What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-08 · 241 added, 165 removed, 507 unchanged (44% of the section changed)

7 unchanged sentences

Restricted cash

Accounts receivable, net of allowance for credit losses of $ 4,880 and $ 3,743 at March 31, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for credit losses of $ 5,236 and $ 3,743 at June 30, 2024 and December 31, 2023, respectively

Prepaid expenses and other assets

17 unchanged sentences

Short-term operating lease liabilities

Short-term debt, net

Total current liabilities

6 unchanged sentences

5,000,000 shares authorized;

nil and 200,000 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

nil and 200,000 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Stockholders' Equity

1 unchanged sentence

100,000,000 shares authorized;

10,800,892 and 10,096,197 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

10,800,892 and 10,096,197 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

11 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of sales:

7 unchanged sentences

Selling, general and administrative expenses

Loss from operations

Income (loss) from operations

Loss from joint ventures

Other income (expense), net

Change in fair value of preferred stock derivative liability

Loss on debt extinguishment

Interest income

Interest expense

Loss before benefit from income taxes

Benefit from income taxes

Income (loss) before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net income (loss)

Net income (loss) attributable to non-controlling interests

Net loss attributable to JAKKS Pacific, Inc.

Net loss attributable to common stockholders

Loss per share - basic and diluted

Shares used in loss per share - basic and diluted

Comprehensive loss

Comprehensive loss attributable to JAKKS Pacific, Inc.

Net income (loss) attributable to Jakks Pacific, Inc.

Net income (loss) attributable to common stockholders

Earnings (loss) per share - basic

Shares used in earnings (loss) per share - basic

Earnings (loss) per share - diluted

Shares used in earnings (loss) per share - diluted

Comprehensive income (loss)

Comprehensive income (loss) attributable to JAKKS Pacific, Inc.

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Three Months Ended March 31, 2024

Three and Six Months Ended June 30, 2024

Pacific, Inc.

12 unchanged sentences

Balance, March 31, 2024

Three Months Ended March 31, 2023

Share-based compensation expense

Foreign currency translation adjustment

Balance, June 30, 2024

Three and Six Months Ended June 30, 2023

Pacific, Inc.

8 unchanged sentences

Balance, March 31, 2023

Share-based compensation expense

Preferred stock accrued dividends

Net income (loss)

Foreign currency translation adjustment

Balance, June 30, 2023

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Provision for credit losses

3 unchanged sentences

Share-based compensation expense

Gain on disposal of property and equipment

Deferred income taxes

Loss on disposal of property and equipment

Loss on debt extinguishment

Change in fair value of preferred stock derivative liability

9 unchanged sentences

Total adjustments

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities

5 unchanged sentences

Repurchase of common stock for employee tax withholding

Repayment of credit facility borrowings

Proceeds from credit facility borrowings

Redemption of preferred stock

8 unchanged sentences

Supplemental disclosures of cash flow information:

Cash paid for income taxes, net

Cash paid for interest

As of March 31, 2024 and 2023, there was $ 3.1 million and $ 2.6 million, respectively, of property and equipment purchases included in accounts payable.

As of March 31, 2024 and 2023, the Company had accrued $ 5.1 million and nil , respectively, for repurchases of common stock for employee tax withholding.

Cash paid for income taxes, net

As of June 30, 2024 and 2023, there was $ 4.3 million and $ 4.7 million, respectively, of property and equipment purchases included in accounts payable.

See Notes 5, 6 and 9 for additional supplemental information to the condensed consolidated statements of cash flows.

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 1 — Basis of Presentation

29 unchanged sentences

The Company is currently evaluating the impact that the updated disclosure will have on its condensed consolidated financial statements.

JAKKS PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

2 unchanged sentences

The Company is currently evaluating the impact that the updated disclosure will have on its condensed consolidated financial statements.

No new additional accounting pronouncements were issued or adopted for the three months ended March 31, 2024 that materially impacted the Company.

JAKKS PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

No new additional accounting pronouncements were issued or adopted for the three and six months ended June 30, 2024 that materially impacted the Company.

Note 2 — Business Segments, Geographic Data and Sales by Major Customers

8 unchanged sentences

Results are not necessarily those which would be achieved if each segment was an unaffiliated business enterprise.

Information by segment and a reconciliation to reported amounts for the three months ended March 31, 2024 and 2023 and as of March 31, 2024 and December 31, 2023 are as follows (in thousands):

Information by segment and a reconciliation to reported amounts for the three and six months ended June 30, 2024 and 2023 and as of June 30, 2024 and December 31, 2023 are as follows (in thousands):

Three Months Ended

Six Months Ended

Toys/Consumer Products

Three Months Ended

Loss from Operations

Six Months Ended

Income (Loss) from Operations

Toys/Consumer Products

Three Months Ended

Six Months Ended

Depreciation and Amortization Expense

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Net revenues are categorized based upon location of the customer, while long-lived assets are categorized based upon the location of the Company’s assets.

The following tables present information about the Company by geographic area as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023 (in thousands):

The following tables present information about the Company by geographic area as of June 30, 2024 and December 31, 2023 and for the three and six months ended June 30, 2024 and 2023 (in thousands):

Long-lived Assets

2 unchanged sentences

Three Months Ended

Six Months Ended

Net Sales by Customer Area

4 unchanged sentences

Major Customers

Net sales to major customers for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except for percentages):

Three Months Ended March 31,

Net sales to major customers for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except for percentages):

Three Months Ended June 30,

Six Months Ended June 30,

No other customer accounted for more than 10% of the Company's total net sales.

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 3 — Inventory

2 unchanged sentences

Finished goods

The inventory obsolescence reserve was $ 10.1 million and $ 7.7 million as of March 31, 2024 and December 31, 2023, respectively.

The inventory obsolescence reserve was $ 8.3 million and $ 7.7 million as of June 30, 2024 and December 31, 2023, respectively.

Note 4 — Revenue Recognition and Reserve for Sales Returns and Allowances

2 unchanged sentences

Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those goods.

The Company’s contracts do not involve financing elements as payment terms with customers are less than one year.

The Company’s contracts do not involve financing elements as payment terms with customers and are less than one year.

Further, because revenue is recognized at the point in time goods are sold to customers, there are no contract assets or contract liability balances.

16 unchanged sentences

As a result, these costs are recorded as direct selling expenses, as incurred.

For the three months ended March 31, 2024 and 2023, sales commissions were $ 0.3 million and $ 0.6 million, respectively.

For the three and six months ended June 30, 2024 sales commissions were $ 0.3 million and $ 0.6 million, respectively.

For the three and six months ended June 30, 2023 sales commissions were $ 0.6 million and $ 1.2 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 three months ended March 31, 2024 and 2023, shipping and handling costs were $ 1.6 million and $ 1.9 million, respectively.

The Company’s reserve for sales returns and allowances amounted to $ 27.9 million as of March 31, 2024, compared to $ 38.5 million as of December 31, 2023.

The Company’s net accounts receivable as of March 31, 2024, December 31, 2023 and December 31, 2022 were $ 79.9 million, $ 123.8 million and $ 102.8 million, respectively.

For the three and six months ended June 30, 2024, shipping and handling costs were $ 1.4 million and $ 3.0 million, respectively.

For the three and six months ended June 30, 2023, shipping and handling costs were $ 1.7 million and $ 3.6 million, respectively.

The Company’s reserve for sales returns and allowances amounted to $ 29.5 million as of June 30, 2024, compared to $ 38.5 million as of December 31, 2023.

The Company’s net accounts receivable as of June 30, 2024 and December 31, 2023 were $ 140.0 million and $ 123.8 million, respectively.

JAKKS PACIFIC, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 5 — Debt

26 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

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.

13 unchanged sentences

The JPMorgan ABL Facility matures in June 2026.

of March 31, 2024 the weighted average interest rate on the credit facility with JPMorgan Chase Bank was nil .

As of June 30, 2024 the weighted average interest rate on the credit facility with JPMorgan Chase Bank was 6.92 %.

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”).

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

The JPMorgan ABL Credit 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, 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, loss of liens or guarantees and a change of control as specified in the JPMorgan ABL Credit Agreement.

1 unchanged sentence

The obligations under the JPMorgan ABL Credit 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.

As of March 31, 2024, the amount of outstanding borrowings was nil and the total excess borrowing availability was $ 57.8 million.

As of March 31, 2024, off-balance sheet arrangements include letters of credit issued by JPMorgan of $ 9.4 million.

Amortization expense classified as interest expense related to the $ 1.6 million of debt issuance costs associated with the transaction that closed on June 2, 2021 (i.e., JPMorgan ABL Credit Agreement) was $ 0.1 million for the three months ended March 31, 2024 and March 31, 2023.

As of March 31, 2024, the Company was in compliance with the financial covenants under the JPMorgan ABL Credit Agreement.

As of June 30, 2024, the amount of outstanding borrowings was $ 5.0 million and the total excess borrowing availability was $ 52.5 million.

As of August 6, 2024, the amount of outstanding borrowings was $ 34.0 million.

As of June 30, 2024, off-balance sheet arrangements include letters of credit issued by JPMorgan of $ 9.4 million.

As of June 30, 2024, the Company was in compliance with the financial covenants under the JPMorgan ABL Credit Agreement.

Note 7 — Income Taxes

The Company’s income tax benefit of $ 6.7 million for the three months ended March 31, 2024, reflects an effective tax (benefit) rate of 32.1 %.

The Company’s income tax benefit of $ 1.4 million for the three months ended March 31, 2023, reflects an effective tax (benefit) rate of 20.6 %.

The tax benefit for the three months ended March 31, 2024 and 2023 primarily relates to discrete items and the tax benefit related to the overall worldwide loss (i.e.

federal, state, and foreign).

Note 8 — Loss Per Share

The following table is a reconciliation of the weighted average shares used in the computation of loss per share for the periods presented (in thousands, except per share data):

The Company’s income tax expense of $ 2.3 million for the three months ended June 30, 2024, reflects an effective tax rate of 30.2 %.

The Company’s income tax expense of $ 1.5 million for the three months ended June 30, 2023, reflects an effective tax rate of 19.3 %.

The increase in tax expense during the three months ended June 30, 2024 compared to the corresponding period in 2023 was primarily due to an increase in the forecasted annual effective tax rate which increased primarily due to non-deductible compensation and foreign inclusions.

