FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from___ to___
COMMISSION FILE NO. 0-7843
4KIDS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its Charter)
NEW YORK
--------
(State of Incorporation)
13-2691380
----------
(I.R.S. Employer Identification Number)
1414 Avenue of the Americas, New York, New York
-----------------------------------------------
(Address of Principal Executive Offices)
10019
-----
(Zip Code)
(212) 758-7666
--------------
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
--------------
(Former Name, Former Address and Former Fiscal Year if changed since last
report)
Indicate by a check mark whether the registrant: (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
-- --
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at August 13, 1999
----- ------------------------------
Common Stock, $.01 Par Value 5,495,578
<PAGE>
4KIDS ENTERTAINMENT, INC.
AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets 1
June 30, 1999 (Unaudited) and
December 31, 1998.
Consolidated Statements of Income 2
Six Months Ended June 30, 1999 and 1998 (Unaudited)
Consolidated Statements of Cash Flows 3
Six Months Ended
June 30, 1999 and 1998 (Unaudited)
Notes to Consolidated Financial 4
Statements (Unaudited)
Item 2: Management's Discussion and Analysis 7
of Financial Condition and
Results of Operations
PART II: OTHER INFORMATION 11
<PAGE>
<TABLE>
<CAPTION>
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
ASSETS (UNAUDITED)
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $19,259,714 $ 9,749,956
Accounts receivable, net 8,661,277 17,694,262
Film inventory-net 1,501,732 1,079,677
Prepaid refundable income taxes 3,737,327 324,864
Prepaid expenses and other current assets 1,140,637 1,151,974
----------- -----------
Total current assets 34,300,687 30,000,733
----------- -----------
FURNITURE, FIXTURES AND COMPUTER EQUIPMENT- (Net) 166,524 174,783
FILM INVENTORY - Noncurrent 1,875,000 1,875,000
ACCOUNTS RECEIVABLE - Noncurrent, net 2,144,795 2,627,680
SECURITY DEPOSITS AND OTHER ASSETS 307,955 282,959
----------- -----------
TOTAL ASSETS $38,794,961 $34,961,155
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to licensors $ 8,319,690 $ 3,690,582
Media payable 2,818,956 11,460,913
Accounts payable and accrued expenses 1,182,819 1,285,624
Taxes payable 124,028 1,750,799
Current Deferred Tax Liability 989,000 989,000
----------- -----------
Total current liabilities 13,434,493 19,176,918
NONCURRENT DEFERRED TAX LIABILITY 379,012 379,012
----------- -----------
Total liabilities 13,813,505 19,555,930
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value - authorized,
3,000,000 shares; none issued
Common stock, $.01 par value - authorized, 20,000,000 shares;
issued, 5,450,978 and 4,594,103 shares 54,510 45,941
Additional paid-in capital 11,841,725 4,946,830
Retained earnings 13,085,221 10,412,454
----------- -----------
Total stockholders' equity 24,981,456 15,405,225
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,794,961 $34,961,155
=========== ===========
</TABLE>
See notes to consolidated financial statements
-1-
<PAGE>
<TABLE>
<CAPTION>
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
--------- --------- ---------- -----------
<S> <C> <C> <C> <C>
NET REVENUES: 5,506,954 2,198,131 $8,758,895 $ 4,601,509
COST AND EXPENSES:
Selling, general and administrative cost 2,298,619 1,671,917 4,389,505 3,207,770
Amortization of capitalized film cost 0 390,632 0 846,312
---------- ---------- ---------- -----------
TOTAL COST AND EXPENSES 2,298,619 2,062,549 4,389,505 4,054,082
---------- ---------- ---------- -----------
3,208,335 135,582 4,369,390 547,427
INTEREST INCOME 172,802 66,850 318,377 143,308
---------- ---------- ---------- -----------
INCOME BEFORE INCOME
TAX PROVISION 3,381,137 202,432 4,687,767 690,735
INCOME TAX PROVISION 1,453,000 87,016 2,015,000 297,016
---------- ---------- ---------- -----------
NET INCOME $1,928,137 $ 115,416 $2,672,767 $ 393,719
========== ========== ========== ===========
PER SHARE AMOUNTS (Notes 3 and 5)
Basic Earnings per common share $ 0.36 $ 0.03 $ 0.53 $ 0.09
========== ========== ========== ===========
Diluted Earnings per common share $ 0.31 $ 0.02 $ 0.45 $ 0.07
========== ========== ========== ===========
Pro Forma Earnings per common share - Basic $ 0.18 $ 0.02 $ 0.27 $ 0.05
========== ========== ========== ===========
Pro Forma Earnings per common share - Diluted $ 0.16 $ 0.01 $ 0.23 $ 0.04
========== ========== ========== ===========
Pro Forma Weighted average common shares
outstanding - basic 10,574,026 8,853,562 10,057,228 8,844,028
========== ========== ========== ===========
Pro Forma Weighted average common shares
outstanding - diluted 12,315,092 11,133,252 11,836,702 10,672,540
========== ========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) SIX SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,672,767 $ 393,719
Adjustments to reconcile net income to net
cash (used in)/provided by operating activities:
Depreciation and amortization 44,514 48,854
Amortization of capitalized film cost 0 846,312
Changes in assets and liabilities (using)/providing cash:
Accounts receivable 9,515,870 19,835,509
Film inventory (422,055) (445,555)
Prepaid expenses and other current assets 11,337 (421,605)
Prepaid/Refundable income taxes (3,412,463) (136,247)
Security deposits and other assets (24,996) 7,249
Due to licensors 4,629,108 853,492
Accounts payable and accrued expenses (102,805) (61,806)
Taxes payable (1,626,771) 283,661
Media payable (8,641,957) (17,695,484)
------------ ------------
Net cash provided by operating activities 2,642,549 3,508,099
------------ ------------
INVESTING ACTIVITIES:
Purchase of furniture and fixtures (36,255) (71,664)
------------ ------------
Net cash used in investing activities (36,255) (71,664)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options
and related tax benefit 6,903,464 228,036
------------ ------------
Net cash provided by financing activities 6,903,464 228,036
------------ ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 9,509,758 3,664,471
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD 9,749,956 2,805,573
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,259,714 $ 6,470,044
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest $ -- $ --
============ ============
Income Taxes $ 2,707,990 $ 51,327
============ ============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
4KIDS ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
Note 1
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes as
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the interim financial information have been included. Operating results for six
months ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and footnotes thereto included in
4Kids Entertainment, Inc.'s (the "Company") Form 10-K for the year ended
December 31, 1998.
Note 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
For a summary of significant accounting policies reference is made to the
Company's report on Form 10-K previously filed for the year ended December 31,
1998.
Note 3
NET INCOME PER SHARE:
The Company applies Statement of Accounting Standards("SFAS") No. 128 "Earnings
per Share" which requires the computation and presentation of earnings per share
("EPS") to include basic and diluted EPS. Basic EPS is computed based solely on
the weighted average number of common shares outstanding during the period.
Diluted EPS reflects all potential dilution of common stock. The weighted
average number of common shares outstanding for basic EPS was 5,287,013 and
5,028,614 for the three and six months ended June 30, 1999. The weighted average
number of common shares outstanding for diluted EPS was 6,157,546 and 5,918,351
for the three and six months ended June 30, 1999. For the three and six months
ended June 30,1998, the weighted average number of common shares outstanding for
basic EPS was 4,426,781 and 4,422,014 respectively. For the three and six months
ended June 30,1998, the weighted average number of common shares outstanding for
diluted EPS was 5,566,626 and 5,336,270 respectively. The 1998 per share amounts
have been restated to reflect the 3 for 2 stock split declared in March 1999.
