UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35448

JAKKS Pacific, Inc. (Exact Name of Registrant as Specified in Its Charter)

Delaware |  | 95-4527222
(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

2951 28th Street Santa Monica, California |  | 90405
(Address of Principal Executive Offices) |  | (Zip Code)

Registrant’s Telephone Number, Including Area Code: (424) 268-9444

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ | Accelerated filer ☒
Non-accelerated filer ☐ | Smaller reporting company ☒
Emerging growth company ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(g) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock $.001 Par Value |  | JAKK |  | The NASDAQ Global Select Market

The number of shares outstanding of the issuer’s common stock is 11,269,529 as of October 31, 2025.

JAKKS PACIFIC, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED September 30, 2025

ITEMS IN FORM 10-Q

Part I | FINANCIAL INFORMATION |
Item 1. | Financial Statements (Unaudited) | 3
| Condensed Consolidated Balance Sheets | 3
| Condensed Consolidated Statements of Operations and Comprehensive Income | 4
| Condensed Consolidated Statements of Stockholders’ Equity | 5
| Condensed Consolidated Statements of Cash Flows | 6
| Notes to Condensed Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 25
Item 4. | Controls and Procedures | 25
Part II | OTHER INFORMATION |
Item 1. | Legal Proceedings | 26
Item 1A. | Risk Factors | 26
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits | 26
Signatures | 27
Exhibit 31.1 |
Exhibit 31.2 |
Exhibit 32.1 |
Exhibit 32.2 |

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

|  | September 30, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
|  | (Unaudited) |  |  |  |
Assets |  |  |  |  |  |
Current assets |  |  |  |  |  |
Cash and cash equivalents |  | $ | 25,887 |  |  | $ | 69,936 |
Restricted cash |  |  | 1,869 |  |  |  | 201 |
Accounts receivable, net of allowance for credit losses of $5,647 and $4,919 at September 30, 2025 and December 31, 2024, respectively |  |  | 195,779 |  |  |  | 131,629 |
Inventory |  |  | 71,497 |  |  |  | 52,780 |
Prepaid expenses and other assets |  |  | 19,784 |  |  |  | 14,141 |
Total current assets |  |  | 314,816 |  |  |  | 268,687 |
Property and equipment |  |  |  |  |  |  |  |
Office furniture and equipment |  |  | 10,185 |  |  |  | 10,049 |
Molds and tooling |  |  | 130,322 |  |  |  | 125,618 |
Leasehold improvements |  |  | 7,238 |  |  |  | 6,956 |
Total |  |  | 147,745 |  |  |  | 142,623 |
Less accumulated depreciation and amortization |  |  | 131,226 |  |  |  | 126,981 |
Property and equipment, net |  |  | 16,519 |  |  |  | 15,642 |
Operating lease right-of-use assets, net |  |  | 49,611 |  |  |  | 53,254 |
Other long-term assets |  |  | 1,631 |  |  |  | 1,781 |
Deferred income tax assets, net |  |  | 67,612 |  |  |  | 70,394 |
Goodwill |  |  | 35,081 |  |  |  | 35,111 |
Total assets |  | $ | 485,270 |  |  | $ | 444,869 |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |
Accounts payable |  | $ | 72,338 |  |  | $ | 42,560 |
Accounts payable - Meisheng (related party) |  |  | — |  |  |  | 13,461 |
Accrued expenses |  |  | 52,085 |  |  |  | 48,456 |
Reserve for sales returns and allowances |  |  | 37,691 |  |  |  | 35,817 |
Income taxes payable |  |  | 5,389 |  |  |  | 1,035 |
Short-term operating lease liabilities |  |  | 13,504 |  |  |  | 8,091 |
Total current liabilities |  |  | 181,007 |  |  |  | 149,420 |
Long-term operating lease liabilities |  |  | 43,113 |  |  |  | 48,433 |
Accrued expenses – long term |  |  | 3,503 |  |  |  | 2,563 |
Income taxes payable |  |  | 1,732 |  |  |  | 3,620 |
Total liabilities |  |  | 229,355 |  |  |  | 204,036 |
Stockholders’ Equity |  |  |  |  |  |  |  |
Common stock, $0.001 par value; 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 |  |  |  | 11 |
Additional paid-in capital |  |  | 301,098 |  |  |  | 297,198 |
Accumulated deficit |  |  | (32,875 | ) |  |  | (39,692 | )
Accumulated other comprehensive loss |  |  | (12,319 | ) |  |  | (17,184 | )
Total JAKKS Pacific, Inc. stockholders’ equity |  |  | 255,915 |  |  |  | 240,333 |
Non-controlling interests |  |  | — |  |  |  | 500 |
Total stockholders’ equity |  |  | 255,915 |  |  |  | 240,833 |
Total liabilities and stockholders’ equity |  | $ | 485,270 |  |  | $ | 444,869 |

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share data)

|  | Three Months Ended September 30, (Unaudited) |  |  | Nine Months Ended September 30, (Unaudited) |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Net sales |  | $ | 211,210 |  |  | $ | 321,606 |  |  | $ | 443,557 |  |  | $ | 560,301 |
Cost of sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods |  |  | 104,846 |  |  |  | 158,770 |  |  |  | 218,256 |  |  |  | 289,190 |
Royalty expense |  |  | 34,099 |  |  |  | 50,011 |  |  |  | 71,776 |  |  |  | 86,181 |
Amortization of tools and molds |  |  | 4,622 |  |  |  | 3,994 |  |  |  | 7,846 |  |  |  | 7,462 |
Cost of sales |  |  | 143,567 |  |  |  | 212,775 |  |  |  | 297,878 |  |  |  | 382,833 |
Gross profit |  |  | 67,643 |  |  |  | 108,831 |  |  |  | 145,679 |  |  |  | 177,468 |
Direct selling expenses |  |  | 5,933 |  |  |  | 7,552 |  |  |  | 21,339 |  |  |  | 21,904 |
General and administrative expenses |  |  | 32,200 |  |  |  | 33,101 |  |  |  | 101,135 |  |  |  | 100,887 |
Depreciation and amortization |  |  | 147 |  |  |  | 95 |  |  |  | 382 |  |  |  | 275 |
Selling, general and administrative expenses |  |  | 38,280 |  |  |  | 40,748 |  |  |  | 122,856 |  |  |  | 123,066 |
Income from operations |  |  | 29,363 |  |  |  | 68,083 |  |  |  | 22,823 |  |  |  | 54,402 |
Other income (expense), net |  |  | 388 |  |  |  | 84 |  |  |  | 418 |  |  |  | 294 |
Loss on debt extinguishment |  |  | (1 | ) |  |  | — |  |  |  | (418 | ) |  |  | — |
Interest income |  |  | 75 |  |  |  | 69 |  |  |  | 832 |  |  |  | 533 |
Interest expense |  |  | (102 | ) |  |  | (539 | ) |  |  | (402 | ) |  |  | (938 | )
Income before provision for income taxes |  |  | 29,723 |  |  |  | 67,697 |  |  |  | 23,253 |  |  |  | 54,291 |
Provision for income taxes |  |  | 9,831 |  |  |  | 15,425 |  |  |  | 8,062 |  |  |  | 10,978 |
Net income |  |  | 19,892 |  |  |  | 52,272 |  |  |  | 15,191 |  |  |  | 43,313 |
Net income attributable to non-controlling interests |  |  | — |  |  |  | — |  |  |  |  |  |  |  | 280 |
Net income attributable to Jakks Pacific, Inc. |  | $ | 19,892 |  |  | $ | 52,272 |  |  | $ | 15,191 |  |  | $ | 43,033 |
Net income attributable to common stockholders |  | $ | 19,892 |  |  | $ | 52,272 |  |  | $ | 15,191 |  |  | $ | 44,363 |
Earnings per share - basic |  | $ | 1.78 |  |  | $ | 4.78 |  |  | $ | 1.36 |  |  | $ | 4.14 |
Shares used in earnings per share - basic |  |  | 11,185 |  |  |  | 10,942 |  |  |  | 11,159 |  |  |  | 10,704 |
Earnings per share - diluted |  | $ | 1.74 |  |  | $ | 4.64 |  |  | $ | 1.32 |  |  | $ | 3.99 |
Shares used in earnings per share - diluted |  |  | 11,423 |  |  |  | 11,275 |  |  |  | 11,487 |  |  |  | 11,106 |
Comprehensive income |  | $ | 20,492 |  |  | $ | 53,314 |  |  | $ | 20,056 |  |  | $ | 43,674 |
Comprehensive income attributable to JAKKS Pacific, Inc. |  | $ | 20,492 |  |  | $ | 53,314 |  |  | $ | 20,056 |  |  | $ | 43,394 |

