What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-05-01 compared with 2025-10-31 · 322 added, 609 removed, 432 unchanged (68% of the section changed)

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thousands, except share amounts)

September 30,

Current assets

1 unchanged sentence

Restricted cash

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

Accounts receivable, net of allowance for credit losses of $ 4,956 and $ 5,103 at March 31, 2026 and December 31, 2025, respectively

Inventory, net

Prepaid expenses and other assets

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Accounts payable

Accounts payable - Meisheng (related party)

Accrued expenses

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100,000,000 shares authorized;

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

11,444,411 and 11,342,981 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Total JAKKS Pacific, Inc.

stockholders’ equity

Non-controlling interests

Total stockholders’ equity

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of sales:

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Selling, general and administrative expenses

Income from operations

Loss from operations

Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

Income before provision for income taxes

Provision for income taxes

Net income attributable to non-controlling interests

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.

Loss before benefit from income taxes

Benefit from income taxes

Loss per share - basic and diluted

Shares used in loss per share - basic and diluted

Comprehensive loss

accompanying notes to condensed consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2025

thousands, except per share data)

Three Months Ended March 31, 2026

Pacific, Inc.

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Balance, March 31, 2026

Share-based compensation expense

Repurchase of common stock for employee tax withholding

Cash dividend declared, $ 0.25 per share

Foreign currency translation adjustment

Balance, June 30, 2025

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

Three Months Ended March 31, 2025

Pacific, Inc.

Comprehensive

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Balance, December 31, 2024

compensation expense

Non-controlling

interests – capital reduction

of common stock for employee tax withholding

stock accrued dividends

stock redemption

currency translation adjustment

Share-based compensation expense

Repurchase of common stock for employee tax withholding

Cash dividend declared, $ 0.25 per share

Foreign currency translation adjustment

Balance, March 31, 2025

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.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Three Months Ended

Cash flows from operating activities

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

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

Recovery of credit losses

Depreciation and amortization

Write-off and amortization of debt issuance costs

Share-based compensation expense

Loss on disposal of property and equipment

Deferred income taxes

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts payable

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).

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).

Accrued expenses

Reserve for sales returns and allowances

Income taxes payable

Other liabilities

Total adjustments

Net cash provided by (used in) operating activities

Cash flows from investing activities

Purchases of property and equipment

Investments in employee deferred compensation trusts

Net cash used in investing activities

Cash flows from financing activities

Repurchase of common stock for employee tax withholding

Cash dividend paid

Deferred issuance costs

Net cash used in financing activities

Net increase (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 disclosures of cash flow information:

Cash paid for income taxes, net

Cash paid for interest

The Company received income tax refunds of $ 6.9

million and nil during the three months ended March 31, 2026 and 2025.

disclosures of non-cash activities:

During the three months ended March 31, 2026 and 2025,

the lease liability increased by $ 0.1 million and $ 2.5 million respectively, with a corresponding increase to the ROU asset.

of March 31, 2026 and 2025, there were $ 6.0 million and $ 4.7 million, respectively, of property and equipment purchases included in accounts

accompanying notes to condensed consolidated financial statements.

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“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

and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in

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

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

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

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

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

in ASC 815-40 related to equity classification.

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

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

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

The new standard is effective for the Company

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

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

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

Company’s condensed consolidated financial statements.

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

Improvements to Reportable Segment Disclosures.”

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

segment expenses.

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

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

Business Segments, Geographic Data and Sales by Major Customers.

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

Improvements to Income Tax Disclosures.” This ASU

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

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

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

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

Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses”.

The new guidance improves disclosures about a public

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

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

those expenses.

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

The standard is effective

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

after December 15, 2027.

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

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

PACIFIC, INC.

AND SUBSIDIARIES

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 November 2024, the FASB issued ASU 2024-03, “Income

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

Disaggregation of Income Statement

Expenses.” The new guidance improves disclosures about a public business entity’s expenses by requiring disaggregated disclosures

of certain types of expenses, including purchases of inventory, employee compensation, depreciation, intangible amortization and depletion,

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

In addition, the standard will require entities to define

and disclose total selling expenses.

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

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

Early adoption is permitted, and entities may apply the

standard prospectively or retrospectively.

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

consolidated financial statements and related disclosures.

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 assets.

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 was permitted in both interim

and annual reporting periods in which financial statements have not yet been issued or made available for issuance.

The Company adopted

this standard as of January 1, 2026.

The adoption of this standard did not have a material impact on its condensed consolidated financial

statements and related disclosures.