The Company’s income tax benefit of $ 4.4 million for the six months ended June 30, 2024 reflects an effective tax (benefit) rate of 33.2 %.

The Company’s income tax expense of $ 0.1 million for the six months ended June 30, 2023 reflects an effective tax rate of 9.9 %.

The increase in tax benefit during the six months ended June 30, 2024 compared to the corresponding period in 2023 was primarily due to a decrease in income before taxes and an increase in benefits from discrete items.

From time to time, in the normal course of business, the Company may be audited by federal, state and foreign tax authorities.

At this time, the Company has at least one audit underway.

The Company currently cannot assess the impact of the outcome on its financial statements.

JAKKS PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

Note 8 — Earnings (Loss) Per Share

The following table is a reconciliation of the weighted average shares used in the computation of earnings (loss) per share for the periods presented (in thousands, except per share data):

Three Months Ended

Loss per share - basic and diluted

Six Months Ended

Earnings (loss) per share - basic and diluted

Net income (loss)

Net income (loss) attributable to non-controlling interests

Net loss attributable to JAKKS Pacific, Inc.

Net income (loss) attributable to JAKKS Pacific, Inc.

Preferred stock dividend*

Redemption of preferred stock

Net loss attributable to common stockholders **

Weighted average common shares outstanding - basic and diluted

Loss per share available to common stockholder - basic and diluted

* The 200,000 shares issued and outstanding as of March 31, 2023 are non-participating.

A preferred dividend of $ 0.4 m was accrued for Q1 2024 and included in the preferred stock redemption.

** Net loss attributable to common stockholders was computed by deducting the difference between the fair value of the consideration transferred to the holders of the preferred stock and the carrying amount of the preferred stock and fair value of the related derivative liability of $ 1.3 million for the three months ended March 31, 2024 and the preferred stock dividend of $ 0.4 million for the three months ended March 31, 2023.

JAKKS PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Net income (loss) attributable to common stockholders **

Weighted average common shares outstanding - basic

Earnings (loss) per share available to common stockholder- basic

Weighted average common shares outstanding - diluted

Earnings (loss) per share available to common stockholder- diluted

* The 200,000 shares issued and outstanding as of June 30, 2023 were non-participating.

A preferred dividend of $ 0.4 million was accrued for Q1 2024 and included in the preferred stock redemption.

** Net income (loss) attributable to common stockholders was computed by deducting the difference between the fair value of the consideration transferred to the holders of the preferred stock and the carrying amount of the preferred stock and fair value of the related derivative liability of $ 1.3 million for the six months ended June 30, 2024 and the preferred stock dividend of $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2023.

Basic loss per share is calculated using the weighted average number of common shares outstanding during the period.

Diluted 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 units to the extent they are dilutive).

Potentially dilutive restricted stock units of 545,145 and 494,106 for the three months ended March 31, 2024 and 2023, respectively, were excluded from the computation of diluted loss per share since they would have been anti-dilutive.

Potentially dilutive restricted stock units of 514,687 for the six months ended June 30, 2024, were excluded from the computation of diluted loss per share since they would have been anti-dilutive.

Note 9 — Common Stock and Preferred Stock

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.

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 for the vesting of restricted shares.

During the year ended December 31, 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 for the vesting of restricted shares.

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.

During 2024, certain employees, including three executive officers, surrendered an aggregate of 147,612 shares of restricted stock units for $ 5.1 million to cover income taxes due for the vesting of restricted shares.

During the six months ended June 30, 2024, certain employees, including three executive officers, surrendered an aggregate of 147,612 shares of restricted stock units for $ 5.1 million to cover income taxes due for the vesting of restricted shares.

Additionally, an aggregate of 17,471 shares of restricted stock granted in 2022 and 2023 with a value of approximately $ 0.3 million was forfeited during 2024.

No dividend was declared or paid in 2024 and 2023.

No dividend was declared or paid in the three months ended June 30, 2024 and 2023.

JAKKS PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

At the Market Offering

1 unchanged sentence

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.

As of March 31, 2024, the Company did not sell any shares of common stock under the ATM Agreement.

As of June 30, 2024, the Company did not sell any shares of common stock under the ATM Agreement.

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.

As of March 31, 2024, the Company has not sold any securities pursuant to its shelf registration statement.

As of June 30, 2024, the Company has not sold any securities pursuant to its shelf registration statement.

Redeemable Preferred Stock

2 unchanged sentences

On March 11, 2024, the Company redeemed all of the outstanding 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.

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”).

Each share of Series A Preferred Stock had an initial value of $ 100 per share, which was automatically increased for any accrued and unpaid dividends (the “Accreted Value”).

The Series A Preferred Stock had the right to receive dividends on a quarterly basis equal to 6.0 % per annum, payable in cash or, if not paid in cash, by an automatic accretion of the Series A Preferred Stock.

No cash dividends had been declared or paid.

Prior to the redemption, for the three and six months ended June 30, 2024 the Company recorded nil and $ 0.4 million, respectively, of preferred stock dividends as an increase in the value of the Series A Preferred Stock.

