What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-03-02 compared with 2025-03-06 · 226 added, 269 removed, 260 unchanged (66% of the section changed)

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2026, there were 145 holders of record of our common stock.

The payment of dividends on common stock is at the discretion of the

Board of Directors and is subject to customary limitations and may be subject to certain restrictions under our credit facility.

were declared or paid in 2024.

However, on February 20, 2025, we issued a press release announcing that our Board of Directors declared

a quarterly cash dividend of $0.25 per common share.

The dividend will be payable on March 31, 2025 to shareholders of record at the close

of business on March 3, 2025.

The payment of dividends on common stock is at

the discretion of the Board of Directors and is subject to customary limitations and may be subject to certain restrictions under our

credit facility.

Quarterly cash dividends of $0.25 per common share were paid on March 31, June 27, September 30 and December 29, 2025.

On February 19, 2026, we issued a press release

to announce that our Board of Directors declared a quarterly cash dividend of $0.25 per common share.

The dividend will be payable on

March 30, 2026 to shareholders of record at the close of business on February 27, 2026.

Compensation Plan Information

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plans not previously approved by our stockholders, if any:

(a) the number of securities to be issued upon the

exercise of outstanding options, warrants and rights;

(a) the number of securities to be issued upon

the exercise of outstanding options, warrants and rights;

(b) the weighted-average exercise price of such

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Equity compensation plans not approved by security holders

Equity compensation plans approved by our stockholders consist of the

2002 Stock Award and Incentive Plan.

An additional 1.0 million, 1.0 million, 3.6 million, 2.5 million and 1.4 million shares were added

to the number of total issuable shares under the Plan and approved by the Board in 2023, 2021, 2019, 2017, and 2013, respectively.

Additionally,

no shares subject to restricted stock awards and no stock options remained unvested and no restricted stock awards and no stock options

have been issued as of December 31, 2024.

Disclosures with respect to equity issuable to certain of our executive officers pursuant to

the terms of their employment agreements are disclosed below under Item 11.

Equity compensation plans approved by our stockholders

consist of the 2002 Stock Award and Incentive Plan.

An additional 1.0 million, 1.0 million, 3.6 million, 2.5 million and 1.4 million

shares were added to the number of total issuable shares under the Plan and approved by the Board in 2023, 2021, 2019, 2017, and 2013,

respectively.

Additionally, no shares subject to restricted stock awards and no stock options remained unvested and no restricted stock

awards and no stock options have been issued as of December 31, 2025.

Disclosures with respect to equity issuable to certain of our executive

officers pursuant to the terms of their employment agreements are disclosed below under Item 11.

Issuer Purchases of Equity Securities

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and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors.

Our actual results could differ materially from those anticipated in these forward-looking statements because of various factors.

You should read this section in conjunction with our consolidated financial statements and the related notes included in Item 8 “ Consolidated

Financial Statements and Supplementary Data.

Critical Accounting Estimates

Critical Accounting Policies and Estimates

The accompanying consolidated financial statements

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Significant accounting policies are discussed in Note 2 to the Consolidated Financial Statements, included within Item 8.

the application of many of these accounting policies is the need for management to make estimates and judgments in the determination of

certain revenues, expenses, assets and liabilities.

the application of many of these accounting policies is the need for management to make estimates and judgments in the determination

of certain revenues, expenses, assets and liabilities.

As such, materially different financial results can occur as circumstances change

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time at which uncollectible accounts receivable balances are actually written off.

Management believes the accounting estimate related

to the allowance for current expected credit losses is a “critical accounting policy” because judgement is required in the

establishment of pools based on customer risk profile characteristics and the historical loss rates applied to each pool.

the allowance requires judgement since it involves estimation of the impact of both current and future economic factors in relation to

The allowance for current expected credit losses requires

judgement related to the establishment of pools based on customer risk profile characteristics and the historical loss rates applied to

each pool and requires judgement since it involves estimation of the impact of both current and future economic factors in relation to

its customers’ risk profile characteristics.

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financial measures, including other selling and administrative expenses, net income and accounts receivable.

