What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-10-31 compared with 2025-08-01 · 418 added, 367 removed, 623 unchanged (56% of the section changed)

4 unchanged sentences

thousands, except share amounts)

September 30,

Current assets

1 unchanged sentence

Restricted cash

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

Accounts receivable, net of allowance for credit losses of $ 5,647 and $ 4,919 at September 30, 2025 and December 31, 2024, respectively

Prepaid expenses and other assets

25 unchanged sentences

100,000,000 shares authorized;

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

11,204,941 and 11,025,582 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

9 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

Three Months Ended June 30,

Six Months Ended

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of sales:

7 unchanged sentences

Selling, general and administrative expenses

Income (loss) from operations

Income from operations

Other income (expense), net

2 unchanged sentences

Interest expense

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

Provision for (benefit from) income taxes

Net income (loss)

Income before provision for income taxes

Provision for income taxes

Net income attributable to non-controlling interests

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.

Net income attributable to Jakks Pacific, Inc.

Net income attributable to common stockholders

Earnings per share - basic

Shares used in earnings per share - basic

Earnings per share - diluted

Shares used in earnings per share - diluted

Comprehensive income

Comprehensive income attributable to JAKKS Pacific, Inc.

accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2025

Three and Nine Months Ended September 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

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, June 30, 2025

Three and Six Months Ended June 30, 2024

Pacific, Inc.

Share-based compensation expense

Non-controlling interests – derecognition

Repurchase of common stock for employee tax withholding

Cash dividend declared, $ 0.25 per share

Foreign currency translation adjustment

Balance, September 30, 2025

and Nine Months Ended September 30, 2024

Comprehensive

2 unchanged sentences

Balance, December

New stock issuance

Share-based compensation expense

Non-controlling interests –

capital reduction

Repurchase of common stock for

employee tax withholding

Preferred stock accrued dividends

Preferred stock redemption

Net income (loss)

Foreign currency

translation adjustment

compensation expense

Non-controlling

interests – capital reduction

of common stock for employee tax withholding

stock accrued dividends

stock redemption

currency translation adjustment

Balance, March 31, 2024

Share-based compensation expense

Foreign currency

translation adjustment

compensation expense

currency translation adjustment

Balance, June 30, 2024

compensation expense

of common stock for employee tax withholding

currency translation adjustment

September 30, 2024

accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

September 30,

Cash flows from operating activities

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

Provision for credit losses

Depreciation and amortization

Write-off and amortization of debt issuance costs

Share-based compensation expense

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

to reconcile net income to net cash used in operating activities:

for credit losses

and amortization

and amortization of debt issuance costs

compensation expense

on disposal of property and equipment

in operating assets and liabilities:

expenses and other assets

payable - Meisheng (related party)

for sales returns and allowances

taxes payable

cash used in operating activities

flows from investing activities

of property and equipment

in employee deferred compensation trusts

from sale of property and equipment

cash used in investing activities

flows from financing activities

of common stock for employee tax withholding

of credit facility borrowings

from credit facility borrowings

issuance costs

of preferred stock

cash used in financing activities

decrease in cash, cash equivalents and restricted cash

of foreign currency translation

cash equivalents and restricted cash, beginning of period

cash equivalents and restricted cash, end of period

disclosures of cash flow information:

paid for interest

paid for income taxes, net

Supplemental disclosures of non-cash activities:

During the nine months ended September 30, 2025

and 2024, the lease liability increased by $ 5.1 million and $ 2.7 million respectively, with a corresponding increase to the ROU asset.

of September 30, 2025 and 2024, there was $ 4.2 million and $ 4.1 million, respectively, of property and equipment purchases included in

accounts payable.

Accounts payable - Meisheng (related party)

Accrued expenses

Reserve for sales returns and allowances

Income taxes payable

Other liabilities

Total adjustments

Net cash used in operating activities

Cash flows from investing activities

Purchases of property and equipment

Investments in employee deferred compensation trusts

Proceeds from sale of property and equipment

Net cash used in investing activities

Cash flows from financing activities

Repurchase of common stock for employee tax withholding

Proceeds from credit facility borrowings

Redemption of preferred stock

Cash dividend paid

Net cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

Effect of foreign currency translation

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Supplemental disclosure of non-cash activities:

Right-of-use assets exchanged for lease liabilities

Supplemental disclosures of cash flow information:

Cash paid for income taxes, net

Cash paid for interest

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

As of September 30, 2025, debt issuance costs of

$ 0.1 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).

that was entered into on June 24, 2025

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

On August 8, 2025, the Company deregistered Jakks Pacific

Trading Ltd., derecognized the related non-controlling interest of $ 0.5 million and recognized a liability towards the former non-controlling

shareholder of $ 0.5 million within accrued expenses.

