8 unchanged sentences
Interest Rate Risk
−Removed: Our exposure to market risk includes interest rate fluctuations in connection with our 2021 BSP Term Loan (see Item 8 “Consolidated Financial Statements and Supplementary Data, Note 10 – Debt) and our 2021 JPMorgan ABL Facility (see Item 8 “Consolidated Financial Statements and Supplementary Data, Note 11 – Credit Facilities).
−Removed: As of December 31, 2022, we have $68.9 million of outstanding indebtedness under our BSP Term Loan which is due June 2027 with interest at either (i) LIBOR plus 6.50% - 7.00% (determined by reference to a net leverage pricing grid), subject to a 1.00% LIBOR floor, or (ii) base rate plus 5.50% - 6.00% (determined by reference to a net leverage pricing grid), subject to a 2.00% base rate floor.
−Removed: Borrowings under our JPMorgan ABL Facility bear interest at either (i) Eurodollar spread plus 1.50% - 2.00% (determined by reference to an excess availability pricing grid) or (ii) Alternate Base Rate plus 0.50% - 1.00% (determined by reference to an excess availability pricing grid and base rate subject to a 1.00% floor).
−Removed: Borrowings under the 2021 BSP Term Loan and 2021 JPMorgan ABL Facility are therefore subject to risk based upon prevailing market interest rates.
+Added: Our exposure to market risk includes interest rate fluctuations in connection with our JPMorgan ABL Facility (see Item 8 “Consolidated Financial Statements and Supplementary Data, Note 10 – Credit Facilities).
+Added: In Q1 2023, we entered into an amendment to our JPMorgan ABL Credit Agreement which changed the interest reference rate on our revolving line of credit from LIBOR to the Secured Overnight Financing Rate (“SOFR”).
+Added: Effective March 16, 2023, borrowings under our JPMorgan ABL Facility bear interest at either (i) SOFR plus 1.50% - 2.00% (determined by reference to an excess availability pricing grid) or (ii) Alternate Base Rate plus 0.50% - 1.00% (determined by reference to an excess availability pricing grid and base rate subject to a 1.00% floor).
+Added: Borrowings under the JPMorgan ABL Facility are therefore subject to risk based upon prevailing market interest rates.
Interest rate risk may result from many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.
1 unchanged sentence
As of December 31, 2023, the amount of total borrowings outstanding under the revolving credit facility was nil.
−Removed: London Interbank Offering Rate (“LIBOR”) is an interest rate benchmark used as a reference rate for our term loan.
−Removed: Borrowings under our term loan will bear interest at a variable rate, primarily based on LIBOR.
−Removed: In July 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.
−Removed: It is unclear whether or not LIBOR will cease to exist at that time (and if so, what reference rate will replace it) or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.
−Removed: On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one-week and two-month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors.
−Removed: While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.
−Removed: In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phase-out could cause LIBOR to perform differently than in the past or cease to exist.
−Removed: The Alternative Reference Rates Committee (“ARRC”) has identified the Secured Overnight Financing Rate ("SOFR") as the recommended alternative for use in financial and other derivatives contracts that are currently indexed to U.S.
−Removed: dollar LIBOR.
−Removed: In Q1 2023, we entered into amendments to our 2021 BSP Term Loan Agreement and our JPMorgan ABL Credit Agreement which changed the interest reference rate on our term loan and revolving line of credit from LIBOR to the Secured Overnight Financing Rate (“SOFR”).
Foreign Currency Risk
−Removed: We have wholly-owned subsidiaries in Hong Kong, China, the United Kingdom, Germany, France, the Netherlands, Canada and Mexico.
+Added: We have wholly-owned subsidiaries in Hong Kong, China, the United Kingdom, Germany, France, the Netherlands, Italy, Canada and Mexico.
Sales are generally made by these operations on FOB China or Hong Kong terms and are denominated in U.S.
−Removed: However, purchases of inventory and Hong Kong operating expenses are typically denominated in Hong Kong dollars and local operating expenses in the United Kingdom, Germany, France, the Netherlands, Canada, Mexico and China are denominated in local currency, thereby creating exposure to changes in exchange rates.
+Added: However, purchases of inventory and Hong Kong operating expenses are typically denominated in Hong Kong dollars and local operating expenses in the United Kingdom, Germany, France, the Netherlands, Italy, Canada, Mexico and China are denominated in local currency, thereby creating exposure to changes in exchange rates.
Changes in the U.S.
2 unchanged sentences
dollar has been linked to the U.S.
−Removed: dollar by the Hong Kong Monetary Authority at HK$7.75 - HK$7.85 to US$1.00 since 2005 and, accordingly, has not represented a currency exchange risk to the U.S.
+Added: dollar by the Hong Kong Monetary Authority at HK$7.75 – HK$7.85 to US$1.00 since 2005 and, accordingly, has not represented a meaningful currency exchange risk to the U.S.
We do not believe that near-term changes in these exchange rates, if any, will result in a material effect on our future earnings, fair values or cash flows.
10 unchanged sentences
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 , in conformity with accounting principles generally accepted in the United States of America.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 15, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
1 unchanged sentence
Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
−Removed: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
+Added: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
1 unchanged sentence
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
−Removed: The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
−Removed: As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
−Removed: Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
3 unchanged sentences
Critical Audit Matter
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
−Removed: The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
+Added: The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Cost of Sales for Royalties and Related Liabilities
4 unchanged sentences
The royalty expense calculation includes multiple variables based on various license agreements, including amended and renewed license agreements, and a significant volume of underlying data.
−Removed: Variables in calculating the royalty expense include the territory of where the sale occurs, a broad range of negotiated royalty rates for the type of product, user/usage measures, and the applicable license holder.
−Removed: The cost of sales for royalties and related liabilities requires judgment to critically evaluate its forecasts and evaluate its ability to fully utilize minimum guaranteed royalties.
−Removed: Auditing management’s royalty expense and associated liabilities involved especially challenging auditor judgment and audit effort due to the nature and extent of effort required to address these matters.
−Removed: The primary procedure we performed to address this critical audit matter included:
+Added: The cost of sales for royalties and related liabilities requires judgment to critically evaluate management’s forecasts, including assessing the Company’s ability to fully utilize minimum guaranteed royalties.
+Added: Auditing these elements involved especially challenging auditor judgment due to the nature and extent of effort required to address these matters.
+Added: The primary procedures we performed to address this critical audit matter included:
Evaluating the reasonableness of management’s forecasts, which included:
−Removed: (i) obtaining an understanding of management’s process for developing forecasts, (ii) comparing prior period forecasts to actual results, (iii) assessing the Company’s ability to meet its future guarantees and (iv) evaluating the impact of alternative assumptions on the measurement and comparing to management’s estimate.
+Added: (i) obtaining an understanding of management’s process for developing forecasts, (ii) comparing prior period forecasts to actual results, (iii) assessing the Company’s ability to meet its future guarantees at the license agreement level and (iv) evaluating the impact of alternative assumptions on the measurement and comparing to management’s estimate.
Assessing management’s projections in the context of other audit evidence obtained during the audit and historical performance to determine whether it was contradictory to the conclusion reached by management.
−Removed: Recalculating royalty costs, agreeing calculation variables to the underlying agreements, and evaluating the reasonableness of royalty expense and related liabilities based on existing, amended and renewed license agreements during the year.
−Removed: Accounting for Income Taxes
−Removed: As described in Notes 2 and 13 of the consolidated financial statements, the Company’s benefit from income taxes for the fiscal year ended December 31, 2022 was $41.0 million, which included a discrete tax benefit of $49.8 million primarily comprised of the release of a majority of the Company’s valuation allowance related to the deferred tax assets.
−Removed: We identified the Company’s assessment of the realizability of its deferred tax assets as a critical audit matter.
−Removed: The principal considerations for this determination were complex and subjective judgements involved in management’s assessment of the realizability of its deferred tax assets, including the evaluation of assumptions that may be affected by future operations of the Company, market or economic conditions and assessing the weight of all existing positive and negative available evidence such as forecasts of future profitability, current and cumulative financial reporting results, and reversal of temporary differences.
−Removed: Auditing these elements involved especially complex and subjective auditor judgement, including the extent of specialized skills and knowledge needed.
−Removed: The primary procedures we performed to address this critical audit matter included:
−Removed: Testing mathematical accuracy and computation of the tax provision and agreeing to relevant source information.
−Removed: Assessing the reasonableness of management’s projections in the context of other audit evidence obtained during the audit, historical performance, allocations by tax jurisdiction, and the inherent uncertainty in the projections to determine whether it was contradictory to the conclusion reached by management.
−Removed: Utilizing personnel with specialized knowledge and skills in accounting for income taxes to assist in evaluating the reasonableness of certain assumptions related to the timing of the release of the valuation allowance and the Company’s consideration of the weight of both positive and negative evidence supporting the potential use of projections of future taxable income to support the realizability of the deferred tax assets.