Goodwill represents the

excess of the purchase price over the fair values of the underlying net assets acquired in an acquisition.

Goodwill is not amortized but

tested for impairment at least annually at the reporting unit level and asset level.

The annual goodwill test is performed in the second

quarter and whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value,

we may assess goodwill for impairment using a qualitative assessment.

Qualitative factors and their impact on critical inputs are assessed

to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If we determine

that a reporting unit has an indication of impairment based on the qualitative assessment, it is required to perform a quantitative assessment.

We may bypass the qualitative assessment and perform a quantitative assessment.

Impairment is recognized in the amount by which, if any,

the carrying value of the reporting unit exceeds the fair value, not to exceed the carrying value of goodwill.

We evaluate fair value

recoverability using both objective and subjective factors.

Objective factors include cash flows and analysis of recent sales and earnings

Subjective factors include our best estimates of projected future earnings and competitive analysis and the Company’s strategic

We performed a quantitative assessment for Toys/Consumer Products reporting unit during Q2 2025, the fair value of which exceeded

its carrying amount by 26%.

As of December 31, 2025, all our Goodwill of $35.1 million related to our Toys/Consumer Products reporting

We enter into license

agreements with strategic partners, inventors, designers and others for the use of intellectual properties in its products.

agreements with strategic partners, inventors, designers and others for the use of intellectual properties in our products.

These agreements

may call for payment in advance or future payment of minimum guaranteed amounts.

Amounts paid in advance are recorded as an asset and

charged to expense when the related revenue is recognized in the consolidated statements of operations.

If all or a portion of the minimum

guaranteed amounts appear not to be recoverable through future use of the rights obtained under the license, the non-recoverable portion

of the guaranty is charged to expense at that time.

On a quarterly basis, we evaluate the recoverability of minimum guarantee amounts

based on forecast revenues to be received for the products and record a shortfall reserve for expected unrecoverable amounts.

If our actual

revenue generated differs from our projections, the recoverability of our minimum guarantees would be impacted and could materially affect

key financial measures, including gross profit, net income and prepaid assets.

Fair value measurements.

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, we use various methods including market, income and cost approaches.

Based upon these

approaches, we often utilize 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.

We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable

Based upon observable inputs used in the valuation techniques, we are 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.

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.

Our 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 (see Item 8 “Consolidated Financial Statements and Supplementary Data Note

15 - Fair Value Measurements” for further information).

generally require a percentage of sales (as defined by the respective agreements) be paid to third parties as royalties.

They also often

require a fixed minimum dollar amount of royalties to be paid regardless of what level of sales are achieved during the term of the agreement.

Payment timing varies across agreements and may precede any sales or collections of monies related to such sales.

We recognize royalty

expenses in the period in which sales are made.

In addition, we assess whether forecasted revenue under any agreement is likely to be

sufficient to cover the minimum royalty guarantee, and if not a royalty shortfall reserve and associated royalty expense is recorded at

If our actual revenue generated differs from our projections, the recoverability of our minimum guarantees would be impacted

and could materially affect key financial measures, including gross profit, net income and prepaid assets.

Reserve for Inventory Obsolescence.

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Based upon consideration of quantities on hand, actual and projected

sales volume, anticipated product selling prices and product lines planned to be discontinued, slow-moving and obsolete inventory is written

down to its net realizable value.

sales volume, anticipated product selling prices and product lines planned to be discontinued, slow-moving and obsolete inventory is

written down to its net realizable value.

Failure to accurately predict and respond to consumer

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for our products would impact management’s estimates in establishing our inventory provision.

Management’s estimates are monitored on a

quarterly basis, and a further adjustment to reduce inventory to its net realizable value is recorded as an increase in the cost of sales

when deemed necessary under the lower of cost or net realizable value standard.

Significant changes in the assumptions used to develop

the estimate could materially affect key financial measures, including gross profit, net income and inventories.

Management’s estimates are monitored on

a quarterly basis, and a further adjustment to reduce inventory to its net realizable value is recorded as an increase in the cost of

sales when deemed necessary under the lower of cost or net realizable value standard.

