UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2004
OR
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission File No. 0-7843

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

Registrant’s telephone number, including area code:  (212) 758-7666

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to the Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)

FORM 10-K REPORT INDEX

10-K Part
and Item No.

PART I

Item 1

Item 2

Item 3

Item 4

PART II

Item 5

Item 6

Item 7

Item 7A

Item 8

Item 9

Item 9A

Item 9B

PART III

Item 10

Item 11

Item 12

Item 13

Item 14

PART IV

Item 15

PART I

Throughout this 10-K report we “incorporate by reference” certain information in parts of other documents filed with the Securities and Exchange Commission (the “SEC”). The SEC allows us to disclose important information by referring to it in that manner. Please refer to such information.

We are making forward-looking statements in this report. Beginning on page 16, we discuss some of the business risks and factors that could cause actual results to differ materially from those stated in the forward-looking statements.

Item 1. Business

       (a)   General Development and Narrative Description of Business — 4Kids Entertainment, Inc. (the “Company”), together with the subsidiaries through which the Company’s businesses are conducted, is a diversified entertainment and media company specializing in the children’s entertainment market with operations in the following business segments: (i) Licensing, (ii) Advertising Media and Broadcasting, and (iii) Television and Film Production/Distribution. The Company was organized as a New York Corporation in 1970.

Licensing — The Company’s wholly-owned subsidiary, 4Kids Entertainment Licensing, Inc. (“4Kids Licensing”), is engaged in the business of licensing the merchandising rights to popular children’s television series, properties and product concepts (collectively the “Properties”). 4Kids Licensing typically acts as exclusive merchandising agent in connection with the grant to third parties of licenses to manufacture and sell all types of merchandise, including toys, videogames, trading cards, apparel, housewares, footwear, books and other published materials, based on such Properties. 4Kids Entertainment International, Ltd. (“4Kids International”), the Company’s wholly-owned subsidiary based in London, manages the Properties represented by the Company in the United Kingdom and European marketplaces. Licensing revenues accounted for approximately 49%, 54% and 54% of consolidated net revenues for the years ended December 31, 2004, 2003 and 2002, respectively.

The following Properties are among those represented exclusively by 4Kids Licensing:

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Company-Owned Properties — The Company developed and owns WMAC Masters, a live action television series in which skilled martial arts professionals compete for supremacy. The Company also owns “Charlie Chan”, the fictional Asian detective who has been the subject of numerous films based on the character created by Earl Derr Biggers. In March 2001, the Company optioned the film rights to “Charlie Chan” to Twentieth Century Fox Film Corporation and in 2004 that option was extended by Twentieth Century Fox Film Corporation for an additional two years. As previously noted, the Company is a co-owner of the new “Teenage Mutant Ninja Turtles” television series and the twenty-six episodes of the “Cubix” animated television series.

Product Concepts — 4Kids Technology, Inc., a wholly-owned subsidiary, develops ideas and concepts for licensing which integrate new and existing technologies with traditional game and toy play patterns. Websites 4Kids, Inc., a wholly-owned subsidiary, specializes in website development by creating websites designed to enhance and support the marketing of children’s properties represented by the Company.

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Advertising Media and Broadcasting — The Company, through a multi-year agreement with Fox leases Fox’s Saturday morning programming block from 8am to 12pm eastern/pacific time (7am to 11am central time). In January, 2005, the Company changed the name of the Saturday morning programming block from Fox Box to 4Kids TV. The Company provides substantially all programming content to be broadcast on 4Kids TV. 4Kids Ad Sales, Inc., a wholly-owned subsidiary of the Company, retains all of the revenue from its sale of network advertising time for the four-hour time period.

The Company’s wholly-owned subsidiary, The Summit Media Group, Inc. (“Summit Media”), provides print and broadcast media planning and buying services for clients which are principally in the children’s toy and game business. Summit Media is compensated by receiving a percentage of the cost of the media it places.

The Advertising Media and Broadcasting segment accounted for 23%, 22% and 21% of consolidated net revenues for the years ended December 31, 2004, 2003 and 2002, respectively.

Television and Film Production/Distribution — The Company’s wholly-owned subsidiary, 4Kids Productions, Inc. (“4Kids Productions”), produces and acquires animated and live-action television programs and theatrical motion pictures for distribution to the television, home video and theatrical markets. 4Kids Productions also adapts foreign programming for the U.S. market and produces original animated television programming for domestic and international broadcast. Additionally, 4Kids Productions produces original music compositions for use with its television and film production activities.

4Kids Entertainment Music, Inc. (“4Kids Music”), a wholly-owned subsidiary, markets and manages the musical operations for the Company on certain existing and newly created music associated with its television programming. 4Kids Entertainment Home Video, Inc. (“4Kids Home Video”), a wholly-owned subsidiary, distributes home videos associated with television programming produced by 4Kids Productions.