−Removed: /s/ BDO USA, LLP
+Added: Testing the cost of sales for royalties and related liabilities by (i) evaluating the reasonableness of royalties based on existing, amended, and renewed license agreements during the year, (ii) testing the activity of selected royalty contracts, and (iii) ensuring the proper classification of the selected royalty contracts at year-end.
+Added: /s/ BDO USA, P.C.
We have served as the Company’s auditor since 2006.
Los Angeles, California
−Removed: April 14, 2023
+Added: March 15, 2024
JAKKS PACIFIC, INC.
5 unchanged sentences
Restricted cash
−Removed: Accounts receivable, net of allowance for doubtful accounts of $ 2,865 and $ 2,626 in 2022 and 2021, respectively
+Added: Accounts receivable, net of allowance for credit losses of $ 3,743 and $ 2,865 in 2023 and 2022, respectively
Prepaid expenses and other assets
9 unchanged sentences
Deferred income tax assets, net
−Removed: Intangible assets, net
Liabilities, Preferred Stock and Stockholders' Equity
9 unchanged sentences
Long-term operating lease liabilities
+Added: Accrued expenses – long term
Debt, non-current portion, net of issuance costs and debt discounts
1 unchanged sentence
Income taxes payable
−Removed: Deferred income taxes liabilities, net
Total liabilities
31 unchanged sentences
Intangible asset impairment
−Removed: Restructuring charge
−Removed: Pandemic related charges
Income from operations
−Removed: Income from joint ventures
+Added: Loss from joint ventures
Other income (expense), net
15 unchanged sentences
Shares used in earnings (loss) per share - diluted
−Removed: * After giving effect to a 1 for 10 reverse stock split effective July 9, 2020.
See accompanying notes to consolidated financial statements.
21 unchanged sentences
Stock-based compensation expense
+Added: RSA to RSU conversion
Conversion of convertible senior notes
3 unchanged sentences
Foreign currency translation adjustment
−Removed: Adjustment to additional paid in capital
Balance, December 31, 2021
Stock-based compensation expense
−Removed: RSA to RSU conversion
−Removed: Conversion of convertible senior notes
Repurchase of common stock for employee tax withholding
9 unchanged sentences
Balance, December 31, 2023
−Removed: * After giving effect to a 1 for 10 reverse stock split effective July 9, 2020.
See accompanying notes to consolidated financial statements.
8 unchanged sentences
Depreciation and amortization
−Removed: Write-off and amortization of debt issuance costs
−Removed: Share-based compensation expense
Payment-in-kind interest
Write-off and amortization of debt discount
−Removed: (Gain) loss on disposal of property and equipment
−Removed: Tools and molds disposal
+Added: Write-off and amortization of debt issuance costs
+Added: Share-based compensation expense
+Added: Gain on disposal of property and equipment
Intangibles impairment
17 unchanged sentences
Purchases of property and equipment
+Added: Investments in employee deferred compensation trusts
Proceeds from sale of property and equipment
2 unchanged sentences
Repurchase of common stock for employee tax withholding
−Removed: Proceeds from loan under the Paycheck Protection Program
−Removed: Retirement of convertible senior notes
Repayment of credit facility borrowings
9 unchanged sentences
Cash, cash equivalents and restricted cash, end of year
−Removed: Supplemental disclosures of non-cash financing activities:
+Added: Supplemental disclosures of non-cash activities:
Forgiveness of Paycheck Protection Program Loan
+Added: Right-of-use assets exchanged for lease liabilities
Supplemental disclosures of cash flow information:
4 unchanged sentences
As of December 31, 2021, there was $ 2.8 million of property and equipment included in accounts payable.
−Removed: The Company received income tax refunds of $ 0.3 million, $ 0.3 million and $ 0.6 million for the years ended December 31, 2022, 2021 and 2020, respectively, and has included these amounts in cash paid during the period for income taxes, net.
+Added: The Company received income tax refunds of nil , $ 0.3 million and $ 0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively, and has included these amounts in cash paid during the period for income taxes, net.
See accompanying notes to consolidated financial statements.
12 unchanged sentences
All intercompany transactions have been eliminated.
−Removed: Effective July 9, 2020, the Company completed a 1 for 10 reverse stock split of its $ 0.001 par value common stock reducing the issued and outstanding shares of common stock from 42,395,782 to 4,239,578 (“Reverse Stock Split”).
−Removed: The Reverse Stock Split did not cause an adjustment to the par value or the authorized shares of the common stock.
−Removed: All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
−Removed: The primary reason for implementing the Reverse Stock Split was to regain compliance with the minimum bid price requirement of The NASDAQ Stock Market LLC (“Nasdaq”).
−Removed: On July 31, 2020, the Company was notified by Nasdaq that it had regained compliance with the Nasdaq listing requirements.
Cash and cash equivalents
10 unchanged sentences
Restricted cash consists of a cash collateral account to cover a guarantee bond.
−Removed: Accounts Receivable and Allowance for Doubtful Accounts
+Added: Accounts Receivable and Allowance for Current Expected Credit Losses
Credit is granted to customers on an unsecured basis.
3 unchanged sentences
The Company uses a variety of financial arrangements to ensure collectability of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment.
−Removed: The Company records an allowance for doubtful accounts based upon management’s assessment of the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, customer disputes and the collectability of specific customer accounts.
+Added: The Company records an allowance for current expected credit losses based upon management’s assessment of the business environment, customers’ risk profile characteristics, historical collection and loss information, aging of accounts receivables, and other matters specific to customer accounts to establish pools based on customer risk profile characteristics and the historical loss rates applied to each pool under the expected credit loss model.
+Added: The allowance consists of the following (in thousands):
+Added: Allowance, beginning balance
+Added: Net additions
+Added: Write-offs and other
+Added: Allowance, ending balance
+Added: Bad debt expense was $ 0.7 million, $ 0.2 million and $( 1.4 ) million for the years ended December 31, 2023, 2022 and 2021, respectively
Use of estimates
26 unchanged sentences
As a result, these costs are recorded as direct selling expenses, as incurred.
+Added: For the twelve months ended December 31, 2023, 2022 and 2021 sales commissions were $ 2.9 million, $ 2.9 million and $ 2.2 million, respectively.
Shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred.
For the twelve months ended December 31, 2023, 2022 and 2021, shipping and handling costs were $8.6 million, $ 7.7 million and $ 5.4 million, respectively.
−Removed: The Company’s reserve for sales returns and allowances amounted to $ 51.9 million as of December 31, 2022 and $ 46.3 million as of December 31, 2021.
+Added: The Company’s reserve for sales returns and allowances amounted to $ 38.5 million and $ 51.9 million as of December 31, 2023 and 2022.
+Added: The Company’s net accounts receivable as of December 31, 2023, and 2022 were $ 123.8 million and $ 102.8 million, respectively.
Fair Value Measurements
12 unchanged sentences
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
−Removed: Inventory, which includes the ex-factory cost of goods, capitalized warehouse costs and in-bound freight and duty, is valued at the lower of cost or net realizable value, net of inventory obsolescence reserve, and consists of the following (in thousands):
+Added: Inventory, which includes the ex-factory cost of goods, capitalized warehouse costs and in-bound freight and duty, is valued at the lower of cost (weighted average) or net realizable value, net of inventory obsolescence reserve, and consists of the following (in thousands):
Raw materials
31 unchanged sentences
For the years ended December 31, 2023, 2022 and 2021, the Company’s aggregate depreciation expense related to property and equipment was $ 8.6 million, $ 9.6 million and $ 9.2 million, respectively.
−Removed: For the years ended December 31, 2022, 2021 and 2020, the Company recorded a (gain) loss on disposal of tools and molds of ($ 43,850 ), ($ 34,100 ) and $ 0.1 million, respectively, which is included in cost of sales in the consolidated statements of operations.
Other Comprehensive Income (Loss)
19 unchanged sentences
Revision of Previously Disclosed Amounts
−Removed: During the course of preparing the Company’s financial statements as of and for the year ended December 31, 2022, the Company completed an Internal Revenue Code Section 382 and 383 analysis of its historical net operating loss and tax credit carryforward amounts.
−Removed: As a result, a portion of the prior year net operating loss and tax credit carryforwards were determined to be limited.
+Added: During the course of preparing the Company’s financial statements as of and for the year ended December 31, 2023, the Company adjusted the rate reconciliation table in Note 12 – Income Taxes to break out more material items of the rate reconciliation for comparative purposes.
+Added: Additionally, the Company adjusted the UTP table disclosed in Note 12 – Income Taxes to exclude associated tax interest.
See Note 12 – Income Taxes, for further details.
32 unchanged sentences
The Company measures all employee share-based compensation awards using a fair value method and records such expense in its consolidated statements of operations.
+Added: Forfeitures are being recognized as they occur.