Significant changes in the assumptions used to

develop the estimate could materially affect key financial measures, including gross profit, net income and inventories.

Reserve for Sales Returns and Allowances .

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activities, and other specified factors such as sales to consumers.

Management believes that the accounting estimates related to sales

adjustments are “critical accounting policies” because significant judgment is required to estimate related accruals, such

as estimating volumes of defective products to support reserves for defective merchandise and estimating future customer performance and

consumer preferences that could impact the discretionary sales promotions.

Significant changes in the assumptions used to develop the

estimates could materially affect key financial measures, such as net sales, gross profit, net income, and reserve for sales returns and

Income Allocation for Income Taxes .

Our annual income tax provision and related income tax assets and liabilities are based upon actual income as allocated to the various

tax jurisdictions based upon our transfer pricing study, US and foreign statutory income tax rates and tax regulations and planning opportunities

in the various jurisdictions in which we operate.

Significant judgment is required in interpreting tax regulations in the U.S.

jurisdictions, and in evaluating worldwide uncertain tax positions.

Actual results could differ materially from those judgments, and changes

from such judgments could materially affect our consolidated financial statements.

The accounting estimate related to sales adjustments requires significant

judgment to estimate related accruals, such as estimating volumes of defective products to support reserves for defective merchandise

and estimating future customer performance and consumer preferences that could impact the discretionary sales promotions.

changes in the assumptions used to develop the estimates could materially affect key financial measures, such as net sales, gross profit,

net income, and reserve for sales returns and allowances.

Income taxes.

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Deferred tax assets

are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax

assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the

date of enactment.

We must assess the likelihood that we will be able

to recover our deferred tax assets.

Deferred tax assets are reduced by a valuation allowance, if, based upon the weight of available evidence,

it is more likely than not that we will not realize some portion or all of the deferred tax assets.

We consider all available positive

and negative evidence when assessing whether it is more likely than not that deferred tax assets are recoverable.

We consider evidence

such as our past operating results, the existence of cumulative losses or cumulative income in previous periods and our forecast of future

taxable income.

We believe this to be a critical accounting policy because should there be a change in our ability to recover our deferred

tax assets, our tax provision would increase in the period in which we determine that the recovery is not likely, as well as decrease

in the period in which the assessment of the recoverability of the deferred tax assets reverses, which could have a material impact on

our results of operations.

are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred

tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on

the date of enactment.

Our annual income tax provision and related income

tax assets and liabilities are based upon actual income as allocated to the various tax jurisdictions based upon our transfer pricing

study, US and foreign statutory income tax rates and tax regulations and planning opportunities in the various jurisdictions in which

Significant judgment is required in interpreting tax regulations in the U.S.

and foreign jurisdictions, and in evaluating

worldwide uncertain tax positions.

Actual results could differ materially from those judgments, and changes from such judgments could

materially affect our consolidated financial statements.

We accrue a tax reserve for additional income taxes

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We recognize current period interest expense and

penalties and the reversal of previously recognized interest expense and penalties that has been determined to not be assessable due to

the expiration of the related audit period or other compelling factors on the income tax liability for unrecognized tax benefits as a

component of the income tax provision recognized in the consolidated statements of operations.

penalties and the reversal of previously recognized interest expense and penalties that has been determined to not be assessable due

to the expiration of the related audit period or other compelling factors on the income tax liability for unrecognized tax benefits as

a component of the income tax provision recognized in the consolidated statements of operations.

Recent Accounting Pronouncements.

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Income from operations

Loss from joint ventures

Other income (expense), net

Change in fair value of preferred stock derivative liability

Loss on debt extinguishment

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Toys/Consumer Products.

Net sales of our

Toys/Consumer Products segment were $570.0 million in 2024, compared to $580.7 million in 2023, representing a decrease of $10.7 million,

The decrease in net sales was primarily due to lower sales in the 1-2% range in each of our Dolls, Role Play and Dress Up Division,

Action Play & Collectibles Division and Seasonal Division.

