jakkspacif20220930

jakkspacif20220930_10q.htm

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, 2022
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: 0-28104

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 (Address of Principal Executive Offices)	90405 (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 9,723,534 as of November 14, 2022.

JAKKS PACIFIC, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED September 30, 2022

ITEMS IN FORM 10-Q

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Stockholders' Equity (Deficit)	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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	None
Item 3.	Defaults Upon Senior Securities	None
Item 4.	Mine Safety Disclosures	None
Item 5.	Other Information	None
Item 6.	Exhibits	33

Signatures
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)

Assets	September 30, 2022			December 31, 2021
	(Unaudited)
Current assets
Cash and cash equivalents	$	76,418		$	44,521
Restricted cash		178			811
Accounts receivable, net of allowance for doubtful accounts of $2,922 and $2,626 at September 30, 2022 and December 31, 2021, respectively		204,856			147,394
Inventory		109,171			83,954
Prepaid expenses and other assets		11,124			10,877
Total current assets		401,747			287,557
Property and equipment
Office furniture and equipment		11,980			11,967
Molds and tooling		113,145			103,102
Leasehold improvements		6,793			6,876
Total		131,918			121,945
Less accumulated depreciation and amortization		116,558			108,796
Property and equipment, net		15,360			13,149
Operating lease right-of-use assets, net		22,154			16,950
Other long-term assets		2,516			2,993
Intangible assets, net		254			1,015
Goodwill		35,083			35,083
Trademarks		—			300
Total assets	$	477,114		$	357,047
Liabilities, Preferred Stock and Stockholders' Equity
Current liabilities
Accounts payable	$	77,126		$	50,237
Accounts payable – Meisheng (related party)		28,301			15,894
Accrued expenses		73,723			47,071
Reserve for sales returns and allowances		59,216			46,285
Income taxes payable		14,084			1,004
Short-term operating lease liabilities		10,515			10,477
Short-term debt, net		2,475			2,104
Total current liabilities		265,440			173,072
Long-term operating lease liabilities		12,555			8,039
Debt, non-current portion, net of issuance costs and debt discounts		65,195			93,415
Preferred stock derivative liability		23,347			21,282
Income taxes payable		66			215
Deferred income taxes, net		53			51
Total liabilities		366,656			296,074

Preferred stock accrued dividends, $0.001 par value; 5,000,000 shares authorized; 200,000 shares issued and outstanding at September 30, 2022 and December 31, 2021		4,128			3,074

Stockholders' Equity
Common stock, $0.001 par value; 100,000,000 shares authorized; 9,723,534 and 9,520,817 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		10			10
Additional paid-in capital		274,040			272,941
Accumulated deficit		(149,987	)		(203,431	)
Accumulated other comprehensive loss		(18,594	)		(12,952	)
Total JAKKS Pacific, Inc. stockholders' equity		105,469

SEC Form 10-Q filed by JAKKS Pacific Inc.