-4-
<PAGE>
Note 4
CREDIT FACILITY:
The Company renegotiated the terms of the its Credit Facility with Chase
Manhattan Bank on August 4,1999. Under the renegotiated terms, the Company may
borrow, from time to time on an unsecured basis, up to $5 million for general
working capital purposes. The Credit Facility, which requires annual renewal,
provides for an interest rate equal to the bank's prime rate and an annual
commitment fee of 1/2%. The Company's line of credit expires on June 30, 2000.
As of August 13, 1999, the Company had no borrowings under the facility. Under
the prior terms with the Company's Credit Facility with Chase Manhattan Bank,
the Company could borrow, from time to time for general working capital
purposes, up to $2 million. Any borrowings under the prior credit facility would
be secured by the Company's receivables. The prior terms provided for an
interest rate of 1% over the bank's prime rate and an annual commitment fee of
3/4%.
Note 5
SUBSEQUENT EVENT AND PRO FORMA INFORMATION
On August 12, 1999, the Company's Board of Directors approved the declaration of
a 2 for 1 stock split effective for shareholders of record on September 1, 1999.
The following table presents a retroactive reconciliation of the pro forma basic
and diluted EPS for the three and six month periods ended June 30, 1999 and 1998
assuming that the stock split had occurred:
<TABLE>
<CAPTION>
3 MONTHS JUNE 30, 1999 3 MONTHS JUNE 30, 1998
---------------------------- -----------------------
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
Net Income $ 1,928,137 $ 1,928,137 $ 115,416 $ 115,416
============== =========== ========== ==========
Pro forma weighted average
common shares outstanding 10,574,026 10,574,026 8,853,562 8,853,562
Pro forma additional shares due to:
Assumed conversion of dilutive
stock options 0 1,741,066 0 2,279,690
-------------- ----------- ---------- ----------
Pro forma adjusted weighted average
common shares outstanding 10,574,026 12,315,092 8,853,562 11,133,252
============== =========== ========== ==========
Pro forma net income per share $ 0.18 $ 0.16 $ 0.02 $ 0.01
============== =========== ========== ==========
6 MONTHS JUNE 30, 1999 6 MONTHS JUNE 30, 1998
---------------------------- -----------------------
BASIC DILUTED BASIC DILUTED
Net Income $ 2,672,767 $ 2,672,767 $ 393,719 $ 393,719
================ =========== ========== ==========
Pro forma weighted average
common shares outstanding 10,057,228 10,057,228 8,844,028 8,844,028
Pro forma additional shares due to:
Assumed conversion of dilutive
stock options 0 1,779,474 0 1,828,512
-------------- ----------- ---------- ----------
Pro forma adjusted weighted average
common shares outstanding 10,057,228 11,836,702 8,844,028 10,672,540
============== =========== ========== ==========
Pro forma net income per share $ 0.27 $ 0.23 $ 0.05 $ 0.04
============== =========== ========== ==========
</TABLE>
-5-
<PAGE>
Note 6
SEGMENT AND RELATED INFORMATION
The Company applies Statement of Financial Accounting Standards No. 131 ("SFAS
No. 131"), "Disclosures About Segments of an Enterprise and Related
Information". The Company has three reportable segments; Licensing, Media Buying
Planning and Television Distribution and Television Production.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company does not have any
inter-segment sales or transfers.
The Company's reportable segments are strategic business units which, while
managed separately, work together as a vertically integrated entertainment
company.
MEDIA & TELEVISION
LICENSING TV DISTRIBUTION PRODUCTION TOTAL
Six Months Ended --------- --------------- ---------- -----
June 30,
1999
Revenues $ 7,441,336 $ 1,183,987 $ 133,572 $ 8,758,895
Amortization -- -- -- --
Segment Profit 4,593,039 85,899 8,829 4,687,767
Segment Assets 25,032,035 10,126,719 3,636,207 38,794,961
1998
Revenues $ 3,690,383 $ 571,850 $ 339,276 $ 4,601,509
Amortization -- -- 846,312 846,312
Segment Profit (Loss) 1,847,314 (590,866) (565,713) 690,735
Segment Assets 11,260,430 7,248,770 4,811,495 23,320,695
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The Company receives revenues from a number of sources, principally licensing,
media buying and television distribution. The Company typically derives a
substantial portion of its licensing revenues from a small number of properties,
which properties usually generate revenues only for a limited period of time.
Because the Company's licensing revenues are highly subject to changing fashion
in the toy and entertainment business, its licensing revenues from year to year
from particular sources are subject to dramatic increases and decreases. It is
not possible to precisely anticipate the length of time a project will be
commercially successful, if at all. Popularity of properties can vary from
months to years. As a result, the Company's revenues and net income may
fluctuate significantly between comparable periods. The Company's revenues have
historically been primarily derived from the license of toy, game and television
property concepts. Thus a substantial portion of the Company's revenues and net
income are subject to the seasonal variations of the toy and game industry.
Typically, a majority of toy orders are shipped in the third and fourth calendar
quarters. In addition the Company's media buying subsidiary concentrates its
activities on the youth oriented market. As a result, most of its revenue is
earned in the fourth quarter when the majority of toy and video game advertising
occurs. As a result, in the Company's usual experience, its net income during
the second half of the year will generally be greater than during the first half
of the year. However, the Company has little control over the timing of
guarantee and minimum royalty payments, some of which are made upon the
execution and delivery of license agreements.
Three and Six Months Ended June 30, 1999 Compared to the three and Six Months
Ended June 30, 1998
Consolidated net revenue increased 151% or $3,308,823 for the three month period
ended June 30, 1999 as compared to the same period in 1998. The six month period
increased 90% or $4,157,386 as compared to the six month period ended June 30,
1998. The increase in net revenue for the three and six month periods was
primarily due to increased licensing revenue from the "Pokemon" property and
from the World Championship Wrestling "WCW/NWO" property. The Company's media
buying and television distribution division recognized increased revenue over
the three and six month period due to an increase in television distribution
activities related to the Pokemon television program. The increase was partially
offset by a decrease in media buying activity due to the loss of Tiger
Electronics media business which was partially offset by new clients'
advertising spending.
-7-
<PAGE>
Selling, general and administrative expenses increased 37% or $626,702 and 37%
or 1,181,735 for the three and six month periods ended June 30, 1999 when
compared to the prior year periods. These increases were primarily due to
contractually based bonus accruals calculated on pre-tax income levels, which
were higher in 1999 as a result of higher pre-tax income. Additionally, the
Company incurred increased payroll and marketing costs associated with the
Company's expanded licensing activities.
At June 30, 1999 there were approximately $3,377,000 of capitalized film
production costs. These costs are primarily related to episodes of "WMAC
Masters" and work related to the adaptation of episodes 53 to 104 of the Pokemon
television series and the Pokemon feature film, "Mewtwo Strikes Back" coupled
with a twenty minute short film entitled "Pikachu's Vacation", set for
theatrical release in November 1999. "WMAC Masters" is a series of 26 half hour
television programs produced by the Company's 4Kids Productions subsidiary. The
1998 amortization relates to the "WMAC Masters" television program. At June 30,
1999 the percentage of total unamortized film cost expected to be amortized
within the next three years exceeds 70%. The Company periodically evaluates its
anticipated revenue from film productions and, consequently, amortization rates
may change as a result of such estimates.
Interest income increased by approximately $106,000 and $175,000 for the three
and six month periods ending June 30, 1999 as compared to the same periods in
1998. This increase is attributable to higher levels of invested cash compared
to the same periods in 1998.
LIQUIDITY AND CAPITAL RESOURCES:
At June 30, 1999 the Company had working capital of $20,866,194 as compared to
working capital of $10,823,815 at December 31, 1998, an increase in working
capital of $10,042,379. Cash and cash equivalents increased by $9,509,758 to
$19,259,714 from December 31, 1998. The increase in cash and cash equivalents is
due primarily to the seasonality of the Company's business and the timing of
advance payments and royalties due on licensing agreements. The Company
generates significantly higher receivables and payables during the fourth
quarter of the year primarily related to its media buying and licensing
activities. Such amounts are collected subsequent to December 31. Additionally,
cash also increased due to proceeds from the exercise of stock options during
the six month period ended June 30, 1999.