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

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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”).

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

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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.

No other accounting pronouncements were issued or

adopted for the three months ended March 31, 2026 that materially impacted the Company.

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

All sales are made to external customers and general corporate expenses

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

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

All sales are made to external customers and general corporate

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

Segment assets are primarily comprised of accounts receivable

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Information by segment and

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)

Direct selling expenses

Product development and testing expenses

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

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

Income from operations

Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September, 30

a reconciliation to reported amounts for the three months ended March 31, 2026 and 2025 and as of March 31, 2026 and December 31, 2025

are as follows (in thousands):

Three Months Ended March 31,

Cost of Sales (A)

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Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

Income before provision for income taxes

Income before benefit from income taxes

(A) Includes depreciation and amortization $ 2,107 $ 15 $ 2,122 $ 1,550 $ 9 $ 1,559

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

September 30,

Toys/Consumer Products

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Company’s assets.

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,

The following tables present information about the Company by geographic area as of March 31, 2026 and December

31, 2025 and for the three months ended March 31, 2026 and 2025 (in thousands):

Long-lived Assets

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Three Months Ended

Nine Months Ended

September 30,

Net Sales by Customer Area

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Middle East & Africa

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,

sales to major customers globally for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except for percentages):

Three Months Ended March 31,

the year ended December 31, 2025, the Company determined that, in prior periods, net sales to two subsidiaries of Walmart Inc., were

not aggregated with net sales to Walmart Inc.

in the major customer disclosure under ASC 280-10-50-42.

Because these entities are under

common control, such sales should be presented as revenues from a single customer.

Accordingly, prior-period amounts have been revised

to aggregate these net sales amounts to Walmart Inc.

and its subsidiaries.

This revision affected only the major customer disclosure

and had no impact on the Company’s condensed consolidated financial statements for any period presented.

The Company concluded

that the revision was not material to previously issued financial statements.

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

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

September 30,

Finished goods

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

inventory obsolescence reserve was $ 2.9 million and $ 2.4 million as of March 31, 2026 and December 31, 2025, respectively.

4 — Revenue Recognition and Reserve for Sales Returns and Allowances

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

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.

For the three months ended March

31, 2026 and 2025, sales commissions were $ 0.5 million and $ 0.4 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 nine months ended September 30, 2025, shipping and handling costs were $ 2.2 million

and $ 6.1 million, respectively.

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

For the three months ended March 31, 2026 and 2025, shipping and handling costs were $ 1.7 million

and $ 2.3 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.

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5 — Credit Facilities

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

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

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

On June 2, 2021, the Company and certain of its

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

N.A., as agent and lender, providing a $ 67.5 million senior secured revolving credit facility (the “JPMorgan ABL Facility”)

maturing in June 2026.

On June 24, 2025, in connection with the execution

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

off and recorded as a loss on extinguishment of debt in the amount of $ 0.4 million.

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

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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.

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

under the Revolving Facility bear interest, at the Company’s election, either (i) the Adjusted Term Secured Overnight Financing

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

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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.

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

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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 $ 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.

of March 31, 2026, the amount of outstanding borrowings was nil and the total excess borrowing availability was $ 68.3 million.

of March 31, 2026, off-balance sheet arrangements include letters of credit issued by BMO of $ 1.7 million and JPMorgan of $ 0.9 million.

of March 31, 2026, the Company was in compliance with the financial covenants under the BMO Credit Agreement.

PACIFIC, INC.

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6 — Income Taxes

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 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.

The Company’s income tax benefit of $ 0.8 million

for the three months ended March 31, 2026, reflects an effective tax rate of 16.6 %.

The Company’s income tax benefit of $ 1.2 million

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

The tax benefit for the three months ended March

31, 2026 and 2025 primarily relates to the overall worldwide loss (i.e.

federal, state, and foreign) partially offset by discrete items.

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

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financial statements.

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

7 — Loss Per Share

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

(in thousands, except per share data):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Earnings per share - basic and diluted

Net income attributable to non-controlling interests

Net income attributable to JAKKS Pacific, Inc.

Redemption of preferred stock

Net income attributable to common stockholders *

Weighted average common shares outstanding - basic

Earnings per share available to common stockholder- basic

Weighted average common shares outstanding - diluted

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

Loss per share - basic and diluted

Weighted average common shares outstanding - basic and diluted

Loss per share available to common stockholder - basic and diluted

Basic loss per share is calculated using the weighted

average number of common shares outstanding during the period.

Diluted loss per share is calculated using the weighted average number

of common shares and common share equivalents outstanding during the period (which consist of restricted stock units to the extent they

are dilutive).

Restricted stock units of 377,755 and 359,344 for the three months ended March 31, 2026 and 2025, respectively, were excluded

from the computation of diluted loss per share.

Of the RSUs excluded for 2026, 105,609 were anti-dilutive based on their terms, while

272,146 would have been dilutive if the Company had reported net income.

8 — Common Stock

issuances of common stock, including those issued pursuant to restricted stock or unit grants, are issued from the Company’s authorized

but not issued and outstanding shares.

2026, certain employees, including two executive officers, surrendered an aggregate of 74,652 shares of restricted stock units for $ 1.3

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

No forfeitures occurred during 2026.

2025, certain employees, including two executive officers, surrendered an aggregate of 135,672 shares of restricted stock units for $ 3.8

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

Additionally, an aggregate of 1,357 shares of restricted stock

granted in 2023 and 2024 with a value of approximately $ 38.1 thousand was forfeited during 2025.

quarterly dividend of $ 0.25 per share for owners of record as of February 27, 2026 was declared on February 18, 2026 and paid on March

A quarterly dividend of $ 0.25 per share for owners of record as of March 3, 2025 was declared on February 18, 2025 and paid

on March 31, 2025.

PACIFIC, INC.

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TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

the Market Offering

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

Riley, as agent

pursuant to which the Company may, from time to time, sell shares of its common stock, up to $ 75 million of common stock, in one or more

offerings in amounts, prices and at terms that the Company will determine at the time of the offering.

of 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

of securities (which will be reduced by any amount of securities sold pursuant to the ATM Agreement) consisting of, or any combination

of, common stock, preferred stock, debt securities, warrants, rights and/or units, in one or more offerings in amounts, prices and at

terms that the Company will determine at the time of the offering.

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

Preferred Stock

August 9, 2019, the Company entered into and consummated multiple, binding definitive agreements (collectively, the “Recapitalization

Transaction”) among various investor parties to recapitalize the Company’s balance sheet.

In connection with the Recapitalization

Transaction, the Company issued 200,000 shares of Series A Senior Preferred Stock (the “Series A Preferred Stock”), $ 0.001

par value per share, to the Investor Parties (the “New Preferred Equity”).

March 11, 2024, the Company redeemed all of the outstanding shares of Series A Senior Preferred Stock for an aggregate price of $ 20.0

million cash and 571,295 of its common shares, representing a value of $ 15.0 million based on a share price of $ 26.26 , settling the preferred

stock derivative liability of $ 29.9 million and the preferred stock accrued dividends of $ 6.0 million as of December 31, 2023.

share of Series A Preferred Stock had an initial value of $ 100 per share, which was automatically increased for any accrued and unpaid

dividends (the “Accreted Value”).

Series A Preferred Stock had the right to receive dividends on a quarterly basis equal to 6.0 % per annum, payable in cash or, if not

paid in cash, by an automatic accretion of the Series A Preferred Stock.

No cash dividends had been declared or paid.

Prior to the redemption,

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

of the Series A Preferred Stock.

Series A Preferred Stock had no stated maturity, however, the Company had the right to redeem all or a portion of the Series A Preferred

Stock at its Liquidation Preference (as defined below) at any time after payment in full of the 2019 Recap Term Loan.

In addition, upon

the occurrence of certain change of control type events, holders of the Series A Preferred Stock were entitled to receive an amount (the

“Liquidation Preference”), in preference to holders of Common Stock or other junior stock, equal to (i) 20 % of the Accreted

Value in the case of a certain specified transaction, or (ii) otherwise, 150 % of the Accreted value, plus any accrued and unpaid dividends.

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company had the right, but was not required, to repurchase all or a portion of the Series A Preferred Stock at its Liquidation Preference

at any time after payment in full of the 2019 Recap Term Loan.

The Series A Preferred Stock did not have any voting rights, except to

the extent required by the Delaware General Corporation Law, except for the exclusive right to elect the Series A Preferred Directors

(as described below) and except for certain approval rights over certain transactions (as described below).

These approval rights required

the prior consent of specified percentages of holders (or in certain cases, all holders) of the Series A Preferred Stock in order for

the Company to take certain actions, including the issuance of additional shares of Series A Preferred Stock or parity stock, the issuance

of senior stock, certain amendments to the Amended and Restated Certificate of Incorporation, the Certificate of Designations of the

Series A Preferred Stock (the “Certificate of Designations”), the Second Amended and Restated By-laws or the Amended and

Restated Nominating and Corporate Governance Committee Charter, material changes in the Company’s line of business and certain

change of control type transactions.

In addition, the Certificate of Designations provided that the approval of at least six directors

was required for any related person transaction within the meaning of Item 404 of Regulation S-K under the Securities Act of 1933, as

amended, including, without limitation, the adoption of, or any amendment, modification or waiver of, any agreement or arrangement related

to any such transaction.

The Certificate of Designations also included restrictions on the ability of the Company to pay dividends on

or make distributions with respect to, or redeem or repurchase, shares of Common Stock or other junior stock.

In addition, holders of

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

agreement was reached with the preferred shareholders to eliminate their ability to elect members to the Company’s Board of Directors

on a going-forward basis.

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

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

Classification and Measurement of

Redeemable Securities , the Company classified the Series A Preferred Stock as temporary equity as the Series A Preferred Stock contained

a redemption feature which was contingent upon certain deemed liquidation events, the occurrence of which may not solely have been within

the control of the Company.

ASC 815, Derivatives and Hedging , certain contractual terms that meet the accounting definition of a derivative must be accounted

for separately from the financial instrument in which they are embedded.

The Company had concluded that the redemption upon a change

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

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

The redemption provision

specified if certain events that constitute a change of control occur, the Company may be required to settle the Series A Preferred Stock

at 150% of its accreted amount.

Accordingly, the redemption provision met the definition of a derivative, and its economic characteristics

were not considered clearly and closely related to the economic characteristics of the Series A Preferred Stock, and is more akin to

a debt instrument than equity.

Company considered the repurchase option to have no value as the likelihood was remote that this event, within the Company’s control,

would ever occur.

The liability was accounted for at fair value, with changes in fair value recognized as other income (expense) on the

Company’s condensed consolidated statements of operations (see Note 13 – Fair Value Measurement).

The value of the redemption

provision explicitly considered the present value of the potential premium that would be paid related to, and the probability of, an

event that would trigger its payment.

The probability of a triggering event was based on management’s estimates of the probability

of a change of control event occurring.

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

During 2024, the Company had redeemed all of the outstanding

shares of the Series A Preferred Stock.

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

temporary equity:

Balance, January 1,

Preferred stock accrued dividends

Preferred stock redemption

Balance, September 30,

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

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

Riley, as agent pursuant to which the Company may, from time to

time, sell shares of its common stock, up to $ 75.0 million of common stock, in one or more offerings in amounts, prices and at terms

that the Company will determine at the time of the offering.

of March 31, 2026, the Company did not sell any shares of common stock under the ATM Agreement.

On October 29, 2025, the Company filed with the

SEC a shelf registration statement pursuant to which it may issue, from time to time, up to $ 150.0 million of securities (which will

be reduced by any amount of securities sold pursuant to the ATM Agreement) consisting of, or any combination of, common stock,

preferred stock, debt securities, warrants, rights and/or units, in one or more offerings in amounts, prices and at terms that the

Company will determine at the time of the offering.

This registration statement replaced an essentially similar one filed in October 2022, which expired by law on

its three-year anniversary.

No shares were sold under such prior registration statement.

of March 31, 2026, the Company has not sold any securities pursuant to its shelf registration statement.

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

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

For the three months ended September 30,

For the three months ended March 31, 2026,

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

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):

10 — Comprehensive Loss

table below presents the components of the Company’s comprehensive loss for the three months ended March 31, 2026 and 2025 (in

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustment

Comprehensive income

Comprehensive income attributable to non-controlling interests

Comprehensive income attributable to JAKKS Pacific, Inc.

Comprehensive loss

11 — Litigation and Contingencies

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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 nine months ended September 30, 2025

and 2024 (in thousands):

following table summarizes the total share-based compensation expense recognized for the three months ended March 31, 2026 and 2025 (in

Three Months Ended

Nine Months Ended

September 30,

Share-based compensation expense

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

following table summarizes the RSU award activity for awards with service conditions for the three months ended March 31, 2026:

Grant Date Fair

Outstanding, December 31, 2025

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.

Outstanding, March 31, 2026

following table summarizes the RSU award activity for awards with market conditions for the three months ended March 31, 2026:

Grant Date Fair

Outstanding, December 31, 2025

Outstanding, March 31, 2026

of March 31, 2026, there was $ 19.8 million of total unrecognized compensation cost related to non-vested restricted stock units, which

is expected to be recognized over a weighted-average period of 2.0 years.

of March 31, 2026, the fair market value of non-vested restricted stock units was $ 26.2 million.

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 — Fair Value Measurements

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

PACIFIC, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

instances where the determination of the fair value measurement is based upon inputs from different levels of the fair value hierarchy,

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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 September

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

31, 2026 and December 31, 2025 (in thousands):

September 30,

Fair Value Measurements

As of September 30, 2025

As of March 31, 2026

Money market funds

Investments in employee deferred compensation trusts

3 unchanged sentences

Investments in employee deferred compensation trusts

Money market funds are included in cash and cash

equivalents on the condensed consolidated balance sheets.

Investments in employee deferred compensation trusts which are comprised of

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

For the 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

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

Investments in employee deferred

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

on the condensed consolidated balance sheets.

For the three months ended March 31, 2026 and 2025, changes in the fair value of securities

held in the rabbi trust and offsetting increases or decreases in the deferred compensation obligation totaled $( 0.2 ) million and

$( 0.1 ) million, respectively, and are recognized in other general and administrative expenses in the Company’s condensed consolidated

statements of operations and comprehensive income.

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

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TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 — Related Party Transactions

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

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

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

board of directors.

Since such time, Mr.

Xiaoqiang Zhao was Meisheng’s nominee.

Meisheng and its affiliates own less than 10% of

the Company’s outstanding shares of common stock.

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

annual meeting.

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

related party to the company.

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.

14 — Prepaid Expenses and Other Assets

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

expenses and other assets as of March 31, 2026 and December 31, 2025 consist of the following (in thousands):

Prepaid expenses

Royalty advances

Royalty advances (current and non-current)

Investments in employee deferred compensation trusts

Income tax receivable

Employee retention credit

Prepaid expenses and other assets

15 — Subsequent events

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.

April 28, 2026, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.25 per common share.

The dividend will

be payable on June 30, 2026, to shareholders of record at the close of business on May 29, 2026.

On April 30, 2026 the Company filed a

pre-effective amendment to its registration statement on Form S-3 (originally filed on October 29, 2025) pursuant to which it may

issue, from time to time, up to $ 150.0 million of securities, which will be reduced by any amount of securities sold pursuant to the

Company’s ATM Agreement (see Note 8 – Common Stock)

Subsequent to March 31, 2026, the U.S.

established a claims process to refund certain tariffs deemed unlawful following a Supreme Court decision.

The Company believes it may

be eligible for refunds related to tariffs previously paid.

As of the date of issuance, the Company has submitted a claim but the timing,

eligibility, and amount of any potential recovery remain subject to uncertainty and administrative review.

Accordingly, no receivable

or gain has been recognized as of March 31, 2026.

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

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critical accounting policies and estimates are included in the 2025 Annual Report on Form 10-K and did not materially change during the

first nine months of 2025.

first three months of 2026.

Accounting Pronouncements

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of sales:

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Selling, general and administrative expenses

Income from operations

Loss from operations

Other income (expense), net

Loss on debt extinguishment

Interest income

Interest expense

Income before provision for income taxes

Provision for income taxes

Net income attributable to non-controlling interests

Net income attributable to JAKKS Pacific, Inc.

Loss before benefit from income taxes

Benefit from income taxes

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

Three Months Ended

Nine Months Ended

September 30,

Toys/Consumer Products

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Toys/Consumer Products

of the Three Months Ended September 30, 2025 and 2024

Toys/Consumer Products.

Net sales of our

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 $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

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%.

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

mix of earnings.

of the Nine Months Ended September 30, 2025 and 2024

Toys/Consumer Products.

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 $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 attributable to tariff expense.

of the Three Months Ended March 31, 2026 and 2025

Toys/Consumer

Net sales of our Toys/Consumer Products segment were $100.1 million for the three months ended March 31, 2026 compared

to $107.4 million for the prior year period, representing a decrease of $7.3 million, or 6.8%.

The decrease was driven by lower sales

from North American customers despite higher sales from our International regions.

Dolls, Role-Play/Dress-up sales were down 32.4% versus

a year ago due to lower sales related to the Moana 2 Movie product as well Disney Princess products.

Net sales from the Action Play &

Collectibles division were up 28.9% due to higher net sales from the Super Mario Movie 2 products.

Net sales of our Costumes segment were $6.6 million for the three months ended March 31, 2026 compared to $5.8 million for the prior

year period, representing an increase of $0.8 million, or 13.8%.

The increase was primarily due to increased sales related to Nintendo

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 $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.

