      |                    |   | 13,352,053 |   |   | $ | (0.37 | ) |   | $ | (20,793 | ) |   |   | 13,286,726 |   |   | $ | (1.56 | ) |
|                                                                                |   |               |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of dilutive security – Stock options                                   |   |               | — |   |                    |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                                                                                |   |               |    |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted loss per share attributable to 4Kids Entertainment Inc. common shareholders |   | $                  | (5,003  | )      |                    |   | 13,352,053 |   |   | $ | (0.37 | ) |   | $ | (20,793 | ) |   |   | 13,286,726 |   |   | $ | (1.56 | ) |

|                                 |   | Total Expenses |   |   | Remaining Liability as of September 30, 2010 |   |
|--------------------------------------|--------|----------------|--------|--------|----------------------------------------------|--------|
| Severance and related costs          |   | $              | 101    |   |                                         | $      | 50 |   |
| Inventory write-down and destruction |   |           | 110    |   |                                         |   | 18 |   |
| Disposal of property and equipment   |   |           | 1,120  |   |                                         |   | — |   |
| Termination of contracts and leases  |   |           | 1,193  |   |                                         |   | 1,100 |   |
|     Total        |   | $              | 2,524  |   |                                         | $      | 1,168 |   |

----

|                              | Three Months Ended |   | Nine Months Ended |   |
|-----------------------------------|--------------------|--------|-------------------|--------|
|                              | September 30,      |   | September 30,     |   |
|                              | 2010               |   | 2009              |   | 2010 |   | 2009 |   |
| Net revenues                      |               | $      | 147               |   |   | $ | 1,534 |   |   | $ | 204 |   |   | $ | 1,786 |   |
| Total costs and expenses          |               |   | 3,309             |   |   |   | 5,298 |   |   |   | 6,614 |   |   |   | 14,458 |   |
| Loss from discontinued operations |               | $      | (3,162            | )      |   | $ | (3,764 | ) |   | $ | (6,410 | ) |   | $ | (12,672 | ) |

|                                              |   | September 30, 2010 |    |   | December 31, 2009 |   |
|---------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
| ASSETS                                            |   |               |    |   |              |   |
|   Accounts receivable – net       |   | $                  | 12      |   |              | $      | 627 |   |
|   Inventory                             |   |               | — |   |              |   | 1,273 |   |
|   Prepaid and other current assets      |   |               | 53      |   |              |   | 501 |   |
| Current assets of discontinued operations         |   | $                  | 65      |   |              | $      | 2,401 |   |
|                                              |   |               |    |   |              |   |   |   |
|   Property and equipment - net          |   | $                  | — |   |              | $      | 1,235 |   |
|   Other assets - net                    |   |               | — |   |              |   | 486 |   |
| Non-current assets of discontinued operations     |   | $                  | — |   |              | $      | 1,721 |   |
|                                              |   |               |    |   |              |   |   |   |
| LIABILITIES                                       |   |               |    |   |              |   |   |   |
|   Accounts payable and accrued expenses |   | $                  | 2,272   |   |              | $      | 2,738 |   |
| Current liabilities of discontinued operations    |   | $                  | 2,272   |   |              | $      | 2,738 |   |
|                                              |   |               |    |   |              |   |   |   |