Movie properties such as Sonic the Hedgehog 3 and Disney’s Moana

2 helped sales in 2024, but were offset by lower shipping from prior year movie properties such as The Super Mario Bros.

Movie, Disney’s

The Little Mermaid, Disney’s Wish and Disney’s Encanto.

Net sales of our Toys/Consumer

Products segment were $461.9 million in 2025, compared to $570.0 million in 2024, representing a decrease of $108.1 million, or 19.0%.

The decrease in net sales was primarily due to lower sales North America, down 24.0%, while International sales grew 2.7%.

Role Play and Dress Up Division decreased 22.6% year over year, mainly due to limited theatrical releases and lower sales within the Disney

Princess and Style Collection businesses.

Within the Action Play & Collectibles Division, down 15.6%, Sonic the Hedgehog 3 and the

Sonic/DC collaboration added incremental year over year sales, while lower Nintendo sales offset those gains.

The Seasonal Division was

down 8.8% from 2024.

Net sales of our Costumes segment

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The decrease in net

sales was primarily driven by US customers recalibrating their order levels down based on Halloween 2023 sell-through.

Despite the lower

sales in the US, our International sales grew in 2024 to the highest year ever.

sales was primarily driven by US customers lowering their order levels based on tariffs.

Despite the lower sales in the US, our International

sales grew in 2025 its highest level.

Cost of Sales

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our Toys/Consumer Products segment was $304.3 million, or 65.9% of related net sales in 2025 compared to $389.5 million, or 68.3% of related

net sales in 2023 representing an increase of $1.2 million or 0.3%.

Although royalty rates were lower year-over-year, the increase in

the cost of sales percentage of net sales, year-over-year is due to higher inventory obsolescence costs.

net sales in 2024 representing a decrease of $85.2 million or 21.9%.

Although royalty rates were higher year-over-year, the decrease in

the cost of sales percentage of net sales, year-over-year is due to lower inventory obsolescence costs.

Cost of sales of our Costumes segment

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The year-over-year decrease in dollars is directly attributable to lower volume.

The decrease in

percent of net sales is attributable lower royalty expense due to lower royalty guarantee shortfalls and marginal improvements in product

The increase in

percent of net sales is attributable higher royalty expense due to higher royalty guarantee shortfalls offset by improvements in product

cost of goods attributable to mix and design for improved margin.

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Selling, general and administrative

expenses increased from the prior year primarily driven by higher media costs, product development expenses and employee compensation.

expenses decreased from the prior year by $2.4 million or 1.4% primarily driven by lower media costs and lower temporary labor costs.

Loss on Debt Extinguishment

In 2025, we recognized a loss on debt extinguishment

of $1.0 million in connection with the extinguishment of the 2021 BSP Term Loan in June 2023.

Change in fair value of the preferred stock derivative

The change in fair value of the preferred stock derivative liability

for year ended December 31, 2024, was nil, as the Company had redeemed all the outstanding preferred shares on March 11, 2024.

in fair value for the year ended December 31, 2023, was $8.0 million reflecting the results of the fair value estimation driven mainly

by the accrual of dividends and changes in unobservable inputs such as discount rate and change-in-control-assumptions.

of $0.4 million in connection with the early termination 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.

Interest Income

Interest Income was $0.8 million for the year ended

December 31, 2024, as compared to $1.3 million in the prior year period.

Interest Income was $1.0 million for the year

ended December 31, 2025, as compared to $0.8 million in the prior year period.

Interest income earned is primarily due to the Company’s

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Interest Expense

Interest expense was $1.1 million for the year ended

December 31, 2024, as compared to $6.5 million in the prior year period.

In 2024, we recorded interest expense of $1.1 million related

to our revolving credit facility.

In 2023, we recorded interest expense of $3.2 million related to our 2021 BSP Term Loan, $0.7 million

related to our revolving credit facility and $2.6 million related to other borrowing costs.

Interest expense was $0.5 million for the year

ended December 31, 2025, as compared to $1.1 million in the prior year period, both related to borrowings from our revolving credit facilities.