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Three and Nine Months Ended September 30, 2025
(Unaudited)
|  |  |  |  |  |  |  |  |  |  | Accumulated |  |  | JAKKS |  |  |  |  |  |  |
|  |  |  |  | Additional |  |  |  |  |  | Other |  |  | Pacific, Inc. |  |  | Non- |  |  | Total |
|  | Common |  |  | Paid-in |  |  | Accumulated |  |  | Comprehensive |  |  | Stockholders’ |  |  | Controlling |  |  | Stockholders’ |
|  | Stock |  |  | Capital |  |  | Deficit |  |  | Loss |  |  | Equity |  |  | Interests |  |  | Equity |
Balance, December 31, 2024 |  | $ | 11 |  |  | $ | 297,198 |  |  | $ | (39,692 | ) |  | $ | (17,184 | ) |  | $ | 240,333 |  |  | $ | 500 |  |  | $ | 240,833 |
Share-based compensation expense |  |  | — |  |  |  | 2,552 |  |  |  | — |  |  |  | — |  |  |  | 2,552 |  |  |  | — |  |  |  | 2,552 |
Repurchase of common stock for employee tax withholding |  |  | — |  |  |  | (3,819 | ) |  |  | — |  |  |  | — |  |  |  | (3,819 | ) |  |  | — |  |  |  | (3,819 | )
Cash dividend declared, $0.25 per share |  |  | — |  |  |  | — |  |  |  | (2,786 | ) |  |  | — |  |  |  | (2,786 | ) |  |  | — |  |  |  | (2,786 | )
Net loss |  |  | — |  |  |  | — |  |  |  | (2,382 | ) |  |  | — |  |  |  | (2,382 | ) |  |  | — |  |  |  | (2,382 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 628 |  |  |  | 628 |  |  |  | — |  |  |  | 628 |
Balance, March 31, 2025 |  |  | 11 |  |  |  | 295,931 |  |  |  | (44,860 | ) |  |  | (16,556 | ) |  |  | 234,526 |  |  |  | 500 |  |  |  | 235,026 |
Share-based compensation expense |  |  | — |  |  |  | 3,188 |  |  |  | — |  |  |  | — |  |  |  | 3,188 |  |  |  | — |  |  |  | 3,188 |
Repurchase of common stock for employee tax withholding |  |  | — |  |  |  | (9 | ) |  |  | — |  |  |  | — |  |  |  | (9 | ) |  |  | — |  |  |  | (9 | )
Cash dividend declared, $0.25 per share |  |  | — |  |  |  | — |  |  |  | (2,786 | ) |  |  | — |  |  |  | (2,786 | ) |  |  | — |  |  |  | (2,786 | )
Net loss |  |  | — |  |  |  | — |  |  |  | (2,319 | ) |  |  | — |  |  |  | (2,319 | ) |  |  | — |  |  |  | (2,319 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,637 |  |  |  | 3,637 |  |  |  | — |  |  |  | 3,637 |
Balance, June 30, 2025 |  |  | 11 |  |  |  | 299,110 |  |  |  | (49,965 | ) |  |  | (12,919 | ) |  |  | 236,237 |  |  |  | 500 |  |  |  | 236,737 |
Share-based compensation expense |  |  | — |  |  |  | 2,392 |  |  |  | — |  |  |  | — |  |  |  | 2,392 |  |  |  | — |  |  |  | 2,392 |
Non-controlling interests – derecognition |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (500 | ) |  |  | (500 | )
Repurchase of common stock for employee tax withholding |  |  | — |  |  |  | (404 | ) |  |  | — |  |  |  | — |  |  |  | (404 | ) |  |  | — |  |  |  | (404 | )
Cash dividend declared, $0.25 per share |  |  | — |  |  |  | — |  |  |  | (2,802 | ) |  |  | — |  |  |  | (2,802 | ) |  |  | — |  |  |  | (2,802 | )
Net income |  |  | — |  |  |  | — |  |  |  | 19,892 |  |  |  | — |  |  |  | 19,892 |  |  |  | — |  |  |  | 19,892 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 600 |  |  |  | 600 |  |  |  | — |  |  |  | 600 |
Balance, September 30, 2025 |  | $ | 11 |  |  | $ | 301,098 |  |  | $ | (32,875 | ) |  | $ | (12,319 | ) |  | $ | 255,915 |  |  | $ | — |  |  | $ | 255,915 |

Three and Nine Months Ended September 30, 2024
(Unaudited)
|  |  |  |  |  |  |  |  |  |  | Accumulated |  |  | JAKKS |  |  |  |  |  |  |
|  |  |  |  | Additional |  |  |  |  |  | Other |  |  | Pacific, Inc. |  |  | Non- |  |  | Total |
|  | Common |  |  | Paid-in |  |  | Accumulated |  |  | Comprehensive |  |  | Stockholders' |  |  | Controlling |  |  | Stockholders' |
|  | Stock |  |  | Capital |  |  | Deficit |  |  | Loss |  |  | Equity |  |  | Interests |  |  | Equity |
Balance, December 31, 2023 |  | $ | 10 |  |  | $ | 278,642 |  |  | $ | (73,612 | ) |  | $ | (15,627 | ) |  | $ | 189,413 |  |  | $ | 708 |  |  | $ | 190,121 |
New stock issuance |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
Share-based compensation expense |  |  | — |  |  |  | 2,575 |  |  |  | — |  |  |  | — |  |  |  | 2,575 |  |  |  | — |  |  |  | 2,575 |
Non-controlling interests – capital reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (488 | ) |  |  | (488 | )
Repurchase of common stock for employee tax withholding |  |  | — |  |  |  | (5,132 | ) |  |  | — |  |  |  | — |  |  |  | (5,132 | ) |  |  | — |  |  |  | (5,132 | )
Preferred stock accrued dividends |  |  | — |  |  |  | (390 | ) |  |  | — |  |  |  | — |  |  |  | (390 | ) |  |  | — |  |  |  | (390 | )
Preferred stock redemption |  |  | — |  |  |  | 16,329 |  |  |  | — |  |  |  | — |  |  |  | 16,329 |  |  |  | — |  |  |  | 16,329 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | (14,505 | ) |  |  | — |  |  |  | (14,505 | ) |  |  | 280 |  |  |  | (14,225 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (565 | ) |  |  | (565 | ) |  |  | — |  |  |  | (565 | )
Balance, March 31, 2024 |  |  | 11 |  |  |  | 292,024 |  |  |  | (88,117 | ) |  |  | (16,192 | ) |  |  | 187,726 |  |  |  | 500 |  |  |  | 188,226 |
Share-based compensation expense |  |  | — |  |  |  | 2,519 |  |  |  | — |  |  |  | — |  |  |  | 2,519 |  |  |  | — |  |  |  | 2,519 |
Net income |  |  | — |  |  |  | — |  |  |  | 5,266 |  |  |  | — |  |  |  | 5,266 |  |  |  | — |  |  |  | 5,266 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (116 | ) |  |  | (116 | ) |  |  | — |  |  |  | (116 | )
Balance, June 30, 2024 |  |  | 11 |  |  |  | 294,543 |  |  |  | (82,851 | ) |  |  | (16,308 | ) |  |  | 195,395 |  |  |  | 500 |  |  |  | 195,895 |
Share-based compensation expense |  |  | — |  |  |  | 2,186 |  |  |  | — |  |  |  | — |  |  |  | 2,186 |  |  |  | — |  |  |  | 2,186 |
Repurchase of common stock for employee tax withholding |  |  | — |  |  |  | (1,329 | ) |  |  | — |  |  |  | — |  |  |  | (1,329 | ) |  |  | — |  |  |  | (1,329 | )
Net income |  |  | — |  |  |  | — |  |  |  | 52,272 |  |  |  | — |  |  |  | 52,272 |  |  |  | — |  |  |  | 52,272 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,042 |  |  |  | 1,042 |  |  |  | — |  |  |  | 1,042 |
Balance, September 30, 2024 |  | $ | 11 |  |  | $ | 295,400 |  |  | $ | (30,579 | ) |  | $ | (15,266 | ) |  | $ | 249,566 |  |  | $ | 500 |  |  | $ | 250,066 |