----

----

|   | ° | 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 September 30, 2010 and 2009 there were no distributions and approximately $8,723 and $8,116, 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 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.  On September 10, 2007, the Company purchased a 25% interest in such patents from Cornerstone for $750. During the three and nine months ended September 30, 2010, the Company earned no royalties, and during the three and nine months ended September 30, 2009, the Company earned royalties of $42 and $115, respectively, associated with its portion of such patents, which such royalties are 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.  During the three and nine months ended September 30, 2010, the Company earned royalties and / or fees of $6 and $74, respectively, and during the three and nine months ended September 30, 2009, the Company earned royalties and or fees of $361 and $690, respectively, relating to the sales of “Chaotic” trading cards under the TCD agreement.  The Company’s portion of such royalties and / or management fee were eliminated in its consolidated financial statements. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   ° | 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) if no amounts are outstanding to 4Kids Digital under the loan agreement of line of credit agreement, 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.  For the three and nine months ended September 30, 2010 and 2009, 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.   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). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ° | Interest Purchase Agreement- On March 2, 2009, TC Digital, the Company and Home Focus entered into various agreements pursuant to which TC Digital and Home Focus agreed to form TDI and the Company agreed to purchase the TDI Interest from Home Focus.  The purchase price for the TDI Interest is an initial price of $1,575 with an obligation to pay up to an additional $1,000 (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. The Company has paid Home Focus the following consideration for the TDI interest: the Company paid $475 upon execution of the various agreements and has paid the monthly installments of $125 for each of April, May, June, July and August of 2009.  The Company ceased paying Home Focus additional amounts under the Interest Purchase Agreement due to the failure by Home Focus to make the required capital contributions to TDI required under the Shareholders Agreement, dated March 2, 2009, entered into by the Company and Home Focus with respect to TDI (the “TDI Agreement”).  See Note 9. Legal Proceedings for details of this matter. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ° | TDI Shareholders Agreement- Under the TDI Agreement, the Board of Directors of TDI consists 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.   For the three and nine months ended September 30, 2010, TC Digital and TC Websites earned no royalties and for the three and nine months ended September 30, 2009, TC Digital and TC Websites earned royalties of $11 and $45, respectively, under this agreement arising from the net sales of “Chaotic” trading cards in the TDI Territory.  The royalties earned by TC Digital and TC Websites are eliminated in the Company’s consolidated financial statements. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                     |   | Three Months Ended September 30, 2009 |   |
|--------------------------|--------|---------------------------------------|--------|
|                     |   | As Originally Reported                |   |   | As Reclassified |   |
| Total net revenues       |   | $                                     | 5,736  |   |   | $ | 5,312 |   |
| Total costs and expenses |   |                                  | 9,191  |   |   |   | 8,767 |   |
| Loss from operations     |   | $                                     | (3,455 | ) |   | $ | (3,455 | ) |
|                     |   |                                  |   |   |   |   |   |   |

|                     |   | Nine Months Ended September 30, 2009 |   |
|--------------------------|--------|--------------------------------------|--------|
|                     |   | As Originally Reported               |   |   | As Reclassified |   |
| Total net revenues       |   | $                                    | 20,077 |   |   | $ | 17,989 |   |
| Total costs and expenses |   |                                 | 28,314 |   |   |   | 26,226 |   |
| Loss from operations     |   | $                                    | (8,237 | ) |   | $ | (8,237 | ) |
|                     |   |                                 |   |   |   |   |   |   |

----

| Year EndingDecember 31, |   | Amount |   |
|-------------------------|--------|--------|--------|
| 2010                    |   | $      | 6,819  |   |
| 2011                    |   |   | 11,500 |   |
| 2012                    |   |   | 11,500 |   |
| 2013                    |   |   | 6,500  |   |
| Total                   |   | $      | 36,319 |   |

----

|                                                            | Three Months Ended |   | Nine Months Ended |   |
|-----------------------------------------------------------------|--------------------|--------|-------------------|--------|
|                                                            | September 30,      |   | September 30,     |   |
|                                                            | 2010               |   | 2009              |   | 2010 |   | 2009 |   |
| TC Digital net loss before common units noncontrolling interest |               | $      | (3,323            | )      |   | $ | (3,697 | ) |   | $ | (7,554 | ) |   | $ | (11,349 | ) |
| Noncontrolling interest percentage                              |               |   | 45                | %      |   |   | 45 | % |   |   | 45 | % |   |   | 45 | % |
| Noncontrolling interest loss allocation                         |               |   | (1,496            | )      |   |   | (1,664 | ) |   |   | (3,400 | ) |   |   | (5,107 | ) |
| Less: Capital contribution from noncontrolling interest         |               |   | —           |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Loss attributable to noncontrolling interest                    |               | $      | (1,496            | )      |   | $ | (1,664 | ) |   | $ | (3,400 | ) |   | $ | (5,107 | ) |

|                                                             | Three Months Ended |   | Nine Months Ended |   |
|------------------------------------------------------------------|--------------------|--------|-------------------|--------|
|                                                             | September 30,      |   | September 30,     |   |
|                                                             | 2010               |   | 2009              |   | 2010 |   | 2009 |   |
| TC Websites net loss before common units noncontrolling interest |               | $      | (689              | )      |   | $ | (990 | ) |   | $ | (1,360 | ) |   | $ | (3,341 | ) |
| Noncontrolling interest percentage                               |               |   | 45                | %      |   |   | 45 | % |   |   | 45 | % |   |   | 45 | % |
| Noncontrolling interest loss allocation                          |               |   | (310              | )      |   |   | (445 | ) |   |   | (612 | ) |   |   | (1,503 | ) |
| Less: Capital contribution from noncontrolling interest          |               |   | 1                 |   |   |   | 51 |   |   |   | 10 |   |   |   | 105 |   |
| Loss attributable to noncontrolling interest                     |               | $      | (309              | )      |   | $ | (394 | ) |   | $ | (602 | ) |   | $ | (1,398 | ) |