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.

20 unchanged sentences

“the Company”).

As of the three months ended September 30, 2025, the

Company has dissolved its subsidiary JAKKS Pacific Trading Ltd., which was partially owned by a non-controlling shareholder.

In connection

with the dissolution, the Company reclassified the non-controlling interest balance of $ 500 ,000 from equity to a liability payable to

the former noncontrolling shareholder.

The reclassification had no impact on net income or cash flows.

August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

40 unchanged sentences

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.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In July 2025, the FASB issued ASU 2025-05, “Financial

Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.” The new

guidance provides a practical expedient in developing reasonable and supportable forecasts when estimating expected credit losses for

current accounts receivable and current contract assets arising from transactions accounted for under Topic 606.

Entities that elect the

practical expedient may assume that current conditions as of the balance sheet date do not change for the remaining life of the respective

The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods

within those annual reporting periods.

Early adoption is permitted in both interim and annual reporting periods in which financial statements

have not yet been issued or made available for issuance.

The Company is currently evaluating the impact of adopting this standard on its

condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill

and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software.” The

new guidance removes all references to prescriptive and sequential software development stages (referred to as “project stages”)

throughout Subtopic 350-40.

Therefore, an entity is required to start capitalizing software costs when both of the following occur:

Management has authorized and committed to funding the software project and 2.

It is probable that the project will be completed and

the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”).

In evaluating the probable-to-complete recognition threshold, an entity is required to consider whether there is significant uncertainty

associated with the development activities of the software (referred to as “significant development uncertainty”).

The amendments

will be effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within

those annual reporting periods.

Early adoption is permitted as of the beginning of an annual reporting period.

The Company is currently

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

were no other new accounting pronouncements, issued or effective during the first nine months of fiscal 2025, which had or are expected

to have a significant impact on the Company’s condensed consolidated financial statements and related disclosures.

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

26 unchanged sentences

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,

a reconciliation to reported amounts for the three and nine months ended September 30, 2025 and 2024 and as of September 30, 2025 and

December 31, 2024 are as follows (in thousands):

Three Months Ended September, 30

Cost of Sales (A)

3 unchanged sentences

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

Income (loss) from operations

Income from operations

Other income (expense), net

2 unchanged sentences

Interest expense

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.

Income before provision for income taxes

(A) Includes depreciation and amortization $ 4,726 $ 43 $ 4,769 $ 4,047 $ 42 $ 4,089

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.

PACIFIC, INC.

1 unchanged sentence

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Nine Months Ended September, 30

Cost of Sales (A)

3 unchanged sentences

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

Loss from operations

Income (loss) from operations

Other income (expense), net

2 unchanged sentences

Interest expense

Loss before benefit from income taxes

Income before provision for income taxes

(A) Includes depreciation and amortization $ 8,135 $ 93 $ 8,228 $ 7,642 $ 95 $ 7,737

1 unchanged sentence

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

September 30,

Toys/Consumer Products

4 unchanged sentences

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):

The following tables present information about the Company by geographic area as of September 30, 2025 and December

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

September 30,

Long-lived Assets

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net Sales by Customer Area

3 unchanged sentences

Middle East & Africa

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,

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

for percentages):

Three Months Ended September 30,

Nine Months Ended September 30,

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

9 unchanged sentences

or net realizable value, net of inventory obsolescence reserve, and consists of the following (in thousands):

September 30,

Finished goods

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

inventory obsolescence reserve was $ 2.1 million and $ 10.9 million as of September 30, 2025 and December 31, 2024, respectively.

4 — Revenue Recognition and Reserve for Sales Returns and Allowances

38 unchanged sentences

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.

For the three and nine months ended

September 30, 2025 sales commissions were $ 0.8 million and $ 1.7 million, respectively.

For the three and nine months ended September

30, 2024 sales commissions were $ 0.7 million and $ 1.3 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

For the three and nine months ended September 30, 2025, shipping and handling costs were $ 2.2 million

and $ 6.1 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.

For the three and nine months ended September 30, 2024, shipping and handling costs were $ 1.8 million

and $ 4.8 million, respectively.

Company’s reserve for sales returns and allowances amounted to $ 37.7 million as of September 30, 2025, compared to $ 35.8 million

as of December 31, 2024.

Company’s net accounts receivable as of September 30, 2025 and December 31, 2024 were $ 195.8 million and $ 131.6 million, respectively.

PACIFIC, INC.

9 unchanged sentences

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.

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.

consolidated statements of operations and comprehensive income for the three and nine months ended September 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 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.