Accounts receivable, net (current and noncurrent) decreased from $20,321,942 at
December 31, 1998 to $10,806,072 at June 30, 1999. The decrease is primarily due
to the Company's media buying activities. When the Company assumes payment
obligation for the media it places on behalf of its clients, the Company records
a receivable from its clients and a corresponding media payable for the gross
amount of the media due. The seasonality of the Company's business tends to
generate higher receivables in the fourth quarter which are generally collected
in the first quarter. There was a corresponding decrease in media payable of
$8,641,957.
-8-
<PAGE>
Amounts due to licensors, which represents the owner's share of royalties
collected, increased by $4,629,108 to $8,319,690 from December 31, 1998. The
increase is primarily due to higher amounts of royalties and advances collected
during the quarter which are payable to licensors after the close of the
quarter.
In the opinion of management, the Company will be able to satisfy its
foreseeable financial obligations from its current working capital and credit
facility. As described in Note 5 to the financial statements, the Company has
established a $5,000,000 credit facility with Chase Manhattan Bank for general
working capital purposes. As of August 13, 1999 there were no borrowings under
this facility.
Year 2000 Compliance
Overview
The Year 2000 issue is primarily the result of computer programs only accepting
a two digit date code, as opposed to four digits, to indicate the year.
Beginning in the Year 2000, and in certain instances prior to the Year 2000,
these date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, the Company's date
critical functions may be adversely affected unless these computer systems and
software products are, or become, able to accept four digit entries.
Internal systems and equipment
The Company has commenced a comprehensive program consisting of identifying,
assessing and if necessary, upgrading and/or replacing its systems and equipment
that may be vulnerable to Year 2000 problems. The first stage of this program,
identifying the systems and equipment, has been substantially completed. The
Company has prioritized the identified items as either critical or non-critical
to the operations of the Company. The Company has made substantial progress
through the second and third stages of this program, assessing and upgrading
and/or replacing the equipment it has deemed to be non-compliant. The Company is
also in the beginning stage of developing a plan to test its entire system for
Year 2000 compliance. The Company believes that it will have completed all of
its necessary upgrades and/or replacements and the testing of its systems by
September, 1999.
Third party relationships
The Company has begun to formally communicate with its significant suppliers and
customers to determine if those parties have appropriate plans to remedy Year
2000 issues when their systems may impact the operations of the Company. There
can be no assurance, however, that the systems of other companies on which the
Company's processes rely will be timely converted, or that a failure to
successfully convert by another company, or a conversion that is incompatible
with the Company's systems, would not have an impact on the Company's
operations. The Company believes that by September 1999 it will substantially
complete its assessment of the status of its significant customers' and
suppliers' compliance with the Year 2000 issues.
-9-
<PAGE>
Contingency plans
Based on the assessment effort to date, the Company has focused on three
separate contingency plans (1) if the Company's systems are non-compliant (2) if
the Company's customers are non-compliant and (3) if the Company's suppliers are
non-compliant. The Company is in the early stages of developing these plans and
believes that it will be able to complete them by September 1999. However, there
can be no assurance that the Company will be able to have an effective
contingency plan in place in the event a significant supplier and/or customer
does not become Year 2000 compliant.
Costs/Risks
Management currently estimates that the cost, in connection with bringing its
own systems and equipment into compliance, will be less than $50,000 for fiscal
1999 and does not expect the total cost to exceed $100,000. Although the Company
is not aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, there can be no assurance that
there will not be a delay in, or increased costs associated with, the
implementation of the necessary systems and changes to address the Year 2000.
Potential sources of risk include but are not limited to (1) the inability of
principal clients and licensees to be Year 2000 compliant, which could result in
delays in product deliveries from such clients and licensees, (2) the inability
of the Company's clients and licensees to become compliant, which could impact
their ability to sell product or report royalties in a timely manner resulting
in a disruption of the Company's cash flow, and (3) disruption of television
broadcast signals, including satellite distribution and commercial integration
vendors as a result of the general failure of systems and necessary
infrastructure such as electrical supply.
Forward-looking Statements
This quarterly report contains forward-looking statements. Due to the fact that
the Company faces competition from toy companies, motion picture studios and
other licensing companies, and the uncertainty of public's response to the
Company's properties, actual results or outcomes may differ materially from any
such forward-looking statements.
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company held its Annual Meeting of
Shareholders on April 29, 1999.
b. The Directors elected at the anuual Meeting were:
Alfred R. Kahn
Robert Dunn Glick
Gerald Rissman
c.(i) The shareholders voted on the election of
directors as follows:
Name For Withheld
---- --- --------
Alfred R. Kahn 3,185,975 5,059
Robert Dunn Glick 3,142,880 48,154
Gerald Rissman 3,141,995 49,039
(ii) The shareholders voted on a proposal to approve
the Company's 1999 Stock Option Plan as follows:
FOR 2,925,618
---------
AGAINST 259,141
---------
ABSTENTIONS 6,275
---------
-11-
<PAGE>
(iii) The shareholders voted on a proposal to amend the
Company's Certificate of Incorporation to increase
the Company's authorized common stock to
20,000,000 shares, par value, $.01 as follows:
FOR 2,939,431
---------
AGAINST 244,514
---------
ABSTENTIONS 7,089
---------
(iv) The shareholders voted on a proposal to approve
Deloitte & Touche LLP as the Company's
independent public accountants as follows:
FOR 3,187,125
---------
AGAINST 1,200
---------
ABSTENTIONS 2,709
---------
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
3(a) Certificate of Incorporation of
Registrant, as amended
27 Financial Data Schedule
(b) Reports on Form 8-K
None
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 13, 1999
4KIDS ENTERTAINMENT, INC.
By: /s/ Alfred R. Kahn
----------------------
Alfred R. Kahn
Chairman of the Board and
Chief Executive Officer
By: /s/ Joseph P. Garrity
- -------------------------
Joseph P. Garrity
Executive Vice President
Chief Financial Officer
-13-
EXHIBIT 3(a)
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
4KIDS ENTERTAINMENT, INC.
- - - - - - - - - - - - - - - - - - - - - - - - -
Under Section 805 of the Business Corporation Law
- - - - - - - - - - - - - - - - - - - - - - - - -
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned Executive Vice President and Secretary, respectively, of 4Kids
Entertainment, Inc., hereby certify:
FIRST: The name of the Corporation is 4Kids Entertainment, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State, Albany, New York on April 28, 1970 under the original
name of American Leisure Industries, Inc.
THIRD: The amendment of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment is to increase the number
of shares of authorized common stock of the corporation.
FOURTH: To accomplish the foregoing amendment, the first sentence of
Article FOURTH of the Certificate of Incorporation of the Corporation, relating
to the number of shares of authorized common stock of the Corporation, is hereby
amended to read as follows:
<PAGE>
"FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is Twenty-Three Million (23,000,000) shares divided
into two classes of which Twenty Million (20,000,000) shares shall be
designated as Common Stock, $.01 par value per share and Three Million
(3,000,000) shares shall be designated as Preferred Stock, $.01 par value
per share.
FIFTH: The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by a vote of the Board of Directors of the
Corporation, followed by a vote of the holders of a majority of all outstanding
shares of the Corporation entitled to vote on the said amendment of the
Certificate of Incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
__ Date: April 29, 1999
By /s/ Alfred R. Kahn
------------------------
Alfred R. Kahn, Chairman
By /s/ Joseph P. Garrity
----------------------------
Joseph P. Garrity, Executive
Vice President, Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
LEISURE CONCEPTS, INC.
Under Section 805 of the Business Corporation Law
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned Executive Vice President and Secretary, respectively, of Leisure
Concepts, Inc., hereby certify:
FIRST: The name of the Corporation is LEISURE CONCEPTS, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State, Albany, New York on April 28, 1970 under the original
name of American Leisure Industries, Inc.