Subsequent 
events were evaluated by the Company through the date the financial statements were issued. There were no events that occurred subsequent to September 30, 2010 that would require recognition in the Company’s consolidated financial statements.

----

|                                      |   | Licensing |    |   | Advertising Media and Broadcast |   |    | TV and Film Production/ Distribution |   |   | Total   |   |
|-------------------------------------------|--------|-----------|---------|--------|---------------------------------|--------|---------|--------------------------------------|--------|--------|---------|--------|
| Three Months Ended September 30,2010:     |   |      |    |   |                            |   |    |                                 |   |   |    |   |
| Net revenues from external customers      |   | $         | 2,158   |   |                            | $      | 438     |                                 |   | $      | 390     |   |   | $ | 2,986 |   |
| Amortization of television and film costs |   |      | — |   |                            |   | — |                                 |   |   | 2,719   |   |   |   | 2,719 |   |
| Interest income                           |   |      | 95      |   |                            |   | — |                                 |   |   | — |   |   |   | 95 |   |
| Impairment of investment securities       |   |      | (1,552  | )      |                            |   | — |                                 |   |   | — |   |   |   | (1,552 | ) |
| Loss on sale of investment securities     |   |      | (212    | )      |                            |   | — |                                 |   |   | — |   |   |   | (212 | ) |
| Segment loss                              |   |      | (3,621  | )      |                            |   | (1,472  | )                                    |   |   | (3,395  | )      |   |   | (8,488 | ) |
|                                      |   |      |    |   |                            |   |    |                                 |   |   |    |   |   |   |   |   |
| 2009:                                     |   |      |    |   |                            |   |    |                                 |   |   |    |   |   |   |   |   |
| Net revenues from external customers      |   | $         | 3,333   |   |                            | $      | 411     |                                 |   | $      | 1,568   |   |   | $ | 5,312 |   |
| Amortization of television and film costs |   |      | — |   |                            |   | — |                                 |   |   | 1,438   |   |   |   | 1,438 |   |
| Interest income (expense)                 |   |      | 183     |   |                            |   | (5      | )                                    |   |   | — |   |   |   | 178 |   |
| Impairment of investment securities       |   |      | (71     | )      |                            |   | — |                                 |   |   | — |   |   |   | (71 | ) |
| Loss on sale of investment securities     |   |      | — |   |                            |   | — |                                 |   |   | — |   |   |   | — |   |
|     Segment loss           |   |      | (521    | )      |                            |   | (1,292  | )                                    |   |   | (1,535  | )      |   |   | (3,348 | ) |
|                                      |   |      |    |   |                            |   |    |                                 |   |   |    |   |   |   |   |   |
| Nine Months Ended September 30,2010:      |   |      |    |   |                            |   |    |                                 |   |   |    |   |   |   |   |   |
| Net revenues from external customers      |   | $         | 7,324   |   |                            | $      | 119     |                                 |   | $      | 2,229   |   |   | $ | 9,672 |   |
| Amortization of television and film costs |   |      | — |   |                            |   | — |                                 |   |   | 4,804   |   |   |   | 4,804 |   |
| Interest income                           |   |      | 282     |   |                            |   | 6       |                                 |   |   | — |   |   |   | 288 |   |
| Impairment of investment securities       |   |      | (1,973  | )      |                            |   | — |                                 |   |   | — |   |   |   | (1,973 | ) |
| Loss on sale of investment securities     |   |      | (212    | )      |                            |   | — |                                 |   |   | — |   |   |   | (212 | ) |
| Segment loss                              |   |      | (6,191  | )      |                            |   | (5,423  | )                                    |   |   | (5,777  | )      |   |   | (17,391 | ) |
| Segment assets                            |   |      | 21,567  |   |                            |   | 3,235   |                                 |   |   | 9,590   |   |   |   | 34,392 |   |
|                                      |   |      |    |   |                            |   |    |                                 |   |   |    |   |   |   |   |   |
| 2009:                                     |   |      |    |   |                            |   |    |                                 |   |   |    |   |   |   |   |   |
| Net revenues from external customers      |   | $         | 11,246  |   |                            | $      | 1,408   |                                 |   | $      | 5,335   |   |   | $ | 17,989 |   |
| Amortization of television and film costs |   |      | — |   |                            |   | — |                                 |   |   | 3,695   |   |   |   | 3,695 |   |
| Interest income                           |   |      | 911     |   |                            |   | 14      |                                 |   |   | — |   |   |   | 925 |   |
| Impairment of investment securities       |   |      | (169    | )      |                            |   | — |                                 |   |   | — |   |   |   | (169 | ) |
| Loss on sale of investment securities     |   |      | (7,250  | )      |                            |   | — |                                 |   |   | — |   |   |   | (7,250 | ) |
| Segment loss                              |   |      | (7,578  | )      |                            |   | (3,898  | )                                    |   |   | (3,255  | )      |   |   | (14,731 | ) |
| Segment assets                            |   |      | 39,566  |   |                            |   | 3,633   |                                 |   |   | 22,144  |   |   |   | 65,343 |   |