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

|  | Nine Months Ended September 30, |
|  | (Unaudited) |
|  | 2025 |  |  | 2024 |
Cash flows from operating activities |  |  |  |  |  |
Net income |  | $ | 15,191 |  |  | $ | 43,313 |
Adjustments to reconcile net income to net cash used in operating activities: |  |  |  |  |  |  |  |
Provision for credit losses |  |  | 785 |  |  |  | 1,687 |
Depreciation and amortization |  |  | 8,228 |  |  |  | 7,737 |
Write-off and amortization of debt issuance costs |  |  | 464 |  |  |  | 237 |
Share-based compensation expense |  |  | 8,132 |  |  |  | 7,280 |
Loss on disposal of property and equipment |  |  | 12 |  |  |  | 115 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | (64,935 | ) |  |  | (168,314 | )
Inventory |  |  | (18,717 | ) |  |  | (10,862 | )
Prepaid expenses and other assets |  |  | (3,832 | ) |  |  | (121 | )
Accounts payable |  |  | 27,756 |  |  |  | 56,085 |
Accounts payable - Meisheng (related party) |  |  | (12,706 | ) |  |  | 22,382 |
Accrued expenses |  |  | 3,071 |  |  |  | 26,158 |
Reserve for sales returns and allowances |  |  | 1,874 |  |  |  | 2,306 |
Income taxes payable |  |  | 2,466 |  |  |  | (3,507 | )
Deferred income taxes |  |  | 2,782 |  |  |  | — |
Other liabilities |  |  | 4,676 |  |  |  | 323 |
Total adjustments |  |  | (39,944 | ) |  |  | (58,494 | )
Net cash used in operating activities |  |  | (24,753 | ) |  |  | (15,181 | )
Cash flows from investing activities |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (7,850 | ) |  |  | (7,344 | )
Investments in employee deferred compensation trusts |  |  | (1,820 | ) |  |  | (1,647 | )
Proceeds from sale of property and equipment |  |  | — |  |  |  | 2 |
Net cash used in investing activities |  |  | (9,670 | ) |  |  | (8,989 | )
Cash flows from financing activities |  |  |  |  |  |  |  |
Repurchase of common stock for employee tax withholding |  |  | (4,232 | ) |  |  | (6,461 | )
Repayment of credit facility borrowings |  |  | (8,000 | ) |  |  | (63,000 | )
Proceeds from credit facility borrowings |  |  | 8,000 |  |  |  | 63,000 |
Dividends paid |  |  | (8,374 | ) |  |  | — |
Deferred issuance costs |  |  | (217 | ) |  |  | — |
Redemption of preferred stock |  |  | — |  |  |  | (20,000 | )
Net cash used in financing activities |  |  | (12,823 | ) |  |  | (26,461 | )
Net decrease in cash, cash equivalents and restricted cash |  |  | (47,246 | ) |  |  | (50,631 | )
Effect of foreign currency translation |  |  | 4,865 |  |  |  | 361 |
Cash, cash equivalents and restricted cash, beginning of period |  |  | 70,137 |  |  |  | 72,554 |
Cash, cash equivalents and restricted cash, end of period |  | $ | 27,756 |  |  | $ | 22,284 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 29 |  |  | $ | 452 |
Cash paid for income taxes, net |  | $ | 2,789 |  |  | $ | 14,866 |

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.

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

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.

On March 11, 2024, the Company issued $15.0 million in common stock as part of the consideration to redeem the preferred stock derivative liability (see Note 8 – Common Stock and Preferred Stock).

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

Note 1 — Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to prevent the information presented from being misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K, which contains audited financial information for the three years in the period ended December 31, 2024.

The information provided in this report reflects all adjustments (consisting solely of normal recurring items) that are, in the opinion of management, necessary to present fairly the financial position and the results of operations for the periods presented. Interim results are not necessarily, especially given seasonality, indicative of results to be expected for a full year.

The condensed consolidated financial statements include the accounts of JAKKS Pacific, Inc. and its wholly-owned subsidiaries (collectively, “the Company”).

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.

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The new guidance eliminates two of the three models in ASC 470-20, which required entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. As a result, only conversion features accounted for under the substantial premium model in ASC 470-20 and those that require bifurcation in accordance with ASC 815-15 will be accounted for separately. In addition, the amendments in ASU 2020-06 eliminate some of the requirements in ASC 815-40 related to equity classification. The amendments in ASU 2020-06 further revised the guidance in ASC 260, Earnings Per Share (“EPS”), to address how convertible instruments are accounted for in calculating diluted EPS and require enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The new standard is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within these fiscal years, with early adoption permitted. 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.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new standard is effective for the Company for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company adopted this standard as of December 31, 2024, which resulted in incremental segment disclosures. See Note 2 - Business Segments, Geographic Data and Sales by Major Customers.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU provides standardization of tax disclosures, primarily related to the rate reconciliation and income taxes paid information. The new standard is effective for the Company for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the updated disclosure will have on its condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The new guidance improves disclosures about a public business entity’s expenses by requiring disaggregated disclosures of certain types of expenses, including purchases of inventory, employee compensation, depreciation, intangible amortization and depletion, as applicable, for each income statement caption that includes those expenses. In addition, the standard will require entities to define and disclose total selling expenses. The standard is effective for public business entities such as the Company for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted, and entities may apply the standard prospectively or retrospectively. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements and related disclosures.

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September 30, 2025

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 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 is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” The new guidance removes all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when both of the following occur: 1. Management has authorized and committed to funding the software project and 2. It is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”). In evaluating the probable-to-complete recognition threshold, an entity is required to consider whether there is significant uncertainty associated with the development activities of the software (referred to as “significant development uncertainty”). The amendments will be effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements and related disclosures.

There 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.

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

The Company is a worldwide producer and marketer of children’s toys and other consumer products, principally engaged in the design, development, production, marketing and distribution of its diverse portfolio of products. The Company’s segments are (i) Toys/Consumer Products (“TCP”) and (ii) Costumes.

The Toys/Consumer Products segment includes action figures, vehicles, play sets, plush products, dolls, electronic products, construction toys, infant and pre-school toys, child-sized and hand-held role play toys and everyday costume play, foot-to-floor ride-on vehicles, wagons, novelty toys, seasonal and outdoor products, kids’ indoor and outdoor furniture, and related products.

