'Yu-Gi-Oh!" Studio Hints at Bankruptcy If Rights Termination Found Valid

What's the future of "Yu-Gi-Oh!" on American television? On March 24th, the Japanese studios behind the massively popular anime cancelled their deal with U.S. distributor, 4Kids Entertainment, over millions of dollars owed and secret agreements with TV networks and home video distributors. In a new report to the Securities & Exchange Commission, 4Kids says it plans to "vigorously oppose" the termination and if necessary, go into bankruptcy to preserve its assets.

The lawsuit filed by TV Tokyo Corporation and Nihon Ad Systems accused 4Kids of making unauthorized deals and then hiding revenues through tricky accounting.

The parties had been engaged in discussions with each other to resolve the situation for a couple of months, since an auditor first turned up irregularities last December. 4Kids confirms the lawsuit's contention that it recently made a "$1 million good-faith payment," and now disputes that TV Tokyo and Nihon properly terminated its agreement.

According to a shareholders' report, 4Kids maintains the "purported termination letter did not comply with the 10 business day notice and cure provision in the Yu-Gi-Oh! Agreement."

The children's entertainment studio says it intends to fight the lawsuit vigorously, and even seek damages against TV Tokyo and Nihon, but admits that if the termination letter is found to be valid, it "would likely significantly impede the Company’s ability to continue its operations" and force the company to file Chapter 11 bankruptcy."