Provision for Income Taxes

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The 2025 tax expense

included a discrete tax benefit of $1.4 million primarily comprised of return to provision adjustments.

Absent these discrete tax benefits,

our effective tax rate for 2024 was 17.4%, primarily due to taxes on federal, state, and foreign income.

included a discrete tax benefit of $0.2 million primarily related to adjustments to uncertain tax positions and to return to provision

Absent these discrete tax benefits, our effective tax rate for 2025 was 34.4%, primarily due to taxes on federal, state,

and foreign income.

During 2024, our income tax expense, which includes

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and income (loss) from operations

Significant outbreaks of contagious diseases, and

other adverse public health developments, could have a material impact on our business operations and operating results.

Significant outbreaks of contagious diseases,

and other adverse public health developments, could have a material impact on our business operations and operating results.

The immediate

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engaged in an armed conflict that continues.

We cannot predict at this time the length of this conflict and if it will spread to other

Accordingly, we cannot quantify at this time if, or the extent, this conflict will adversely impact our business operations.

The suggestion that the U.S.

will take unilateral

action to impose tariffs on products imported from China creates significant uncertainty about our ability to source products with a cost

structure consistent with our recent history.

The additional suggestion that the U.S.

will take unilateral action to impose tariffs on

products imported from Canada and/or Mexico also creates significant uncertainty about which additional markets could be targeted for

It also increases the possibility that markets outside the U.S.

could institute retaliatory tariffs that would ultimately

increase the cost of our doing business in those markets where we import product.

In addition, our customer base may face significant

increased costs in importing our product from Hong Kong into their home markets.

In the event our customers choose to raise consumer prices

to offset these costs, negative consumer reaction could substantially reduce unit demand for our product line, and by extension lower

Lower sales could negatively impact our profitability and cash flows.

We cannot predict at this time if the conflict will spread to other countries.

we cannot quantify at this time if, or the extent, this conflict will adversely impact our business operations.

taking unilateral action to impose tariffs

on products imported from China and adopting an approach to deploy tariffs with no advance notice or feedback mechanism has created across

markets has created uncertainty about our ability to source products with a cost structure consistent with our recent history.

increased the possibility that markets outside the U.S.

could institute retaliatory tariffs that would ultimately increase the cost of

our doing business in those markets where we import product.

In addition, our customer base has faced increased costs in importing our

product from Hong Kong into their home markets.

In the event our customers choose to raise consumer prices to offset these costs, negative

consumer reaction could substantially reduce unit demand for our product line, and by extension lower sales.

Lower sales could negatively

impact our profitability and cash flows.

Quarterly Fluctuations and Seasonality

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The seasonality of our business is reflected in this quarterly presentation.

a % of full year

a % of net sales

(loss) from operations

a % of full year

a % of net sales

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

a % of net sales

income (loss)

a % of net sales

income (loss) attributable to non-controlling interests

a % of net sales

income (loss) attributable to JAKKS Pacific, Inc.

a % of net sales

income (loss) attributable to common stockholders

a % of net sales

earnings (loss) per share

average shares and equivalents outstanding

As a % of full year

As a % of net sales

Income (loss) from operations

As a % of full year

As a % of net sales

Income (loss) before provision for

(benefit from) income taxes

As a % of net sales

Net income (loss)

As a % of net sales

Net income (loss) attributable to

non-controlling interests

As a % of net sales

Net income (loss) attributable to

JAKKS Pacific, Inc.

As a % of net sales

Net income (loss) attributable to

common stockholders

As a % of net sales

Diluted earnings (loss) per share

Weighted average shares and equivalents outstanding

Quarterly and year-to-date computations of income

(loss) per share amounts are made independently.

Therefore, the sum of the per share amounts for the quarters may not agree with the per

share amounts for the year.

Therefore, the sum of the per share amounts for the quarters may not agree with the

per share amounts for the year.

Liquidity and Capital Resources

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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 25% payable on net sales of such products.

As of December

31, 2024, these agreements required future aggregate minimum royalty guarantees of $74.6 million, exclusive of $0.9 million in advances

already paid.

