##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


|           |  |                                                                                       
|---------- |  | --------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                       
|x          |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the Fiscal Year Ended December 31, 2004                                           
|          
|o          |  | TRANSITION REPORT UNDER 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.


(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.)

|                                                   |  |           
|-------------------------------------------------- |  | ----------
|22619 Pacific Coast Highway
    Malibu, California |  | 90265     
|(Address of principal executive offices)           |  | (Zip Code)

Registrants telephone number, including area code:
(310) 456-7799


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


|                    |  |                      
|------------------- |  | ---------------------
|                    |  | Name of each exchange
|Title of each class |  | on which registered  
|                    |  |                      
|None                |  |                      

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


Title of Class


Common Stock, $.001 par value per share


x o


o


x o






Documents Incorporated by Reference












---










JAKKS PACIFIC, INC.


INDEX TO ANNUAL REPORT ON FORM 10-K


For the Fiscal Year ended December 31, 2004


Items in Form 10-K


|             |  |                                                                                                                      |    |      |      | 
|------------ |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | ---- | 
|             |  |                                                                                                                      |    | Page |     
|             |  |                                                                                                                      |    |      |     
|PART I      
|Item 1.      |  | Business                                                                                                             |    |      | 2    | 
|Item 2.      |  | Properties                                                                                                           |    |      | 22   | 
|Item 3.      |  | Legal Proceedings                                                                                                    |    |      | 23   | 
|Item 4.      |  | Submission of Matters to a Vote of Security Holders                                                                  |    |      | None | 
|PART II     
|Item 5.      |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 25   | 
|Item 6.      |  | Selected Financial Data                                                                                              |    |      | 26   | 
|Item 7.      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |      | 27   | 
|Item 7A.     |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |      | 40   | 
|Item 8.      |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 41   | 
|Item 9.      |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure                             |    |      | None | 
|Item 9A.     |  | