What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-08-01 compared with 2025-04-30 · 789 added, 747 removed, 201 unchanged (88% of the section changed)

Financial Statements

JAKKS PACIFIC, INC.

PACIFIC, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

CONSOLIDATED BALANCE SHEETS

thousands, except share amounts)

Current assets

1 unchanged sentence

Restricted cash

Accounts receivable, net of allowance for credit losses of $ 4,923 and $ 4,919 at March 31, 2025 and December 31, 2024, respectively

Accounts receivable, net of allowance for credit losses of $ 5,258 and $ 4,919 at June 30, 2025 and December 31, 2024, respectively

Prepaid expenses and other assets

9 unchanged sentences

Deferred income tax assets, net

Liabilities, Preferred Stock and Stockholders’ Equity

Liabilities and Stockholders’ Equity

Current liabilities

13 unchanged sentences

100,000,000 shares authorized;

11,146,230 and 11,025,582 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

11,146,831 and 11,025,582 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

5 unchanged sentences

Total stockholders’ equity

Total liabilities, preferred stock and stockholders’ equity

See accompanying notes to condensed consolidated

financial statements.

JAKKS PACIFIC, INC.

Total liabilities and stockholders’ equity

accompanying notes to condensed consolidated financial statements.

PACIFIC, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

Three Months Ended

Three Months Ended June 30,

Six Months Ended

Cost of sales:

7 unchanged sentences

Selling, general and administrative expenses

Loss from operations

Income (loss) from operations

Other income (expense), net

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 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.

See accompanying notes to condensed consolidated

financial statements.

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.

accompanying notes to condensed consolidated financial statements.

PACIFIC, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(In thousands)

Three Months Ended March 31, 2025

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2025

Pacific, Inc.

4 unchanged sentences

Share-based compensation expense

Repurchase of common stock for employee tax withholding

Repurchase of common stock for employee

tax withholding

Cash dividend declared, $ 0.25 per share

Foreign currency translation adjustment

Foreign currency

translation adjustment

Balance, March 31, 2025

Three Months Ended March 31, 2024

Share-based compensation expense

Repurchase of common stock for employee

tax withholding

Cash dividend declared, $ 0.25 per share

Foreign currency

translation adjustment

Balance, June 30, 2025

Three and Six Months Ended June 30, 2024

Pacific, Inc.

5 unchanged sentences

Share-based compensation expense

Non-controlling interests – capital reduction

Repurchase of common stock for employee tax withholding

Non-controlling interests –

capital reduction

Repurchase of common stock for

employee tax withholding

Preferred stock accrued dividends

1 unchanged sentence

Net income (loss)

Foreign currency translation adjustment

Foreign currency

translation adjustment

Balance, March 31, 2024

See accompanying notes to condensed consolidated

financial statements.

JAKKS PACIFIC, INC.

Share-based compensation expense

Foreign currency

translation adjustment

Balance, June 30, 2024

accompanying notes to condensed consolidated financial statements.

PACIFIC, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Cash flows from operating activities

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

(Recovery of) provision for credit losses

Provision for credit losses

Depreciation and amortization

1 unchanged sentence

Share-based compensation expense

Gain on disposal of property and equipment

Deferred income taxes

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

16 unchanged sentences

Repurchase of common stock for employee tax withholding

Proceeds from credit facility borrowings

Redemption of preferred stock

10 unchanged sentences

Cash paid for interest

As of March 31, 2025 and 2024, there was $ 4.7

million and $ 3.1 million, respectively, of property and equipment purchases included in accounts payable.

As of March 31, 2025 and 2024, the Company had

accrued nil and $ 5.1 million, respectively, for repurchases of common stock for employee tax withholding.

On March 11, 2024, the Company issued $ 15.0 million

in common stock as part of the consideration to redeem the preferred stock derivative liability (see Note 8 – Common Stock and

Preferred Stock).

See Notes 5 and 8 for additional supplemental information to the condensed

consolidated statements of cash flows.

See accompanying notes to condensed consolidated

financial statements.

JAKKS PACIFIC, INC.

of June 30, 2025 and 2024, there was $ 6.1 million and $ 4.3 million, respectively, of property and equipment purchases included in accounts

As of June 30, 2025, the debt issuance costs of

$ 0.3 million associated with the Company’s revolving credit facility with BMO Bank N.A.

that was entered into on June 24, 2025 were

included in accrued expenses (see Note 5 – Credit Facilities).

March 11, 2024, the Company issued $ 15.0 million in common stock as part of the consideration to redeem the preferred stock derivative

liability (see Note 8 – Common Stock and Preferred Stock).

Notes 5 and 8 for additional supplemental information to the condensed consolidated statements of cash flows.

accompanying notes to condensed consolidated financial statements.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

Note 1 — Basis of Presentation

The accompanying unaudited interim condensed consolidated

financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities

and Exchange Commission (the “SEC”).

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant

to such rules and regulations.

However, the Company believes that the disclosures are adequate to prevent the information presented from

being misleading.

These financial statements should be read in conjunction with the financial statements and the notes thereto included

in the Company’s Annual Report on Form 10-K, which contains audited financial information for the three years in the period ended

December 31, 2024.

The information provided in this report reflects

all adjustments (consisting solely of normal recurring items) that are, in the opinion of management, necessary to present fairly the

financial position and the results of operations for the periods presented.

Interim results are not necessarily, especially given seasonality,

indicative of results to be expected for a full year.

The condensed consolidated financial statements

include the accounts of JAKKS Pacific, Inc.

and its wholly-owned subsidiaries (collectively, “the Company”).

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):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The new guidance eliminates

two of the three models in ASC 470-20, which required entities to account for beneficial conversion features and cash conversion features

in equity, separately from the host convertible debt or preferred stock.

As a result, only conversion features accounted for under the

substantial premium model in ASC 470-20 and those that require bifurcation in accordance with ASC 815-15 will be accounted for separately.

In addition, the amendments in ASU 2020-06 eliminate some of the requirements in ASC 815-40 related to equity classification.

The amendments

in ASU 2020-06 further revised the guidance in ASC 260, Earnings Per Share (“EPS”), to address how convertible instruments

are accounted for in calculating diluted EPS and require enhanced disclosures about the terms of convertible instruments and contracts

in an entity’s own equity.

The new standard is effective for the Company for fiscal years beginning after December 15, 2023, including

interim periods within these fiscal years, with early adoption permitted.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 — Basis of Presentation

accompanying unaudited interim condensed consolidated financial statements included herein have been prepared by the Company, without

audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Certain information and

footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in

the United States of America have been condensed or omitted pursuant to such rules and regulations.

However, the Company believes that

the disclosures are adequate to prevent the information presented from being misleading.

These financial statements should be read in

conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K, which contains

audited financial information for the three years in the period ended December 31, 2024.

information provided in this report reflects all adjustments (consisting solely of normal recurring items) that are, in the opinion of

management, necessary to present fairly the financial position and the results of operations for the periods presented.

Interim results

are not necessarily, especially given seasonality, indicative of results to be expected for a full year.

condensed consolidated financial statements include the accounts of JAKKS Pacific, Inc.

and its wholly-owned subsidiaries (collectively,

“the Company”).

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):

Accounting for Convertible Instruments and Contracts in

an Entity’s Own Equity.” The new guidance eliminates two of the three models in ASC 470-20, which required entities to account

for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock.

As a result, only conversion features accounted for under the substantial premium model in ASC 470-20 and those that require bifurcation

in accordance with ASC 815-15 will be accounted for separately.

In addition, the amendments in ASU 2020-06 eliminate some of the requirements

in ASC 815-40 related to equity classification.

The amendments in ASU 2020-06 further revised the guidance in ASC 260, Earnings Per Share

(“EPS”), to address how convertible instruments are accounted for in calculating diluted EPS and require enhanced disclosures

about the terms of convertible instruments and contracts in an entity’s own equity.

The new standard is effective for the Company

for fiscal years beginning after December 15, 2023, including interim periods within these fiscal years, with early adoption permitted.

The Company adopted ASU 2020-06 on January 1, 2024.

of this new accounting standard did not have a material impact on the Company’s condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07,

“Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” The amendments in this update improve reportable

segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The new standard is effective

for the Company for fiscal years beginning after December 15, 2023, with early adoption permitted.

The Company adopted this standard as

of December 31, 2024, which resulted in incremental segment disclosures.

See Note 2 - Business Segments, Geographic Data and Sales by

Major Customers.

In December 2023, the FASB issued ASU 2023-09,

“Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This ASU provides standardization of tax disclosures,

primarily related to the rate reconciliation and income taxes paid information.

The new standard is effective for the Company for fiscal

years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact that the updated

disclosure will have on its condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,

“Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation

of Income Statement Expenses”.

The new guidance improves disclosures about a public business entity’s expenses by requiring

disaggregated disclosures of certain types of expenses, including purchases of inventory, employee compensation, depreciation, intangible

amortization and depletion, as applicable, for each income statement caption that includes those expenses.

In addition, the standard will

require entities to define and disclose total selling expenses.

The standard is effective for public business entities such as the Company

for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted,

and entities may apply the standard prospectively or retrospectively.

The Company is currently evaluating the impact of adopting this

standard on its condensed consolidated financial statements and related disclosures.

No new additional accounting pronouncements were

issued or adopted for the three months ended March 31, 2025 that materially impacted the Company.

JAKKS PACIFIC, INC.

The adoption of this new accounting standard did not have a material impact on the

Company’s condensed consolidated financial statements.

November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.”

The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant

segment expenses.

The new standard is effective for the Company for fiscal years beginning after December 15, 2023, with early adoption

The Company adopted this standard as of December 31, 2024, which resulted in incremental segment disclosures.

Business Segments, Geographic Data and Sales by Major Customers.

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

Improvements to Income Tax Disclosures.” This ASU

provides standardization of tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

standard is effective for the Company for fiscal years beginning after December 15, 2024, with early adoption permitted.

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

November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation

Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses”.

The new guidance improves disclosures about a public

business entity’s expenses by requiring disaggregated disclosures of certain types of expenses, including purchases of inventory,

employee compensation, depreciation, intangible amortization and depletion, as applicable, for each income statement caption that includes

those expenses.

In addition, the standard will require entities to define and disclose total selling expenses.

The standard is effective

for public business entities such as the Company for annual periods beginning after December 15, 2026, and interim periods beginning

after December 15, 2027.

Early adoption is permitted, and entities may apply the standard prospectively or retrospectively.

is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements and related disclosures.

new additional accounting pronouncements were issued or adopted for the three and six months ended June 30, 2025 that materially impacted

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

Note 2 — Business Segments, Geographic Data and Sales

by Major Customers

The Company is a worldwide producer and

marketer of children’s toys and other consumer products, principally engaged in the design, development, production, marketing

and distribution of its diverse portfolio of products.

The Company’s segments are (i) Toys/Consumer Products

(“TCP”) and (ii) Costumes.

The Toys/Consumer Products segment includes action

figures, vehicles, play sets, plush products, dolls, electronic products, construction toys, infant and pre-school toys, child-sized and

hand-held role play toys and everyday costume play, foot-to-floor ride-on vehicles, wagons, novelty toys, seasonal and outdoor products,

kids’ indoor and outdoor furniture, and related products.

The Costumes segment, under its Disguise branding,

designs, develops, markets and sells a wide range of every-day and special occasion dress-up costumes and related accessories in support

of Halloween, Carnival, Children’s Day, Book Day/Week, and every-day/any-day costume play.

The Company’s Chief Executive Officer and

Chief Financial Officer have been identified jointly as the Chief Operating Decision Maker (“CODM”).

The CODM manages and

allocates resources on a segment basis.

The determination of the two segments is consistent with the financial information regularly reviewed

by the CODM for purposes of evaluating performance.

Results are regularly reviewed in comparison with current budget, prior forecast,

prior year and recent years’ performance in that quarter.

Segment performance is measured at the operating

income (loss) level.

All sales are made to external customers and general corporate expenses have been attributed to the segments based

upon relative sales volumes.

Segment assets are primarily comprised of accounts receivable and inventories, net of applicable reserves

and allowances, goodwill and other assets.

Certain assets which are not tracked by operating segment and/or that benefit multiple operating

segments have been allocated on the same basis.

JAKKS PACIFIC, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Company is a worldwide producer and marketer of children’s toys and other consumer products, principally engaged in the design,

development, production, marketing and distribution of its diverse portfolio of products.

The Company’s segments are (i) Toys/Consumer

Products (“TCP”) and (ii) Costumes.

Toys/Consumer Products segment includes action figures, vehicles, play sets, plush products, dolls, electronic products, construction

toys, infant and pre-school toys, child-sized and hand-held role play toys and everyday costume play, foot-to-floor ride-on vehicles,

wagons, novelty toys, seasonal and outdoor products, kids’ indoor and outdoor furniture, and related products.

Costumes segment, under its Disguise branding, designs, develops, markets and sells a wide range of every-day and special occasion dress-up

costumes and related accessories in support of Halloween, Carnival, Children’s Day, Book Day/Week, and every-day/any-day costume

Company’s Chief Executive Officer and Chief Financial Officer have been identified jointly as the Chief Operating Decision Maker

The CODM manages and allocates resources on a segment basis.

The determination of the two segments is consistent

with the financial information regularly reviewed by the CODM for purposes of evaluating performance.

Results are regularly reviewed

in comparison with current budget, prior forecast, prior year and recent years’ performance in that quarter.

performance is measured at the operating income (loss) level.

All sales are made to external customers and general corporate expenses

have been attributed to the segments based upon relative sales volumes.

Segment assets are primarily comprised of accounts receivable

and inventories, net of applicable reserves and allowances, goodwill and other assets.

Certain assets which are not tracked by operating

segment and/or that benefit multiple operating segments have been allocated on the same basis.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

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, 2025 and 2024 and as of March 31, 2025 and December 31, 2024 are as follows (in thousands):

Three Months Ended March 31,

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 and six months ended June 30, 2025 and 2024 and as of June 30, 2025 and December 31,

2024 are as follows (in thousands):

Three Months Ended June 30,

Cost of Sales (A)

5 unchanged sentences

Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

Income before benefit from income taxes

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

(A) Includes depreciation

and amortization $ 1,858 $ 42 $ 1,900 $ 2,095 $ 39 $ 2,134

(B) Consist mainly of payroll and related expenses, rent, depreciation and other general and administrative expenses.

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Cost of Sales (A)

Direct selling expenses

Product development and testing expenses

Divisional general and administrative expenses (A), (B)

Allocated headquarter general & administrative expenses (A), (C)

Loss from operations

Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

Loss before benefit from income taxes

(A) Includes depreciation and amortization $ 3,409 $ 50 $ 3,459 $ 3,595 $ 53 $ 3,648

(B) Consist mainly of payroll and

related expenses, rent, depreciation and other general and administrative expenses.

expenses, rent, depreciation and other general and administrative expenses.

mainly of payroll and related expenses, rent, depreciation and other general and administrative expenses.

mainly of payroll related expenses, rent, depreciation and other general and administrative expenses.

Toys/Consumer Products

JAKKS PACIFIC, INC.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

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, 2025 and December 31, 2024 and for the three months ended March 31, 2025

and 2024 (in thousands):

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2025 and December

31, 2024 and for the three and six months ended June 30, 2025 and 2024 (in thousands):

Long-lived Assets

2 unchanged sentences

Three Months Ended

Six Months Ended

Net Sales by Customer Area

3 unchanged sentences

Middle East & Africa

Major Customers

Net sales to major customers globally for the three

months ended March 31, 2025 and 2024 were as follows (in thousands, except for percentages):

Three Months Ended March 31,

No other customer accounted for more than 10% of

the Company’s total net sales.

The concentration of the Company’s business

with a relatively small number of customers may expose the Company to material adverse effects if one or more of its large customers were

to experience financial difficulty.

The Company performs ongoing credit evaluations of its top customers and maintains an allowance for

potential credit losses.

JAKKS PACIFIC, INC.

sales to major customers globally for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except for

percentages):

Three Months Ended June 30,

Six Months Ended June 30,

other customer accounted for more than 10% of the Company’s total net sales.

concentration of the Company’s business with a relatively small number of customers may expose the Company to material adverse

effects if one or more of its large customers were to experience financial difficulty.

The Company performs ongoing credit evaluations

of its top customers and maintains an allowance for potential credit losses.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

Note 3 — Inventory

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):

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — 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):

Finished goods

The inventory obsolescence reserve was $ 6.5 million and $ 10.9 million

as of March 31, 2025 and December 31, 2024, respectively.

Note 4 — Revenue Recognition and Reserve for Sales

Returns and Allowances

The Company’s contracts with customers only

include one performance obligation (i.e., sale of the Company’s products).

Revenue is recognized in the gross amount at a point

in time when delivery is completed and control of the promised goods is transferred to the customers.

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.

Further, because revenue is recognized at the point in time goods are

sold to customers, there are no contract assets or contract liability balances.

The Company disaggregates its revenues from contracts

with customers by reporting segment:

inventory obsolescence reserve was $ 3.3 million and $ 10.9 million as of June 30, 2025 and December 31, 2024, respectively.

4 — Revenue Recognition and Reserve for Sales Returns and Allowances

Company’s contracts with customers only include one performance obligation (i.e., sale of the Company’s products).

is recognized in the gross amount at a point in time when delivery is completed and control of the promised goods is transferred to the

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

Company’s contracts do not involve financing elements as payment terms with customers 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.

Company disaggregates its revenues from contracts with customers by reporting segment:

Toys/Consumer Products and Costumes.

The Company further disaggregates revenues by major geographic

regions (See Note 2 - Business Segments, Geographic Data and Sales by Major Customers, for further information).

The Company offers various discounts, pricing concessions,

and other allowances to customers, all of which are considered in determining the transaction price.

Certain discounts and allowances

are fixed and determinable at the time of sale and are recorded at the time of sale as a reduction to revenue.

Other discounts and allowances

can vary and are determined at management’s discretion (variable consideration).

Specifically, the Company occasionally grants discretionary

credits to facilitate markdowns and sales of slow-moving merchandise, and consequently accrues an allowance based on historic credits

and management estimates.

The Company also participates in cooperative advertising arrangements with some customers, whereby it allows

a discount from invoiced product amounts in exchange for customer purchased advertising that features the Company’s products.

these allowances range from 1 % to 30 % of gross sales and are generally based upon product purchases or specific advertising campaigns.

Such allowances are accrued when the related revenue is recognized.

To the extent these cooperative advertising arrangements provide a

distinct benefit at fair value, they are accounted for as direct selling expenses, otherwise they are recorded as a reduction to revenue.

Further, while the Company generally does not allow product returns, the Company does make occasional exceptions to this policy and consequently

records a sales return allowance based upon historic return amounts and management estimates.

These allowances (variable consideration)

are estimated using the expected value method and are recorded at the time of sale as a reduction to revenue.

The Company adjusts its

estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change.

consideration is not constrained as the Company has sufficient history on the related estimates and does not believe there is a risk of

significant revenue reversal.

Sales commissions are expensed when incurred as

the related revenue is recognized at a point in time and therefore the amortization period is less than one year.

As a result, these costs

are recorded as direct selling expenses, as incurred.

For the three months ended March 31, 2025 and 2024, sales commissions were $ 0.4

million and $ 0.3 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.

the three months ended March 31, 2025 and 2024, shipping and handling costs were $ 2.3 million and $ 1.6 million, respectively.

The Company’s reserve for sales returns and

allowances amounted to $ 26.2 million as of March 31, 2025, compared to $ 35.8 million as of December 31, 2024.

The Company’s net accounts receivable as of

March 31, 2025 and December 31, 2024 were $ 95.6 million and $ 131.6 million, respectively.

JAKKS PACIFIC, INC.

further disaggregates revenues by major geographic regions (See Note 2 - Business Segments, Geographic Data and Sales by Major Customers,

for further information).

Company offers various discounts, pricing concessions, and other allowances to customers, all of which are considered in determining

the transaction price.

Certain discounts and allowances are fixed and determinable at the time of sale and are recorded at the time of

sale as a reduction to revenue.

Other discounts and allowances can vary and are determined at management’s discretion (variable

consideration).

Specifically, the Company occasionally grants discretionary credits to facilitate markdowns and sales of slow-moving

merchandise, and consequently accrues an allowance based on historic credits and management estimates.

The Company also participates

in cooperative advertising arrangements with some customers, whereby it allows a discount from invoiced product amounts in exchange for

customer-purchased advertising that features the Company’s products.

Generally, these allowances range from 0.5 % to 30 % of gross

sales and are generally based upon product purchases or specific advertising campaigns.

Such allowances are accrued when the related

revenue is recognized.

To the extent these cooperative advertising arrangements provide a distinct benefit at fair value, they are accounted

for as direct selling expenses, otherwise they are recorded as a reduction to revenue.

Further, while the Company generally does not

allow product returns, the Company does make occasional exceptions to this policy and consequently records a sales return allowance based

upon historic return amounts and management estimates.

These allowances (variable consideration) are estimated using the expected value

method and are recorded at the time of sale as a reduction to revenue.

The Company adjusts its estimate of variable consideration at

least quarterly or when facts and circumstances used in the estimation process may change.

The variable consideration is not constrained

as the Company has sufficient history on the related estimates and does not believe there is a risk of significant revenue reversal.

commissions are expensed when incurred as the related revenue is recognized at a point in time and therefore the amortization period

is less than one year.

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

For the three and six months ended

June 30, 2025 sales commissions were $ 0.5 million and $ 0.9 million, respectively.

For the three and six months ended June 30, 2024 sales

commissions were $ 0.3 million and $ 0.6 million, respectively.

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 and six months ended June 30, 2025, shipping and handling costs were $ 1.7 million

and $ 3.9 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.

Company’s reserve for sales returns and allowances amounted to $ 29.1 million as of June 30, 2025, compared to $ 35.8 million as

of December 31, 2024.

Company’s net accounts receivable as of June 30, 2025 and December 31, 2024 were $ 124.5 million and $ 131.6 million, respectively.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

Note 5 — Credit Facilities

JPMorgan Chase

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 — Credit Facilities

June 2, 2021, the Company and certain of its subsidiaries, as borrowers, entered into a Credit Agreement (the “JPMorgan ABL Credit

Agreement”) with JPMorgan Chase Bank, N.A., as agent and lender, providing a $ 67.5 million senior secured revolving credit facility

(the “JPMorgan ABL Facility”) maturing in June 2026.

On June 24, 2025, in connection with the execution

of a new credit facility with BMO Bank N.A., the Company voluntarily terminated the JPMorgan ABL Facility.

At the time of termination,

there were no borrowings outstanding under the JPMorgan ABL Facility.

The termination of the JPMorgan ABL Facility did not result in any

prepayment penalties or early termination fees.

Unamortized debt issuance costs associated with the JPMorgan ABL Facility were written

off and recorded as a loss on extinguishment of debt in the amount of $ 0.4 million, which is reflected in interest expense in the condensed

consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2025.

JPMorgan ABL Facility was replaced with a new senior secured revolving credit facility with BMO Bank N.A., as described below.

On June 24, 2025, the Company and certain of its

subsidiaries, as borrowers, entered into a Credit Agreement (the “JPMorgan ABL Credit Agreement”), with JPMorgan Chase Bank,

(“JPMorgan”), as agent and lender for a $ 67,500,000 senior secured revolving credit facility (the “JPMorgan ABL

The Company pays a commitment fee ( 0.25 % - 0.375 %) based on the unused portion of the revolving credit facility.

JPMorgan ABL Facility matures in June 2026.

As of March 31, 2025 the weighted average interest rate on the credit facility with JPMorgan

Chase Bank was nil .

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”).

The new interest reference rate for the ABL Facility became effective on

March 16, 2023.

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.

Under certain circumstances the Company is also subject to a

springing fixed charge coverage ratio covenant of not less than 1.1 to 1.0 , as described in more detail in the JPMorgan ABL Credit Agreement.

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.

If an event of default occurs, the commitments of the lenders to

lend under the JPMorgan ABL Credit Agreement may be terminated and the maturity of the amounts owed may be accelerated.

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, 2025, the amount of outstanding

borrowings was nil and the total excess borrowing availability was $ 61.8 million.

As of March 31, 2025, off-balance sheet arrangements

include letters of credit issued by JPMorgan of $ 4.4 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, 2025 and March 31, 2024.

As of March 31, 2025, the Company was in compliance

with the financial covenants under the JPMorgan ABL Credit Agreement.

JAKKS PACIFIC, INC.

subsidiaries entered into a new Credit Agreement (the “BMO Credit Agreement”) with BMO Bank N.A., as administrative agent,

and a syndicate of lenders.

The BMO Credit Agreement provides for a senior secured revolving credit facility (the “Revolving Facility”)

with aggregate commitments of up to $70.0 million, including a $10.0 million sublimit for swingline loans and a $25.0 million sublimit

for letters of credit.

The Revolving Facility matures on June 24, 2030, unless extended pursuant to its terms.

Capitalized terms used

below have the meanings assigned to them in the BMO Credit Agreement.

Borrowings under the Revolving Facility bear interest,

at the Company’s election, at either (i) the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable

margin or (ii) the Base Rate plus an applicable margin.

The applicable margin varies based on the Company’s Total Net Leverage Ratio

and ranges from 1.50 % to 2.00 % for SOFR loans and from 0.50 % to 1.00 % for Base Rate loans.

The Company is also subject to a commitment

fee on the unused portion of the Revolving Facility ranging from 0.20 % to 0.30 %, and a fee on outstanding letters of credit ranging from

1.50 % to 2.00 %.

The BMO Credit Agreement contains customary affirmative

and negative covenants, including limitations on indebtedness, liens, investments, asset sales, and dividends.

Financial covenants include

a minimum Consolidated Interest Coverage Ratio of 3.00 to 1.00 , and maximum Total Net Leverage Ratio of 2.00 to 1.00 , tested quarterly.

The obligations under the BMO Credit Agreement

are guaranteed by certain of the Company’s U.S., Canadian and Hong Kong subsidiaries and are secured by substantially all of the

assets of the Company and certain of its subsidiaries, including equity interests in certain subsidiaries, subject to certain customary

of June 30, 2025, the amount of outstanding borrowings was nil and the total excess borrowing availability was $ 70.0 million.

of June 30, 2025, off-balance sheet arrangements include letters of credit issued by JPMorgan of $ 4.4 million temporarily secured with

cash as collateral.

New letters of credit will be issued with BMO as part of the new lending agreement announced on June 24, 2025.

expense classified as interest expense related to the $ 0.3 million of debt issuance costs associated with the transaction that closed

on June 24, 2025 (i.e., BMO Credit Agreement) was $ 1.0 thousand for the three months ended June 30, 2025.

of June 30, 2025, the Company was in compliance with the financial covenants under the BMO Credit Agreement.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

Note 6 — Income Taxes

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — Income Taxes

The Company’s income tax benefit of $ 0.6

million for the three months ended June 30, 2025, reflects an effective tax rate of 20.7 %.

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 decrease in tax expense for the quarter

ended June 30, 2025 compared to the corresponding period in 2024 is primarily attributable to a change in the forecasted annual effective

tax rate driven by the change in the jurisdictional mix of earnings.

The Company’s income tax benefit of $ 1.8 million

for the three months ended March 31, 2025, reflects an effective tax rate of 32.8 %.

for the six months ended June 30, 2025 reflects an effective tax rate of 27.3 %.

The Company’s income tax benefit of $ 4.4 million

for the three months ended March 31, 2024, reflects an effective tax rate of 32.1 %.

The tax benefit for the three months ended

March 31, 2025 and 2024 primarily relates to discrete items and the tax benefit related to the overall worldwide loss (i.e.

federal, state,

and foreign).

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.

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

Note 7 — 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):

for the six months ended June 30, 2024 reflects an effective tax rate of 33.2 %.

The decrease in tax benefit during the six months ended

June 30, 2025 compared to the corresponding period in 2024 was primarily due to a decrease in benefits from discrete items.

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 condensed consolidated

financial statements.

7 — Earnings (Loss) Per Share

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):

Three Months Ended

Loss per share - basic and diluted

Six Months Ended

Earnings (loss) per share - basic and diluted

Net income (loss)

Net income attributable to non-controlling interests

Net loss attributable to JAKKS Pacific, Inc.

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

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

* 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,

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 359,344 and 545,145 for the three months ended March 31, 2025 and 2024,

respectively, were excluded from the computation of diluted loss per share since they would have been anti-dilutive.

Note 8 — Common Stock and Preferred

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.

JAKKS PACIFIC, INC.

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

* 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.

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

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 250,349 for

the three months ended June 30, 2025, and 340,270 and 514,687 for the six months ended June 30, 2025 and 2024, respectively, were excluded

from the computation of diluted loss per share since they would have been anti-dilutive.

8 — Common Stock and Preferred Stock

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.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

During 2025, certain employees, including two executive

officers, surrendered an aggregate of 135,672 shares of restricted stock units for $ 3.8 million to cover income taxes due for the vesting

of restricted shares.

Additionally, an aggregate of 1,357 shares of restricted stock granted in 2023 and 2024 with a value of approximately

$ 38.1 thousand was forfeited during 2025.

During 2024, certain employees, including two 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 13,714 shares of restricted stock granted in 2022 and 2023 with a value of approximately

$ 0.2 million was forfeited during 2024.

A quarterly dividend of $ 0.25 per share for owners of

record as of March 3, 2025 was declared on February 18, 2025 and paid on March 31, 2025.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2025, certain employees, including two executive officers, surrendered an aggregate of 136,071 shares of restricted stock units for $ 3.8

million to cover income taxes due for the vesting of restricted shares.

Additionally, an aggregate of 3,549 shares of restricted stock

granted in 2022, 2023 and 2024 with a value of approximately $ 0.1 million was forfeited during 2025.

2024, certain employees, including two 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.

quarterly dividend of $ 0.25 per share for owners of record as of May 30, 2025 was declared on April 28, 2025 and paid on June 27, 2025.

No dividend was declared or paid in 2024.

At the Market Offering

On July 1, 2022, the Company entered into an At the

Market Issuance Sales Agreement (“ATM Agreement”) with B.

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, 2025, 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, 2025, the Company has not sold any securities

pursuant to its shelf registration statement.

Redeemable Preferred Stock

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.

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”).

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 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.

the Market Offering

July 1, 2022, the Company entered into an At the Market Issuance Sales Agreement (“ATM Agreement”) with B.

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.

of June 30, 2025, the Company did not sell any shares of common stock under the ATM Agreement.

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.

of June 30, 2025, the Company has not sold any securities pursuant to its shelf registration statement.

Preferred Stock

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.

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”).

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.

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”).

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 months ended March 31, 2024, the

Company recorded $ 0.4 million 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.

Prior to the redemption,

for the three months ended June 30, 2024, the Company recorded $ 0.4 million of preferred stock dividends as an increase in the value

of the Series A Preferred Stock.

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.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

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.

Prior to the redemption, the Series A Preferred Stock

redemption amount was contingent upon certain events with no stated redemption date.

