Kametsu

On Thursday, United States Bankruptcy Judge Shelley C. Chapman ruled that 4Kids Entertainment’s licensing agreement for the Yu-Gi-Oh! anime franchise is still in effect. Judge Chapman found that the Japanese consortium that controls Yu-Gi-Oh! rights — Nihon Ad Systems (NAS), TV Tokyo, and ADK — did not effectively terminate the agreement with 4Kids Entertainment.

As written in the court’s findings: “Like characters in the Yu-Gi-Oh! series itself, 4Kids and the Consortium were locked in a high stakes duel over the future of the series in the Western world and, by extension, the survival of 4Kids as a going concern. On March 24, 2011, the Consortium attempted to end the duel by issuing a letter that purports to terminate its licensing agreement with 4Kids.”

The Consortium claimed in March that 4Kids hid income that should have been subject to US$4,819,354.63 in royalties for the Japanese owners:

1 – Unreported Funimation Home Video Revenue – US$1,967,000.00
2 – Unreported Majesco Home Video Revenue – US$91,666.50
3 – Unsubstantiated International Withholding Taxes – US$2,265,767.16
4 – Unreported Post June 2008 Home Video Revenue – US$26,894.27
5 – Unauthorized Audit Fee Deduction – US$105,111.20
6 – Unauthorized E&O Insurance Cost – US$67,328.45
7 – Unauthorized Bank Charges – US$4,270.58
8 – Other Unauthorized Deductions – US$43,554.59
9 – Other Recovery – Material and Courier Cost – US$247,771.88

However, Judge Chapman determined that seven of these audit findings (1, 2, 3, 4, 5, 6, and 9) were withdrawn by the consortium or were meritless. The court emphasized that “the invalidity of any single one of these Findings is sufficient to support the ultimate conclusion that termination was ineffective.”

Judge Chapman further found that the consortium did not follow the proper procedure for terminating its agreement with 4Kids, under the terms listed in the agreement itself. The agreement dictated that 4Kids should have had a period of time to correct a claimed breach of contract, but the judge stated that “4Kids never received a proper and effective notice” of this.

Source: ANN

The New York Stock Exchange warned the licensing company 4Kids and the video rental chain Blockbuster that they face delisting from the New York Stock Exchange because their market capitalization is below the exchange’s minimum limit. 4Kids’ most recently reported stockholders’equity was US$35.1 million, below US$50 million limit that the stock exchange requires over a 30-trading-day period. 4Kids said on Friday it intends to submit a plan within the required 45 days on how it plans to comply with the stock exchange’s requirements for listing.

However, if 4Kids’ average market capitalization falls below US$15 million over a 30-trading-day period, the stock exchange’s delisting procedure would begin regardless of any plan 4Kids would submit. 4Kids also has to maintain an average closing price of US$1.00 for a share of its stock, and has six months to raise the stock price above US$1.00 after receiving another notice.

As of the close of business on Wednesday, 4Kids’ stock stands at US$1.15 with a market capitalization of US$15.35 million.

The stock exchange requires Blockbuster to raise its market capitalization above US$75 million. As of the close of business on Wednesday, Blockbuster’s market capitalization is US$52.94 million.