For the three and six months ended June 30, 2023 the Company recorded $ 0.4 million and $ 0.7 million, respectively, of preferred stock dividends as an increase in the value of the Series A Preferred Stock.

The Series A Preferred Stock had no stated maturity, however, the Company had the right to redeem all or a portion of the Series A Preferred Stock at its Liquidation Preference (as defined below) at any time after payment in full of the 2019 Recap Term Loan.

In addition, upon the occurrence of certain change of control type events, holders of the Series A Preferred Stock were 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.

JAKKS PACIFIC, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

The Series A Preferred Stock has the right to receive dividends on a quarterly basis equal to 6.0 % per annum, payable in cash or, if not paid in cash, by an automatic accretion of the Series A Preferred Stock.

No cash dividends had been declared or paid.

Prior to the redemption, for the three months ended March 31, 2024 and 2023, the Company recorded $ 0.4 million and $ 1.1 million, respectively, of preferred stock dividends as an increase in the value of the Series A Preferred Stock.

The Series A Preferred Stock has no stated maturity, however, the Company has the right to redeem all or a portion of the Series A Preferred Stock at its Liquidation Preference (as defined below) at any time after payment in full of the 2019 Recap Term Loan.

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.

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).

These approval rights require the prior consent of specified percentages of holders (or in certain cases, all holders) of the Series A Preferred Stock in order for the Company to take certain actions, including the issuance of additional shares of Series A Preferred Stock or parity stock, the issuance of senior stock, certain amendments to the Amended and Restated Certificate of Incorporation, the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”), the Second Amended and Restated By-laws or the Amended and Restated Nominating and Corporate Governance Committee Charter, material changes in the Company’s line of business and certain change of control type transactions.

In addition, the Certificate of Designations provides that the approval of at least six directors is required for any related person transaction within the meaning of Item 404 of Regulation S-K under the Securities Act of 1933, as amended, including, without limitation, the adoption of, or any amendment, modification or waiver of, any agreement or arrangement related to any such transaction.

The Certificate of Designations also includes restrictions on the ability of the Company to pay dividends on or make distributions with respect to, or redeem or repurchase, shares of Common Stock or other junior stock.

In addition, holders of the Series A Preferred Stock have preemptive rights regarding future issuance of Series A Preferred Stock or parity stock.

June 30, 2024

The Company had the right, but was 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 did 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).

These approval rights required the prior consent of specified percentages of holders (or in certain cases, all holders) of the Series A Preferred Stock in order for the Company to take certain actions, including the issuance of additional shares of Series A Preferred Stock or parity stock, the issuance of senior stock, certain amendments to the Amended and Restated Certificate of Incorporation, the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”), the Second Amended and Restated By-laws or the Amended and Restated Nominating and Corporate Governance Committee Charter, material changes in the Company’s line of business and certain change of control type transactions.

In addition, the Certificate of Designations provided that the approval of at least six directors was required for any related person transaction within the meaning of Item 404 of Regulation S-K under the Securities Act of 1933, as amended, including, without limitation, the adoption of, or any amendment, modification or waiver of, any agreement or arrangement related to any such transaction.

The Certificate of Designations also included restrictions on the ability of the Company to pay dividends on or make distributions with respect to, or redeem or repurchase, shares of Common Stock or other junior stock.

In addition, holders of the Series A Preferred Stock had preemptive rights regarding future issuance of Series A Preferred Stock or parity stock.

In 2022, an agreement was reached with the preferred shareholders to eliminate their ability to elect members to the Company’s Board of Directors on a going-forward basis.

The Series A Preferred Stock redemption amount is contingent upon certain events with no stated redemption date as of the reporting date, although may become redeemable in the future.

The Series A Preferred Stock redemption amount was contingent upon certain events with no stated redemption date as of the reporting date, although may become redeemable in the future.

In accordance with the SEC guidance within ASC Topic 480, Distinguishing Liabilities from Equity:

Classification and Measurement of Redeemable Securities , the Company classified the Series A Preferred Stock as temporary equity as the Series A Preferred Stock contains a redemption feature which is contingent upon certain deemed liquidation events, the occurrence of which may not solely be within the control of the Company.

Classification and Measurement of Redeemable Securities , the Company classified the Series A Preferred Stock as temporary equity as the Series A Preferred Stock contained a redemption feature which was contingent upon certain deemed liquidation events, the occurrence of which may not solely have been within the control of the Company.

Under ASC 815, Derivatives and Hedging , certain contractual terms that meet the accounting definition of a derivative must be accounted for separately from the financial instrument in which they are embedded.

The Company has concluded that the redemption upon a change of control and the repurchase option by the Company constitute embedded derivatives.

The Company had concluded that the redemption upon a change of control and the repurchase option by the Company constituted embedded derivatives.

The embedded redemption upon a change of control must be accounted for separately from the Series A Preferred Stock.

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.

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.

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 15 – Fair Value Measurement).

The redemption provision specified 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.

Accordingly, the redemption provision met the definition of a derivative, and its economic characteristics were not considered clearly and closely related to the economic characteristics of the Series A Preferred Stock and were more akin to a debt instrument than equity.

The Company considered the repurchase option to have no value as the likelihood is remote that this event, within the Company’s control, would ever occur.

The liability was 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 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.