THIRD: The amendment of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment is to change the name of
the Corporation.
FOURTH: To accomplish the foregoing amendment, Article FIRST of the
Certificate of Incorporation of the Corporation, relating to the name of the
Corporation, is hereby amended to read as follows:
"FIRST: The name of the Corporation is 4Kids Entertainment, INC.
FIFTH: The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by a vote of the Board of Directors of the
Corporation, followed by a vote of the holders of a majority of all outstanding
shares of the Corporation entitled to vote on the said amendment of the
Certificate of Incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
Date: November 16, 1995 By /s/ Joseph P. Garrity
---------------------------
Joseph P. Garrity,
Executive Vice President
By /s/ William J. Baron
---------------------------
William J. Baron, Secretary
-3-
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
LEISURE CONCEPTS, INC.
(Under Section 805 of the Business Corporation Law)
We, the undersigned, being the Chairman and Secretary of Leisure Concepts,
Inc. in accordance with Section 805 of the Business Corporation Law, do hereby
certify:
FIRST: The name of the Corporation is Leisure Concepts, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 28th day of April, 1970 under the name American
Leisure Industries, Inc.
THIRD: The Certificate of Incorporation of the Corporation, as amended, is
hereby amended pursuant to Section 805 of the Business Corporation Law.
FOURTH: A new Article Ninth shall be added to the Certificate of
Incorporation to read in its entirety as follows:
"NINTH: No director shall be personally liable to the Corporation or any
stockholder for damages for breach of fiduciary duty as a director, except for
any matter in respect of which such director shall be liable under Section 719
of the New York Business Corporation Law or any amendment thereto or successor
provision thereto or shall be liable by reason that, in addition to any and all
other requirements for such liability, he (i) shall have breached his duty of
loyalty to the Corporation or its stockholders, (ii) shall not have acted in
good faith or, in failing to act, shall not have acted in good faith, (iii)
shall have acted in a manner involving intentional misconduct or a knowing
violation of law or (iv) shall have personally gained a financial profit or
other advantage to which he was not legally entitled. Neither the amendment nor
repeal of this Article, nor the adoption of any provision of the Certificate of
Incorporation inconsistent with the Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any cause of
action, suit or claim that but for this Article would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision."
FIFTH: The manner in which this Amendment to the Certificate of
Incorporation of the Corporation was authorized by the vote at a meeting of all
the Directors, followed by the affirmative vote of the holders of at least a
majority of the outstanding shares of the Corporation entitled to vote thereon
at a meeting of the shareholders of the Corporation duly called and held on the
19th day of July, 1989.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
19th day of July 1989.
/s/ Stanley A. Weston
---------------------------
Stanley A. Weston, Chairman
/s/ Michael Germakian
----------------------------
Michael Germakian, Secretary
-5-
<PAGE>
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK)
Stanley A. Weston, being duly sworn, deposes and says that he is the
Chairman of Leisure Concepts, Inc. and is one of the persons who signed the
foregoing Certificate of Amendment; that he has read the Certificate of
Amendment and knows the contents thereof and that the same is true to his own
knowledge.
/s/ Stanley A. Weston
---------------------
Stanley A. Weston
Sworn to before me
this 19th day of July, 1989.
/s/ Richard Zaroff
- ------------------
Notary Public
(stamp)
RICHARD M. ZAROFF
NOTARY PUBLIC, State of New York
No. 4748005
Qualified in Nassau County
Commission Expires August 31, 1989
-6-
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
LEISURE CONCEPTS, INC.
(Under Section 805 of the Business Corporation Law)
We, the undersigned, being the President and Secretary of Leisure
Concepts, Inc. in accordance with Section 805 of the Business Corporation Law,
do hereby certify:
FIRST: The name of the corporation is Leisure Concepts, Inc. (hereinafter
the "Corporation").
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 28th day of April, 1970 under the name American
Leisure Industries, Inc.
THIRD: The amendment of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment is as follows: To increase
the aggregate number of shares which the Corporation shall have authority to
issue by authorizing 5,000,000 additional shares of Common Stock, par value $.01
per share and 1,000,000 additional shares of Preferred Stock, par value $.01 per
share.
FOURTH: To accomplish the foregoing amendment, article "Fourth" of the
Certificate of Incorporation of the Corporation, relating to the authorized
number of shares of Common and Preferred Stock is hereby amended in its entirety
to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is Thirteen Million (13,000,000) shares divided into two
classes of which Ten Million (10,000,000) shares shall be designated as Common
Stock, $.01 par value per share and Three Million (3,000,000) shares shall be
designated as Preferred Stock, $.01 par value per share. The Preferred Stock
shall be issuable in one or more series in such designations, relative rights
and limitations as may be fixed from time to time by the Board of Directors of
the Corporation. The designations, preferences and relative, participating,
optional and other special rights of the Preferred Stock (unless otherwise fixed
by the Board of Directors) and the Common Stock, and the qualifications,
limitations and restrictions thereof, are as follows:
-7-
<PAGE>
1. The shares of Preferred Stock may be divided into and issued in one or
more series, and each series shall be so designated so as to distinguish the
shares thereof from the shares of all other series. All shares of Preferred
Stock shall be identical except in respect of particulars which may be fixed by
the Board of Directors as hereinafter provided pursuant to authority which is
hereby expressly vested in the Board of Directors. Each share of a series shall
be identical in all respects with all other shares of such series, except as to
the date from which dividends thereon shall be cumulative on any series as to
which dividends are cumulative. Shares of Preferred Stock of any series which
have been retired in any manner, including shares redeemed or reacquired by the
Corporation and shares which have been converted into or exchanged for shares of
any other class, or any series of the same or any other class, shall have the
status of authorized but unissued shares of Preferred Stock and may be reissued
as shares of the series of which they were originally a part, or any other
series.
2. Before any shares of Preferred Stock of any series shall be issued, the
Board of Directors, pursuant to authority hereby expressly vested in it, shall
fix by resolution or resolutions the following provisions in respect of the
shares of each such series so far as the same are not inconsistent with the
provisions of this paragraph FOURTH applicable to all series of Preferred Stock:
(a) the distinctive designations of such series and the number of shares
which shall constitute such series, which number may be increased (or decreased
except where otherwise provided by the Board of Directors in creating such
series) from time to time by like action of the Board of Directors;
(b) the annual rate or amount of dividends payable on shares of such
series, whether such dividends shall be cumulative or non-cumulative, the
conditions upon which and/or the dates when such dividends shall be payable and
the date from which dividends on cumulative series shall accrue and be
cumulative on all shares of such series issued prior to the payment date for the
first dividend of such series;
(c) whether such series shall be redeemable and, if so, the terms and
conditions of such redemption, including the time or times when and the price or
prices at which shares of such series shall be redeemed;
(d) the amount and priority payable on shares of such series in the event
of liquidation, dissolution or winding up of the affairs of the Corporation;
(e) whether such series shall be convertible into or exchangeable for
shares of any other class, and, if so, the terms and conditions thereof,
including the date or dates when such shares shall be so convertible or
exchangeable, and any adjustments which shall be made, and the circumstances in
which any such adjustments shall be made, in such conversion or exchange prices
or rates;
-8-
<PAGE>
(f) whether such series shall have any voting rights in addition to those
prescribed by law and, if so, the terms and conditions of exercise of such
voting rights; and
(g) any other designations, preferences and relative, participating,
optional or other special rights, and any qualifications, limitations and
restrictions thereof.
3. (a) So long as any shares of Preferred Stock of any series shall be
outstanding, the Corporation will not declare or pay any dividends on the Common
Stock (other than dividends payable solely in shares of Common Stock) or make
any distributions of any kind, either directly or indirectly, in respect of
shares of Common Stock, or make any payment on account of the purchase,
redemption or other acquisition of Common Stock, unless on the payment,
distribution or redemption date, as the case may be, all dividends on the then
outstanding shares of Preferred Stock of all series for all past dividend
periods shall have been paid to the full extent of the preference, if any, to
which each series of Preferred Stock is then entitled.