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 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 had concluded that the redemption upon a change of control and the repurchase option by the Company

constitute embedded derivatives.

The embedded redemption upon a change of control must

be accounted for separately from the Series A Preferred Stock.

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.

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 is more akin to a debt instrument than equity.

The Company considered the repurchase option to

have no value as the likelihood was 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 13 – 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 March 31, 2024, the Company had redeemed all of

the outstanding shares of the Series A Preferred Stock.

JAKKS PACIFIC, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

to the redemption, the Series A Preferred Stock redemption amount was contingent upon certain events with no stated redemption date.

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 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.

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 had concluded that the redemption upon a change

of control and the repurchase option by the Company constitute embedded derivatives.

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

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 is more akin to

a debt instrument than equity.

Company considered the repurchase option to have no value as the likelihood was 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 13 – 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.

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

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

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

The following table provides a reconciliation of the

beginning and ending balances of the Series A Preferred Stock, which was recorded in temporary equity:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following table provides a reconciliation of the beginning and ending balances of the Series A Preferred Stock, which was recorded in

temporary equity:

Balance, January 1,

1 unchanged sentence

Preferred stock redemption

Balance, March 31,

Note 9 — Goodwill

The Company applies a fair value-based impairment test

to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis and, on an interim basis, if certain events

or circumstances indicate that an impairment loss may have been incurred.

Goodwill impairment exists when the estimated fair value of

goodwill is less than its carrying value.

For the three months ended March 31, 2025, there were no events or circumstances that indicated

that an impairment loss may have been incurred.

Note 10 — Comprehensive Loss

The table below presents the components of the Company’s

comprehensive loss for the three months ended March 31, 2025 and 2024 (in thousands):

Balance, June 30,

Company applies a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual

basis and, on an interim basis, if certain events or circumstances indicate that an impairment loss may have been incurred.

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

For the three months ended June 30, 2025,

there were no events or circumstances that indicated that an impairment loss may have been incurred.

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

the three-months ended June 30, 2025, the Company identified certain macroeconomic developments that represented potential indicators

of impairment of goodwill in the form of rising import costs for the U.S.

As a result, the Company performed an interim quantitative

impairment test for its reporting units as of May 31, 2025, consistent with the guidance in ASC 350.

The results of this analysis indicated

that the fair value of each reporting unit continued to exceed its carrying amount.

The Company will continue to monitor relevant events

and conditions on an ongoing basis.

goodwill impairment was determined to have occurred for the six months ended June 30, 2025 and June 30, 2024.

10 — Comprehensive Income (Loss)

table below presents the components of the Company’s comprehensive income (loss) for the three and six months ended June 30, 2025

and 2024 (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.

Note 11 — Litigation and Contingencies

The Company is a party to, and certain of its property

is the subject of, various pending claims and legal proceedings that routinely arise in the ordinary course of its business.

accrues for losses when the loss is deemed probable and the liability can reasonably be estimated.

Where a liability is probable and there

is a range of estimated loss with no best estimate in the range, the Company records the minimum estimated liability related to the claim.

As additional information becomes available, the Company assesses the potential liability related to its pending litigation and revises

its estimates.

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.

The duration and amount of such obligations is,

in certain cases, indefinite.

The Company’s director’s and officer’s liability insurance policy may, however, enable it to

recover a portion of any future payments related to its officer, director or employee indemnifications.

For the past five years, costs

related to director and officer indemnifications have not been significant.

Other than certain liabilities recorded in the normal course

of business related to royalty payments due to the Company’s licensors, no liabilities have been recorded for indemnifications and/or

other commitments.

JAKKS PACIFIC, INC.

Comprehensive income (loss)

Comprehensive income attributable to non-controlling interests

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

11 — Litigation and Contingencies

Company is a party to, and certain of its property is the subject of, various pending claims and legal proceedings that routinely arise

in the ordinary course of its business.

The Company accrues for losses when the loss is deemed probable and the liability can reasonably

be estimated.

Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records

the minimum estimated liability related to the claim.

As additional information becomes available, the Company assesses the potential

liability related to its pending litigation and revises its estimates.

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.

The duration and amount of such obligations is, in certain cases, indefinite.

The Company’s director’s and officer’s

liability insurance policy may, however, enable it to recover a portion of any future payments related to its officer, director or employee

indemnifications.

For the past five years, costs related to director and officer indemnifications have not been significant.

certain liabilities recorded in the normal course of business related to royalty payments due to the Company’s licensors, no liabilities

have been recorded for indemnifications and/or other commitments.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

Note 12 — Share-Based Payments

The Company’s 2002 Stock Award and

Incentive Plan (the “Plan”), as amended, provides for the awarding of stock options, restricted stock and restricted

stock units to certain key employees, executive officers and non-employee directors.

Current awards under the Plan include grants to

executive officers and certain key employees of restricted stock units, with vesting contingent upon the completion of specified

service periods ranging from one year to four years and/or (b) meeting certain financial performance and/or market-based metrics.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12 — Share-Based Payments

Company’s 2002 Stock Award and Incentive Plan (the “Plan”), as amended, provides for the awarding of stock options,

restricted stock and restricted stock units to certain key employees, executive officers and non-employee directors.

Current awards under

the Plan include grants to executive officers and certain key employees of restricted stock units, with vesting contingent upon the completion

of specified service periods ranging from one to four years and/or (b) meeting certain financial performance and/or market-based metrics.

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, 2025 and 2024 (in thousands):

following table summarizes the total share-based compensation expense recognized for the three and six months ended June 30, 2025 and

2024 (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, 2025 is summarized as follows:

stock unit activity (including those with performance-based vesting criteria) for the three months ended June 30, 2025 is summarized

Restricted Stock Units

Grant Date Fair

Grant Date Fair Value

Outstanding, December 31, 2024

Outstanding, March 31, 2025

As of March 31, 2025, there was $ 17.0 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 2.1 years.

As of March 31, 2025, the fair market value of non-vested

restricted stock units was $ 25.2 million.

Note 13 — Fair Value Measurements

Fair value is the price that would be received to sell

an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In determining

fair value, the Company uses various methods including market, income and cost approaches.

Based upon these approaches, the Company often

utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or

the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market-corroborated, or unobservable

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value

The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad

levels as follows:

Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Valuations for assets and liabilities traded in less active dealer or broker markets.

Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

JAKKS PACIFIC, INC.

Outstanding, June 30, 2025

of June 30, 2025, there was $ 15.9 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 1.9 years.

of June 30, 2025, the fair market value of non-vested restricted stock units was $ 21.1 million.

13 — Fair Value Measurements

value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date.

In determining fair value, the Company uses various methods including market, income and cost approaches.

upon these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability,

including assumptions about risk and/or the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable,

market-corroborated, or unobservable inputs.

The Company utilizes valuation techniques that maximize the use of observable inputs and

minimize the use of unobservable inputs.

Based upon observable inputs used in the valuation techniques, the Company is required to provide

information according to the fair value hierarchy.

The fair value hierarchy ranks the quality and reliability of the information used

to determine fair values into three broad levels as follows:

for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical

assets or liabilities.

for assets and liabilities traded in less active dealer or broker markets.

Valuations are obtained from third-party pricing services

for identical or similar assets or liabilities.

incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

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.

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, 2025 and December 31, 2024 (in thousands):

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June

30, 2025 and December 31, 2024 (in thousands):

Fair Value Measurements

As of March 31, 2025

As of June 30, 2025

Money market funds

1 unchanged sentence

Fair Value Measurements

December 31, 2024

As of December 31, 2024

Money market funds

Investments in employee deferred compensation trusts

Money market funds are included in cash and cash equivalents on the

condensed consolidated balance sheets.

Investments in employee deferred compensation trusts which are comprised of mutual funds are classified

as trading securities are included in prepaid and other assets on the condensed consolidated balance sheets.

For the three months ended

March 31, 2025 and 2024, changes in the fair value of securities held in the rabbi trust and offsetting increases or decreases in the

deferred compensation obligation totaled $( 142.4 ) thousand and $ 73.4 thousand, respectively, and are recognized in other general

and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income.

The following tables provide 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):

market funds are included in cash and cash equivalents on the condensed consolidated balance sheets.

Investments in employee deferred

compensation trusts which are comprised of mutual funds are classified as trading securities are included in prepaid and other assets

on the condensed consolidated balance sheets.

For the six months ended June 30, 2025 and 2024, changes in the fair value of securities

held in the rabbi trust and offsetting increases or decreases in the deferred compensation obligation totaled $( 52.2 ) thousand and

$ 44.1 thousand, respectively, and are recognized in other general and administrative expenses in the Company’s condensed consolidated

statements of operations and comprehensive income (loss).

following tables provide 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):

Preferred stock derivative liability

2 unchanged sentences

Extinguishment through redemption of preferred stock

Balance, March 31,

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.

value of the redemption provision embedded in the Series A Preferred Stock is estimated based on a discounted cash flow model and probability

assumptions based on management’s estimates of a change of control event occurring.

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

In subsequent periods, the derivative 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.

JAKKS PACIFIC, INC.

Balance, June 30,

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.

The fair value of the redemption provision embedded in the Series A Preferred Stock is

estimated based on a discounted cash flow model and probability assumptions based on management’s estimates of a change of control

event occurring.

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.

In subsequent periods, the derivative 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 and comprehensive income (loss).

PACIFIC, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

March 31, 2025

The preferred stock derivative liability was extinguished

on March 11, 2024.

The Company’s cash and cash equivalents including

restricted cash, accounts receivable, accounts payable, and accrued expenses 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.

Note 14 — Related Party Transactions

In March 2017, the Company entered into an equity purchase

agreement with Hong Kong Meisheng Cultural Company Limited (“Meisheng”) which provided, among other things, that as long as

Meisheng and its affiliates hold 10% or more of the issued and outstanding shares of common stock of the Company, Meisheng shall have

the right from time to time to designate a nominee for election to the Company’s board of directors.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

preferred stock derivative liability was extinguished on March 11, 2024.

Company’s cash and cash equivalents including restricted cash, accounts receivable, accounts payable, and accrued expenses 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.

14 — Related Party Transactions

March 2017, the Company entered into an equity purchase agreement with Hong Kong Meisheng Cultural Company Limited (“Meisheng”)

which provided, among other things, that as long as Meisheng and its affiliates hold 10% or more of the issued and outstanding shares

of common stock of the Company, Meisheng shall have the right from time to time to designate a nominee for election to the Company’s

board of directors.

Since such time, Mr.

Zhao was Meisheng’s nominee.

Meisheng and its affiliates own less than 10% of the Company’s outstanding shares of common stock.

Zhao did not stand for reelection as director at the Company’s 2024 annual meeting.

Since December 6, 2024, Meisheng is not

represented on the Company’s board of directors and thus ceased to be a related party to the company.

Meisheng also serves as a significant manufacturer of

For the three months ended March 31, 2024, the Company made inventory-related payments to Meisheng of approximately $ 14.9

As of December 31, 2024, amounts due to Meisheng for inventory received by the Company, but not paid totaled $ 13.5 million, respectively.

Note 15 — Prepaid Expenses and Other Assets

Prepaid expenses and other assets as of March 31, 2025

and December 31, 2024 consist of the following (in thousands):

Xiaoqiang Zhao was Meisheng’s nominee.

Meisheng and its affiliates own less than 10% of

the Company’s outstanding shares of common stock.

Zhao did not stand for reelection as director at the Company’s 2024

annual meeting.

Since December 6, 2024, Meisheng is not represented on the Company’s board of directors and thus ceased to be a

related party to the company.

Meisheng continues to be a significant manufacturer

of the Company.

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.

As of December 31, 2024, amounts due to Meisheng for inventory received by the Company,

but not paid totaled $ 13.5 million.

15 — Prepaid Expenses and Other Assets

expenses and other assets as of June 30, 2025 and December 31, 2024 consist of the following (in thousands):

Income tax receivable

3 unchanged sentences

Prepaid expenses and other assets

Note 16 — Subsequent events

On April 25, 2025, the Company’s Board of

16 — Subsequent events

July 4, 2025, changes to the US Tax code were signed into law.

These changes were enacted after the close of Q2 2025 and will be accounted

for in Q3 2025.

On July 22, 2025, the Company’s Board of

Directors declared a quarterly cash dividend of $ 0.25 per common share.

The dividend will be payable on June 27, 2025, to shareholders

of record at the close of business on May 30, 2025.

Management ’ s Discussion and

Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition

and results of operations should be read together with our condensed consolidated financial statements and notes thereto, which appear

elsewhere herein.

Disclosure Regarding Forward-Looking Statements

This Report includes “forward-looking statements”

within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

For example, statements

included in this Report regarding our financial position, business strategy and other plans and objectives for future operations, and

assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking

When we use words like “intend,” “anticipate,” “believe,” “estimate,” “plan”

or “expect,” or other words of a similar import, we are making forward-looking statements.

We believe that the assumptions

and expectations reflected in such forward-looking statements are reasonable, based upon information available to us on the date hereof,

but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that

we may presently be planning.

We have disclosed certain important factors (e.g., see “Risk Factors”) that could cause our

actual results to differ materially from our current expectations elsewhere in this Report.

You should understand that forward-looking

statements made in this Report are necessarily qualified by these factors.

We are not undertaking to publicly update or revise any forward-looking

statement if we obtain new information or upon the occurrence of future events or otherwise.

Critical Accounting Estimates

Our critical accounting policies and estimates are included

in the 2024 Annual Report on Form 10-K and did not materially change during the first three months of 2025.

New Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements.

Results of Operations

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,

The dividend will be payable on September 30, 2025, to shareholders

of record at the close of business on August 29, 2025.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis of financial condition and results of operations should be read together with our condensed consolidated

financial statements and notes thereto, which appear elsewhere herein.

Regarding Forward-Looking Statements

Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section

21E of the Securities Exchange Act of 1934.

For example, statements included in this Report regarding our financial position, business

strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing,

costs, marketing and pricing factors are all forward-looking statements.

When we use words like “intend,” “anticipate,”

“believe,” “estimate,” “plan” or “expect,” or other words of a similar import, we are

making forward-looking statements.

We believe that the assumptions and expectations reflected in such forward-looking statements are

reasonable, based upon information available to us on the date hereof, but we cannot assure you that these assumptions and expectations

will prove to have been correct or that we will take any action that we may presently be planning.

We have disclosed certain important

factors (e.g., see “Risk Factors”) that could cause our actual results to differ materially from our current expectations

elsewhere in this Report.

You should understand that forward-looking statements made in this Report are necessarily qualified by these

We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence

of future events or otherwise.

Accounting Estimates

critical accounting policies and estimates are included in the 2024 Annual Report on Form 10-K and did not materially change during the

first six months of 2025.

Accounting Pronouncements

Note 1 to the condensed consolidated financial statements.

of Operations

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

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

Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

Loss before benefit from income taxes

Benefit from income taxes

Net income (loss) attributable to non-controlling interests

Net 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,

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

Provision for (benefit from) income taxes

Net income (loss)

Net income attributable to non-controlling interests

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

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

Three Months Ended

Six Months Ended

Toys/Consumer Products

2 unchanged sentences

Toys/Consumer Products

Comparison of the Three Months Ended March 31, 2025 and 2024

of the Three Months Ended June 30, 2025 and 2024

Toys/Consumer Products.

Net sales of our Toys/Consumer

Products segment were $107.4 million for the three months ended March 31, 2025 compared to $82.9 million for the prior year period, representing

an increase of $24.5 million, or 29.6%.

The increase was driven by higher sales in Dolls, Role-Play/Dress-up, up 36.7% versus a year ago,

due to higher sales related to the Moana 2 Movie product as well as increases in Disney Princess and Style Collection products.