The Television and Film Production/Distribution segment accounted for 28%, 24%, and 25% of consolidated net revenues for the years ended December 31, 2004, 2003 and 2002, respectively.

       (b)   Financial Information About Industry Segments — Financial information regarding industry segments can be found in Note 13 of the Notes to the Company’s consolidated financial statements.

       (c)   Dependence on a Few Sources of Revenues — The Company typically derives a substantial portion of its revenues from a small number of Properties, which Properties usually generate revenues only for a limited period of time. Since the Company’s revenues are highly subject to changing trends in the toy, game and entertainment businesses, the Company’s revenues from year to year from particular properties are subject to dramatic increases and decreases. It is not possible to accurately predict the length of time a property will be commercially successful or if a property will be commercially successful at all. Popularity of Properties can vary from months to years. In addition, the Company’s control over the timing of payments made by licensees of various rights to the properties is limited, as some payments are made upon the execution and delivery of license agreements and some payments are made in quarterly royalty payments reported by the licensees. Due to these factors, the Company must continually seek new Properties from which it can derive revenues.

Two Properties, “Yu-Gi-Oh!” and “Teenage Mutant Ninja Turtles” represented 55% of consolidated net revenues for fiscal 2004. One licensee, Konami Corporation, represented 18% of consolidated net revenues for fiscal 2004. For more information on Revenues/Major Customers, please see Note 7 of the Notes to the Company’s consolidated financial statements.

       (d)   Trademarks and Copyrights — The Company generally does not own any trademarks or copyrights in properties which the Company represents as merchandising agent. The trademarks and copyrights are typically owned by the creator of the Property or by the entity, such as a television producer, which may expend substantial amounts of resources in developing or promoting the property. However, the Company does own the copyrights and trademarks to “Charlie Chan” and “WMAC Masters” and is a joint copyright holder of “Cubix” and the new “Teenage Mutant Ninja Turtles” television series.

       (e)   Seasonal Aspects — A substantial portion of the Company’s revenues and net income are subject to the seasonal and trend variations of the toy and game industry. Typically, a majority of toy orders are shipped in the third and fourth calendar quarters. Historically, the Company’s net income from toy and game royalties during the second half of the year has generally been greater than during the first half of the year. Additionally, advertising revenues derived from the sale of commercial time on 4Kids TV is generally higher in the fourth quarter in view of the higher advertising rates derived from children’s advertisers for advertising during the holiday season.

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       (f)   Competition — The Company’s principal competitors in the area of merchandise licensing are the large media companies with theatrical distribution and television broadcast distribution (e.g., Disney, Time-Warner, Viacom), toy companies, other licensing companies, and numerous individuals who act as merchandising agents. There are also many independent product development firms with which the Company competes. Many of these companies have substantially greater resources than the Company and represent properties which have been commercially successful for longer periods than the Properties represented by the Company. The Company believes it would be relatively easy for a potential competitor to enter its market in light of the relatively small investment required to commence operations as a merchandising agent. However, the ultimate success of a new entrant in the field would depend on its access to toy and other manufacturers, access to distribution of television based properties, access to properties to be licensed, retail market acceptance of properties and its know-how in the negotiation and subsequent administration of licenses.

The Company’s Advertising Media and Broadcasting segment also operates in a highly competitive marketplace against companies with substantially greater resources and distribution networks than the Company.

The Company’s Television and Film Production/Distribution segment competes with all forms of entertainment directed at children. There are a significant number of companies that produce and/or broadcast television programming and distribute theatrical motion pictures and home videos for the children’s audience. The Company also competes with these companies to obtain creative talent to write adapt, score, provide voice-overs and produce the television programs and theatrical motion pictures produced by the Company and its subsidiaries.

The Company’s ability to derive advertising revenue from the sale of commercial time on 4Kids TV depends, in substantial part, on the popularity of the television shows that the Company broadcasts on 4Kids TV. The Company also faces significant competition from other television broadcasters and cable networks, including competition from successful television programs that the Company produces (“Pokémon” and “Yu-Gi-Oh!”), which are broadcast on Saturday mornings on a competing network.

       (g)   Employees — As of March 15, 2005, the Company had a total of 240 full-time employees in its domestic and international operations. Of the total, approximately 85 employees were primarily rendering services for the Licensing segment, approximately 44 were primarily rendering services for the Advertising Media and Broadcasting segment and approximately 111 were primarily rendering services for the Television and Film Production/Distribution segment. The Company also hires additional employees on a program-by-program basis which are typically allocated to the capitalized cost of the related programming.