(b) When dividends shall have been paid (or declared and set aside for
payment) on the Preferred Stock to the full extent of the preference, if any, to
which the Preferred Stock is entitled, dividends on the remaining class or
classes of stock may then be paid out of the funds of the Corporation which are
legally available therefor.
(c) Subject to the limitations prescribed in this paragraph FOURTH and any
further limitations which may from time to time be prescribed by the Board of
Directors in accordance herewith, the holders of Common Stock shall be entitled
to receive dividends on the Common Stock, when, as and if declared by the Board
of Directors, out of the funds of the Corporation which are legally available
therefor.
4. The authorized but unissued shares of Common Stock and the authorized
but unissued shares of Preferred Stock may be issued for such consideration, not
less than the par value thereof, as may be fixed from time to time by the Board
of Directors."
FIFTH: The manner in which this Amendment to the Certificate of
Incorporation of the Corporation was authorized was by the affirmative vote of
the Board of Directors and followed by the affirmative vote of the holders of at
least a majority of the outstanding shares of the Corporation entitled to vote
thereon at a meeting of the shareholders of the Corporation duly called and held
on the 30th day of July, 1986.
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
30th day of July, 1986. We have subscribed this document and do hereby affirm,
under the penalties of perjury, that the statements contained therein are true
and correct.
/s/ Stanley A. Weston
----------------------------
Stanley A. Weston, President
/s/ Michael Germakian
-----------------------------
Michael Germakian, Secretary
-10-
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
LEISURE CONCEPTS, INC.
(Under Section 805 of the Business Corporation Law)
We, the undersigned, being the President and Secretary of Leisure
Concepts, Inc. in accordance with Section 805 of the Business Corporation Law,
do hereby certify:
FIRST: The name of the corporation is Leisure Concepts, Inc. (hereinafter
the "Corporation").
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 28th day of April, 1970 under the name American
Leisure Industries, Inc.
THIRD: The amendment of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment is as follows: To increase
the aggregate number of shares which the Corporation shall have authority to
issue by authorizing 2,000,000 additional shares of Common Stock, par value $.01
per share and 1,000,000 additional shares of Preferred Stock, par value $.01 per
share.
FOURTH: To accomplish the foregoing amendment, Article "Fourth" of the
Certificate of Incorporation of the Corporation, relating to the authorized
number of shares of Common and Preferred Stock is hereby amended in its entirety
to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is Seven Million (7,000,000) shares divided into two classes
of which Five Million (5,000,000) shares shall be designated as Common Stock,
$.01 par value per share and Two Million (2,000,000) shares shall be designated
as Preferred Stock, $.01 par value per share. The Preferred Stock shall be
issuable in one or more series in such designations, relative rights and
limitations as may be fixed from time to time by the Board of Directors of the
Corporation. The designations, preferences and relative, participating, optional
and other special rights of the Preferred Stock (unless otherwise fixed by the
Board of Directors) and the Common Stock, and the qualifications, limitations
and restrictions thereof, are as follows:
-11-
<PAGE>
1. The shares of Preferred Stock may be divided into and issued in one or
more series, and each series shall be so designated so as to distinguish the
shares thereof from the shares of all other series. All shares of Preferred
Stock shall be identical except in respect of particulars which may be fixed by
the Board of Directors as hereinafter provided pursuant to authority which is
hereby expressly vested in the Board of Directors. Each share of a series shall
be identical in all respects with all other shares of such series, except as to
the date from which dividends thereon shall be cumulative on any series as to
which dividends are cumulative. Shares of Preferred Stock of any series which
have been retired in any manner, including shares redeemed or reacquired by the
Corporation and shares which have been converted into or exchanged for shares of
any other class, or any series of the same or any other class, shall have the
status of authorized but unissued shares of Preferred Stock and may be reissued
as shares of the series of which they were originally a part, or any other
series.
2. Before any shares of Preferred Stock of any series shall be issued, the
Board of Directors, pursuant to authority hereby expressly vested in it, shall
fix by resolution or resolutions the following provisions in respect of the
shares of each such series so far as the same are not inconsistent with the
provisions of this paragraph FOURTH applicable to all series of Preferred Stock:
(a) the distinctive designations of such series and the number of shares
which shall constitute such series, which number may be increased (or decreased
except where otherwise provided by the Board of Directors in creating such
series) from time to time by like action of the Board of Directors;
(b) the annual rate or amount of dividends payable on shares of such
series, whether such dividends shall be cumulative or non-cumulative, the
conditions upon which and/or the dates when such dividends shall be payable and
the date from which dividends on cumulative series shall accrue and be
cumulative on all shares of such series issued prior to the payment date for the
first dividend of such series;
(c) whether such series shall be redeemable and, if so, the terms and
conditions of such redemption, including the time or times when and the price or
prices at which shares of such series shall be redeemed;
(d) the amount and priority payable on shares of such series in the event
of liquidation, dissolution or winding up of the affairs of the Corporation;
(e) whether such series shall be convertible into or exchangeable for
shares of any other class, and, if so, the terms and conditions thereof,
including the date or dates when such shares shall be so convertible or
exchangeable, and any adjustments which shall be made, and the circumstances in
which any such adjustments shall be made, in such conversion or exchange prices
or rates;
-12-
<PAGE>
(f) whether such series shall have any voting rights in addition to those
prescribed by law and, if so, the terms and conditions of exercise of such
voting rights; and
(g) any other designations, preferences and relative, participating,
optional or other special rights, and any qualifications, limitations and
restrictions thereof.
3. (a) So long as any shares of Preferred Stock of any series shall be
outstanding, the Corporation will not declare or pay any dividends on the Common
Stock (other than dividends payable solely in shares of Common Stock) or make
any distributions of any kind, either directly or indirectly, in respect of
shares of Common Stock, or make any payment on account of the purchase,
redemption or other acquisition of Common Stock, unless on the payment,
distribution or redemption date, as the case may be, all dividends on the then
outstanding shares of Preferred Stock of all series for all past dividend
periods shall have been paid to the full extent of the preference, if any, to
which each series of Preferred Stock is then entitled.
(b) When dividends shall have been paid (or declared and set aside for
payment) on the Preferred Stock to the full extent of the preference, if any, to
which the Preferred Stock is entitled, dividends on the remaining class or
classes of stock may then be paid out of the funds of the Corporation which are
legally available therefor.
(c) Subject to the limitations prescribed in this paragraph FOURTH and any
further limitations which may from time to time be prescribed by the Board of
Directors in accordance herewith, the holders of Common Stock shall be entitled
to receive dividends on the Common Stock, when, as and if declared by the Board
of Directors, out of the funds of the Corporation which are legally available
therefor.
4. The authorized but unissued shares of Common Stock and the authorized
but unissued shares of Preferred Stock may be issued for such consideration, not
less than the par value thereof, as may be fixed from time to time by the Board
of Directors."
FIFTH: The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by the vote at a meeting of the Board of Directors of
the Corporation, followed by the affirmative vote of the holders of at least a
majority of the outstanding shares of the Corporation entitled to vote thereon
at a meeting of the shareholders of the Corporation duly called and held on the
22nd day of May, 1985.
-13-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
22nd day of May, 1985.
/s/ Stanley A. Weston
- ----------------------------
Stanley A. Weston, President
/s/ Michael Germakian
- ----------------------------
Michael Germakian, Secretary
-14-
<PAGE>
STATE OF NEW YORK )
:SS.:
COUNTY OF NEW YORK)
Stanley A. Weston, being duly sworn deposes and says that he is one of the
persons who signed the foregoing Certificate of Amendment; that he signed said
Certificate in the capacity set opposite or beneath his signature thereon; that
he has read the said Certificate and knows the contents thereof; and that the
statements contained therein are true to his own knowledge.