Earnings (Loss) per share
14 unchanged sentences
Diluted earnings (loss) per share is calculated using the weighted average number of common shares and common share equivalents outstanding during the period (which consist of restricted stock awards, restricted stock units and convertible debt to the extent they are dilutive).
−Removed: For the years ended December 31, 2021 and 2020, the convertible senior notes interest and related weighted common share equivalent of 1,735,938 and 5,758,365 , respectively, were excluded from the diluted earnings (loss) per share calculation since they would have been anti-dilutive.
−Removed: Potentially dilutive restricted stock awards and units of nil , 122,371 and 185,455 for each of the years ended December 31, 2022, 2021 and 2020, respectively, were excluded from the computation of diluted earnings (loss) per share since they would have been anti-dilutive.
+Added: For the years ended December 31, 2023, 2022 and 2021, the convertible senior notes interest and related weighted common share equivalent of nil , nil and 1,735,938 , respectively, were excluded from the diluted earnings (loss) per share calculation since they would have been anti-dilutive.
+Added: Potentially dilutive restricted stock awards and units of nil , nil and 122,371 for each of the years ended December 31, 2023, 2022 and 2021, respectively, were excluded from the computation of diluted earnings (loss) per share since they would have been anti-dilutive.
Recent Accounting Pronouncements
4 unchanged sentences
As a result, the effective date for the standard is fiscal years beginning after December 15, 2022, and interim periods therein, and early adoption is permitted.
−Removed: Based on the Company’s preliminary evaluation, the Company does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements.
−Removed: In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax assets for investments.
−Removed: The guidance also reduces complexity in certain areas, including the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group.
−Removed: This new standard is effective for the Company for fiscal years beginning January 1, 2021, with early adoption permitted.
−Removed: The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
+Added: The Company adopted ASU 2016-13 and its related amendments on January 1, 2023.
+Added: The adoption of this new accounting standard did not have a material impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):
3 unchanged sentences
The amendments in ASU 2020-04 apply to contracts, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to the global transition away from LIBOR and certain other interbank offered rates.
−Removed: The new standard is effective for the Company for fiscal years beginning after December 15, 2024, including interim periods within these fiscal years, with early adoption permitted.
−Removed: The Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements.
+Added: In December 2022, the FASB issued ASU 2022-06 which extended the effective date of the new standard to fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted.
+Added: In Q1 2023, the Company entered into amendments to its 2021 BSP Term Loan Agreement and its JPMorgan ABL Credit Agreement, which transitioned the interest reference rate on its term loan and revolving line of credit from LIBOR to the Secured Overnight Financing Rate (“SOFR”) (See Note 9 – Debt and Note 10 – Credit Facilities).
+Added: The adoption of this new accounting standard did not have a material impact on the Company’s consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):
5 unchanged sentences
The Company is currently evaluating the impact that the adoption of this new guidance will have on its consolidated financial statements.
−Removed: In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832):
−Removed: Disclosures by Business Entities about Government Assistance.” ASU 2021-10 requires annual disclosures that are expected to increase the transparency of transactions involving government grants, including (1) the types of transactions, (2) the accounting for those transactions and (3) the effect of those transactions on an entity’s financial statements.
−Removed: The provisions of ASU 2021-10 are effective for fiscal years beginning after December 31, 2021, with early adoption permitted.
−Removed: The Company adopted ASU 2021-10 during the fiscal period December 31, 2021.
−Removed: (See Note 5 – Prepaid Expenses and Other Assets and Note 10 – Debt, for disclosures related to government assistance received by the Company).
−Removed: The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
+Added: In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):
+Added: Improvements to Reportable Segment Disclosures.” The amendments in this Update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.
+Added: The new standard is effective for the Company for fiscal years beginning after December 15, 2023, with early adoption permitted.
+Added: The Company is currently evaluating the impact that the updated disclosure will have on its consolidated financial statements.
+Added: In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures.” This ASU provides standardization of tax disclosures, primarily related to the rate reconciliation and income taxes paid information.
+Added: The new standard is effective for the Company for fiscal years beginning after December 15, 2024, with early adoption permitted.
+Added: The Company is currently evaluating the impact that the updated disclosure will have on its consolidated financial statements.
Note 3 — Business Segments, Geographic Data and Sales by Major Customers
40 unchanged sentences
Ltd., (“MC&C”), for the purpose of providing certain JAKKS licensed and non-licensed toys and consumer products to agreed-upon territories of the People’s Republic of China.
−Removed: The joint venture includes a subsidiary in the Shanghai Free Trade Zone that sells, distributes and markets these products, which include dolls, plush, role play products, action figures, costumes, seasonal items, technology and app-enhanced toys, based on top entertainment licenses and JAKKS’ own proprietary brands.
−Removed: The Company owns fifty-one percent of the joint venture and consolidates the joint venture since control rests with the Company.
+Added: On May 10, 2023, the Company dissolved the joint venture with MC&C.
+Added: Prior to the dissolution, the Company owned fifty-one percent of the joint venture.
+Added: The results of operations of the joint venture are consolidated with the Company's results.
The non-controlling interest’s share of the income (loss) from the joint venture for the years ended December 31, 2023, 2022 and 2021 was ($ 293 ,000), ($ 330 ,000) and $ 120 ,000, respectively.
In October 2016, the Company entered into a joint venture with Hong Kong Meisheng Cultural Company Limited ("Meisheng"), a Hong Kong-based subsidiary of Meisheng Culture & Creative Corp., for the purpose of creating and developing original, multiplatform content for children including new short-form series and original shows.
−Removed: JAKKS and Meisheng each own fifty percent of the joint venture and will jointly own the content.
−Removed: JAKKS will retain merchandising rights for kids’ consumer products in all markets except China, which Meisheng Culture & Creative Corp.
−Removed: will oversee through the Company’s existing distribution joint venture.
+Added: On December 1, 2023, the Company dissolved the joint venture with Meisheng.
+Added: Prior to the dissolution, JAKKS and Meisheng each owned fifty percent of the joint venture.
The results of operations of the joint venture are consolidated with the Company's results.
2 unchanged sentences
Prepaid expenses and other assets for the year ended December 31, 2023 and 2022 consist of the following (in thousands):
+Added: Income tax receivable
Prepaid expenses
1 unchanged sentence
Employee retention credit
−Removed: Income tax receivable
Note 6 — Goodwill
2 unchanged sentences
There were no events or changes in circumstances subsequent to the second quarter assessment that indicate that the carrying value of a reporting unit may exceed its fair value as of December 31, 2023.
−Removed: Note 7 — Intangible Assets Other Than Goodwill
−Removed: Intangible assets other than goodwill consist primarily of licenses, product lines, customer relationships and trademarks.
−Removed: Amortized intangible assets are included in intangibles in the accompanying consolidated balance sheets.
−Removed: Trademarks are disclosed separately in the accompanying consolidated balance sheets.
−Removed: Intangible assets are as follows (in thousands, except for weighted useful lives):
−Removed: December 31, 2022
−Removed: December 31, 2021
−Removed: Amortization/
−Removed: Amortization/
−Removed: Amortized Intangible Assets:
−Removed: Product lines
−Removed: Customer relationships
−Removed: Non-compete agreements
−Removed: Total amortized intangible assets
−Removed: December 31, 2022
−Removed: December 31, 2021
−Removed: Unamortized Intangible Assets:
−Removed: For the years ended December 31, 2022, 2021 and 2020, the Company’s aggregate amortization expense related to intangible assets was $ 1.0 million, $ 1.0 million and $ 1.2 million, respectively.
Note 7 — Concentration of Credit Risk
Financial instruments that subject the Company to concentration of credit risk are cash and cash equivalents and accounts receivable.
−Removed: Cash equivalents consist primarily of overnight funds.
+Added: Cash equivalents consist primarily of overnight and money market funds.
These instruments are short-term in nature and bear minimal risk.
14 unchanged sentences
In addition to royalties currently payable on the sale of licensed products during the year, the Company records a liability as accrued royalties for the estimated shortfall in achieving minimum royalty guarantees pursuant to certain license agreements (see Note–16 - Commitments).
+Added: Accrued expenses – long-term, which result from negotiated extended payment terms as part of a multi-year agreement with a 3rd party rights holder amounted to $ 2.7 million as of December 31, 2023, payable in installments over the next 2 years, and nil as of December 31, 2022.
+Added: The remaining $ 1.0 million as of December 31, 2023 related to obligations from the Company’s non-qualified deferred compensation plan (see Note 18 – Employee Benefit Plans) which were nil as of December 31, 2022.
Note 9 — Debt
3 unchanged sentences
In connection with the Recapitalization Transaction, the Company issued (i) amended and restated notes with respect to the Company’s $ 21.6 million Oasis Note issued on November 7, 2017, and the $ 8.0 million Oasis Note issued on July 26, 2018 (together, the “Existing Oasis Notes”), and (ii) a new $ 8.0 million convertible senior note having the same terms as such amended and restated notes (the "New $8.0 million Oasis Note" and collectively, the “New Oasis Notes” or the " 3.25 % convertible senior notes due 2023").
−Removed: Interest on the New Oasis Notes is payable on each May 1 and November 1 until maturity and accrues at an annual rate of (i) 3.25 % if paid in cash or 5.00 % if paid in stock plus (ii) 2.75 % payable in kind.
−Removed: The New Oasis Notes mature 91 days after the amounts outstanding under the 2019 Recap Term Loan are paid in full, and in no event later than July 3, 2023.
−Removed: Excluding the impact of the Reverse Stock Split in July of 2020, the New Oasis Notes provide, among other things, that the initial conversion price is $ 1.00 .
−Removed: The conversion price will be reset on each February 9 and August 9, starting on February 9, 2020 (each, a “reset date”) to a price equal to 105 % of the 5-day VWAP preceding the applicable reset date.
−Removed: Under no circumstances shall the reset result in a conversion price be below the greater of (i) the closing price on the trading day immediately preceding the applicable reset date and (ii) 30 % of the stock price as of the Transaction Agreement Date, or August 7, 2019, and will not be greater than the conversion price in effect immediately before such reset.
−Removed: The Company may trigger a mandatory conversion of the New Oasis Notes if the market price exceeds 150 % of the conversion price under certain circumstances.
−Removed: The Company may redeem the New Oasis Notes in cash if a person, entity or group acquires shares of the Company’s Common Stock, par value $ 0.001 per share (the “Common Stock”), and as a result owns at least 49 % of the Company’s issued and outstanding Common Stock.
+Added: Interest on the New Oasis Notes was payable on each May 1 and November 1 until maturity and accrued at an annual rate of (i) 3.25 % if paid in cash or 5.00 % if paid in stock plus (ii) 2.75 % payable in kind.
+Added: The New Oasis Notes matured 91 days after the amounts outstanding under the 2019 Recap Term Loan were paid in full, and in no event later than July 3, 2023.
+Added: Excluding the impact of the Reverse Stock Split in July of 2020, the New Oasis Notes provided, among other things, that the initial conversion price was $ 1.00 .
+Added: The conversion price was to be reset on each February 9 and August 9, starting on February 9, 2020 (each, a “reset date”) to a price equal to 105 % of the 5-day VWAP preceding the applicable reset date.
+Added: Under no circumstances was the reset to result in a conversion price be below the greater of (i) the closing price on the trading day immediately preceding the applicable reset date and (ii) 30 % of the stock price as of the Transaction Agreement Date, or August 7, 2019, and was not to be greater than the conversion price in effect immediately before such reset.
+Added: The Company could trigger a mandatory conversion of the New Oasis Notes if the market price exceeded 150 % of the conversion price under certain circumstances.
+Added: The Company could redeem the New Oasis Notes in cash if a person, entity or group acquired shares of the Company’s Common Stock, par value $ 0.001 per share (the “Common Stock”), and as a result owned at least 49 % of the Company’s issued and outstanding Common Stock.
On February 9, 2020, excluding the impact of the Reverse Stock Split, the conversion price of the New Oasis Notes reset to $ 1.00 per share ($ 10.00 per share after reverse stock split).
4 unchanged sentences
As a result of the conversion in 2021, the New Oasis Notes were fully extinguished.
−Removed: The Company accounted for the debt held by Oasis at fair value using Level 3 inputs and as a result, recognized a loss of $ 16.4 million and $ 2.3 million for the years ended December 31, 2021 and 2020, respectively, related to changes in the fair value of the 3.25% convertible senior notes due 2023 (see Note 16 – Fair Value Measurement).
+Added: The Company accounted for the debt held by Oasis at fair value using Level 3 inputs and as a result, recognized a loss of $ 16.4 million for the year ended December 31, 2021, related to changes in the fair value of the 3.25% convertible senior notes due 2023 (see Note 15 – Fair Value Measurement).
On February 5, 2021, Benefit Street Partners and Oasis Investment II Master Funds Ltd, both related parties, entered into a purchase and sale agreement wherein Benefit Street Partners purchased $ 11.0 million of principal amount, plus all accrued and unpaid interest thereon, of the New Oasis Notes from Oasis Investment II Master Funds Ltd (see Note 11 – Related Party Transactions).
11 unchanged sentences
* The term loan was valued using the discounted cash flow method to determine the implied debt discount.
−Removed: The debt discount and issuance costs are being amortized over the life of the term loan on a straight-line basis which approximates the effective interest method.
+Added: The debt discount and issuance costs are amortized over the life of the term loan on a straight-line basis which approximates the effective interest method.
On June 2, 2021, the Company and certain of its subsidiaries, as borrowers, entered into a First Lien Term Loan Facility Credit Agreement (the “2021 BSP Term Loan Agreement”) with Benefit Street Partners L.L.C., as Sole Lead Arranger, and BSP Agency, LLC, as agent, for a $ 99.0 million first-lien secured term loan (the “Initial Term Loan”) and a $ 19.0 million delayed draw term loan (the “Delayed Draw Term Loan” and collectively, the “2021 BSP Term Loan”).
1 unchanged sentence
These fees are amortized over the life of the 2021 BSP Term Loan on a straight-line basis which approximates the effective interest method.
−Removed: Proceeds from the Initial Term Loan, together with available cash from the Company, were used to repay the Company’s existing term loan (the “2019 Recap Term Loan” formerly known as the “New Term Loan” in prior filings) under the agreement dated as of August 9, 2019 with Cortland Capital Market Services LLC, as agent for certain investor parties.
+Added: Proceeds from the Initial Term Loan, together with available cash from the Company, were used to repay the Company’s former term loan (the “2019 Recap Term Loan” formerly known as the “New Term Loan” in prior filings) under the agreement dated as of August 9, 2019 with Cortland Capital Market Services LLC, as agent for certain investor parties.
The Delayed Draw Term Loan provision was designed to provide necessary capital to redeem any of the Company’s outstanding 3.25 % convertible senior notes due 2023, upon their maturity, which, upon repayment of the 2019 Recap Term Loan, accelerated to no later than 91 days from the repayment of the 2019 Recap Term Loan, or September 1, 2021.
On July 29, 2021, the Company terminated its Delayed Draw Term Loan option as it determined it had sufficient liquidity to fund any outstanding convertible senior notes that remained upon maturity.
−Removed: Amounts outstanding under the 2021 BSP Term Loan bear interest at either (i) LIBOR plus 6.50 % - 7.00 % (determined by reference to a net leverage pricing grid), subject to a 1.00% LIBOR floor, or (ii) base rate plus 5.50% - 6.00% (determined by reference to a net leverage pricing grid), subject to a 2.00% base rate floor .
−Removed: The 2021 BSP Term Loan matures in June 2027.
−Removed: The 2021 BSP Term Loan Agreement contains negative covenants that, subject to certain exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge its assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.
−Removed: Commencing with the fiscal quarter ending June 30, 2021, the Company is required to maintain a Net Leverage Ratio of 4:00x, with step-downs occurring each fiscal year starting with the quarter ending March 31, 2022 through the quarter ending September 30, 2024 in which the Company is required to maintain a Net Leverage Ratio of 3:00x.
+Added: Amounts outstanding under the 2021 BSP Term Loan bore interest at either (i) LIBOR plus 6.50 % - 7.00 % (determined by reference to a net leverage pricing grid), subject to a 1.00% LIBOR floor, or (ii) base rate plus 5.50% - 6.00% (determined by reference to a net leverage pricing grid), subject to a 2.00% base rate floor .
+Added: The 2021 BSP Term Loan was termed to mature in June 2027.
+Added: In January 2023, the Company entered into a second amendment for its 2021 BSP Term Loan Agreement, which transitioned the interest reference rate on its 2021 BSP Term Loan from LIBOR to the Secured Overnight Financing Rate (“SOFR”).
+Added: The new interest reference rate for the 2021 BSP Term Loan was effective on April 1, 2023.
+Added: In addition to the transition to SOFR, the amendment also included a constant 0.10% spread adjustment until the maturity of the 2021 BSP Term Loan .
+Added: The 2021 BSP Term Loan Agreement contained negative covenants that, subject to certain exceptions, limited the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge its assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.
+Added: Commencing with the fiscal quarter ending June 30, 2021, the Company was required to maintain a Net Leverage Ratio of 4:00x, with step-downs occurring each fiscal year starting with the quarter ending March 31, 2022 through the quarter ending September 30, 2024 in which the Company was required to maintain a Net Leverage Ratio of 3:00x.
On April 26, 2022, the Company entered into a First Amendment to the 2021 BSP Term Loan Agreement, to provide, among other things, that the Company must maintain Qualified Cash of at least:
2 unchanged sentences
and (c) at all times on and after July 1, 2022, through September 30, 2022, $17.5 million;
−Removed: provided, however, that if the Total Net Leverage Ratio exceeded 1.75:1.00 as of the last day of the most recently ended month for which financial statements were required to have been delivered, then the amount set forth in this clause shall be increased to $20.0 million.