----

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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|                                                                                 |   | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30, |
|--------------------------------------------------------------------------------------|--------|---------------------------------|--------------------------------|
|                                                                                 |   | 2010                            |                           | 2009 |   | 2010 |   | 2009 |   |
| Net revenues                                                                         |   |                            | 100                            | % |   | 100 | % |   | 100 | % |   | 100 | % |
|                                                                                 |   |                            |                           |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                                                  |   |                            |                           |   |   |   |   |   |   |   |   |   |   |
|    Selling, general and administrative                                |   |                            | 237                            |   |   | 138 |   |   | 211 |   |   | 125 |   |
|    Amortization of television and film costs                          |   |                            | 91                             |   |   | 27 |   |   | 50 |   |   | 21 |   |
|           Total costs and expenses |   |                            | 328                            |   |   | 165 |   |   | 261 |   |   | 146 |   |
|                                                                                 |   |                            |                           |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                                 |   |                            | (228                           | ) |   | (65 | ) |   | (161 | ) |   | (46 | ) |
|                                                                                 |   |                            |                           |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                      |   |                            | 3                              |   |   | 3 |   |   | 3 |   |   | 5 |   |
| Impairment of investment securities                                                  |   |                            | (52                            | ) |   | (1 | ) |   | (20 | ) |   | (1 | ) |
| Loss on sale of investment securities                                                |   |                            | (7                             | ) |   | — |   |   | (2 | ) |   | (40 | ) |
|           Total other expense      |   |                            | (56                            | ) |   | 2 |   |   | (19 | ) |   | (36 | ) |
|                                                                                 |   |                            |                           |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes                                                             |   |                            | (284                           | ) |   | (63 | ) |   | (180 | ) |   | (82 | ) |
| Benefit from income taxes                                                            |   |                            | —                        |   |   | — |   |   | — |   |   | — |   |
| Loss from continuing operations                                                      |   |                            | (284                           | ) |   | (63 | ) |   | (180 | ) |   | (82 | ) |
| Loss from discontinued operations                                                    |   |                            | (106                           | ) |   | (71 | ) |   | (66 | ) |   | (70 | ) |
| Net Loss                                                                             |   |                            | (390                           | ) |   | (134 | ) |   | (246 | ) |   | (152 | ) |
|                                                                                 |   |                            |                           |   |   |   |   |   |   |   |   |   |   |
| Loss attributable to noncontrolling interests                                        |   |                            | 60                             |   |   | 40 |   |   | 41 |   |   | 36 |   |
| Net loss attributable to 4Kids Entertainment, Inc.                                   |   |                            | (330                           | )% |   | (94 | )% |   | (205 | )% |   | (116 | )% |
|                                                                                 |   |                            |                           |   |   |   |   |   |   |   |   |   |   |