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.

of December 31, 2025, these agreements required future aggregate minimum royalty guarantees of $189.8 million, exclusive of $2.3 million

in advances already paid.

Of this $189.8 million future minimum royalty guarantee, $57.4 million is due over the next twelve months.

Investing activities used net cash of $12.3 million

and $8.9 million for the years ended December 31, 2024 and 2023, respectively, and consisted primarily of cash paid for the purchase of

molds and tooling used in the manufacture of our products.

and $12.9 million for the years ended December 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

from our non-qualified deferred compensation plan.

Financing activities used net cash of $17.1 million

in 2025 and $26.9 million in 2024.

The cash used in 2024 primarily consists of the cash portion for the redemption of the Series A Preferred

The cash used in 2025 primarily consists of the quarterly cash dividends paid to holders of our common

stock of $11.2 million and the repurchase of common stock for employee tax withholding of $5.7 million.

The cash used in 2024 primarily

consists of the repayment of our 2021 BSP Term Loan of $69.2 million and the repurchase of common stock for employee tax withholding of

$3.1 million.

The following is a summary of our significant contractual

cash obligations for the periods indicated that existed as of December 31, 2024 and is based upon information appearing in the notes to

the consolidated financial statements (in thousands):

consists of the cash portion for the redemption of the Series A Preferred stock of $20.0 million and the repurchase of common stock for

employee tax withholding of $6.9 million.

The following is a summary of our significant

contractual cash obligations for the periods indicated that existed as of December 31, 2025 and is based upon information appearing in

the notes to the consolidated financial statements (in thousands):

Operating leases

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Total contractual cash obligations

The above table excludes any potential uncertain

income tax liabilities that may become payable upon examination of our income tax returns by taxing authorities.

Such amounts and periods

of payment cannot be reliably estimated (see Item 8 “Consolidated Financial Statements and Supplementary Data Note 12 - Income

The above table excludes any potential uncertain income

tax liabilities that may become payable upon examination of our income tax returns by taxing authorities.

Such amounts and periods of

payment cannot be reliably estimated (see Item 8 “Consolidated Financial Statements and Supplementary Data Note 11 - Income

Taxes” for further explanation of our uncertain tax positions).

As of December 31, 2024, we had no outstanding indebtedness

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

In June 2023 we had fully paid off our first-lien secured term loan (the “2021 BSP Term Loan Agreement”).

The First Lien Term Loan Facility Credit Agreement

(the “2021 BSP Term Loan Agreement”) and the Credit Agreement with JPMorgan Chase Bank, N.A., as agent and lender (the “JPMorgan

ABL Credit Agreement”) each contained negative covenants that, subject to certain exceptions, limited our ability and our subsidiaries

ability to, among other things, incur additional indebtedness, make restricted payments, pledge our assets as security, make investments,

loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.

The terms of the

2021 BSP Term Loan Agreement also required us to maintain a Net Leverage Ratio of 4:00x, with step-downs occurring each fiscal year starting

with the quarter ending March 31, 2022 through the quarter ending September 30, 2024 in which we were required to maintain a Net Leverage

Ratio of 3:00x.

On April 26, 2022, we entered into a First Amendment to the 2021 BSP Term Loan Agreement, to provide, among other things,

that we must maintain Qualified Cash of at least:

(a) at all times after the Closing Date and prior to the First Amendment Effective Date,

$20.0 million;

(b) at all times during the period commencing on the First Amendment Effective Date through and including June 30, 2022,

$15.0 million;

and (c) at all times on and after July 1, 2022, through September 30, 2022, $17.5 million;

provided, however, that if the

Total Net Leverage Ratio exceeded 1.75:1.00 as of the last day of the most recently ended month for which financial statements were required

to have been delivered, then the amount set forth in this clause shall be increased to $20.0 million.

Notwithstanding the foregoing, the

Applicable Minimum Cash Amount shall be reduced by $1.0 million for every $5.0 million principal prepayment or repayment of the Term Loans

following the First Amendment Effective Date;

provided however, that, the Applicable Minimum Cash Amount shall in no event be reduced

below $15.0 million.