−Removed: Notwithstanding the foregoing, the Applicable Minimum Cash Amount shall be reduced by $1.0 million for every $5.0 million principal prepayment or repayment of the Term Loans following the First Amendment Effective Date;
−Removed: provided however, that, the Applicable Minimum Cash Amount shall in no event be reduced below $15.0 million .
+Added: provided, however, that if the Total Net Leverage Ratio exceeded 1.75:1.00 as of the last day of the most recently ended month for which financial statements were required to have been delivered, then the amount set forth in this clause was to be increased to $20.0 million.
+Added: Notwithstanding the foregoing, the Applicable Minimum Cash Amount was to be reduced by $1.0 million for every $5.0 million principal prepayment or repayment of the Term Loans following the First Amendment Effective Date;
+Added: provided however, that, the Applicable Minimum Cash Amount was in no event to be reduced below $15.0 million .
+Added: The 2021 BSP Term Loan Agreement contained events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, certain judgment defaults and a change of control as specified in the 2021 BSP Term Loan Agreement.
+Added: If an event of default occurred, the maturity of the amounts owed under the 2021 BSP Term Loan Agreement might have been accelerated.
+Added: The obligations under the 2021 BSP Term Loan Agreement were guaranteed by the Company, the subsidiary borrowers thereunder and certain of the other existing and future direct and indirect subsidiaries of the Company and were secured by substantially all of the assets of the Company, the subsidiary borrowers thereunder and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens and subject to the priority lien granted under the JPMorgan ABL Credit Agreement (see Note 10 – Credit Facility).
+Added: The agent and Sole Lead Arranger under the 2021 BSP Term Loan were affiliates of an affiliate of the Company, which affiliate, at the time of refinancing, owned common stock, and the 3.25 % convertible senior notes due 2023 of the Company as well as the Company’s outstanding Series A Preferred Stock (see Note 11 – Related Party Transactions).
+Added: The fair value of the Company’s 2021 BSP Term Loan was considered Level 3 fair value (see Note 15 – Fair Value Measurements for further discussion of the fair value hierarchy) and was measured using the discounted future cash flow method.
+Added: In addition to the debt terms, the valuation methodology included an assumption of a discount rate that approximated the current yield on a debt security with comparable risk.
+Added: This assumption was considered an unobservable input in that it reflected the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability.
+Added: The Company believed that this was the best information available for use in the fair value measurement.
+Added: The estimated fair value of the 2021 BSP Term Loan was $ 69.3 million as of December 31, 2022 compared to a carrying value of $ 68.9 million as of December 31, 2022.
On June 27, 2022, as permitted by the terms within the 2021 BSP Term Loan Agreement, the Company made a voluntary fee-free $ 10.0 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan.
On September 28, 2022, as permitted by the terms within the 2021 BSP Term Loan Agreement, the Company made a voluntary $ 17.5 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan and incurred a $ 0.5 million prepayment penalty.
−Removed: The 2021 BSP Term Loan Agreement contains events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, certain judgment defaults and a change of control as specified in the 2021 BSP Term Loan Agreement.
−Removed: If an event of default occurs, the maturity of the amounts owed under the 2021 BSP Term Loan Agreement may be accelerated.
−Removed: The obligations under the 2021 BSP Term Loan Agreement are guaranteed by the Company, the subsidiary borrowers thereunder and certain of the other existing and future direct and indirect subsidiaries of the Company and are secured by substantially all of the assets of the Company, the subsidiary borrowers thereunder and such other subsidiary guarantors, in each case, subject to certain exceptions and permitted liens and subject to the priority lien granted under the JPMorgan ABL Credit Agreement (see Note 11 – Credit Facility).
−Removed: The agent and Sole Lead Arranger under the 2021 BSP Term Loan are affiliates of an affiliate of the Company, which affiliate, at the time of refinancing, owned common stock and the 3.25 % convertible senior notes due 2023 of the Company, as well as the Company’s outstanding Series A Preferred Stock.
−Removed: Amortization expense classified as interest expense related to the $ 0.8 million of debt issuance costs associated with the issuance of the 2021 BSP Term Loan was $ 0.2 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively.
−Removed: Amortization expense classified as interest expense related to the $ 1.6 million debt discount associated with the issuance of the 2021 BSP Term Loan was $ 0.3 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively.
−Removed: The fair value of the Company’s 2021 BSP Term Loan is considered Level 3 fair value and are measured using the discounted future cash flow method.
−Removed: In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a debt security with comparable risk.
−Removed: This assumption is considered an unobservable input in that it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability.
−Removed: The Company believes that this is the best information available for use in the fair value measurement.
−Removed: The estimated fair value of the 2021 BSP Term Loan as of December 31, 2022 was $ 69.3 million compared to a carrying value of $ 68.9 million.
−Removed: The estimated fair value of the 2021 BSP Term Loan as of December 31, 2021 was $ 97.3 million compared to a carrying value of $ 95.5 million.
−Removed: As of December 31, 2022, the Company was in compliance with the financial covenants under the 2021 BSP Term Loan Agreement.
−Removed: The aggregate principal amount of long-term debt maturing in the next five years and thereafter is as follows:
−Removed: 2021 BSP Term Loan
−Removed: * Represents the Company’s current portion of principal amortization payments for the 2021 BSP Term Loan.
+Added: On January 3, 2023, as permitted by the terms within the 2021 BSP Term Loan Agreement, the Company made a voluntary $ 15.0 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan and incurred a $ 0.2 million prepayment penalty.
+Added: On March 3, 2023, as required by the terms within the 2021 BSP Term Loan Agreement under the Excess Cash Flow (“ECF”) Sweep provision, the Company made a mandatory $ 23.1 million payment towards the outstanding principal amount of the 2021 BSP Term Loan.
+Added: On June 5, 2023, the Company paid in full the 2021 BSP Term Loan and terminated the 2021 BSP Term Loan Agreement by making a $ 30.2 million prepayment towards the outstanding principal amount.
+Added: Additionally, the Company made a $ 0.4 million payment towards the outstanding accrued interest, and a $ 0.3 million payment for the prepayment penalty and other related fees.
+Added: In connection with this transaction, the Company recognized a loss on debt extinguishment of $ 1.0 million on its condensed consolidated statements of operations.
Loan under Paycheck Protection Program
7 unchanged sentences
The Company may be subjected to penalties and repayment of the PPP loan if the SBA disagrees with the Company’s eligibilities.
−Removed: Income from the forgiveness of the PPP Loan is recognized as a$ 6.2 million gain on loan forgiveness in the consolidated statements of operations.
+Added: Income from the forgiveness of the PPP Loan was recognized as a $ 6.2 million gain on loan forgiveness for the year ended December 31, 2021, in the consolidated statements of operations.
Note 10 — Credit Facilities
3 unchanged sentences
The Company pays a commitment fee ( 0.25 % - 0.375 %) based on the unused portion of the revolving credit facility.
−Removed: Any amounts borrowed under the JPMorgan ABL Facility will bear interest at either (i) Eurodollar spread plus 1.50 % - 2.00 % (determined by reference to an excess availability pricing grid) or (ii) Alternate Base Rate plus 0.50 % - 1.00 % (determined by reference to an excess availability pricing grid and base rate subject to a 1.00% floor).
+Added: Any amounts borrowed under the JPMorgan ABL Facility bore interest at either (i) LIBOR plus 1.50 % - 2.00 % (determined by reference to an excess availability pricing grid) or (ii) Alternate Base Rate plus 0.50 % - 1.00 % (determined by reference to an excess availability pricing grid and base rate subject to a 1.00% floor).
The JPMorgan ABL Facility matures in June 2026.
−Removed: As of December 31, 2022 and 2021, the weighted average interest rate on the credit facility with JPMorgan Chase Bank was 1.88 %.
+Added: As of December 31, 2023 and 2022, the weighted average interest rate on the credit facility with JPMorgan Chase Bank was 6.77 % and 1.88 %, respectively.
+Added: In March 2023, the Company entered into a first amendment for its JPMorgan ABL Credit Agreement, which transitioned the interest reference rate on its JPMorgan ABL Facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”).
+Added: The new interest reference rate for the ABL Facility became effective on March 16, 2023.
+Added: Any amounts borrowed under the JPMorgan ABL Facility will bear interest at either (i) SOFR plus 1.50 % - 2.00 % (determined by reference to an excess availability pricing grid) plus a constant 0.10 % spread adjustment or (ii) Alternate Base Rate plus 0.50 % - 1.00 % (determined by reference to an excess availability pricing grid and base rate subject to a 1.00% floor).
The JPMorgan ABL Credit Agreement contains negative covenants that, subject to certain exceptions, limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.
7 unchanged sentences
As of December 31, 2023, the Company was in compliance with the financial covenants under the JPMorgan ABL Credit Agreement.