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

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 %.

As of September 30, 2025 the weighted average interest rate on the credit

facility with BMO Bank was 5.87 %.

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.

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 exclusions.

of September 30, 2025, the amount of outstanding borrowings was nil and the total excess borrowing availability was $ 68.3 million.

As of September 30, 2025, off-balance sheet arrangements

include letters of credit issued by BMO of $ 1.7 million, and by JPMorgan Chase of $ 1.6 million.

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.

on June 24, 2025 (i.e., BMO Credit Agreement) was $ 13.7 thousand for the three months ended September 30, 2025.

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

PACIFIC, INC.

2 unchanged sentences

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 $ 9.8 million

for the three months ended September 30, 2025, reflects an effective tax rate of 33.1 %.

The Company’s income tax expense of $ 15.4

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 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 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.

million for the three months ended September 30, 2024, reflects an effective tax rate of 22.8 %.

The decrease in tax expense for the three

months ended September 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 expense of $ 8.1 million

for the nine months ended September 30, 2025 reflects an effective tax rate of 34.7 %.

The Company’s income tax expense of $ 11.0

million for the nine months ended September 30, 2024 reflects an effective tax rate of 20.2 %.

The decrease in tax expense during the nine

months ended September 30, 2025 compared to the corresponding period in 2024 was primarily due to a decrease in pre-tax book income.

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

3 unchanged sentences

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

The One Big Beautiful Bill Act (“the

Act”) was signed into law on July 4, 2025.

The Act extends or reinstates certain provisions of the Tax Cuts and Jobs Act,

includes tax relief measures, and revises international tax provisions, among other key items.

The Company has evaluated the impact

of the Act enacted and currently anticipates it will reduce our current cash tax payments and is not expected to have a material

impact on the Company’s consolidated financial statements.

The Company will continue to evaluate the full impact of the Act as

future developments and guidance become available.

7 — Earnings Per Share

following table is a reconciliation of the weighted average shares used in the computation of earnings per share for the periods presented

(in thousands, except per share data):

Three Months Ended

Six Months Ended

Earnings (loss) per share - basic and diluted

Net income (loss)

September 30,

Nine Months Ended

September 30,

Earnings per share - basic and diluted

Net income attributable to non-controlling interests

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

Net income attributable to JAKKS Pacific, Inc.

Redemption of preferred stock

Net income (loss) attributable to common stockholders *

Net income attributable to common stockholders *

Weighted average common shares outstanding - basic

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

Earnings 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.

Earnings per share available to common stockholder- diluted

* Net income 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 nine months ended September 30, 2024.

Basic earnings 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).

For the three and nine months ended September 30, 2025 and 2024, there were no potentially dilutive securities that

were not included in the calculation of diluted net earnings per share because they would have been anti-dilutive.

8 — Common Stock and Preferred Stock

4 unchanged sentences

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.

During the nine months ended September 30, 2025, certain

employees, including two executive officers, surrendered an aggregate of 159,589 shares of restricted stock units for $ 4.2 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.

During the nine months ended September 30, 2024,

certain employees, including two executive officers, surrendered an aggregate of 211,981 shares of restricted stock units for $ 6.5 million

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

Additionally, an aggregate of 20,450 shares of restricted stock granted

in 2020, 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 August 29, 2025 was declared on July 22, 2025 and paid on September

No dividend was declared or paid in 2024.

4 unchanged sentences

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.

of September 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

2 unchanged sentences

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.

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

Preferred Stock

73 unchanged sentences

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.

During 2024, the Company had redeemed all of the outstanding

shares of the Series A Preferred Stock.

PACIFIC, INC.

6 unchanged sentences

Preferred stock redemption

Balance, June 30,

Balance, September 30,

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

1 unchanged sentence

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

For the three months ended June 30, 2025,

For the three months ended September 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):

During 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.

No goodwill impairment was determined to have occurred

for the nine months ended September 30, 2025 and September 30, 2024.

Note 10 — Comprehensive Income

The table below presents the components of the

Company’s comprehensive income for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended

Six Months Ended

Net income (loss)

Other comprehensive income (loss):

Nine Months Ended

September 30,

Other comprehensive income:

Foreign currency translation adjustment

Comprehensive income (loss)

Comprehensive income

Comprehensive income attributable to non-controlling interests

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

Comprehensive income attributable to JAKKS Pacific, Inc.

11 — Litigation and Contingencies

27 unchanged sentences

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

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

2024 (in thousands):

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

and 2024 (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Share-based compensation expense

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

Restricted stock unit activity (including those

with performance-based vesting criteria) for the nine months ended September 30, 2025 is summarized as follows:

Restricted Stock Units

Grant Date Fair Value

Outstanding, December 31, 2024

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.