The Costumes segment, under its Disguise branding, designs, develops, markets and sells a wide range of every-day and special occasion dress-up costumes and related accessories in support of Halloween, Carnival, Children’s Day, Book Day/Week, and every-day/any-day costume play.

The Company’s Chief Executive Officer and Chief Financial Officer have been identified jointly as the Chief Operating Decision Maker (“CODM”). The CODM manages and allocates resources on a segment basis. The determination of the two segments is consistent with the financial information regularly reviewed by the CODM for purposes of evaluating performance. Results are regularly reviewed in comparison with current budget, prior forecast, prior year and recent years’ performance in that quarter.

Segment performance is measured at the operating income (loss) level. All sales are made to external customers and general corporate expenses have been attributed to the segments based upon relative sales volumes. Segment assets are primarily comprised of accounts receivable and inventories, net of applicable reserves and allowances, goodwill and other assets. Certain assets which are not tracked by operating segment and/or that benefit multiple operating segments have been allocated on the same basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

Results are not necessarily those which would be achieved if each segment was an unaffiliated business enterprise. Information by segment and a reconciliation to reported amounts for the three 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 |
|  | 2025 |  |  | 2024 |
|  | TCP |  |  | Costumes |  |  | Total |  |  | TCP |  |  | Costumes |  |  | Total |
Net Sales |  | $ | 156,080 |  |  | $ | 55,130 |  |  | $ | 211,210 |  |  | $ | 264,306 |  |  | $ | 57,300 |  |  | $ | 321,606 |
Cost of Sales (A) |  |  | 104,513 |  |  |  | 39,054 |  |  |  | 143,567 |  |  |  | 171,774 |  |  |  | 41,001 |  |  |  | 212,775 |
Gross Profit |  |  | 51,567 |  |  |  | 16,076 |  |  |  | 67,643 |  |  |  | 92,532 |  |  |  | 16,299 |  |  |  | 108,831 |
Direct selling expenses |  |  | 3,919 |  |  |  | 2,014 |  |  |  | 5,933 |  |  |  | 5,002 |  |  |  | 2,550 |  |  |  | 7,552 |
Product development and testing expenses |  |  | 2,137 |  |  |  | 708 |  |  |  | 2,845 |  |  |  | 2,245 |  |  |  | 760 |  |  |  | 3,005 |
Divisional general and administrative expenses (A), (B) |  |  | 5,233 |  |  |  | 2,763 |  |  |  | 7,996 |  |  |  | 8,227 |  |  |  | 2,860 |  |  |  | 11,087 |
Allocated headquarter general & administrative expenses (A), (C) |  |  | 15,726 |  |  |  | 5,780 |  |  |  | 21,506 |  |  |  | 15,582 |  |  |  | 3,522 |  |  |  | 19,104 |
Income from operations |  |  | 24,552 |  |  |  | 4,811 |  |  |  | 29,363 |  |  |  | 61,476 |  |  |  | 6,607 |  |  |  | 68,083 |
Other income (expense), net |  |  |  |  |  |  |  |  |  |  | 388 |  |  |  |  |  |  |  |  |  |  |  | 84 |
Loss on debt extinguishment |  |  |  |  |  |  |  |  |  |  | (1 | ) |  |  |  |  |  |  |  |  |  |  | — |
Interest income |  |  |  |  |  |  |  |  |  |  | 75 |  |  |  |  |  |  |  |  |  |  |  | 69 |
Interest expense |  |  |  |  |  |  |  |  |  |  | (102 | ) |  |  |  |  |  |  |  |  |  |  | (539 | )
Income before provision for income taxes |  |  |  |  |  |  |  |  |  | $ | 29,723 |  |  |  |  |  |  |  |  |  |  | $ | 67,697 |

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

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

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

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September 30, 2025

|  | Nine Months Ended September, 30 |
|  | 2025 |  |  | 2024 |
|  | TCP |  |  | Costumes |  |  | Total |  |  | TCP |  |  | Costumes |  |  | Total |
Net Sales |  | $ | 343,897 |  |  | $ | 99,660 |  |  | $ | 443,557 |  |  | $ | 451,786 |  |  | $ | 108,515 |  |  | $ | 560,301 |
Cost of Sales (A) |  |  | 227,045 |  |  |  | 70,833 |  |  |  | 297,878 |  |  |  | 304,348 |  |  |  | 78,485 |  |  |  | 382,833 |
Gross Profit |  |  | 116,852 |  |  |  | 28,827 |  |  |  | 145,679 |  |  |  | 147,438 |  |  |  | 30,030 |  |  |  | 177,468 |
Direct selling expenses |  |  | 16,873 |  |  |  | 4,466 |  |  |  | 21,339 |  |  |  | 16,027 |  |  |  | 5,877 |  |  |  | 21,904 |
Product development and testing expenses |  |  | 6,332 |  |  |  | 1,981 |  |  |  | 8,313 |  |  |  | 5,964 |  |  |  | 2,405 |  |  |  | 8,369 |
Divisional general and administrative expenses (A), (B) |  |  | 16,595 |  |  |  | 8,951 |  |  |  | 25,546 |  |  |  | 21,288 |  |  |  | 9,408 |  |  |  | 30,696 |
Allocated headquarter general & administrative expenses (A), (C) |  |  | 53,248 |  |  |  | 14,410 |  |  |  | 67,658 |  |  |  | 50,183 |  |  |  | 11,914 |  |  |  | 62,097 |
Income (loss) from operations |  |  | 23,804 |  |  |  | (981 | ) |  |  | 22,823 |  |  |  | 53,976 |  |  |  | 426 |  |  |  | 54,402 |
Other income (expense), net |  |  |  |  |  |  |  |  |  |  | 418 |  |  |  |  |  |  |  |  |  |  |  | 294 |
Loss on debt extinguishment |  |  |  |  |  |  |  |  |  |  | (418 | ) |  |  |  |  |  |  |  |  |  |  | — |
Interest income |  |  |  |  |  |  |  |  |  |  | 832 |  |  |  |  |  |  |  |  |  |  |  | 533 |
Interest expense |  |  |  |  |  |  |  |  |  |  | (402 | ) |  |  |  |  |  |  |  |  |  |  | (938 | )
Income before provision for income taxes |  |  |  |  |  |  |  |  |  | $ | 23,253 |  |  |  |  |  |  |  |  |  |  | $ | 54,291 |

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

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

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

|  | September 30, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Assets |  |  |  |  |  |
Toys/Consumer Products |  | $ | 425,216 |  |  | $ | 429,254 |
Costumes |  |  | 60,054 |  |  |  | 15,615 |
|  | $ | 485,270 |  |  | $ | 444,869 |

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

Net revenues are categorized based upon location of the customer, while long-lived assets are categorized based upon the location of the Company’s assets. The following tables present information about the Company by geographic area as of September 30, 2025 and December 31, 2024 and for the three and nine months ended September 30, 2025 and 2024 (in thousands):

|  | September 30, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Long-lived Assets |  |  |  |  |  |
United States |  | $ | 45,289 |  |  | $ | 53,020 |
China |  |  | 14,226 |  |  |  | 13,553 |
United Kingdom |  |  | 3,096 |  |  |  | 808 |
Hong Kong |  |  | 2,027 |  |  |  | 582 |
Italy |  |  | 765 |  |  |  | 754 |
Mexico |  |  | 610 |  |  |  | 31 |
Canada |  |  | 96 |  |  |  | 107 |
France |  |  | 21 |  |  |  | 41 |
|  | $ | 66,130 |  |  | $ | 68,896 |