Additionally,

net sales from the Action Play & Collectibles division were up 29.9% due to higher net sales from the Sonic 3 Movie, DogMan and Simpsons

Net sales of our Costumes segment were $5.8 million for the three months

ended March 31, 2025 compared to $7.2 million for the prior year period, representing a decrease of $1.4 million, or 19.4%.

was primarily due to reduced orders from select recurring customers.

Cost of Sales

Net sales of our

Toys/Consumer Products segment were $80.4 million for the three months ended June 30, 2025 compared to $104.6 million for the prior year

period, representing a decrease of $24.2 million, or 23.1%.

The decrease was driven by lower sales in North America due to higher importation

costs decreasing demand for FOB sales, down 27.5% versus a year ago, while International net sales were up 41.1% in the quarter.

Role-Play/Dress Up segment showed the largest decrease of 27.4% in part due to a customer’s discontinuation of a private label program

in 2024, while the Action Play and Collectibles segment decreased 18.2% compared to the same period a year ago.

Net sales of our Costumes segment

were $38.7 million for the three months ended June 30, 2025 compared to $44.0 million for the prior year period, representing a decrease

of $5.3 million, or 12.0%.

The decrease was primarily due to reduced orders from select recurring customers in turn due to higher importation

cost for FOB sales.

Toys/Consumer Products.

Cost of sales of our Toys/Consumer Products segment was $69.2 million,

or 64.4% of related net sales for the three months ended March 31, 2025 compared to $65.1 million, or 78.5% of related net sales for the

prior year period, representing an increase of $4.1 million, or 6.4%, in line with the increase in net sales.

The decrease as a percentage

of net sales was due to a higher mix of high margin movie-related product as well as decreased inventory reserves.

Cost of sales of our Costumes segment was $5.0 million, or 86.0% of

related net sales for the three months ended March 31, 2025, compared to $4.0 million, or 55.6% of related net sales for the prior year

period, representing an increase in dollars of $1.0 million, or 26.0%.

The increase was due to higher product COGS related to product

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $42.8 million for

the three months ended March 31, 2025 compared to $42.4 million for the prior year period constituting 37.7% and 47.1% of net sales, respectively.

Selling, general and administrative expenses were primarily flat year over year, with slightly higher product development expenses being

offset by lower outside spending.

Benefit From Income Taxes

Our income tax benefit, which includes federal, state and foreign income

taxes and discrete items, was $1.2 million, or an effective tax rate of 32.8%, for the three months ended March 31, 2025.

During the comparable

period in 2024, our income tax benefit was $6.7 million, or an effective tax rate of 32.1%.

The slight increase in the effective tax rate

is primarily due to the relationship between the tax provision benefit and a lower pre-tax book loss this year.

Seasonality and Backlog

The retail toy industry is inherently seasonal.

our sales have been highest during the second and third quarters, and collections for those sales have been highest during the succeeding

fourth and first 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.

While we have taken steps to level sales over the entire

year, sales are expected to remain heavily influenced by the seasonality of our toy and costume products.

The result of these seasonal

patterns is that operating results and the demand for working capital may vary significantly by quarter.

Orders placed with us are generally

cancelable until the date of shipment.

The combination of seasonal demand and the potential for order cancellation makes accurate forecasting

of future sales difficult and causes us to believe that backlog may not be an accurate indicator of our future sales.

Similarly, financial

results for a particular quarter may not be indicative of results for the entire year.

Liquidity and Capital Resources

As of March 31, 2025, we had working capital (inclusive

of cash, cash equivalents and restricted cash) of $109.2 million, compared to $119.3 million as of December 31, 2024, representing a decrease

in working capital of $10.1 million during the three-month period ended March 31, 2025.

The decrease in working capital is mainly attributable

to cash used for financing activities.

Operating activities used net cash of $1.7 million during

the three months ended March 31, 2025, as compared to net cash used of $12.9 million in the prior year period.

The decrease in net cash

used in operating activities year-over-year is primarily due to a lower net loss.

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.

However, we may incur

costs or other losses as a result of not placing orders consistent with our forecasts for product manufactured by our suppliers or manufacturers

for a variety of reasons including customer order cancellations or a decline in demand.

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 22%

payable on net sales of such products.

As of March 31, 2025, these agreements required future aggregate minimum royalty guarantees of

$76.8 million exclusive of $3.5 million in advances already paid.

Of this $76.8 million future minimum royalty guarantee, $54.8 million

is due over the next twelve months.

Investing activities used net cash of $3.1 million and

$3.6 million for the three months ended March 31, 2025 and 2024, 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

Cost of sales of

our Toys/Consumer Products segment was $53.3 million, or 66.3% of related net sales for the three months ended June 30, 2025 compared

to $67.5 million, or 64.5% of related net sales for the prior year period, representing a decrease of $14.2 million, or 21.0%.

as a percentage of net sales was due to higher reserves and royalties as a percentage of net sales in the previous year, while in the

current year the product-mix was weighted towards higher margin movie-related products.

Cost of sales of our Costumes segment was $26.8 million, or 69.3% of related net sales for the three months ended June 30, 2025, compared

to $33.5 million, or 76.1% of related net sales for the prior year period, representing a decrease in dollars of $6.7 million, or 20.0%.

The decrease was due to higher reserves on Costume product a year ago as well as better pricing on sales in the quarter.

General and Administrative Expenses

general and administrative expenses were $41.8 million for the three months ended June 30, 2025 compared to $39.9 million for the prior

year period constituting 35.1% and 26.9% of net sales, respectively.

Selling, general and administrative expenses were up $2.9 million

year over year, with slightly higher selling expenses, salaries and benefits and professional services.

From Income Taxes

Our income tax benefit, which includes federal,

state and foreign income taxes and discrete items, was $0.6 million, or an effective tax rate of 20.7%, for the three months ended June

During the comparable period in 2024, our income tax expense was $2.3 million, or an effective tax rate of 30.2%.

in the effective tax rate is primarily due to a change in the forecasted annual effective tax rate driven by the change in the jurisdictional

mix of earnings.

of the Six Months Ended June 30, 2025 and 2024

Toys/Consumer Products.

Net sales of our

Toys/Consumer Products segment were $187.8 million for the six months ended June 30, 2025 compared to $187.5 million for the prior year

period, representing an increase of $0.3 million, or 0.2%.

The increase was driven by higher sales in Action Play and Collectibles, up

4.6% versus a year ago, due to higher sales related to the Sonic 3 Movie product, offset by slightly lower sales of 2.5% from the Dolls,

Role-Play/Dress Up segment in part due to a customer’s discontinuation of a private label program in 2024.

Net sales of our Costumes segment

were $44.5 million for the six months ended June 30, 2025 compared to $51.2 million for the prior year period, representing a decrease

of $6.7 million, or 13.1%.

The decrease was primarily due to reduced orders from select recurring customers in turn due to higher importation

cost for FOB sales.

Toys/Consumer

Cost of sales of our Toys/Consumer Products segment was $122.5 million, or 65.2% of related net sales for the six months

ended June 30, 2025 compared to $132.6 million, or 70.7% of related net sales for the prior year period, representing a decrease of $10.1million,

The decrease as a percentage of net sales was due to a product-mix weighted towards high margin movie-related product as well

as lower inventory reserves.

Cost of sales of our Costumes

segment was $31.8 million, or 71.5% of related net sales for the six months ended June 30, 2025, compared to $37.5 million, or 73.2% of

related net sales for the prior year period, representing a decrease in dollars of $5.7 million, or 15.2%.

The decrease was due to higher

reserves on Costume product a year ago as well as improved factory costing.

General and Administrative Expenses

general and administrative expenses were $84.6 million for the six months ended June 30, 2025 compared to $82.3 million for the prior

year period constituting 36.4% and 34.5% of net sales, respectively.

Selling, general and administrative expenses were up $2.3 million

year over year, with slightly higher selling expenses and salaries and benefits.