The probability of a triggering event was based on management’s estimates of the probability of a change of control event occurring.

Accordingly, these two embedded derivatives were accounted for separately from the Series A Preferred Stock at fair value.

As of June 30, 2024, the Company had redeemed all of the outstanding shares of the Series A Preferred Stock.

As of December 31, 2023, the Series A Preferred Stock was recorded in temporary equity at the amount of accrued, but unpaid dividends of $ 6.0 million, and the redemption provision, as a bifurcated derivative, was recorded as a long-term liability with an estimated value of $ 29.9 million.

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.

JAKKS PACIFIC, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Accordingly, these two embedded derivatives are accounted for separately from the Series A Preferred Stock at fair value.

As of March 31, 2024, the Company had redeemed all of the outstanding shares of the Series A Preferred Stock.

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.

June 30, 2024

The following table provides a reconciliation of the beginning and ending balances of the Series A Preferred Stock, which is recorded in temporary equity:

Balance, January 1,

$ 5,992 $ 4,490

Preferred stock accrued dividends

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Balance, March 31,

Preferred stock accrued dividends

Balance, June 30,

Note 10 — Joint Ventures

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The results of operations of the joint venture are consolidated with the Company's results.

The non-controlling interests incurred a gain of $ 280 ,000 and a loss $ 5 ,000 for the three months ended March 31, 2024 and 2023, respectively.

The non-controlling interests incurred a gain of nil and $ 0.3 million for the three and six months ended June 30, 2024, respectively.

The non-controlling interests incurred a loss of $ 0.3 million each for the three and six months ended June 30, 2023.

Note 11 — Goodwill

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Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying value.

For the three months ended March 31, 2024, there were no events or circumstances that indicated that an impairment loss may have been incurred.

Note 12 — Comprehensive Loss

The table below presents the components of the Company’s comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

For the three and six months ended June 30, 2024, there were no events or circumstances that indicated that an impairment loss may have been incurred.

Based on the Company’s April 1 annual assessment, it determined that the fair values of its reporting units were not less than the carrying amounts.

No goodwill impairment was determined to have occurred for the six months ended June 30, 2024 and June 30, 2023.

Note 12 — Comprehensive Income (Loss)

The table below presents the components of the Company’s comprehensive loss for the three and six months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

Six Months Ended

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation adjustment

Comprehensive loss

Comprehensive loss attributable to non-controlling interests

Comprehensive loss attributable to JAKKS Pacific, Inc.

Comprehensive income (loss)

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive income (loss) attributable to JAKKS Pacific, Inc.

JAKKS PACIFIC, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 13 — Litigation and Contingencies

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Shares for the restricted stock units are not issued until they vest.

The following table summarizes the total share-based compensation expense recognized for the three months ended March 31, 2024 and 2023 (in thousands)

The following table summarizes the total share-based compensation expense recognized for the three and six months ended June 30, 2024 and 2023 (in thousands)

Three Months Ended

Six Months Ended

Share-based compensation expense

Restricted Stock Units

Restricted stock unit activity (including those with performance-based vesting criteria) for the three months ended March 31, 2024 is summarized as follows:

Restricted stock unit activity (including those with performance-based vesting criteria) for the six months ended June 30, 2024 is summarized as follows:

Restricted Stock Units

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Outstanding, December 31, 2023

Outstanding, March 31, 2024

As of March 31, 2024, there was $ 17.1 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.

As of March 31, 2024, the fair market value of non-vested restricted stock units was $ 28.0 million.

Outstanding, June 30, 2024

As of June 30, 2024, there was $ 14.5 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 2.0 years.

As of June 30, 2024, the fair market value of non-vested restricted stock units was $ 20.3 million.

JAKKS PACIFIC, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 15 — Fair Value Measurements

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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.

The following tables summarize the Company's financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in thousands):

The following tables summarize the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):

Fair Value Measurements

Carrying Amount as of

As of December 31, 2023

March 31, 2024

Money market funds

As of June 30, 2024

June 30, 2024

Investments in employee deferred compensation trusts

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Extinguishment through redemption of preferred stock

Balance, March 31,

Balance, June 30,

JAKKS PACIFIC, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

The Company’s Series A Preferred derivative liability was classified within Level 3 of the fair value hierarchy because unobservable inputs were used in estimating the fair value.

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* Represents the hypothetical market yield

The Company’s cash and cash equivalents including restricted cash, accounts receivable, accounts payable, and accrued expenses represent financial instruments.

The Company’s cash and cash equivalents including restricted cash, accounts receivable, accounts payable, accrued expenses and short-term debt represent financial instruments.

The carrying value of these financial instruments is a reasonable approximation of fair value due to the short-term nature of the instruments.

The carrying amount of short-term debt at June 30, 2024 approximates fair value because the interest rate approximates the current market interest rate.

Note 16 — Related Party Transactions

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Meisheng also serves as a significant manufacturer of the Company.

For the three months ended March 31, 2024 and 2023, the Company made inventory-related payments to Meisheng of approximately $ 14.9 million and $ 9.3 million, respectively.

As of March 31, 2024 and December 31, 2023, amounts due to Meisheng for inventory received by the Company, but not paid totaled $ 8.7 million and $ 12.3 million, respectively.

For the three and six months ended June 30, 2024 the Company made inventory-related payments to Meisheng of approximately $ 13.9 million and $ 28.8 million, respectively.

For the three and six months ended June 30, 2023, the Company made inventory-related payments to Meisheng of approximately $ 19.1 million and $ 28.4 million, respectively.

As of June 30, 2024 and December 31, 2023, amounts due to Meisheng for inventory received by the Company, but not paid totaled $ 19.1 million and $ 12.3 million, respectively.

JAKKS PACIFIC, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

Note 17 — Prepaid Expenses and Other Assets

Prepaid expenses and other assets as of March 31 ,2024 and December 31, 2023 consist of the following (in thousands):

Royalty advances

Prepaid expenses and other assets as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

Income tax receivable

Prepaid expenses

Royalty advances

Employee retention credit

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Critical Accounting Estimates

Our critical accounting policies and estimates are included in the 2023 Annual Report on Form 10-K and did not materially change during the first three months of 2024.

Our critical accounting policies and estimates are included in the 2023 Annual Report on Form 10-K and did not materially change during the first six months of 2024.

New Accounting Pronouncements

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The following unaudited table sets forth, for the periods indicated, certain statement of income data as a percentage of net sales:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of sales:

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Selling, general and administrative expenses

Loss from operations

Income (loss) from operations

Loss from joint ventures

Other income (expense), net

Change in fair value of preferred stock derivative liability

Loss on debt extinguishment

Interest income

Interest expense

Loss before benefit from income taxes

Benefit from income taxes

Income (loss) before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net income (loss)

Net income (loss) attributable to non-controlling interests

Net loss attributable to JAKKS Pacific, Inc.

Net income (loss) attributable to JAKKS Pacific, Inc.

The following unaudited table sets forth, for the periods indicated, certain statements of operations data by segment (in thousands):

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Toys/Consumer Products

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Toys/Consumer Products

Comparison of the Three Months Ended March 31, 2024 and 2023

Comparison of the Three Months Ended June 30, 2024 and 2023

Toys/Consumer Products.

Net sales of our Toys/Consumer Products segment were $82.9 million for the three months ended March 31, 2024 compared to $97.9 million for the prior year period, representing a decrease of $15.0 million, or 15.3%.

The decrease was primarily driven by lower sales in North America, which was down $9.3 million, or 12.0%.

Our Dolls, Role-Play/Dress-up division products saw a decline of 15.2%, due to lower Disney sales versus a year ago.

Net sales from the Action Play & Collectibles division were down 12.8% due to lower net sales from the Super Mario Movie TM which was released April 2023.

Net sales of our Costumes segment were $7.2 million for the three months ended March 31, 2024 compared to $9.6 million for the prior year period, representing a decrease of $2.4 million, or 25.0%.

The decrease was primarily due to reduced orders from select recurring costumes.

Net sales of our Toys/Consumer Products segment were $104.6 million for the three months ended June 30, 2024 compared to $117.9 million for the prior year period, representing a decrease of $13.3 million, or 11.3%.

Net sales from the Action Play & Collectibles division were down 30.5% in part due to lower net sales from the Super Mario Movie TM which was released April 2023.

Net sales of our Costumes segment were $44.0 million for the three months ended June 30, 2024 compared to $49.0 million for the prior year period, representing a decrease of $5.0 million, or 10.2%.

The decrease in net sales was primarily due to reduced orders from select recurring customers informed in part by the prior year’s sell-through during the Halloween shopping season.

Cost of Sales

Toys/Consumer Products.

Cost of sales of our Toys/Consumer Products segment was $65.1 million, or 78.5% of related net sales for the three months ended March 31, 2024 compared to $68.7 million, or 70.1% of related net sales for the prior year period, representing a decrease of $3.6 million, or 5.3%.

The increase as a percentage of net sales was due to a lower mix of high margin movie-related product as well as increased inventory reserves on slower moving movie-related product.

Cost of sales of our Costumes segment was $4.0 million, or 55.6% of related net sales for the three months ended March 31, 2024, compared to $7.4 million, or 77.1% of related net sales for the prior year period, representing a decrease in dollars of $3.4 million, or 45.9%.

The decrease as a percentage of net sales was due to lower inventory reserves as a result of higher sell thru of reserved product.

Cost of sales of our Toys/Consumer Products segment was $67.5 million, or 64.5% of related net sales for the three months ended June 30, 2024 compared to $77.6 million, or 65.8% of related net sales for the prior year period, representing a decrease of $10.1 million, or 13.0%.

The decrease as a percentage of net sales was due to lower royalties as well as lower finished goods inventory reserves for product obsolescence.

Cost of sales of our Costumes segment was $33.5 million, or 76.1% of related net sales for the three months ended June 30, 2024, compared to $38.1 million, or 77.8% of related net sales for the prior year period, representing a decrease in dollars of $4.6 million, or 12.1%.

The decrease as a percentage of net sales was due to lower royalties as well as lower inventory reserves.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $42.4 million for the three months ended March 31, 2024 compared to $35.8 million for the prior year period constituting 47.1% and 33.3% of net sales, respectively.

The increase in selling, general and administrative expenses was primarily due to higher headcount and salaries as we expand our international presence and associated marketing and travel expenses, as well as additional costs related to IT infrastructure, process and internal control enhancements.

Selling, general and administrative expenses were $39.9 million for the three months ended June 30, 2024 compared to $34.8 million for the prior year period constituting 26.9% and 20.8.% of net sales, respectively.

The increase in selling, general and administrative expenses was primarily due to increased full-time staff as we expand our international presence and associated marketing and travel expenses, as well as higher costs related to warehousing.

Interest Expense

Interest expense was $0.1 million for the three months ended March 31, 2024, as compared to $3.0 million in the prior year period.

During the three months ended March 31, 2024, we incurred interest expense of $0.1 million related to our revolving credit facility.

During the three months ended March 31, 2023, we incurred interest expense of $2.5 million related to our 2021 BSP Term Loan, $0.1 million related to our revolving credit facility and $0.4 million related to other borrowing costs.

Interest expense was $0.3 million for the three months ended June 30, 2024, as compared to $1.3 million in the prior year period.

During the three months ended June 30, 2024, we incurred interest expense of $0.3 million related to our revolving credit facility.

During the three months ended June 30, 2023, we incurred interest expense of $0.7 million related to our 2021 BSP Term Loan, $0.3 million related to our revolving credit facility and $0.3 million related to other borrowing costs.

Provision For (Benefit From) Income Taxes

Our income tax benefit, which includes federal, state and foreign income taxes and discrete items, was $6.7 million, or an effective tax (benefit) rate of 32.1%, for the three months ended March 31, 2024.

During the comparable period in 2023, our income tax benefit was $1.4 million, or an effective tax (benefit) rate of 20.6%.

The effective tax rate increased primarily due to the expectation of taxes owed in higher tax jurisdictions.

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $2.3 million, or an effective tax rate of 30.2%, for the three months ended June 30, 2024.

During the comparable period in 2023, our income tax expense was $1.5 million, or an effective tax rate of 19.3%.

The effective tax rate increased primarily due to non-deductible compensation and foreign inclusions.

Comparison of the Six Months Ended June 30, 2024 and 2023

Toys/Consumer Products.

Net sales of our Toys/Consumer Products segment were $187.5 million for the six months ended June 30, 2024 compared to $215.8 million for the prior year period, representing a decrease of $28.3 million, or 13.1%.

Net sales from the Action Play & Collectibles division were down 23.1% due to lower net sales in part from the Super Mario Movie TM which was released April 2023.

Net sales of our Costumes segment were $51.2 million for the six months ended June 30, 2024 compared to $58.6 million for the prior year period, representing a decrease of $7.4 million, or 12.6%.

The decrease in net sales was primarily due to reduced orders from select recurring customers informed in part by the prior year’s sell-through during the Halloween shopping season.

Cost of Sales

Toys/Consumer Products.

Cost of sales of our Toys/Consumer Products segment was $132.6 million, or 70.7% of related net sales for the six months ended June 30, 2024 compared to $146.3 million, or 67.8% of related net sales for the prior year period, representing a decrease of $13.7 million, or 9.4%.

The increase as a percentage of net sales was due to a lower share of high margin film-related product .

Cost of sales of our Costumes segment was $37.5 million, or 73.2% of related net sales for the six months ended June 30, 2024, compared to $45.5 million, or 77.6% of related net sales for the prior year period, representing a decrease in dollars of $8.0 million, or 17.6%.

The decrease in dollars was related to lower overall sales.

The decrease in as a percentage of net sales was driven by lower finished goods inventory reserves for product obsolescence.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $82.3 million for the six months ended June 30, 2024 compared to $70.6 million for the prior year period constituting 34.5% and 25.7% of net sales, respectively.

Interest Expense

Interest expense was $0.4 million for the six months ended June 30, 2024, as compared to $4.3 million in the prior year period.

During the six months ended June 30, 2024, we incurred interest expense of $0.4 million related to our revolving credit facility.

During the six months ended June 30, 2023, we incurred interest expense of $3.2 million related to our 2021 BSP Term Loan, $0.4 million related to our revolving credit facility and $0.7 million related to other borrowing costs.

Provision for (Benefit From) Income Taxes

Our income tax benefit, which includes federal, state and foreign income taxes and discrete items, was $4.4 million benefit, or an effective tax (benefit) rate of 33.2%, for the six months ended June 30, 2024.

During the comparable period in 2023, our income tax expense was $0.1 million, or an effective tax rate of 9.9%.

The effective tax rate increased primarily due to a higher expected tax rate for the year, non-deductible compensation and foreign inclusions.

Seasonality and Backlog

The retail toy industry is inherently seasonal.

Generally, our sales have been highest during the third and fourth quarters, and collections for those sales have been highest during the succeeding fourth and first quarters.

Generally, our sales have been highest during the second and third quarters owing to our preference for the FOB (free-on-board)/DI (direct import) business model where our customers take possession of the product in Asia and are responsible for importing into their respective countries from that point forward, and collections for those sales have been highest during the succeeding third and fourth quarters.

Our working capital needs have been highest during the second and third quarters as we make royalty advance payments for some of our licenses and buy and sell inventory subject to customer payment terms.