On January 3, 2023, as permitted by the terms within

the 2021 BSP Term Loan Agreement, we made a voluntary $15.0 million prepayment towards the outstanding principal amount of the 2021 BSP

Term Loan and incurred a $0.2 million prepayment penalty.

On March 3, 2023, as required by the terms within

the 2021 BSP Term Loan Agreement under the Excess Cash Flow (“ECF”) Sweep provision, we made a mandatory $23.1 million payment

towards the outstanding principal amount of the 2021 BSP Term Loan.

On June 5, 2023, we paid in full the 2021 BSP Term

Loan and terminated the 2021 BSP Term Loan Agreement by making a $30.2 million prepayment towards the outstanding principal amount.

Additionally,

we made a $0.4 million payment towards the outstanding accrued interest, and a $0.3 million payment for the prepayment penalty and other

related fees.

In connection with this transaction, we recognized a loss on debt extinguishment of $1.0 million on our consolidated statements

of operations.

The JPMorgan ABL Agreement contains events of default

that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal,

nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default

to certain other existing indebtedness, bankruptcy or insolvency events, certain judgment defaults and a change of control as specified

in each Agreement.

If an event of default occurs under the Agreement, the maturity of the amounts owed under the JPMorgan ABL Agreement

may be accelerated.

In 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.

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.

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

Availability under the revolving facility as of

December 31, 2025, was $68.3 million.

The facility provides the Company with flexibility to fund working capital, capital expenditures,

acquisitions, and general corporate purposes.

We were in compliance with the financial covenants

under the JPMorgan ABL Agreement as of December 31, 2024.

under the BMO Credit Agreement as of December 31, 2025.

(See Item 8 “Consolidated Financial Statements

and Supplementary Data, Note 9 – Debt and Note 10 – Credit Facilities” for additional information pertaining to our

Debt and Credit Facilities.)

As of December 31, 2024 and 2023, we held cash and

cash equivalents, including restricted cash, of $70.1 million and $72.6 million, respectively.

Cash, and cash equivalents, including restricted

cash held outside of the United States, in various foreign subsidiaries totaled $16.5 million and $21.5 million as of December 31, 2024

and Supplementary Data, Note 8 – Debt and Note 9 – Credit Facilities” for additional information pertaining to our Debt

and Credit Facilities.)

As of December 31, 2025, and 2024, we held cash

and cash equivalents, including restricted cash, of $54.1 million and $70.1 million, respectively.

Cash, and cash equivalents, including

restricted cash held outside of the United States, in various foreign subsidiaries totaled $16.9 million and $16.5 million as of December

31, 2025, and 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.

Any such repatriation may result in foreign withholding taxes, which we expect would not

be significant as of December 31, 2024.

Our primary sources of working capital are cash

flows from operations and borrowings under our JPMorgan ABL Facility (See Item 8 “Consolidated Financial Statements and Supplementary

Data Note 10 – Credit Facilities”).

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.

Any such repatriation may result in foreign withholding taxes, which we expect would

not be significant as of December 31, 2025.

Our primary sources of working capital are cash flows

from operations and borrowings under our credit facility (See Item 8 “Consolidated Financial Statements and Supplementary Data Note

9 – Credit Facilities”).

Typically, cash flows from operations are impacted

13 unchanged sentences

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

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

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.

On July 1, 2022, we entered into an ATM Agreement

6 unchanged sentences

registration statement filed by us to be effective.

As of March 6, 2025, we have not sold any shares

of common stock under the ATM Agreement.

We have on file with the SEC an effective registration

statement pursuant to which we 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 we will determine at the time of the offering.

As of March 6, 2025, we have not sold any securities

pursuant to our shelf registration statement.

In 2025, the registration statement expired by law on its third anniversary.

to file a new registration that will be declared effective during the first or second quarter of 2026.

We did not sell any shares of common stock under

the ATM Agreement or pursuant to our self-registration statement.

The nature of our business is several factors influence

26 unchanged sentences

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-K

Item 5. Market for Registrant’s Common Equity