From Income Taxes

Our income tax benefit, which includes federal,

state and foreign income taxes and discrete items, was $1.8 million, or an effective tax rate of 27.3%, for the six months ended June

During the comparable period in 2024, our income tax benefit was $4.4 million, or an effective tax rate of 33.2%.

in the effective tax rate is primarily due to a decrease in benefits from discrete items.

retail toy industry is inherently seasonal.

Generally, our sales have been highest during the second and third quarters, and collections

for those sales have been highest during the succeeding fourth and first 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.

we have taken steps to level sales over the entire year, sales are expected to remain heavily influenced by the seasonality of our toy

and costume products.

The result of these seasonal patterns is that operating results and the demand for working capital may vary significantly

Orders placed with us are generally cancelable until the date of shipment.

The combination of seasonal demand and the potential

for order cancellation makes accurate forecasting of future sales difficult and causes us to believe that backlog may not be an accurate

indicator of our future sales.

Similarly, financial results for a particular quarter may not be indicative of results for the entire

and Capital Resources

of June 30, 2025, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $109.1 million, compared to $119.3

million as of December 31, 2024, representing a decrease in working capital of $10.2 million during the six-month period ended June 30,

The decrease in working capital is mainly attributable to cash used for financing activities.

Operating activities used net cash of $15.9 million

during the six months ended June 30, 2025, as compared to net cash used of $27.7 million in the prior year period.

The decrease in net

cash used in operating activities year-over-year is primarily due to a lower net loss and less cash taxes paid.

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.

However, we may incur costs or other losses as a result of not placing orders consistent with our forecasts for product manufactured by

our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand.

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 22% payable on net sales of such products.

As of June 30, 2025, these agreements required future aggregate minimum

royalty guarantees of $63.4 million exclusive of $2.9 million in advances already paid.

Of this $63.4 million future minimum royalty guarantee,

$48.5 million is due over the next twelve months.

Investing activities used net cash of $6.0 million

and $6.2 million for the six months ended June 30, 2025 and 2024, 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 $6.6 million and

$20.0 million for the three months ended March 31, 2025 and 2024, respectively.

The cash used in financing activities during the three

months ended March 31, 2025, consists of $3.8 million used for the repurchase of our common stock for employee tax withholding and $2.8

Financing activities used net cash of $9.4 million

and $20.1 million for the six months ended June 30, 2025 and 2024, respectively.

The cash used in financing activities during the six

months ended June 30, 2025, consists of $3.8 million used for the repurchase of our common stock for employee tax withholding and $5.6

million used to pay dividends.

The cash used in financing activities during the three months ended March 31, 2024, consists of $20.0 million

used in the redemption of our outstanding preferred stock.

As of March 31, 2025, we have no outstanding indebtedness

under our senior secured revolving credit facility (the “JPMorgan ABL Facility”), aside from utilizing $4.4 million in letters

See Note 5 – Credit Facilities for additional

information pertaining to our Credit Facilities.

As of March 31, 2025 and December 31, 2024,

we held cash and cash equivalents, including restricted cash, of $59.4 million and $70.1 million, respectively.

Cash, and cash equivalents,

including restricted cash held outside of the United States in various foreign subsidiaries totaled $15.4 million and $16.5 million as

of March 31, 2025 and December 31, 2024, respectively.

The cash and cash equivalents, including restricted cash balances in our foreign

subsidiaries have either been fully taxed in the U.S.

or tax has been accounted for in connection with the Tax Cuts and Jobs Act, or may

be eligible for a full foreign dividends received deduction under such Act, and thus would not be subject to additional U.S.

such amounts be repatriated in the form of dividends or deemed distributions.

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.

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

As such, foreign withholding

taxes on future repatriations are not expected to be significant.

Our primary sources of working capital are cash flows

from operations and borrowings under our JPMorgan ABL Facility (see Note 5 – Credit Facilities).

Typically, cash flows from operations are impacted by

the effect on sales of (1) the appeal of our products, (2) the success of our licensed brands in motivating consumer purchase of related

merchandise, (3) the highly competitive conditions existing in the toy industry and in securing commercially attractive licenses, (4)

dependency on a limited set of large customers, and (5) general economic conditions.

A downturn in any single factor or a combination

of factors could have a material adverse impact upon our ability to generate sufficient cash flows to operate the business.

our business and liquidity are dependent to a significant degree on our vendors and their financial health, as well as the ability to

accurately forecast the demand for products.

The loss of a key vendor, or material changes in support by them, or a significant variance

in actual demand compared to the forecast, can have a material adverse impact on our cash flows and business.

Given the conditions in

the toy industry environment in general, vendors, including licensors, may seek further assurances or take actions to protect against

non-payment of amounts due to them.

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

As of March 31, 2025 off-balance sheet arrangements

include letters of credit issued by JPMorgan of $4.4 million.

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”).

June 2025, we terminated our existing $67.5 million JPMorgan ABL revolving credit facility in connection with entering into a new senior

secured facility with BMO Bank N.A.

The prior facility had no outstanding borrowings at the time of termination.

We recorded a non-cash

charge of $0.3 million for the write-off of previously deferred financing costs associated with the JPMorgan facility.

June 24, 2025, we entered into a new $70.0 million senior secured revolving credit facility with a maturity date of June 24, 2030.

facility replaces our prior facility and is expected to provide improved pricing and enhanced liquidity flexibility.

Interest is payable

at either SOFR plus a leverage-based margin or a Base Rate alternative and includes a commitment fee on unused amounts.

includes financial covenants requiring a minimum interest coverage ratio of 3.00 to 1.00 and a maximum total net leverage ratio of 2.00

As of June 30, 2025, we were in compliance with all financial covenants.

under the revolving facility as of June 30, 2025, was $70.0 million.

The facility provides the Company with flexibility to fund working

capital, capital expenditures, acquisitions, and general corporate purposes.

Note 5 – Credit Facilities for additional information pertaining to our Credit Facilities.

of June 30, 2025 and December 31, 2024, we held cash and cash equivalents, including restricted cash, of $43.1 million and $70.1 million,

respectively.

Cash, and cash equivalents, including restricted cash held outside of the United States in various foreign subsidiaries

totaled $13.9 million and $16.5 million as of June 30, 2025 and December 31, 2024, respectively.

The cash and cash equivalents, including

restricted cash balances in our foreign subsidiaries have either been fully taxed in the U.S.

or tax has been accounted for in connection

with the Tax Cuts and Jobs Act, or may be eligible for a full foreign dividends received deduction under such Act, and thus would not

be subject to additional U.S.

tax should such amounts be repatriated in the form of dividends or deemed distributions.

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 June 30, 2024.

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

withholding taxes.

As such, foreign withholding taxes on future repatriations are not expected to be significant.

primary sources of working capital are cash flows from operations and borrowings under our Revolving Facility (see Note 5 – Credit

cash flows from operations are impacted by the effect on sales of (1) the appeal of our products, (2) the success of our licensed brands

in motivating consumer purchase of related merchandise, (3) the highly competitive conditions existing in the toy industry and in securing

commercially attractive licenses, (4) dependency on a limited set of large customers, and (5) general economic conditions.

in any single factor or a combination of factors could have a material adverse impact upon our ability to generate sufficient cash flows

to operate the business.

In addition, our business and liquidity are dependent to a significant degree on our vendors and their financial

health, as well as the ability to accurately forecast the demand for products.

The loss of a key vendor, or material changes in support

by them, or a significant variance in actual demand compared to the forecast, can have a material adverse impact on our cash flows and

Given the conditions in the toy industry environment in general, vendors, including licensors, may seek further assurances

or take actions to protect against non-payment of amounts due to them.

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

of June 30, 2025 off-balance sheet arrangements include letters of credit issued by JPMorgan of $4.4 million temporarily secured with

cash as collateral.

New letters of credit will be issued with BMO as part of the new lending agreement announced on June 24, 2025.

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