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Liquidity and Capital Resources

As of March 31, 2024, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $67.1 million, compared to $106.1 million as of December 31, 2023, representing a decrease in working capital of $39.0 million during the three-month period ended March 31, 2024.

As of June 30, 2024, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $73.9 million, compared to $106.1 million as of December 31, 2023, representing a decrease in working capital of $32.2 million during the six-month period ended June 30, 2024.

The decrease in working capital is primarily attributable to the $20.0 million cash payment made to holders for the redemption of our outstanding preferred stock.

The remaining decrease is mainly attributable to cash used in operating activities and higher working capital usage.

Operating activities used net cash of $12.9 million during the three months ended March 31, 2024, as compared to net cash used of $4.1 million in the prior year period.

The increase in net cash used in operating activities year-over-year is primarily due to a higher net loss.

Operating activities used net cash of $27.7 million during the six months ended June 30, 2024, as compared to net cash provided by operating activities of $20.8 million in the prior year period.

The increase in net cash used in operating activities year-over-year is primarily due to a net loss for the six months ended June 30, 2024, an increase in cash taxes paid by $10.6 million and $23.0 million in other working capital changes.

Other than open purchase orders issued in the normal course of business related to shipped product, we have no obligations to purchase inventory from our manufacturers.

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As part of our strategy to develop and market new products, we have entered into various character and product licenses with royalties/obligations generally ranging from 1% to 25% payable on net sales of such products.

As of March 31, 2024, these agreements required future aggregate minimum royalty guarantees of $60.2 million exclusive of $7.0 million in advances already paid.

As of June 30, 2024, these agreements required future aggregate minimum royalty guarantees of $60.7 million exclusive of $3.6 million in advances already paid.

Of this $60.7 million future minimum royalty guarantee, $36.9 million is due over the next twelve months.

Investing activities used net cash of $3.6 million and $3.5 million for the three months ended March 31, 2024 and 2023, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products and purchases of investments to fund our obligation to our employees stemming from our non-qualified deferred compensation plan.

Financing activities used net cash of $20.0 million and $39.9 million for the three months ended March 31, 2024 and 2023, respectively.

The cash used in financing activities during the three months ended March 31, 2023, consists of $20.0 million used in the redemption of our outstanding preferred stock.

The cash used in financing activities during the three months ended March 31, 2023, primarily consists of the repayment of our 2021 BSP Term Loan of $38.7 million and the repurchase of common stock for employee tax withholding of $1.2 million.

As of March 31, 2024, we have no outstanding indebtedness under our senior secured revolving credit facility (the “JPMorgan ABL Facility”), aside from utilizing $9.4 million in letters of credit.

Investing activities used net cash of $6.2 million and $4.9 million for the six months ended June 30, 2024 and 2023, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products and purchases of investments to fund our obligation to our employees stemming from our non-qualified deferred compensation plan.

Financing activities used net cash of $20.1 million and $70.4 million for the six months ended June 30, 2024 and 2023, respectively.

The cash used in financing activities during the six months ended June 30, 2024, primarily consists of $20.0 million used in the redemption of our outstanding preferred stock and $5.1 million used in the repurchase of common stock for employee tax withholdings, compensated by $5.0 million of cash provided by the draw on our senior secured revolving credit facility (the “JPMorgan ABL Facility”).

The cash used in financing activities during the six months ended June 30, 2023, primarily consists of the repayment of our 2021 BSP Term Loan of $69.2 million and the repurchase of common stock for employee tax withholding of $1.2 million.

As of June 30, 2024, we have $5.0 million outstanding indebtedness under the JPMorgan ABL Facility, aside from utilizing $9.4 million in letters of credit.

See Note 5 – Debt and Note 6 – Credit Facilities for additional information pertaining to our Debt and Credit Facilities.

As of March 31, 2024 and December 31, 2023, we held cash and cash equivalents, including restricted cash, of $35.5 million and $72.6 million, respectively.

Cash, and cash equivalents, including restricted cash held outside of the United States in various foreign subsidiaries totaled $26.9 million and $21.5 million as of March 31, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, we held cash and cash equivalents, including restricted cash, of $17.9 million and $72.6 million, respectively.

Cash, and cash equivalents, including restricted cash held outside of the United States in various foreign subsidiaries totaled $15.7 million and $21.5 million as of June 30, 2024 and December 31, 2023, respectively.

The cash and cash equivalents, including restricted cash balances in our foreign subsidiaries have either been fully taxed in the U.S.

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During the first quarter of 2024, the Company declared a one-time dividend from Canada to the U.S in the amount of $5.9 million, in order to fund the preferred stock redemption that occurred during the quarter, resulting in a 5% withholding tax.

This was a significant one-time event as there are no preferred stock outstanding as of March 31, 2024.

This was a significant one-time event as there are no preferred stock outstanding after the redemption.

Future cash remittances will come from Hong Kong, which does not impose withholding taxes.

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Changes in this area could have a material adverse impact on our liquidity.

As of March 31, 2024 off-balance sheet arrangements include letters of credit issued by JPMorgan of $9.4 million.

As of June 30, 2024 off-balance sheet arrangements include letters of credit issued by JPMorgan of $9.4 million.

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.

What changed 10-Q

Item 1. Financial Statements