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Net Sales by Customer Area |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 154,516 |  |  | $ | 255,278 |  |  | $ | 330,450 |  |  | $ | 451,545 |
Europe |  |  | 29,408 |  |  |  | 30,034 |  |  |  | 55,875 |  |  |  | 46,033 |
Latin America |  |  | 14,066 |  |  |  | 22,632 |  |  |  | 27,572 |  |  |  | 33,867 |
Canada |  |  | 9,237 |  |  |  | 7,068 |  |  |  | 21,342 |  |  |  | 16,726 |
Asia |  |  | 1,526 |  |  |  | 2,345 |  |  |  | 3,725 |  |  |  | 4,578 |
Australia & New Zealand |  |  | 2,095 |  |  |  | 3,339 |  |  |  | 3,594 |  |  |  | 6,292 |
Middle East & Africa |  |  | 362 |  |  |  | 910 |  |  |  | 999 |  |  |  | 1,260 |
|  | $ | 211,210 |  |  | $ | 321,606 |  |  | $ | 443,557 |  |  | $ | 560,301 |

Major Customers

Net 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, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
|  |  |  |  | Percentage |  |  |  |  |  | Percentage |  |  |  |  |  | Percentage |  |  |  |  |  | Percentage |
|  | Amount |  |  | of Net Sales |  |  | Amount |  |  | of Net Sales |  |  | Amount |  |  | of Net Sales |  |  | Amount |  |  | of Net Sales |
Target |  | $ | 60,298 |  |  |  | 28.5 | % |  | $ | 93,417 |  |  |  | 29.0 | % |  | $ | 120,372 |  |  |  | 27.1 | % |  | $ | 161,494 |  |  |  | 28.8 | %
Walmart |  |  | 42,736 |  |  |  | 20.2 |  |  |  | 82,051 |  |  |  | 25.5 |  |  |  | 109,118 |  |  |  | 24.6 |  |  |  | 138,084 |  |  |  | 24.6 |
Amazon |  |  |  |  |  |  |  |  |  |  | 42,347 |  |  |  | 13.2 |  |  |  |  |  |  |  |  |  |  |  | 55,873 |  |  |  | 10.0 |
|  | $ | 103,034 |  |  |  | 48.7 | % |  | $ | 217,815 |  |  |  | 67.7 | % |  | $ | 229,490 |  |  |  | 51.7 | % |  | $ | 355,451 |  |  |  | 63.4 | %

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

The concentration of the Company’s business with a relatively small number of customers may expose the Company to material adverse effects if one or more of its large customers were to experience financial difficulty. The Company performs ongoing credit evaluations of its top customers and maintains an allowance for potential credit losses.

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(Unaudited)

September 30, 2025

Note 3 — Inventory

Inventory, which includes the ex-factory cost of goods, capitalized warehouse costs, and in-bound freight and duty, is valued at the lower of cost or net realizable value, net of inventory obsolescence reserve, and consists of the following (in thousands):

|  | September 30, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
Finished goods |  | $ | 71,497 |  |  | $ | 52,780 |

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

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

The Company’s contracts with customers only include one performance obligation (i.e., sale of the Company’s products). Revenue is recognized in the gross amount at a point in time when delivery is completed and control of the promised goods is transferred to the customers. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those goods. The Company’s contracts do not involve financing elements as payment terms with customers are less than one year. Further, because revenue is recognized at the point in time goods are sold to customers, there are no contract assets or contract liability balances.

The Company disaggregates its revenues from contracts with customers by reporting segment: Toys/Consumer Products and Costumes. The Company further disaggregates revenues by major geographic regions (See Note 2 - Business Segments, Geographic Data and Sales by Major Customers, for further information).

The Company offers various discounts, pricing concessions, and other allowances to customers, all of which are considered in determining the transaction price. Certain discounts and allowances are fixed and determinable at the time of sale and are recorded at the time of sale as a reduction to revenue. Other discounts and allowances can vary and are determined at management’s discretion (variable consideration). Specifically, the Company occasionally grants discretionary credits to facilitate markdowns and sales of slow-moving merchandise, and consequently accrues an allowance based on historic credits and management estimates. The Company also participates in cooperative advertising arrangements with some customers, whereby it allows a discount from invoiced product amounts in exchange for customer-purchased advertising that features the Company’s products. Generally, these allowances range from 1% to 30% of gross sales and are generally based upon product purchases or specific advertising campaigns. Such allowances are accrued when the related revenue is recognized. To the extent these cooperative advertising arrangements provide a distinct benefit at fair value, they are accounted for as direct selling expenses, otherwise they are recorded as a reduction to revenue. Further, while the Company generally does not allow product returns, the Company does make occasional exceptions to this policy and consequently records a sales return allowance based upon historic return amounts and management estimates. These allowances (variable consideration) are estimated using the expected value method and are recorded at the time of sale as a reduction to revenue. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. The variable consideration is not constrained as the Company has sufficient history on the related estimates and does not believe there is a risk of significant revenue reversal.

Sales commissions are expensed when incurred as the related revenue is recognized at a point in time and therefore the amortization period is less than one year. As a result, these costs are recorded as direct selling expenses, as incurred. For the three 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.

Shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. For the three 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 and $4.8 million, respectively.

The 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.

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

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Note 5 — Credit Facilities

JPMorgan Chase

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 of a new credit facility with BMO Bank N.A., the Company voluntarily terminated the JPMorgan ABL Facility. At the time of termination, there were no borrowings outstanding under the JPMorgan ABL Facility. The termination of the JPMorgan ABL Facility did not result in any prepayment penalties or early termination fees. Unamortized debt issuance costs associated with the JPMorgan ABL Facility were written off and recorded as a loss on extinguishment of debt in the amount of $0.4 million, which is reflected in interest expense in the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2025.

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

BMO Bank

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%. As of September 30, 2025 the weighted average interest rate on the credit facility with BMO Bank was 5.87%.

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 exclusions.

As 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.

Amortization 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.

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

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JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

Note 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.

From time to time, in the normal course of business, the Company may be audited by federal, state and foreign tax authorities. At this time, the Company has at least one audit underway. The Company currently cannot assess the impact of the outcome on its condensed consolidated 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.

Note 7 — Earnings Per Share

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
Earnings per share - basic and diluted |  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Net income |  | $ | 19,892 |  |  | $ | 52,272 |  |  | $ | 15,191 |  |  | $ | 43,313 |
Net income attributable to non-controlling interests |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 280 |
Net income attributable to JAKKS Pacific, Inc. |  |  | 19,892 |  |  |  | 52,272 |  |  |  | 15,191 |  |  |  | 43,033 |
Redemption of preferred stock |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,330 |
Net income attributable to common stockholders * |  | $ | 19,892 |  |  | $ | 52,272 |  |  | $ | 15,191 |  |  | $ | 44,363 |
Weighted average common shares outstanding - basic |  |  | 11,185 |  |  |  | 10,942 |  |  |  | 11,159 |  |  |  | 10,704 |
Earnings per share available to common stockholder- basic |  | $ | 1.78 |  |  | $ | 4.78 |  |  | $ | 1.36 |  |  | $ | 4.14 |
Weighted average common shares outstanding - diluted |  |  | 11,423 |  |  |  | 11,275 |  |  |  | 11,487 |  |  |  | 11,106 |
Earnings per share available to common stockholder- diluted |  | $ | 1.74 |  |  | $ | 4.64 |  |  | $ | 1.32 |  |  | $ | 3.99 |

* | 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.