|                                        |   | 2010   |   |   | 2009   |   |   | $ Change |   |   | % Change |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
| Licensing                                   |   | $      | 2,158  |   |   | $      | 3,333  |     |   | $      | (1,175   | )      |   |   | (35 | )% |
| Advertising, Media and Broadcast            |   |   | 438    |   |   |   | 411    |     |   |   | 27       |   |   |   | 7 |   |
| Television and Film Production/Distribution |   |   | 390    |   |   |   | 1,568  |     |   |   | (1,178   | )      |   |   | (75 | ) |
| Total                                       |   | $      | 2,986  |   |   | $      | 5,312  |     |   | $      | (2,326   | )      |   |   | (44 | )% |

|                                        |   | 2010   |   |   | 2009   |   |   | $ Change |   |   | % Change |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
| Licensing                                   |   | $      | 7,324  |   |   | $      | 11,246 |     |   | $      | (3,922   | )      |   |   | (35 | )% |
| Advertising, Media and Broadcast            |   |   | 119    |   |   |   | 1,408  |     |   |   | (1,289   | )      |   |   | (92 | ) |
| Television and Film Production/Distribution |   |   | 2,229  |   |   |   | 5,335  |     |   |   | (3,106   | )      |   |   | (58 | ) |
| Total                                       |   | $      | 9,672  |   |   | $      | 17,989 |     |   | $      | (8,317   | )      |   |   | (46 | )% |

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| (i)   | reduced licensing revenue on the “Yu-Gi-Oh!” and “Teenage Mutant Ninja Turtles” Properties, worldwide of approximately $840 and $435, respectively; as well as |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   | reduced licensing revenue on the “Monster Jam” Property, domestically of approximately $215; partially offset by |
|------------------|------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | increased licensing revenue on the “Viva Piñata” Property, domestically of approximately $330. |
|-------------------|-----------------------------------------------------------------------------------------------------------------|

| (i)   | reduced licensing revenues on the “Monster Jam” and “American Kennel Club” Properties, domestically of approximately $1,695 and $245, respectively; as well as |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   | reduced licensing revenues on the “Teenage Mutant Ninja Turtles”, “Yu-Gi-Oh and “Dinosaur King” Properties, worldwide of approximately $1,155, $645 and $280, respectively; partially offset by |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | increased licensing revenue on the “Viva Piñata” Property, domestically of approximately $365. |
|-------------------|-----------------------------------------------------------------------------------------------------------------|

| (i)   | decreased international broadcast sales from the  “Dinosaur King”, “Yu-Gi-Oh!” and “Teenage Mutant Ninja Turtles” television series of approximately $970, $560 and $390, respectively; as well as |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   | decreased broadcast sales from the “Chaotic” television series of approximately $390; as well as |
|------------------|--------------------------------------------------------------------------------------------------------------|

| (iii)   | decreased contract revenue from the “Pat and Stan” television series of approximately $240. |
|-------------------|---------------------------------------------------------------------------------------------------------|

| (i)   | decreased personnel related costs of approximately $5,360; as well as |
|-----------------|-----------------------------------------------------------------------|

| (ii)   | decreased international selling expenses of approximately $1,345; partially offset by |
|------------------|---------------------------------------------------------------------------------------|

| (iii)   | decreased capitalized production salaries which increased costs by approximately $3,140; as well as |
|-------------------|-----------------------------------------------------------------------------------------------------|

| (iv)   | increased bad debt expense of approximately $1,005. |
|------------------|-----------------------------------------------------|

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|                                      |   | 2010 |   |   | 2009   |   |   | $ Change |   |   | % Change |
|-------------------------------------------|--------|------|--------|--------|--------|--------|--------|----------|--------|--------|----------|
| Amortization of Television and Film Costs |   | $    | 2,719  |   |   | $      | 1,438  |     |   | $      | 1,281    |   |   |   | 89 | % |

|                                      |   | 2010 |   |   | 2009   |   |   | $ Change |   |   | % Change |
|-------------------------------------------|--------|------|--------|--------|--------|--------|--------|----------|--------|--------|----------|
| Amortization of Television and Film Costs |   | $    | 4,804  |   |   | $      | 3,695  |     |   | $      | 1,109    |   |   |   | 30 | % |

|                                        |   | 2010   |   |   | 2009   |   |   | $ Change |   |   | % Change |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
| Licensing                                   |   | $      | (3,621 | )      |   | $      | (521   | )        |   | $      | (3,100   | )      |   |   | (595 | )% |
| Advertising, Media and Broadcast            |   |   | (1,472 | )      |   |   | (1,292 | )        |   |   | (180     | )      |   |   | (14 | ) |
| Television and Film Production/Distribution |   |   | (3,395 | )      |   |   | (1,535 | )        |   |   | (1,860   | )      |   |   | (121 | ) |
| Total                                       |   | $      | (8,488 | )      |   | $      | (3,348 | )        |   | $      | (5,140   | )      |   |   | (154 | )% |