/s/ Stanley A. Weston
-----------------------------
Stanley A. Weston, President
Subscribed and sworn to
before me on May 21, 1985.
/s/ (signature of Notary)
- -------------------------
Notary Public
-15-
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
LEISURE CONCEPTS, INC.
(Under Section 805 of the Business Corporation Law)
We, the undersigned, being the President and Secretary of Leisure
Concepts, Inc. in accordance with Section 805 of the Business Corporation Law,
do hereby certify:
FIRST: The name of the Corporation is Leisure Concepts, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on the 28th day of April, 1970 under the name American
Leisure Industries, Inc.
THIRD: The Certificate of Incorporation of the Corporation, as amended, is
hereby amended pursuant to Section 805 of the Business Corporation Law.
FOURTH: Paragraph number "FOURTH" of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is Four Million (4,000,000) shares divided into two classes
of which Three Million (3,000,000) shares shall be designated as Common Stock,
$.01 par value per share and One Million (1,000,000) shares shall be designated
as Preferred Stock, $.01 par value per share. The Preferred Stock shall be
issuable in one or more series in such designations, relative rights and
limitations as may be fixed from time to time by the Board of Directors of the
Corporation. The designations, preferences and relative, participating, optional
and other special rights of the Preferred Stock (unless otherwise fixed by the
Board of Directors) and the Common Stock, and the qualifications, limitations
and restrictions thereof, are as follows:
1. The shares of Preferred Stock may be divided into and issued in one or
more series, and each series shall be so designated so as to distinguish the
shares thereof from the shares of all other series. All shares of Preferred
Stock shall be identical except in respect of particulars which may be fixed by
the Board of Directors as hereinafter provided pursuant to authority which is
hereby expressly vested in the Board of Directors. Each share of a series shall
be identical in all respects with all other shares of such series, except as to
the date from which dividends thereon shall be cumulative on any series as to
which dividends are cumulative.
-16-
<PAGE>
Shares of Preferred Stock of any series which have been retired in any manner,
including shares redeemed or reacquired by the Corporation and shares which have
been converted into or exchanged for shares of any other class, or any series of
the same or any other class, shall have the status of authorized but unissued
shares of Preferred Stock and may be reissued as shares of the series of which
they were originally a part, or any other series.
2. Before any shares of Preferred Stock of any series shall be issued, the
Board of Directors, pursuant to authority hereby expressly vested in it, shall
fix by resolution or resolutions the following provisions in respect of the
shares of each such series so far as the same are not inconsistent with the
provisions of this paragraph FOURTH applicable to all series of Preferred Stock:
(a) the distinctive designations of such series and the number of shares
which shall constitute such series, which number may be increased (or decreased
except where otherwise provided by the Board of Directors in creating such
series) from time to time by like action of the Board of Directors:
(b) the annual rate or amount of dividends payable on shares of such
series, whether such dividends shall be cumulative or non-cumulative, the
conditions upon which and/or the dates when such dividends shall be payable and
the date from which dividends on cumulative series shall accrue and be
cumulative on all shares of such series issued prior to the payment date for the
first dividend of such series;
(c) whether such series shall be redeemable and, if so, the terms and
conditions of such redemption, including the time or times when and the price or
prices at which shares of such series shall be redeemed;
(d) the amount and priority payable on shares of such series in the event
of liquidation, dissolution or winding up of the affairs of the Corporation;
(e) whether such series shall be convertible into or exchangeable for
shares of any other class, and, if so, the terms and conditions thereof,
including the date or dates when such shares shall be so convertible or
exchangeable, and any adjustments which shall be made, and the circumstances in
which any such adjustments shall be made, in such conversion or exchange prices
or rates;
(f) whether such series shall have any voting rights in addition to those
prescribed by law and, if so, the terms and conditions of exercise of such
voting rights; and
(g) any other designations, preferences and relative, participating,
optional or other special rights, and any qualifications, limitations and
restrictions thereof.
-17-
<PAGE>
3.(a) So long as any shares of Preferred Stock of any series shall be
outstanding, the Corporation will not declare or pay any dividends on the Common
Stock (other than dividends payable solely in shares of Common Stock) or make
any distributions of any kind, either directly or indirectly, in respect of
shares of Common Stock, or make any payment on account of the purchase,
redemption or other acquisition of Common Stock, unless on the payment,
distribution or redemption date, as the case may be, all dividends on the then
outstanding shares of Preferred Stock of all series for all past dividend
periods shall have been paid to the full extent of the preference, if any, to
which each series of Preferred Stock is then entitled.
(b) When dividends shall have been paid (or declared and set aside for
payment) on the Preferred Stock to the full extent of the preference, if any, to
which the Preferred Stock is entitled, dividends on the remaining class or
classes of stock may then be paid out of the funds of the Corporation which are
legally available therefor.
(c) Subject to the limitations prescribed in this paragraph FOURTH and any
further limitations which may from time to time be prescribed by the Board of
Directors in accordance herewith, the holders of Common Stock shall be entitled
to receive dividends on the Common Stock, when, as and if declared by the Board
of Directors, out of the funds of the Corporation which are legally available
therefor.
4. The authorized but unissued shares of Common Stock and the authorized
but unissued shares of Preferred Stock may be issued for such consideration, not
less than the par value thereof, as may be fixed from time to time by the Board
of Directors.
FIFTH: The manner in which this Amendment to the Certificate of
Incorporation of the Corporation was authorized was by the affirmative vote of
the holders of at least a majority of the outstanding shares of the Corporation
entitled to vote thereon at a meeting of the shareholders of the Corporation
duly called and
-18-
<PAGE>
held on the 11th day of July, 1979.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
17th day of July, 1979.
/s/ Stanley A. Weston
---------------------
Stanley A. Weston
President
/s/ Milton Kayle
----------------
Milton Kayle
Secretary
-19-
<PAGE>
STATE OF NEW YORK )
:SS.:
COUNTY OF NEW YORK)
Stanley A. Weston, being duly sworn, deposes and says that he is the
President of Leisure Concepts, Inc. and is one of the persons who signed the
foregoing Certificate of Amendment: that he has read the Certificate of
Amendment and knows the contents thereof and that the same is true to his own
knowledge.
/s/ Stanley A. Weston
---------------------
Stanley A. Weston
Sworn to before me this 19th day of July, 1979.
/s/ Sheri Binder
- ----------------
Notary Public
-20-
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN LEISURE INDUSTRIES, INC.
Under Section 805 of the Business Corporation Law
WE, the undersigned, being the President and Assistant Secretary of
AMERICAN LEISURE INDUSTRIES, INC., do hereby certify and set forth:
FIRST: The name of the corporation is AMERICAN LEISURE INDUSTRIES, INC.
SECOND: The Certificate of Incorporation of AMERICAN LEISURE INDUSTRIES,
INC. was filed by the Department of State on the 28th day of April, 1970.
THIRD: The Certificate of Incorporation of AMERICAN LEISURE INDUSTRIES,
INC. is hereby amended pursuant to Section 801(b)(1) of the Business Corporation
Law.
FOURTH: Paragraph number "FIRST" of the Certificate of Incorporation, the
subject matter of which is the name of the Corporation, is hereby eliminated and
the following provision is substituted in its place and stead:
"FIRST: The name of the Corporation is LEISURE CONCEPTS, INC."
FIFTH: The manner in which this amendment to the Certificate of
Incorporation of AMERICAN LEISURE INDUSTRIES, INC. was authorized was by the
unanimous written consent of the holders of all of the issued and outstanding
shares entitled to vote.
IN WITNESS WHEREOF, the undersigned have executed this certificate this
21st day of April, 1972.