+Added: As of December 31, 2022 the Company was in compliance with the financial covenants under the 2021 BSP Term Loan Agreement and the JPMorgan ABL Agreement.
Note 11 — Related Party Transactions
4 unchanged sentences
Meisheng also serves as a significant manufacturer of the Company.
−Removed: For the years ended December 31, 2022, 2021 and 2020, the Company made inventory-related payments to Meisheng of approximately $ 120.5 million, $ 77.7 million and $ 64.8 million respectively.
+Added: For the years ended December 31, 2023, 2022 and 2021, the Company made inventory, molds and tooling related payments to Meisheng of approximately $ 75.7 million, $ 120.5 million and $ 77.7 million respectively.
As of December 31, 2023 and 2022, amounts due to Meisheng for inventory received by the Company, but not paid totaled $ 12.3 million and $ 9.8 million, respectively.
A director of the Company is a director at Benefit Street Partners, who owns 145,788 shares of the Series A Preferred Stock (see Note 14 – Common Stock and Preferred Stock).
−Removed: As of December 31, 2022, a division of Benefit Street Partners held $ 68.9 million in principal amount of the 2021 BSP Term Loan (see Note 10 - Debt).
Note 12 — Income Taxes
1 unchanged sentence
The Company files federal and state returns and its foreign subsidiaries file returns in their respective jurisdiction.
−Removed: For the years ended 2022, 2021 and 2020, the provision for income taxes, which included federal, state and foreign income taxes, was a benefit of $ 41.0 million, an expense of $ 0.2 million, and an expense of $ 0.7 million, respectively, reflecting effective tax provision rates of ( 81.9 %), ( 4.0 %), and ( 5.5 %), respectively.
−Removed: The 2022 tax benefit of $41.0 million included a discrete tax benefit of $ 49.8 million primarily comprised of the valuation allowance release.
+Added: For the years ended 2023, 2022 and 2021, the provision for income taxes, which included federal, state and foreign income taxes, was an expense of $ 6.8 million, a benefit of $ 41.0 million, and an expense of $ 0.2 million, respectively, reflecting effective tax provision rates of 15.2 %, ( 81.9 )% and ( 4.0 )%, respectively.
+Added: The 2023 tax expense of $6.8 million included a discrete tax benefit of $ 2.7 million primarily comprised of valuation allowance adjustments.
Absent these discrete tax benefits, our effective tax rate for 2023 was 21.3 %, primarily due to taxes on federal, state and foreign income.
−Removed: For the years ended 2021 and 2020, provision for income taxes includes federal, state and foreign income taxes at effective tax rates of (4.0%) and (5.5%).
+Added: For the years ended 2022 and 2021, provision for income taxes includes federal, state and foreign income taxes at effective tax rates of (81.9)% and (4.0)%, respectively.
Exclusive of discrete items, the effective tax provision rate would be 17.6 % in 2022 and ( 10.7 )% in 2021.
−Removed: As of December 31, 2022 and 2021, the Company had net deferred tax assets of $ 57.8 million related to the U.S.
−Removed: and foreign jurisdictions and net deferred tax liabilities of approximately $ 51,000 primarily related to foreign jurisdictions, respectively.
+Added: As of December 31, 2023 and 2022, the Company had net deferred tax assets of $ 68.1 million and $ 57.8 million, respectively, related to U.S.
+Added: and foreign jurisdictions.
Provision for income taxes reflected in the accompanying consolidated statements of operations are comprised of the following (in thousands):
Year ended December 31,
+Added: Current income tax expense (benefit):
State and local
−Removed: Total Current
+Added: Total current income tax expense (benefit)
+Added: Deferred income tax expense (benefit):
+Added: State and Local
+Added: Total deferred income tax expense (benefit)
+Added: Total income tax expense (benefit)
The components of deferred tax assets/(liabilities) are as follows (in thousands):
−Removed: Net deferred tax assets/(liabilities):
+Added: Year ended December 31,
+Added: Deferred Income Tax Assets:
Reserve for sales allowances and possible losses
7 unchanged sentences
Interest limitation
−Removed: Undistributed foreign earnings
−Removed: Operating lease right-of-use assets
Operating lease liabilities
1 unchanged sentence
Credit carryforwards
−Removed: Research & development capitalization
+Added: Research and development capitalization
+Added: Total Deferred Income Tax Assets
+Added: Deferred Income Tax Liabilities:
+Added: Undistributed foreign earnings
+Added: Operating lease right-of-use assets
+Added: Total Deferred Income Tax Liabilities
Valuation allowance
−Removed: Total net deferred tax assets (liabilities)
+Added: Total Net Deferred Income Tax Assets/(Liabilities)
Provision for income taxes varies from the U.S.
8 unchanged sentences
Provision to return
+Added: Other deferred adjustments
Change in tax rate
1 unchanged sentence
Non-deductible expenses
−Removed: Foreign tax credit
Unrealized loss
+Added: Section 162(m)
+Added: Foreign tax credit
Undistributed foreign earnings
9 unchanged sentences
Balance, December 31, 2021
+Added: Additions based on tax positions related to the current year
+Added: Additions for tax positions of prior years
Balance, December 31, 2022
3 unchanged sentences
Current interest on uncertain income tax liabilities is recognized as a component of the income tax provision recognized in the consolidated statements of operations.
−Removed: During 2022, the Company recognized $ 0.2 million of interest expense related to UTPs.
−Removed: The Company did not recognize any interest expense relating to UTPs in 2021.
+Added: During 2023 and 2022, the Company recognized $ 41 thousand and $ 0.2 million of interest expense related to UTPs, respectively.
The Company does not expect its gross unrecognized tax benefits to significantly change within the next 12 months.
−Removed: Tax years 2019 through 2021 remain subject to examination in the United States.
+Added: Tax years 2020 through 2022 remains subject to examination in the United States.
The tax years 2019 through 2022 are generally still subject to examination in the various states.
6 unchanged sentences
Based on the Company’s evaluation of all positive and negative evidence, as of December 31, 2023, a valuation allowance of $ 0.7 million has been recorded against the deferred tax assets that more likely than not will not be realized.
−Removed: For the year ended December 31, 2022, the valuation allowance decreased from $67.3 million at December 31, 2021.
−Removed: The release of the valuation allowance as of December 31, 2022 was primarily due to a pattern of sustained profitability such that it is more likely than not that the deferred income tax assets will be realized.
−Removed: The net deferred tax assets of $57.8 million consists of the net deferred tax assets in the US and foreign jurisdictions, where the Company is in a cumulative income position.
−Removed: The net deferred tax liabilities of $51,000 in 2021 represent the net deferred tax liabilities in the foreign jurisdiction, where the Company is in a cumulative income position.
+Added: For the year ended December 31, 2023, the valuation allowance remained approximately the same as the $0.7 million recorded at December 31, 2022.
+Added: The 2023 and 2022 net deferred tax assets of $ 68.1 million and $ 57.8 million, respectively, consist of the net deferred tax assets in the US and foreign jurisdictions, where the Company is in a cumulative income position.
Pursuant to the Internal Revenue Code of 1986, as amended (the “Code”) Sections 382 and 383, annual use of a company’s NOL and tax credit carryforwards may be limited if there is a cumulative change in ownership of greater than 50% within a three-year period.
3 unchanged sentences
The Company had established a valuation allowance as the realization of such deferred tax assets had not met the more likely than not threshold requirement.
−Removed: Due to the existence of the valuation allowance, further changes in the Company’s unrecognized tax benefits did not impact the Company’s effective tax rate for 2021.
−Removed: During 2022, the Company completed an assessment of the available net operating loss and tax credit carryforwards under Section 382 and 383 and determined that the Company underwent two ownership changes during the period from 2019 to 2021.
−Removed: As a result, net operating loss and tax credit carryforwards attributable to the pre-ownership changes are subject to substantial annual limitations under Section 382 and 383 of Code due to the ownership changes.
−Removed: The Company has adjusted their previously reported net operating loss and tax credit carryforwards to address the impact of the ownership changes.
−Removed: This resulted in a net reduction of available gross federal and state net operating loss carryforwards of approximately $ 53 million and $ 85 million, respectively which related to the year ended December 31, 2021 and prior.
−Removed: The tax effected federal and state net operating loss carryforwards (“NOL”) reduction amounts were $ 16.8 million.
−Removed: This also resulted in a reduction of federal tax credit carryforwards of approximately $ 0.6 million related to the years ended December 31, 2021 and prior.
−Removed: Accordingly, the net operating loss and tax credit carryforwards presented above for the year ending December 31, 2021 were reduced by $ 16.8 million and $ 0.6 million, respectively, with a corresponding reduction to the valuation allowance of $ 17.4 million.
+Added: During 2023, the Company finalized the assessment of available net operating loss and tax credit carryforwards under Section 382 and 383.
+Added: This resulted in an increase of available tax-effected federal and state net operating loss carryforwards of approximately $ 1.4 million and $ 1.3 million, respectively.