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|                                        |   | 2010   |    |   | 2009   |   |    | $ Change |   |   | % Change |   |
|---------------------------------------------|--------|--------|---------|--------|--------|--------|---------|----------|--------|--------|----------|--------|
| Licensing                                   |   | $      | (6,191  | )      |   | $      | (7,578  | )        |   | $      | 1,387    |   |   |   | 18 | % |
| Advertising, Media and Broadcast            |   |   | (5,423  | )      |   |   | (3,898  | )        |   |   | (1,525   | )      |   |   | (39 | ) |
| Television and Film Production/Distribution |   |   | (5,777  | )      |   |   | (3,255  | )        |   |   | (2,522   | )      |   |   | (77 | ) |
| Total                                       |   | $      | (17,391 | )      |   | $      | (14,731 | )        |   | $      | (2,660   | )      |   |   | (18 | )% |

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|                              | Three Months Ended |   | Nine Months Ended |   |
|-----------------------------------|--------------------|--------|-------------------|--------|
|                              | September 30,      |   | September 30,     |   |
|                              | 2010               |   | 2009              |   | 2010 |   | 2009 |   |
| Net revenues                      |               | $      | 147               |   |   | $ | 1,534 |   |   | $ | 204 |   |   | $ | 1,786 |   |
| Total costs and expenses          |               |   | 3,309             |   |   |   | 5,298 |   |   |   | 6,614 |   |   |   | 14,458 |   |
| Loss from discontinued operations |               | $      | (3,162            | )      |   | $ | (3,764 | ) |   | $ | (6,410 | ) |   | $ | (12,672 | ) |

|                                              |   | September 30, 2010 |    |   | December 31, 2009 |   |
|---------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
| ASSETS                                            |   |               |    |   |              |   |
|   Accounts receivable – net       |   | $                  | 12      |   |              | $      | 627 |   |
|   Inventory                             |   |               | — |   |              |   | 1,273 |   |
|   Prepaid and other current assets      |   |               | 53      |   |              |   | 501 |   |
| Current assets of discontinued operations         |   | $                  | 65      |   |              | $      | 2,401 |   |
|                                              |   |               |    |   |              |   |   |   |
|   Property and equipment - net          |   | $                  | — |   |              | $      | 1,235 |   |
|   Other assets - net                    |   |               | — |   |              |   | 486 |   |
| Non-current assets of discontinued operations     |   | $                  | — |   |              | $      | 1,721 |   |
|                                              |   |               |    |   |              |   |   |   |
| LIABILITIES                                       |   |               |    |   |              |   |   |   |
|   Accounts payable and accrued expenses |   | $                  | 2,272   |   |              | $      | 2,738 |   |
| Current liabilities of discontinued operations    |   | $                  | 2,272   |   |              | $      | 2,738 |   |
|                                              |   |               |    |   |              |   |   |   |

|                      | September 30, |   | December 31, |   |     |   |
|---------------------------|---------------|--------|--------------|--------|----------|--------|
|                      | 2010          |   | 2009         |   | $ Change |   |
|                      |          |   |         |   |     |   |   |   |   |
| Cash and cash equivalents |          | $      | 3,977        |   |     | $      | 3,621 |   |   | $ | 356 |   |

----

|        | September 30, |   | December 31, |   |     |   |
|-------------|---------------|--------|--------------|--------|----------|--------|
|        | 2010          |   | 2009         |   | $ Change |   |
|        |          |   |         |   |     |   |   |   |   |
| Investments |          | $      | 10,936       |   |     | $      | 14,180 |   |   | $ | (3,244 |  ) |

----

| Sources (Uses)       |   | 2010   |   |   | 2009   |   |
|----------------------|--------|--------|--------|--------|--------|--------|
| Operating Activities |   | $      | (2,403 | )      |   | $      | (12,835 | ) |
| Investing Activities |   |   | 2,870  |   |   |   | 2,467 |   |
| Financing Activities |   |   | (44    | )      |   |   | 47 |   |

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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. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 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        |   |
|                                                                       |   |

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