/s/ Stanley A. Weston
--------------------------------
Stanley A. Weston, President
/s/ Gerald Deutsch
---------------------------------------
Gerald Deutsch, Assistant Secretary
-21-
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
STANLEY A. WESTON, being duly sworn, deposes and says:
That he is President of AMERICAN LEISURE INDUSTRIES, INC., and is one of
the persons who signed the foregoing Certificate of Amendment; that he has read
the Certificate of Amendment and knows the contents thereof and that the same is
true to his own knowledge.
/s/ Stanley A. Weston
---------------------
STANLEY A. WESTON
Sworn to before me this 21st
day of April, 1972.
/s/ Gerald S. Deuce
- -------------------
Notary Public
GERALD S. Deuce
Notary Public State of New York
No.
Qualified in Queens County
Term Expires March 30, 1974
-22-
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN LEISURE INDUSTRIES, INC.
Under Section 805 of the Business Corporation Law:
WE, the undersigned, being the President and Secretary of AMERICAN LEISURE
INDUSTRIES, INC., do hereby certify and set forth:
FIRST: The name of the corporation as AMERICAN LEISURE INDUSTRIES, INC.
SECOND: The Certificate of Incorporation of AMERICAN LEISURE INDUSTRIES,
INC. was filed by the Department of State on the 28th day of April, 1970.
THIRD: The Certificate of Incorporation of AMERICAN LEISURE INDUSTRIES,
INC. is hereby amended pursuant to Section 801 of the Business Corporation Law.
FOURTH: Paragraph number "FOURTH" of the Certificate of Incorporation,
dealing with the capitalization of the Corporation, is hereby amended to be and
read as follows:
"FOURTH: The aggregate number of shares which the Corporation shall have
the authority to issue is One Million (1,000,000) Common Shares having a par
value of One ($.01) Cent per share, aggregating Ten Thousand ($10,000) Dollars."
Pursuant to the filing of this Certificate of Amendment and effective on
such filing date, the Corporation shall exchange and issue Three Hundred
Seventy-Five (375) of the Corporation's Common Shares, One ($.01) Cent par value
per share, for each One (1) of the Corporation's One Thousand (1,000) Common
Shares, with no par value, outstanding (being all of the authorized shares and
the Corporation having no unissued shares) and held by each shareholder, so that
there shall be Three Hundred Seventy-Five Thousand (375,000) Common Shares, One
($.01) Cent par value per share, issued and outstanding subsequent to such
exchange.
FIFTH: Paragraph numbered "FIFTH" of the Certificate of Incorporation
dealing with the designation of the Secretary of State as the Agent for service
of process is hereby re-numbered and amended and added as a new paragraph
numbered "EIGHTH". Paragraph numbered "FIFTH" is now changed to be and read as
follows:
-23-
<PAGE>
"FIFTH: Except as may otherwise be specifically provided, no provision of
this Certificate of Incorporation is intended by the Corporation to be construed
as limiting, prohibiting, denying or abrogating any of the general or specific
powers or rights conferred under the Business Corporation Law upon the
Corporation, upon its shareholders, bondholders, and security holders, and upon
its directors, officers, and other corporate personnel, including, in
particular, the power of the Corporation to furnish indemnification to directors
and officers in the capacities defined and prescribed by the Business
Corporation Law and the defined and prescribed rights of said persons to
indemnification as same are conferred by the Business Corporation Law."
SIXTH: A new paragraph numbered "SIXTH" is hereby added to the Certificate
of Incorporation to be and read as follows:
"SIXTH: No holder of any of the shares of the Corporation of any class now
or hereafter authorized shall be entitled (other than as the Board of Directors
may in its discretion determine), by reason of his holding of such shares, to
any pre-emptive right to purchase or subscribe for any share or shares of the
Corporation of any class now or hereafter authorized, or any notes, debentures,
bonds, certificates of indebtedness or other securities convertible into or
carrying any options, warrants or rights to purchase shares of the Corporation,
or any warrants or other instruments evidencing rights or options to purchase or
subscribe for any such shares. Any unissued shares of the Corporation or any
additional shares of any class now or hereafter authorized, or any securities
convertible into or carrying any right to purchase shares may be issued and
disposed of by the Corporation to such persons, firms, corporations or
associations for such consideration and upon such terms as the Board of
Directors may, in its discretion, determine without offering the same to holders
then of record, of any class thereof, any such shares or securities."
SEVENTH: A new paragraph numbered "SEVENTH" is hereby added to the
Certificate of Incorporation to be and read as follows:
"SEVENTH: At any annual or special meeting of the Board of Directors, it
shall have the power and authority, by a majority vote, to add to, repeal or
amend, the Corporate By-Laws without prejudice to or limitation of the like
statutory power and authority of the stockholders. Any By-Laws adopted by the
Board of Directors shall be subject to amendment or repeal by the stockholders."
EIGHTH: A new paragraph number "EIGHTH" of the Certificate of
Incorporation replacing paragraph numbered "FIFTH", dealing with the designation
of the Secretary of State as agent for service of process, is hereby added and
amended to be and read as follows:
"EIGHTH: The Secretary of State is designated as agent of the Corporation
upon whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the Corporation
served upon him is in care of Blackman & Lefrak, 424 Madison Avenue, New York,
New York 10017."
-24-
<PAGE>
NINTH: The manner in which this amendment to the Certificate of
Incorporation of AMERICAN LEISURE INDUSTRIES, INC. was authorized was by the
unanimous vote of the holders of all the issued and outstanding shares entitled
to vote thereon at a special meeting of the shareholders, duly called and held
on the 12th day of October, 1971.
IN WITNESS WHEREOF, the undersigned have executed this certificate this
12th day of October, 1971.
/s/ Stanley A. Weston
--------------------------------
Stanley A. Weston, President
/s/ Arthur Zeiger
-----------------------------
Arthur Zeiger, Secretary
-25-
<PAGE>
STATE OF NEW YORK )
SS.:
COUNTY OF NEW YORK)
STANLEY A. WESTON, being duly sworn, deposes and says that he is President
of AMERICAN LEISURE INDUSTRIES, INC. and is one of the persons who signed the
foregoing Certificate of Amendment; that he has read the Certificate of
Amendment and knows the contents thereof and that the same is true to his own
knowledge.
DAVID J. MYERSON
Notary Public, State of New York /s/ Stanley A. Weston
No. 60-2841790 ------------------------------------
Stanley A. Weston
Qualified in Westchester County
Certificate filed in New York County
Commission Expires March 30, 1973
Sworn to before me this 12th day of October, 1971.
/s/ David J. Myerson
- --------------------
Notary Public
-26-
<PAGE>
CERTIFICATE OF INCORPORATION
of
AMERICAN LEISURE INDUSTRIES INC.
(Pursuant to Section 402 of the Business Corporation Law)
The Undersigned, being a natural person of at least twenty-one years of
age and acting as the incorporator of the Corporation hereby being formed under
the Business Corporation Law certifies that:
FIRST: The name of the Corporation shall be AMERICAN LEISURE INDUSTRIES,
INC.
SECOND: The purposes for which it is to be formed are as follows:
(a) To engage in any business or enterprise of any description whatsoever
including, but not limited to, business or enterprises involving licensing and
merchandising, new product development, geriatrics franchising, toys and games,
hobbies and crafts, publishing, communications and entertainment, sports and
sporting goods, camping and picnicking, travel and transportation, mobil homes,
vacation homes, land development projects, hotels, motels and resorts,
photography and photo supplies, health aids, amusement parks, pets and pet
centers, gardening and lawn care, swimming pools, home-centered leisure
activities, leisure arts, mail order business, toiletries and cosmetics, public
relations, advertising, rapid graphic services and other businesses and
enterprises.
(b) To originate, acquire by purchase, lease, assignment or otherwise own,
hold, edit, copyright, present, license the use of sell, assign, transfer and
otherwise dispose of stories, scenarios, pictures, dramas, literary
compositions, books, musical compositions, musical comedies, musical and
pictorial compositions, productions, works, publications and properties of all
kinds.