Cost of sales of our

Toys/Consumer Products segment was $66.1 million, or 66.0% of related net sales for the three months ended March 31, 2026 compared to

$69.2 million, or 64.4% of related net sales for the prior year period, representing a decrease of $3.1 million, or 4.5%.

as a percentage of net sales was due to a higher cost of product and tolling amortization compared with prior year.

Cost of sales of our Costumes segment

was $5.0 million, or 75.8% of related net sales for the three months ended March 31, 2026, compared to $5.0 million, or 86.2% of related

net sales for the prior year period.

The decrease as a percentage of net sales was due to lower royalty expense.

General and Administrative Expenses

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

$41.2 million for the three months ended March 31, 2026 compared to $42.8 million for the prior year period constituting 38.6% and 37.7%

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

Selling, general and administrative expenses were slightly lower year over year, led by decreases in temp

help and media spend.

From Income Taxes

Our income tax benefit, which includes federal, state

and foreign income taxes and discrete items, was $0.8 million, or an effective tax rate of 16.6%, for the three months ended March 31,

During the comparable period in 2025, our income tax benefit was $1.2 million, or an effective tax rate of 32.8%.

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

in the effective tax rate is primarily attributable to a decrease in discrete tax benefits and an increase in pre-tax book loss for the

current period.

retail toy industry is inherently seasonal.

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and Capital Resources

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 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

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

As part of our

strategy to develop and market new products, we have entered into various character and product licenses with royalties/obligations generally

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

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

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

Of this $79.7 million future minimum royalty guarantee,

$39.3 million is due over the next twelve months.

Investing activities used net cash of $9.7 million

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

from our non-qualified deferred compensation plan.

Financing activities used net cash of $12.8 million

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

of March 31, 2026, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $111.8 million, compared to $121.0

million as of December 31, 2025, representing a decrease in working capital of $9.2 million during the three-month period ended March

The decrease in working capital is mainly attributable to changes in receivables, inventory and payables, coupled with cash

used in financing activities.

Operating activities provided net cash of $21.8 million

during the three months ended March 31, 2026, as compared to net cash used of $1.7 million in the prior year period.

The increase in

net cash provided by operating activities year-over-year is primarily due to higher receivable collections, lower inventory purchases,

less capital tied in prepaids and other assets, a lower cash out-flow for payables and a net refund of cash taxes paid in prior years.

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

inventory from our manufacturers.

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

for product manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline

As part of our strategy to develop and market new products, we have entered into various character and product licenses with

royalties/obligations generally ranging from 1% to 22% payable on net sales of such products.

As of March 31, 2026, these agreements

required future aggregate minimum royalty guarantees of $193.4 million exclusive of $4.5 million in advances already paid.

Of this $193.4

million future minimum royalty guarantee, $66.8 million is due over the next twelve months.

activities used net cash of $5.8 million and $3.1 million for the three months ended March 31, 2026 and 2025, 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.

activities used net cash of $4.3 million and $6.6 million for the three months ended March 31, 2026 and 2025, respectively.

used in financing activities during the three months ended March 31, 2026, mainly consists of $1.3 million used for the repurchase of

our common stock for employee tax withholding and $2.9 million used to pay dividends.

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.

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

and $2.8 million used to pay dividends.

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

3 unchanged sentences

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

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

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

Interest is payable

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

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

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

under the revolving facility as of 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.

On June 24, 2025, we entered into a new $70.0 million

senior secured revolving credit facility with a maturity date of June 24, 2030.

This facility replaces our prior facility and is expected

to provide improved pricing and enhanced liquidity flexibility.

Interest is payable at either SOFR plus a leverage-based margin or a

Base Rate alternative and includes a commitment fee on unused amounts.

The facility includes financial covenants requiring a minimum

interest coverage ratio of 3.00 to 1.00 and a maximum total net leverage ratio of 2.00 to 1.00.

As of March 31, 2026, we were in compliance

with all financial covenants.

under the revolving facility as of March 31, 2026, 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.

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

As of March 31, 2026 and December 31, 2025, we held

cash and cash equivalents, including restricted cash, of $64.0 million and $54.1 million, respectively.

Cash, and cash equivalents, including

restricted cash held outside of the United States in various foreign subsidiaries totaled $20.0 million and $16.9 million as of March

31, 2026 and December 31, 2025, 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.

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 credit facility (see Note 5 – Credit

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

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

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.

of March 31, 2026 off-balance sheet arrangements include letters of credit issued by JPMorgan of $0.9 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