+Added: During 2022, the Company completed an initial assessment of the available net operating loss and tax credit carryforwards under Section 382 and 383 and determined that the Company underwent two ownership changes during the period from 2019 to 2021.
+Added: This resulted in a net reduction of available federal and state net operating loss carryforwards of $ 16.8 million and federal tax credit carryforwards of approximately $ 0.6 million, with a corresponding reduction to the valuation allowance of $ 17.4 million.
At December 31, 2023, the Company has U.S.
1 unchanged sentence
At December 31, 2023, the Company has state NOLs of approximately $ 49.0 million, which will begin to expire in 2024.
+Added: The Company maintained undistributed earnings overseas as of December 31, 2023.
+Added: As of December 31, 2023, the Company believed the funds held by all non-U.S.
+Added: subsidiaries will be permanently reinvested outside of the U.S., with the exception of Hong Kong.
+Added: As a result of tax reform, the Company’s unrepatriated earnings are no longer subject to federal income tax in the U.S.
+Added: when distributed.
Note 13 — Leases
5 unchanged sentences
Under ASC 842, total operating lease costs for the years ended December 31, 2023, 2022 and 2021 were $ 12.4 million, $ 19.1 million, and $ 10.3 million, respectively.
−Removed: Of the $19.1 million for the year ended December 31, 2022, $ 10.7 million related to short-term and variable lease costs, including common area maintenance charges, management fees, taxes and storage fees.
+Added: Of the $12.4 million for the year ended December 31, 2023, $ 3.3 million was related to short-term and variable lease costs, including common area maintenance charges, management fees, taxes and storage fees.
Sublease rental income was $ 1.5 million in 2023.
−Removed: Of the $10.3 million for the year ended December 31, 2021, $ 2.0 million related to short-term and variable lease costs, including common area maintenance charges, management fees, taxes and storage fees.
+Added: Of the $19.1 million for the year ended December 31, 2022, $ 10.7 million was related to short-term and variable lease costs, including common area maintenance charges, management fees, taxes and storage fees.
Sublease rental income was $ 2.2 million in 2022.
−Removed: Of the $11.7 million for the year ended December 31, 2020, $ 2.0 million related to short-term and variable lease costs, including common area maintenance charges, management fees, taxes and storage fees.
+Added: Of the $10.3 million for the year ended December 31, 2021, $ 2.0 million was related to short-term and variable lease costs, including common area maintenance charges, management fees, taxes and storage fees.
Sublease rental income was $ 2.2 million in 2021.
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Total lease payments
−Removed: Less imputed interest
+Added: Imputed interest
As of December 31, 2023 and 2022, the minimum lease payments for executed and legally enforceable leases that have not yet commenced were nil .
Note 14 — Common Stock and Preferred Stock
−Removed: Effective July 9, 2020, the Company completed a Reverse Stock Split of its $ 0.001 par value common stock reducing the issued and outstanding shares of common stock from 42,395,782 to 4,239,578 .
−Removed: All common stock and price per share amounts in this report have been restated to reflect the Reverse Stock Split.
−Removed: The Reverse Stock Split did not cause an adjustment to the par value or the authorized shares of the common stock.
−Removed: All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this Reverse Stock Split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
−Removed: The primary reason for implementing the Reverse Stock Split was to regain compliance with the minimum bid price requirement of Nasdaq.
−Removed: On July 31, 2020, the Company was notified by Nasdaq that it had regained compliance with the Nasdaq listing requirements.
All issuances of common stock, including those issued pursuant to restricted stock or unit grants, are issued from the Company’s authorized but not issued and outstanding shares.
−Removed: In January 2021, the Company issued an aggregate of 113,896 shares of restricted stock at a value of approximately $ 0.6 million to two executive officers, which vest in four equal annual installments over four years .
−Removed: During 2021, certain employees, including two executive officers, surrendered an aggregate of 32,846 shares of restricted stock for $ 163,573 to cover income taxes due on the vesting of restricted shares.
−Removed: Additionally, an aggregate of 93,352 shares of restricted stock granted in 2018 with a value of approximately $ 0.5 million was forfeited during 2021.
During 2022, certain employees, including three executive officers, surrendered an aggregate of 113,162 shares of restricted stock units for $ 1.4 million to cover income taxes due on the vesting of restricted shares.
Additionally, an aggregate of 149,238 shares of restricted stock granted in 2019 with a value of approximately $ 2.2 million was forfeited during 2022.
+Added: During 2023, certain employees, including three executive officers, surrendered an aggregate of 157,019 shares of restricted stock units for $ 3.1 million to cover income taxes due on the vesting of restricted shares.
+Added: Additionally, an aggregate of 34,588 shares of restricted stock granted in 2021 and 2022 with a value of approximately $ 0.6 million was forfeited during 2023.
No dividend was declared or paid in 2023 and 2022.
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Riley, as agent pursuant to which the Company may, from time to time, sell shares of its common stock, up to $ 75 million of common stock, in one or more offerings in amounts, prices and at terms that the Company will determine at the time of the offering.
−Removed: During the year ended December 31, 2022, the Company did not sell any shares of common stock under the ATM Agreement.
−Removed: The Company has on file with the SEC an effective registration statement pursuant to which it may issue, from time to time, up to an additional $ 75 million of securities consisting of, or any combination of, common stock, preferred stock, debt securities, warrants, rights and/or units, in one or more offerings in amounts, prices and at terms that the Company will determine at the time of the offering.
−Removed: During the year ended December 31, 2022, the Company has not sold any securities pursuant to its shelf registration statement.
+Added: As of the year ended December 31, 2023, the Company did not sell any shares of common stock under the ATM Agreement.
+Added: The Company has on file with the SEC an effective registration statement pursuant to which it may issue, from time to time, up to $ 150 million of securities (which will be reduced by any amount of securities sold pursuant to the ATM Agreement) consisting of, or any combination of, common stock, preferred stock, debt securities, warrants, rights and/or units, in one or more offerings in amounts, prices and at terms that the Company will determine at the time of the offering.
+Added: As of the year ended December 31, 2023, the Company has not sold any securities pursuant to its shelf registration statement.
Redeemable Preferred Stock
−Removed: On August 9, 2019, in connection with the Recapitalization Transaction (see Note 10 - Debt), the Company issued 200,000 shares of Series A Senior Preferred Stock (the “Series A Preferred Stock”), $ 0.001 par value per share, to the Investor Parties (the “New Preferred Equity”).
−Removed: As of December 31, 2022 and 2021, 200,000 shares of Series A Preferred Stock were outstanding.
+Added: On August 9, 2019, the Company entered into and consummated multiple, binding definitive agreements (collectively, the “Recapitalization Transaction”) among various investor parties to recapitalize the Company’s balance sheet.
+Added: In connection with the Recapitalization Transaction, the Company issued 200,000 shares of Series A Senior Preferred Stock (the “Series A Preferred Stock”), $ 0.001 par value per share, to the Investor Parties (the “New Preferred Equity”).
+Added: As of December 31, 2023 and December 31, 2022, 200,000 shares of Series A Preferred Stock were outstanding.
Each share of Series A Preferred Stock has an initial value of $ 100 per share, which is automatically increased for any accrued and unpaid dividends (the “Accreted Value”).
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In addition, upon the occurrence of certain change of control type events, holders of the Series A Preferred Stock are entitled to receive an amount (the “Liquidation Preference”), in preference to holders of Common Stock or other junior stock, equal to (i) 20 % of the Accreted Value in the case of a certain specified transaction, or (ii) otherwise, 150 % of the Accreted value, plus any accrued and unpaid dividends.
−Removed: The Company has the right, but is not required, to repurchase all or a portion of the Series A Preferred Stock at its Liquidation Preference at any time after payment in full of the 2019 Recap Term Loan (see Note 10 - Debt).
+Added: The Company has the right, but is not required, to repurchase all or a portion of the Series A Preferred Stock at its Liquidation Preference at any time after payment in full of the 2019 Recap Term Loan.
The Series A Preferred Stock does not have any voting rights, except to the extent required by the Delaware General Corporation Law, except for the exclusive right to elect the Series A Preferred Directors (as described below) and except for certain approval rights over certain transactions (as described below).
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The redemption provision specifies if certain events that constitute a change of control occur, the Company may be required to settle the Series A Preferred Stock at 150% of its accreted amount.
−Removed: Accordingly, the redemption provision meets the definition of a derivative, and its economic characteristics are not considered clearly and closely related to the economic characteristics of the Series A Preferred Stock, which is more akin to a debt instrument than equity.
+Added: Accordingly, the redemption provision meets the definition of a derivative, and its economic characteristics are not considered clearly and closely related to the economic characteristics of the Series A Preferred Stock, and is more akin to a debt instrument than equity.
The Company considers the repurchase option to have no value as the likelihood is remote that this event, within the Company’s control, would ever occur.
−Removed: The liability is accounted for at fair value, with changes in fair value recognized as other income (expense) on the Company's condensed consolidated statements of operations (see Note 16 – Fair Value Measurement).
+Added: The liability is accounted for at fair value, with changes in fair value recognized as other income (expense) on the Company's consolidated statements of operations (see Note 15 – Fair Value Measurement).
The value of the redemption provision explicitly considered the present value of the potential premium that would be paid related to, and the probability of, an event that would trigger its payment.
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As of December 31, 2022, the Series A Preferred Stock is recorded in temporary equity at the amount of accrued, but unpaid dividends of $ 4.5 million, and the redemption provision, as a bifurcated derivative, is recorded as a long term liability with an estimated value of $ 21.9 million.
+Added: As of December 31, 2023, the Series A Preferred Stock had a carrying value of $ 26.0 million and a liquidation value of $ 39.0 million.
+Added: As of December 31, 2022, the Series A Preferred Stock had a carrying value of $ 24.5 million and a liquidation value of $ 36.7 million.
The following table provides a reconciliation of the beginning and ending balances of the Series A Preferred Stock, which is recorded in temporary equity:
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Note 15 — Fair Value Measurements
−Removed: The following tables summarize the Company’s financial liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021 (in thousands):
+Added: In instances where the determination of the fair value measurement is based upon inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based upon the lowest level input that is significant to the fair value measurement in its entirety.
+Added: The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
+Added: The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):
Fair Value Measurements
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December 31, 2023
+Added: Money market funds
+Added: Investments in employee deferred compensation trusts
Preferred stock derivative liability
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The following table provides a reconciliation of the beginning and ending balances of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):
−Removed: 3.25% convertible senior notes due 2023
−Removed: Balance at January 1,
−Removed: Conversion of convertible senior notes
−Removed: Change in fair value
−Removed: Payment in-kind
−Removed: Balance at December 31,
Preferred stock derivative liability
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Balance at December 31,
−Removed: The Company had elected the fair value option of measurement for the 3.25% 2023 Notes, under ASC 815, Derivatives and Hedging.
−Removed: As a result, these notes are re-measured each reporting period using Level 3 inputs (Monte Carlo simulation model and inputs for stock price, risk-free rate and volatility), with changes in fair value reflected in current period earnings in its consolidated statements of operations.
The Company’s Series A Preferred derivative liability is classified within Level 3 of the fair value hierarchy because unobservable inputs were used in estimating the fair value.
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Change-in-control probability assumptions
−Removed: 10 % to 40 % ( 27.3 %)
Timing of change-in-control assumptions
−Removed: 1 to 10 years ( 4.19 years)
+Added: 1 to 10 years
Discount Rate
−Removed: 17.48 % to 18.23 % ( 17.70 %)
−Removed: Implied yield*
+Added: Market yield*
As of December 31, 2022
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Change-in-control probability assumptions
−Removed: 5 % to 45 % ( 30.7 %)
Timing of change-in-control assumptions
−Removed: 1 to 10 years ( 3.67 years)
+Added: 1 to 10 years
Discount Rate
−Removed: 13.71 % to 19.46 % ( 15.16 %)
Implied yield**
+Added: * Represents the hypothetical market yield
** Represents the implied yield of the 2021 BSP Term Loan
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Outstanding, December 31
−Removed: As of December 31, 2022, there was nil of total unrecognized compensation cost related to non-vested restricted stock.
−Removed: As of December 31, 2021, there was nil of total unrecognized compensation cost related to non-vested restricted stock.
+Added: As of December 31, 2023, 2022 and 2021 there was nil of total unrecognized compensation cost related to non-vested restricted stock.
On September 27, 2021, the Company amended the employment agreements with certain executives.
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As of December 31, 2023, there was $ 15.4 million of total unrecognized compensation cost related to non-vested restricted stock units, which is expected to be recognized over a weighted-average period of 2.2 years.
+Added: As of December 31, 2023, the fair market value of non-vested restricted stock units was $ 46.4 million.
Share-Based Compensation Expense
−Removed: The following table summarizes the total share-based compensation expense (in thousands):
+Added: The following table summarizes the total share-based compensation expense (in thousands) which is recognized in General and administrative expenses in the Consolidated Statement of Operations:
Year Ended December 31,
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The Plan provided that employees may defer up to 50 % of their annual compensation subject to annual dollar limitations, and that the Company would make a matching contribution equal to 100 % of each employee’s deferral, up to 5 % of the employee’s annual compensation.
−Removed: Company-matching contributions, which vests immediately, totaled $ 2.1 million, $ 1.9 million and nil for the year ended December 31, 2022, 2021 and 2020, respectively.
−Removed: The Company eliminated the match on March 31, 2019, and resumed the match on contributions effective January 1, 2021.
+Added: Company-matching contributions, which vest immediately, totaled $ 1.5 million, $ 2.1 million and $ 1.9 million for the year ended December 31, 2023, 2022 and 2021, respectively.
+Added: Starting December 2023, the Company sponsored for certain of its U.S.
+Added: based senior employees, a nonqualified deferred compensation plan which includes provisions for salary deferrals and discretionary contributions on a deferred tax basis.
+Added: As of December 31, 2023 the Company has not made any discretionary matching contributions to the plan.
+Added: Employees direct the investment of their account balances, and the Company invests amounts held in the associated investment trust consistent with these directions.
+Added: The value of the assets held in trust by the nonqualified plan was $ 41 thousand as of December 31, 2023.
+Added: The Company has statutory benefit plans outside the U.S., which are not material.
Note 19 — Litigation and Contingencies
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As additional information becomes available, the Company assesses the potential liability related to its pending litigation and revises its estimates.
−Removed: A putative class action lawsuit was filed on May 18, 2021 in the Superior Court of the State of California for the County of Los Angeles (Isaiah Villarica v.
−Removed: Jakks Pacific, Inc.).
−Removed: Plaintiff formerly worked in one of the Company’s warehouses and was retained via Workforce Enterprises, a provider of temporary employees.
−Removed: The lawsuit alleges that the Company violated various California Labor Code provisions governing wage and hour requirements, including that the Company failed to pay all minimum and overtime wages owed, provide legally compliant meal and rest periods, or reimburse business expenses.
−Removed: The lawsuit further alleges derivative wage and hour claims for failure to timely pay all wages owed at separation of employment, failure to provide accurate wage statements, and unfair business practices.
−Removed: The same counsel in the Villarica matter also filed a related lawsuit on February 15, 2022 in the same court (Matthew Cordova v.
−Removed: Jakks Pacific, Inc).
−Removed: Plaintiff also formerly worked in one of the Company’s warehouses and was retained via Workforce Enterprises.
−Removed: The lawsuit alleges that the Company committed wage and hour violations under the California Private Attorneys General Act, including failing to provide compliant meal and rest periods, properly calculate and pay all minimum and overtime wages, provide accurate wage statements, provide all wages due at separation of employment, provide sick leave, maintain accurate payroll records, or reimburse business expenses.
−Removed: Both of these matters were settled at mediation in March 2022, and the Court in November 2022 approved the settlements, the proceeds of which have been tendered to the settlement administrator to distribute to the State of California, plaintiff’s counsel, and class members.
−Removed: The Company’s temporary employee service providers provided the bulk of the settlement funds, and the matter had no material impact on the Company.
In the normal course of business, the Company may provide certain indemnifications and/or other commitments of varying scope to a) its licensors, customers and certain other parties, including against third-party claims of intellectual property infringement, and b) its officers, directors and employees, including against third-party claims regarding the periods in which they serve in such capacities with the Company.
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Note 20 — Subsequent Events
−Removed: On January 3, 2023, as permitted by the terms within the 2021 BSP Term Loan Agreement, the Company made a voluntary $ 15.0 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan and incurred a $ 0.2 million prepayment penalty.
−Removed: On March 3, 2023, as required by the terms within the 2021 BSP Term Loan Agreement under the ECF Sweep provision, the Company made a mandatory $ 23.1 million prepayment towards the outstanding principal amount of the 2021 BSP Term Loan.
−Removed: In Q1 2023, the Company entered into amendments to its 2021 BSP Term Loan Agreement and its JPMorgan ABL Credit Agreement, which changed the interest reference rate on its term loan and revolving line of credit from LIBOR to the Secured Overnight Financing Rate (“SOFR”).
+Added: On March 11, 2024, the Company redeemed all of the shares of Series A Senior Preferred Stock for an aggregate price of $ 20.0 million cash and 571,295 of its common shares, representing a value of $ 15.0 million based on a share price of $ 26.26 , settling the preferred stock derivative liability of $ 29.9 million and the preferred stock accrued dividends of $ 6.0 million as of December 31, 2023.
+Added: The redemption removes the restrictions the preemptive rights of the Series A Senior Preferred Stock placed upon the Company (see Note 14 – Common Stock and Preferred Stock and Note 15- Fair Value Measurements).
+Added: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.