(c) To employ actors, singers, designers, directors, conductors, writers,
composers, photographers, artists, musicians, arrangers, dancers and any and all
other performers for the purpose of creating, devising, producing and presenting
television programs, motion pictures, radio programs and all other kinds of
products.
(d) Directly, or through ownership of stock in any corporation, to
purchase or otherwise acquire, hold, manufacture, sell, exchange, mortgage,
pledge, hypothecate, underwrite, deal in and dispose of stocks, bonds, notes,
debentures, or other evidences of indebtedness and obligations and securities of
any corporation, company, association, partnership, syndicate, entity, or
person, domestic or foreign, or of any domestic or foreign state, government, or
governmental authority or of any political or administrative subdivision or
department thereof,
-27-
<PAGE>
and certificates or receipts of any kind representing or evidencing any interest
in any such stocks, bonds, notes, debentures, evidences of indebtedness,
obligations, or securities; to issue its own shares of stock, bonds, notes,
debentures, or other evidences of indebtedness and obligations and securities
for the acquisition of any such stocks, bonds, notes, debentures, evidences of
indebtedness, obligations, securities, certificates, or receipts purchased or
acquired by it; and, while the owner or holder of any such stocks, bonds, notes,
debentures, evidences of indebtedness, obligations, securities, certificates or
receipts, to exercise all the rights of ownership in respect thereof; and, to
the extent now or hereafter permitted by law, to aid by loan, subsidy, guaranty,
or otherwise, those issuing, creating, or responsible for any such stocks,
bonds, notes, debentures, evidences of indebtedness, obligations, securities,
certificates or receipts.
(e) To purchase or otherwise acquire, hold, exchange, pledge, hypothecate,
sell, deal in, and dispose of mortgages covering any kind of property, tax
liens, and transfers of tax liens on real estate.
(f) To transact a general real estate agency and brokerage business,
buying, selling and dealing in real estate and real property and any interest
therein, on commission, or otherwise, and renting and managing real estate; and
to act as agent, or attorney-in-fact for any persons or corporations in buying,
selling, holding and dealing in real estate and any interest therein and choses
in action secured thereby and other personal property collateral thereto and in
supervising, managing, and protecting such property and any interest therein and
claims affecting same.
(g) To enter into, make and perform contracts of every kind and
description pertaining to the business of the corporation with any person, firm,
corporation, association, municipality, county, state, body politic or
government or colony or dependency thereof.
(h) To acquire and pay for in cash, stocks or bonds of this corporation,
or otherwise, the good will, rights, assets and property and to undertake to
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation, provided such acquisition is related to the
purposes stated herein.
(i) To carry on, assist, and to participate with others, in the
organization, financing (including lending and advancing money),
liquidation or reorganization of firms, associations, or
corporations engaged in any similar lawful business enterprise, and
to lend and advance money and to give credit to individuals,
partnerships, corporations, joint stock associations, and trustees,
either with or without security; provided, however, nothing herein
contained shall be taken to authorize such corporation to engage in
the business of banking or to deal in commercial paper in the
exercise of the functions of bank discount.
-28-
<PAGE>
(j) To borrow or raise moneys for any of the purposes of the corporation,
and from time to time, without limitation as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness, in such form and with such provisions as to
preference of payment and otherwise as the Board of Directors may prescribe, and
to secure the payment of any thereof and of the interest thereon by mortgage
upon or pledge, conveyance or assignment in trust of the whole or any part of
the property of the corporation, whether at the time owned or thereafter
acquired, and to sell, pledge, or otherwise dispose of such bonds or other
obligations of the corporation for its corporate purposes.
(k) To buy, sell, or otherwise deal in as principal, factor, agent or
broker, and upon commission or otherwise, all forms and kinds of securities,
shares of stocks, bonds, debentures, warehouse receipts, promissory notes, open
accounts, certificates of indebtedness, evidence of indebtedness of every kind,
nature or character, commercial paper, mortgages, chattel mortgages and other
similar instruments, and rights, whether secured or unsecured, including bills
and accounts receivable, choses in action, leases, contracts of conditional
sale, and any and all kinds of negotiable or non-negotiable paper (secured as
well as unsecured), evidencing or connected with the purchase, sale or exchange
of any and all kinds of personal property.
(l) To purchase, hold, sell and transfer the shares of its own capital
stock, provided it shall not use its funds or property for the purchase of its
own shares of capital stock when such use would cause any impairment of its
capital except as otherwise permitted by law, and provided further that the
shares of its own capital stock belonging to it shall not be voted upon directly
or indirectly.
(m) To apply for, purchase, or in any manner acquire; to hold, use, own
and operate; to sell or in any manner dispose of; to grant or license letters
patent, copyrights, chemical formulas, rights of representation, licenses and
privileges of any sort, and in any manner deal with, any and all such rights,
interests, inventions, improvements and processes used in connection with or
secured under such copyrights or under letters patent of the United States or
other countries or otherwise, and to work, operate and develop the same.
(n) To have one or more offices, to carry on all or any of its operations
and business, and to exercise all or any of its corporate powers and rights, in
any of the States, Districts, Territories or Colonies of the United States, and
in any and all foreign countries, subject to the laws of such State, District,
Territory, Colony or Country.
(o) In general, to carry on any other business connected with the
foregoing, or incidental, appurtenant to or growing out of any of the foregoing,
or in any way necessary, suitable or proper for the accomplishment of the
aforesaid objects, purposes and powers, and to have and exercise all the powers
conferred by the laws of New York upon corporations, formed under the Business
Corporation Law of the State of New York.
-29-
<PAGE>
(p) The objects and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in no wise limited or restricted by
reference to, or inference from, the terms of any other clause in this
Certificate of Incorporation, but the objects and purposes specified in each of
the foregoing clauses of this Article shall be regarded as independent objects
and purposes.
THIRD: The City, incorporated village or town and the county within the
State of New York in which the office of the Corporation is to be located are as
follows:
City County
New York New York
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is One Thousand (1000) all of which are without par value,
and all of which are of the same class.
FIFTH: The Secretary of State is designated as the agent of the
Corporation upon whom process against the Corporation may be served. The post
office address within or without the State of New York to which the Secretary of
State shall mail a copy of any process against the Corporation served upon him
is:
FRANKLIN & WEINRIB
600 Madison Avenue
New York, New York 10022
IN WITNESS WHEREOF, I, being over the age of twenty-one (21)
-30-
<PAGE>
years, have made, signed and acknowledged this Certificate this 22nd day of
April, 1970.
------------------------
Leonard Franklin
600 Madison Avenue
New York, New York 10022
STATE OF NEW YORK )
)SS.:
COUNTY OF NEW YORK)
On the date hereinafter set forth, before me came LEONARD FRANKLIN, to me
known to be the individual who is described in, and who signed the foregoing
Certificate of Incorporation, and he acknowledged to me that he signed the same.
Dated: New York, New York
/s/ Leola R. Glenn
------------------
Notary Public
-31-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 19,259,714
<SECURITIES> 0
<RECEIVABLES> 11,322,743
<ALLOWANCES> 516,671
<INVENTORY> 0
<CURRENT-ASSETS> 34,300,687
<PP&E> 1,592,498
<DEPRECIATION> 1,425,974
<TOTAL-ASSETS> 38,794,961
<CURRENT-LIABILITIES> 13,434,493
<BONDS> 0
0
0
<COMMON> 54,510
<OTHER-SE> 24,926,946
<TOTAL-LIABILITY-AND-EQUITY> 38,794,961
<SALES> 0
<TOTAL-REVENUES> 8,758,895
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,687,767
<INCOME-TAX> 2,015,000
<INCOME-CONTINUING> 2,672,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,672,767
<EPS-BASIC> 0.53
<EPS-DILUTED> 0.45
</TABLE>