Outstanding, September 30, 2025

of September 30, 2025, there was $ 14.0 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 1.7 years.

of September 30, 2025, the fair market value of non-vested restricted stock units was $ 18.0 million.

13 — Fair Value Measurements

26 unchanged sentences

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

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

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

September 30,

Fair Value Measurements

As of June 30, 2025

Money market funds

As of September 30, 2025

Investments in employee deferred compensation trusts

3 unchanged sentences

Investments in employee deferred compensation trusts

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

Balance, January 1,

Change in fair value

Extinguishment through redemption of preferred stock

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 nine months ended September 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 $ 18.4 thousand and $ 161.4 thousand, respectively, and are

recognized in other general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive

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

2 unchanged sentences

nature of the instruments.

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 — Related Party Transactions

11 unchanged sentences

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.

continues to be a significant manufacturer of the Company.

For the three and nine months ended September 30, 2024 the Company made inventory-related

payments to Meisheng of approximately $ 32.0 million and $ 60.7 million, respectively.

As of December 31, 2024, amounts due to Meisheng

for inventory received by the Company, but not paid totaled $ 13.5 million, respectively.

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):

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

September 30,

Income tax receivable

Investments in employee deferred compensation trusts

Prepaid expenses

3 unchanged sentences

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 September 30, 2025, to shareholders

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

On October 29, 2025, the Company filed a registration statement on Form S-3 in order to

renew the registration of the securities registered on Form S-3 filed on October 20, 2022 and declared effective on October 28, 2022 pursuant

to which it may issue, from time to time, up to $ 150.0 million of securities, which amount includes up to $ 75.0 million of common stock

which can be sold pursuant to an ATM Agreement with B.

Riley, as agent (see Note 8 – Common Stock and Preferred Stock).

On October 29, 2025, the Company’s Board

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

The dividend will be payable on December 29, 2025, to shareholders

of record at the close of business on November 28, 2025.

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

21 unchanged sentences

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.

first nine months of 2025.

Accounting Pronouncements

2 unchanged sentences

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,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of sales:

7 unchanged sentences

Selling, general and administrative expenses

Income (loss) from operations

Income from operations

Other income (expense), net

2 unchanged sentences

Interest expense

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

Provision for (benefit from) income taxes

Net income (loss)

Income before provision for income taxes

Provision for income taxes

Net income attributable to non-controlling interests

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

Net income 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

Nine Months Ended

September 30,

Toys/Consumer Products

2 unchanged sentences

Toys/Consumer Products

of the Three Months Ended June 30, 2025 and 2024

of the Three Months Ended September 30, 2025 and 2024

Toys/Consumer Products.

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 segment were $156.1 million for the three months ended September 30, 2025 compared to $264.3 million for the prior

year period, representing a decrease of $108.2 million, or 40.9%.

The decrease was driven by lower sales from both our North American

and International businesses.

Decreases were seen in all three of our divisions:

Dolls, Role-Play/Dress-up was down 37.1% versus a year

ago, Action Play & Collectibles division was down 46.4% and the Outdoor/Seasonal segment was down 42.1%.

Net sales of our Costumes segment were $55.1 million for the three months ended September 30, 2025 compared to $57.3 million for the

prior year period, representing a decrease of $2.2 million, or 3.8%.

The decrease was primarily due to reduced orders from select recurring

Toys/Consumer Products.

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.

our Toys/Consumer Products segment was $104.5 million, or 66.9% of related net sales for the three months ended September 30, 2025 compared

to $171.8 million, or 65% of related net sales for the prior year period, representing a decrease of $67.3 million, or 39.2%, in line

with the decrease in net sales.

The increase as a percentage of net sales was due to a lower mix of high margin movie-related product,

slightly offset by decreased inventory reserves.

Cost of sales of our Costumes

segment was $39.1 million, or 71.0% of related net sales for the three months ended September 30, 2025, compared to $41.0 million, or

71.6% of related net sales for the prior year period, representing a decrease in dollars of $1.9 million, or 4.6%.

The decrease was due

to lower product COGS related to product mix and decreased inventory reserves.

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

Selling, general and administrative expenses were

$38.3 million for the three months ended September 30, 2025 compared to $40.7 million for the prior year period constituting 18.1% and

12.6% of net sales, respectively.

Despite selling, general and administrative expenses being lower in dollars year over year, as a percentage

of net sales selling, general and administrative expenses were up year over year because of lower net sales.

for Income Taxes

Our income tax expense, which includes federal, state

and foreign income taxes and discrete items, was $9.8 million, or an effective tax rate of 33.1%, for the three months ended September

During the comparable period in 2024, our income tax expense was $15.4 million, or an effective tax rate of 22.8%.