Note 8 — Common Stock and Preferred Stock

Common Stock

All issuances of common stock, including those issued pursuant to restricted stock or unit grants, are issued from the Company’s authorized but not issued and outstanding shares.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

During the nine months ended September 30, 2025, certain employees, including two executive officers, surrendered an aggregate of 159,589 shares of restricted stock units for $4.2 million to cover income taxes due for the vesting of restricted shares. Additionally, an aggregate of 3,549 shares of restricted stock granted in 2022, 2023 and 2024 with a value of approximately $0.1 million was forfeited during 2025.

During the nine months ended September 30, 2024, certain employees, including two executive officers, surrendered an aggregate of 211,981 shares of restricted stock units for $6.5 million to cover income taxes due for the vesting of restricted shares. Additionally, an aggregate of 20,450 shares of restricted stock granted in 2020, 2022 and 2023 with a value of approximately $0.3 million was forfeited during 2024.

A 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 30, 2025. No dividend was declared or paid in 2024.

At the Market Offering

On July 1, 2022, the Company entered into an At the Market Issuance Sales Agreement (“ATM Agreement”) with B. Riley, as agent pursuant to which the Company may, from time to time, sell shares of its common stock, up to $75 million of common stock, in one or more offerings in amounts, prices and at terms that the Company will determine at the time of the offering.

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

The Company has on file with the SEC an effective registration statement pursuant to which it may issue, from time to time, up to $150 million of securities (which will be reduced by any amount of securities sold pursuant to the ATM Agreement) consisting of, or any combination of, common stock, preferred stock, debt securities, warrants, rights and/or units, in one or more offerings in amounts, prices and at terms that the Company will determine at the time of the offering.

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

Redeemable Preferred Stock

On August 9, 2019, the Company entered into and consummated multiple, binding definitive agreements (collectively, the “Recapitalization Transaction”) among various investor parties to recapitalize the Company’s balance sheet. In connection with the Recapitalization Transaction, the Company issued 200,000 shares of Series A Senior Preferred Stock (the “Series A Preferred Stock”), $0.001 par value per share, to the Investor Parties (the “New Preferred Equity”).

On March 11, 2024, the Company redeemed all of the outstanding shares of Series A Senior Preferred Stock for an aggregate price of $20.0 million cash and 571,295 of its common shares, representing a value of $15.0 million based on a share price of $26.26, settling the preferred stock derivative liability of $29.9 million and the preferred stock accrued dividends of $6.0 million as of December 31, 2023.

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

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

The Series A Preferred Stock had no stated maturity, however, the Company had the right to redeem all or a portion of the Series A Preferred Stock at its Liquidation Preference (as defined below) at any time after payment in full of the 2019 Recap Term Loan. In addition, upon the occurrence of certain change of control type events, holders of the Series A Preferred Stock were entitled to receive an amount (the “Liquidation Preference”), in preference to holders of Common Stock or other junior stock, equal to (i) 20% of the Accreted Value in the case of a certain specified transaction, or (ii) otherwise, 150% of the Accreted value, plus any accrued and unpaid dividends.

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JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

The Company had the right, but was not required, to repurchase all or a portion of the Series A Preferred Stock at its Liquidation Preference at any time after payment in full of the 2019 Recap Term Loan. The Series A Preferred Stock did not have any voting rights, except to the extent required by the Delaware General Corporation Law, except for the exclusive right to elect the Series A Preferred Directors (as described below) and except for certain approval rights over certain transactions (as described below). These approval rights required the prior consent of specified percentages of holders (or in certain cases, all holders) of the Series A Preferred Stock in order for the Company to take certain actions, including the issuance of additional shares of Series A Preferred Stock or parity stock, the issuance of senior stock, certain amendments to the Amended and Restated Certificate of Incorporation, the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”), the Second Amended and Restated By-laws or the Amended and Restated Nominating and Corporate Governance Committee Charter, material changes in the Company’s line of business and certain change of control type transactions. In addition, the Certificate of Designations provided that the approval of at least six directors was required for any related person transaction within the meaning of Item 404 of Regulation S-K under the Securities Act of 1933, as amended, including, without limitation, the adoption of, or any amendment, modification or waiver of, any agreement or arrangement related to any such transaction. The Certificate of Designations also included restrictions on the ability of the Company to pay dividends on or make distributions with respect to, or redeem or repurchase, shares of Common Stock or other junior stock. In addition, holders of the Series A Preferred Stock had preemptive rights regarding future issuance of Series A Preferred Stock or parity stock. In 2022, an agreement was reached with the preferred shareholders to eliminate their ability to elect members to the Company’s Board of Directors on a going-forward basis.

Prior to the redemption, the Series A Preferred Stock redemption amount was contingent upon certain events with no stated redemption date. In accordance with the SEC guidance within ASC Topic 480, Distinguishing Liabilities from Equity: Classification and Measurement of Redeemable Securities, the Company classified the Series A Preferred Stock as temporary equity as the Series A Preferred Stock contained a redemption feature which was contingent upon certain deemed liquidation events, the occurrence of which may not solely have been within the control of the Company.

Under ASC 815, Derivatives and Hedging, certain contractual terms that meet the accounting definition of a derivative must be accounted for separately from the financial instrument in which they are embedded. The Company had concluded that the redemption upon a change of control and the repurchase option by the Company constitute embedded derivatives.

The embedded redemption upon a change of control must be accounted for separately from the Series A Preferred Stock. The redemption provision specified if certain events that constitute a change of control occur, the Company may be required to settle the Series A Preferred Stock at 150% of its accreted amount. 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.

The Company considered the repurchase option to have no value as the likelihood was remote that this event, within the Company’s control, would ever occur. The liability was accounted for at fair value, with changes in fair value recognized as other income (expense) on the Company’s condensed consolidated statements of operations (see Note 13 – Fair Value Measurement). The value of the redemption provision explicitly considered the present value of the potential premium that would be paid related to, and the probability of, an event that would trigger its payment. The probability of a triggering event was based on management’s estimates of the probability of a change of control event occurring.

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

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

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JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

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

|  | 2024 |
Balance, January 1, |  | $ | 5,992 |
Preferred stock accrued dividends |  |  | 390 |
Preferred stock redemption |  |  | (6,382 | )
Balance, September 30, |  | $ | — |

Note 9 — Goodwill

The Company applies a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis and, on an interim basis, if certain events or circumstances indicate that an impairment loss may have been incurred. Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying value. For the three months ended September 30, 2025, 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. market. As a result, the Company performed an interim quantitative impairment test for its reporting units as of May 31, 2025, consistent with the guidance in ASC 350. The results of this analysis indicated that the fair value of each reporting unit continued to exceed its carrying amount.

No goodwill impairment was determined to have occurred for the nine months ended September 30, 2025 and September 30, 2024.

Note 10 — Comprehensive Income

The table below presents the components of the Company’s comprehensive income for the three and nine months ended September 30, 2025 and 2024 (in thousands):

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Net income |  | $ | 19,892 |  |  | $ | 52,272 |  |  | $ | 15,191 |  |  | $ | 43,313 |
Other comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  | 600 |  |  |  | 1,042 |  |  |  | 4,865 |  |  |  | 361 |
Comprehensive income |  |  | 20,492 |  |  |  | 53,314 |  |  |  | 20,056 |  |  |  | 43,674 |
Less: Comprehensive income attributable to non-controlling interests |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 280 |
Comprehensive income attributable to JAKKS Pacific, Inc. |  | $ | 20,492 |  |  | $ | 53,314 |  |  | $ | 20,056 |  |  | $ | 43,394 |

Note 11 — Litigation and Contingencies

The Company is a party to, and certain of its property is the subject of, various pending claims and legal proceedings that routinely arise in the ordinary course of its business. The Company accrues for losses when the loss is deemed probable and the liability can reasonably be estimated. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records the minimum estimated liability related to the claim. As additional information becomes available, the Company assesses the potential liability related to its pending litigation and revises its estimates.

In the normal course of business, the Company may provide certain indemnifications and/or other commitments of varying scope to a) its licensors, customers and certain other parties, including against third-party claims of intellectual property infringement, and b) its officers, directors and employees, including against third-party claims regarding the periods in which they serve in such capacities with the Company. The duration and amount of such obligations is, in certain cases, indefinite. The Company’s director’s and officer’s liability insurance policy may, however, enable it to recover a portion of any future payments related to its officer, director or employee indemnifications. For the past five years, costs related to director and officer indemnifications have not been significant. Other than certain liabilities recorded in the normal course of business related to royalty payments due to the Company’s licensors, no liabilities have been recorded for indemnifications and/or other commitments.

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JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

Note 12 — Share-Based Payments

The Company’s 2002 Stock Award and Incentive Plan (the “Plan”), as amended, provides for the awarding of stock options, restricted stock and restricted stock units to certain key employees, executive officers and non-employee directors. Current awards under the Plan include grants to executive officers and certain key employees of restricted stock units, with vesting contingent upon the completion of specified service periods ranging from one to four years and/or (b) meeting certain financial performance and/or market-based metrics. Shares for the restricted stock units are not issued until they vest.

The following table summarizes the total share-based compensation expense recognized for the three and nine months ended September 30, 2025 and 2024 (in thousands):

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Share-based compensation expense |  | $ | 2,392 |  |  | $ | 2,186 |  |  | $ | 8,132 |  |  | $ | 7,280 |

Restricted Stock Units

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 |
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding, December 31, 2024 |  |  | 1,008,400 |  |  | $ | 22.51 |
Granted |  |  | 293,394 |  |  |  | 29.55 |
Vested |  |  | (338,903 | ) |  |  | 17.82 |
Forfeited |  |  | (3,549 | ) |  |  | 28.06 |
Outstanding, September 30, 2025 |  |  | 959,342 |  |  |  | 26.30 |

As 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.

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

Note 13 — Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based upon these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

| Level 1: | Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.
| Level 2: | 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.
| Level 3: | Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

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JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

In instances where the determination of the fair value measurement is based upon inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based upon the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 (in thousands):

|  | Carrying Amount as of September 30, |  |  | Fair Value Measurements As of September 30, 2025 |
|  | 2025 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Investments in employee deferred compensation trusts |  | $ | 3,505 |  |  | $ | 3,505 |  |  | $ | — |  |  | $ | — |

|  | Carrying Amount as of December 31, |  |  | Fair Value Measurements As of December 31, 2024 |
|  | 2024 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Money market funds |  | $ | 39,907 |  |  | $ | 39,907 |  |  | $ | — |  |  | $ | — |
Investments in employee deferred compensation trusts |  |  | 1,686 |  |  |  | 1,686 |  |  |  | — |  |  |  | — |

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 income.

The Company’s cash and cash equivalents including restricted cash, accounts receivable, accounts payable, and accrued expenses represent financial instruments. The carrying value of these financial instruments is a reasonable approximation of fair value due to the short-term nature of the instruments.

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JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2025

Note 14 — Related Party Transactions

In March 2017, the Company entered into an equity purchase agreement with Hong Kong Meisheng Cultural Company Limited (“Meisheng”) which provided, among other things, that as long as Meisheng and its affiliates hold 10% or more of the issued and outstanding shares of common stock of the Company, Meisheng shall have the right from time to time to designate a nominee for election to the Company’s board of directors. 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. Mr. Zhao did not stand for reelection as director at the Company’s 2024 annual meeting. Since December 6, 2024, Meisheng is not represented on the Company’s board of directors and thus ceased to be a related party to the company.

Meisheng continues to be a significant manufacturer of the Company. For the three and 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.

Note 15 — Prepaid Expenses and Other Assets

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

|  | September 30, 2025 |  |  | December 31, 2024 |
Income tax receivable |  | $ | 8,884 |  |  | $ | 8,798 |
Investments in employee deferred compensation trusts |  |  | 3,505 |  |  |  | 1,686 |
Prepaid expenses |  |  | 2,446 |  |  |  | 2,306 |
Royalty advances |  |  | 1,777 |  |  |  | 941 |
Employee retention credit |  |  | 285 |  |  |  | 285 |
Other assets |  |  | 2,887 |  |  |  | 125 |
Prepaid expenses and other assets |  | $ | 19,784 |  |  | $ | 14,141 |

Note 16 — 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read together with our condensed consolidated financial statements and notes thereto, which appear elsewhere herein.

Disclosure Regarding Forward-Looking Statements

This Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements included in this Report regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking statements. When we use words like “intend,” “anticipate,” “believe,” “estimate,” “plan” or “expect,” or other words of a similar import, we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based upon information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors (e.g., see “Risk Factors”) that could cause our actual results to differ materially from our current expectations elsewhere in this Report. You should understand that forward-looking statements made in this Report are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.

Critical Accounting Estimates

Our critical accounting policies and estimates are included in the 2024 Annual Report on Form 10-K and did not materially change during the first nine months of 2025.

New Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements.

Results of Operations

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

|  | Three Months Ended September 30, (Unaudited) |  |  | Nine Months Ended September 30, (Unaudited) |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Net sales |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
Cost of sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods |  |  | 49.6 |  |  |  | 49.4 |  |  |  | 49.2 |  |  |  | 51.6 |
Royalty expense |  |  | 16.2 |  |  |  | 15.6 |  |  |  | 16.2 |  |  |  | 15.4 |
Amortization of tools and molds |  |  | 2.2 |  |  |  | 1.2 |  |  |  | 1.8 |  |  |  | 1.3 |
Cost of sales |  |  | 68.0 |  |  |  | 66.2 |  |  |  | 67.2 |  |  |  | 68.3 |
Gross profit |  |  | 32.0 |  |  |  | 33.8 |  |  |  | 32.8 |  |  |  | 31.7 |
Direct selling expenses |  |  | 2.8 |  |  |  | 2.3 |  |  |  | 4.8 |  |  |  | 3.9 |
General and administrative expenses |  |  | 15.2 |  |  |  | 10.3 |  |  |  | 22.8 |  |  |  | 18.1 |
Depreciation and amortization |  |  | 0.1 |  |  |  | — |  |  |  | 0.1 |  |  |  | — |
Selling, general and administrative expenses |  |  | 18.1 |  |  |  | 12.6 |  |  |  | 27.7 |  |  |  | 22.0 |
Income from operations |  |  | 13.9 |  |  |  | 21.2 |  |  |  | 5.1 |  |  |  | 9.7 |
Other income (expense), net |  |  | 0.2 |  |  |  | — |  |  |  | 0.1 |  |  |  | 0.1 |
Loss on debt extinguishment |  |  | — |  |  |  | — |  |  |  | (0.1 | ) |  |  | — |
Interest income |  |  | — |  |  |  | — |  |  |  | 0.2 |  |  |  | 0.1 |
Interest expense |  |  | — |  |  |  | (0.2 | ) |  |  | (0.1 | ) |  |  | (0.2 | )
Income before provision for income taxes |  |  | 14.1 |  |  |  | 21.0 |  |  |  | 5.2 |  |  |  | 9.7 |
Provision for income taxes |  |  | 4.7 |  |  |  | 4.7 |  |  |  | 1.8 |  |  |  | 2.0 |
Net income |  |  | 9.4 |  |  |  | 16.3 |  |  |  | 3.4 |  |  |  | 7.7 |
Net income attributable to non-controlling interests |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Net income attributable to JAKKS Pacific, Inc. |  |  | 9.4 | % |  |  | 16.3 | % |  |  | 3.4 | % |  |  | 7.7 | %

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The 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, |  |  | September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Net Sales |  |  |  |  |  |  |  |  |  |  |  |
Toys/Consumer Products |  | $ | 156,080 |  |  | $ | 264,306 |  |  | $ | 343,897 |  |  | $ | 451,786 |
Costumes |  |  | 55,130 |  |  |  | 57,300 |  |  |  | 99,660 |  |  |  | 108,515 |
|  |  | 211,210 |  |  |  | 321,606 |  |  |  | 443,557 |  |  |  | 560,301 |
Cost of Sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Toys/Consumer Products |  |  | 104,513 |  |  |  | 171,774 |  |  |  | 227,045 |  |  |  | 304,348 |
Costumes |  |  | 39,054 |  |  |  | 41,001 |  |  |  | 70,833 |  |  |  | 78,485 |
|  |  | 143,567 |  |  |  | 212,775 |  |  |  | 297,878 |  |  |  | 382,833 |
Gross Profit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Toys/Consumer Products |  |  | 51,567 |  |  |  | 92,532 |  |  |  | 116,852 |  |  |  | 147,438 |
Costumes |  |  | 16,076 |  |  |  | 16,299 |  |  |  | 28,827 |  |  |  | 30,030 |
|  | $ | 67,643 |  |  | $ | 108,831 |  |  | $ | 145,679 |  |  | $ | 177,468 |

Comparison of the Three Months Ended September 30, 2025 and 2024

Net Sales

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%.

Costumes. 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 customers.

Cost of Sales

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.

Costumes. 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.

Selling, 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.

Provision 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 30, 2025. During the comparable period in 2024, our income tax expense was $15.4 million, or an effective tax rate of 22.8%. The increase 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.

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Comparison of the Nine Months Ended September 30, 2025 and 2024

Net Sales

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. business.

Costumes. 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.

Cost of Sales

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 reserves.

Costumes. 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.

Selling, 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 22.0% of net sales, respectively. Selling, general and administrative expenses were essentially flat year over year, but as a percentage of net sales selling, general and administrative expenses were up year over year because of lower net sales.

Provision 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 30, 2025. During the comparable period in 2024, our income tax benefit was $11.0 million, or an effective tax rate of 20.2%. The increase in the effective tax rate is primarily due to a decrease in pre-tax book income across the jurisdictions.

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Seasonality and Backlog

The retail toy industry is inherently seasonal. Generally, our sales have been highest during the second and third quarters, and collections for those sales have been highest during the succeeding fourth and first quarters. Our working capital needs have been highest during the second and third quarters as we make royalty advance payments for some of our licenses and buy and sell inventory subject to customer payment terms.

While we have taken steps to level sales over the entire year, sales are expected to remain heavily influenced by the seasonality of our toy and costume products. The result of these seasonal patterns is that operating results and the demand for working capital may vary significantly by quarter. Orders placed with us are generally cancelable until the date of shipment. The combination of seasonal demand and the potential for order cancellation makes accurate forecasting of future sales difficult and causes us to believe that backlog may not be an accurate indicator of our future sales. Similarly, financial results for a particular quarter may not be indicative of results for the entire year.

Liquidity and Capital Resources

As of 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. The increase 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. 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.

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. The prior facility had no outstanding borrowings at the time of termination. We recorded a non-cash charge of $0.3 million for the write-off of previously deferred financing costs associated with the JPMorgan facility.

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

Availability 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.

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

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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. tax should such amounts be repatriated in the form of dividends or deemed distributions. During the first quarter of 2024, the Company declared a one-time dividend from Canada to the U.S in the amount of $5.9 million, in order to fund the preferred stock redemption that occurred during the quarter, resulting in a 5% withholding tax. This was a significant one-time event as there 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.

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

Typically, cash flows from operations are impacted by the effect on sales of (1) the appeal of our products, (2) the success of our licensed brands in motivating consumer purchase of related merchandise, (3) the highly competitive conditions existing in the toy industry and in securing commercially attractive licenses, (4) dependency on a limited set of large customers, and (5) general economic conditions. A downturn in any single factor or a combination of factors could have a material adverse impact upon our ability to generate sufficient cash flows to operate the business. In addition, our business and liquidity are dependent to a significant degree on our vendors and their financial health, as well as the ability to accurately forecast the demand for products. The loss of a key vendor, or material changes in support by them, or a significant variance in actual demand compared to the forecast, can have a material adverse impact on our cash flows and business. Given the conditions in the toy industry environment in general, vendors, including licensors, may seek further assurances or take actions to protect against non-payment of amounts due to them. Changes in this area could have a material adverse impact on our liquidity.

As of 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our exposure to market risk includes interest rate fluctuations in connection with our Revolving Facility (see Note 5 – Credit Facilities). As detailed in the BMO Credit Agreement, borrowings under the Revolving Facility bear interest, at the Company’s election, at either (i) the Adjusted Term 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. Borrowings under the Revolving Facility are therefore subject to risk based upon prevailing market interest rates. Interest rate risk may result from many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.

Foreign Currency Risk

We have wholly-owned subsidiaries in Hong Kong, China, the United Kingdom, Germany, France, the Netherlands, Italy, Canada and Mexico. Sales are generally made by these operations on FOB China or Hong Kong terms and are denominated in U.S. dollars. However, purchases of inventory and Hong Kong operating expenses are typically denominated in Hong Kong dollars and local operating expenses in the United Kingdom, Germany, France, the Netherlands, Italy, Canada, Mexico and China are denominated in local currency, thereby creating exposure to changes in exchange rates. Changes in the U.S. dollar exchange rates may positively or negatively affect our results of operations. We do not believe that near-term changes in these exchange rates, if any, will result in a material effect on our future earnings, fair values or cash flows. Therefore, we have chosen not to enter into foreign currency hedging transactions. We cannot assure you that this approach will be successful, especially in the event of a significant and sudden change in the value of these foreign currencies.

Item 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report, have concluded that as of that date, our disclosure controls and procedures were effective. There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) that occurred during the period covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are a party to, and certain of our property is the subject of, various pending claims and legal proceedings that routinely arise in the ordinary course of our business. We accrue for losses when the loss is deemed probable and the liability can reasonably be estimated. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the claim. As additional information becomes available, we assess the potential liability related to the pending litigation and revise our estimates.

In the normal course of business, we may provide certain indemnifications and/or other commitments of varying scope to a) our licensors, customers and certain other parties, including against third-party claims of intellectual property infringement, and b) our officers, directors and employees, including against third-party claims regarding the periods in which they serve in such capacities with us. The duration and amount of such obligations is, in certain cases, indefinite. Our director’s and officer’s liability insurance policy may, however, enable us to recover a portion of any future payments related to our officer, director or employee indemnifications. For the past five years, costs related to director and officer indemnifications have not been significant. Other than certain liabilities recorded in the normal course of business related to royalty payments due to our licensors, no liabilities have been recorded for indemnifications and/or other commitments.

Item 1A. Risk Factors

Risk factors with respect to us and our business are contained in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes from the risk factors previously disclosed in such filing. The disclosures made in this Quarterly Report should be reviewed together with the risk factors contained therein.

Item 6. Exhibits

Number |  | Description
31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (1)
31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (1)
32.1 |  | Section 1350 Certification of Chief Executive Officer (1)
32.2 |  | Section 1350 Certification of Chief Financial Officer (1)
101.INS |  | Inline XBRL Instance Document
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

| (1) | Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| JAKKS PACIFIC, INC.
Date: October 31, 2025 | By: | /s/ John Kimble
|  | John Kimble
|  | Executive Vice President and
|  | Chief Financial Officer
|  | (Duly Authorized Officer and
|  | Principal Financial Officer)

27

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