       (h)   Available Information — The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the Proxy Statement for its Annual Meeting of Stockholders are made available, free of charge, through its Web site http://www.4kidsentertainment.com, as soon as reasonably practicable after such reports have been filed with or furnished to the Securities and Exchange Commission (the “SEC”).

Item 2. Properties

The following table sets forth, with respect to properties leased (none are owned) by the Company at December 31, 2004, the location of the property, the date on which the lease expires and the use which the Company makes of such facilities:

The Company’s lease of its former international sales office in London expired on January 6, 2005. The executive, marketing, sales and administrative office is utilized by the Licensing and by the Advertising Media and Broadcast segments. The international sales office is utilized primarily by the Licensing Segment. The production facility is utilized by the Television and Film Production/Distribution segment. The Company considers that, in general, its physical properties are well maintained, in good operating condition and adequate for its purposes.

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Item 3. Legal Proceedings

       (i)   DSI Toys. During 2003, the Company’s subsidiary, Summit Media served as the media buying agency for DSI Toys, Inc. (“DSI”). On October 17, 2003, DSI filed a voluntary petition under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. In January 2004, the Trustee for the bankruptcy estate of DSI (the “Trustee”) sent a letter to Summit Media alleging that DSI made payments to Summit Media totaling $1,159 (the “Amount”) during the ninety (90) day period prior to DSI’s bankruptcy filing and asserting that such payments constituted avoidable preference payments, and the Trustee formally demanded that Summit Media repay the Amount. The Company and the Trustee have entered into a settlement agreement pertaining to this matter which provides for the payment by the Company of $5 and a full release in favor of the Company, which has been approved by the Bankruptcy Court. A motion by the Trustee to dismiss the formal action against the Company is pending in the Bankruptcy Court.

       (ii)   Telamerica Cable Connect. During 2002, Summit Media entered into three (3) agreements with Telamerica Cable Connect (“TCC”) for the purchase of certain advertising units for broadcast use on the ABC Family, Cartoon Network and Nickelodeon cable stations. The agreements between Summit Media and TCC provided for a “ratings and Cost per Thousand (“CPM”) guarantee” for the media buys and required TCC to provide Summit Media with a summary affidavit analysis of the media buys. Summit Media paid TCC for the advertising units with respect to which TCC has provided confirmation of the delivery of the ratings and CPM guarantee set forth in the agreements. To date, TCC has been unable to provide Summit Media with appropriate documentation confirming the delivery of the ratings and CPM guarantee for the remainder of advertising units purchased by Summit Media. Summit Media has, therefore, refused to pay TCC for the advertising units with respect to which TCC has not provided confirmation of the ratings and CPM guarantee.

On September 27, 2004, TCC filed a Demand for Arbitration claiming that Summit Media owes approximately $234 plus interest for advertising purchased by Summit Media from TCC. Summit Media has denied the claim by TCC and asserted a counterclaim against TCC for up to $150. The Company believes that it has meritorious defenses to the claim asserted by TCC. The arbitration hearing has been scheduled for May 2005.

The Company from time to time is involved in litigation arising in the ordinary course of its business. The Company does not believe that such litigation to which the Company or any subsidiary of the Company is a party or of which any of their property is the subject will, individually or in the aggregate, have a material adverse effect on the Company’s financial position or the results of its operations.

Item 4. Submission of Matters to a Vote of Security Holders

During the Company’s fiscal quarterly period ended December 31, 2004, there were no matters submitted to a vote of security holders.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

       (a)   The Company’s Common Stock is listed for trading on the New York Stock Exchange under the symbol “KDE”. The following table indicates high and low sales quotations for the periods indicated based upon information supplied by the New York Stock Exchange.

       (b)   Number of Holders of Common Stock — The number of holders of record of the Company’s Common Stock on March 15, 2005 was 355, which does not include individual participants in security position listings.

       (c)   Dividends — There were no dividends or other distributions made by the Company during 2004 or 2003. Future dividend policy will be determined by the Board of Directors based on the Company’s earnings, financial condition, capital requirements and other existing conditions. It is anticipated that cash dividends will not be paid to the holders of the Company’s Common Stock in the foreseeable future.

       (d)   Equity Compensation Plans — Information regarding the Company’s equity compensation plans is incorporated by reference to Item 12 in Part III of this Form 10-K.

       (e)   Purchases of Equity Securities by the Issuer and Affiliated Purchasers

ISSUER PURCHASES OF EQUITY SECURITIES

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Item 6. Selected Consolidated Financial Data (in thousands of dollars, except per share data)

Our selected consolidated financial data presented below has been derived from our audited consolidated financial statements and should be read in conjunction with the related Notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.