1 unchanged sentence

mix of earnings.

of the Six Months Ended June 30, 2025 and 2024

of the Nine Months Ended September 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 Toys/Consumer

Products segment were $343.9 million for the nine months ended September 30, 2025 compared to $451.8 million for the prior year period,

representing a decrease of $107.9 million, or 23.9%.

Decreases were seen in all three of our divisions:

Dolls, Role-Play/Dress-up was

down 22.7% versus a year ago, Action Play & Collectibles division was down 25.3% and the Outdoor/Seasonal segment was down 25.3%.

The decrease was mainly driven by lower sales from our U.S.

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

were $99.7 million for the nine months ended September 30, 2025 compared to $108.5 million for the prior year period, representing a decrease

of $8.8 million, or 8.1%.

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.

The decrease was primarily due to reduced orders from select recurring customers attributable to tariff expense.

Toys/Consumer Products.

Cost of sales of

our Toys/Consumer Products segment was $227.0 million, or 66.0% of related net sales for the nine months ended September 30, 2025 compared

to $304.3 million, or 67.4% of related net sales for the prior year period, representing a decrease of $77.3 million, or 25.4%, in line

with the decrease in net sales.

The decrease as a percentage of net sales was due to changes in product mix as well as decreased inventory

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.

segment was $70.8 million, or 71.0% of related net sales for the nine months ended September 30, 2025, compared to $78.5 million, or 72.4%

of related net sales for the prior year period, representing a decrease in dollars of $7.7 million, or 9.8%.

The decrease was due to lower

product COGS related to product mix.

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

Selling, general and administrative expenses were

$122.9 million for the nine months ended September 30, 2025 compared to $123.1 million for the prior year period constituting 27.7% and

22.0% of net sales, respectively.

Selling, general and administrative expenses were essentially flat year over year, but as a percentage

of net sales selling, general and administrative expenses were up year over year because of lower net sales.

for Income Taxes

Our income tax expense, which includes federal,

state and foreign income taxes and discrete items, was $8.1 million, or an effective tax rate of 34.7%, for the nine months ended September

During the comparable period in 2024, our income tax benefit was $11.0 million, or an effective tax rate of 20.2%.

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

in the effective tax rate is primarily due to a decrease in pre-tax book income across the jurisdictions.

retail toy industry is inherently seasonal.

13 unchanged sentences

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.

of September 30, 2025, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $133.8 million, compared to

$119.3 million as of December 31, 2024, representing an increase in working capital of $14.6 million during the nine-month period ended

September 30, 2025.

The increase in working capital is mainly attributable to cash used for financing activities, which was burdened

by $20.0 million cash outflow for the redemption of the Company’s preferred stock in March 2024.

Operating activities used net cash of $24.8 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.

during the nine months ended September 30, 2025, as compared to net cash used of $15.2 million in the prior year period.

in net cash used in operating activities year-over-year is primarily due to a lower net income in 2025.

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

3 unchanged sentences

ranging from 1% to 22% payable on net sales of such products.

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

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

royalty guarantees of $79.7 million exclusive of $1.8 million in advances already paid.

2 unchanged sentences

Investing activities used net cash of $9.7 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

and $9.0 million for the nine months ended September 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

1 unchanged sentence

Financing activities used net cash of $12.8 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 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”).

and $26.5 million for the nine months ended September 30, 2025 and 2024, respectively.

The cash used in financing activities during the

nine months ended September 30, 2025, consists primarily of $4.2 million used for the repurchase of our common stock for employee tax

withholding and $8.4 million used to pay dividends.

The cash used in financing activities during the nine months ended September 30, 2024,

primarily consisted of $20.0 million used in the redemption of our outstanding preferred stock and $6.5 million used in the repurchase

of common stock for employee tax withholdings.

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

9 unchanged sentences

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.

under the revolving facility as of September 30, 2025, was $68.3 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.

As of September 30, 2025 and December 31, 2024,

we held cash and cash equivalents, including restricted cash, of $27.8 million and $70.1 million, respectively.

Cash, and cash equivalents,

including restricted cash held outside of the United States in various foreign subsidiaries totaled $18.7 million and $16.5 million as

of September 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.

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 was no preferred stock outstanding

as of September 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

11 unchanged sentences

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.

As of September 30, 2025, off-balance sheet arrangements

include letters of credit issued by JPMorgan of $1.6 million, temporarily secured with cash as collateral, and letters of credit issued

by BMO of $1.7 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements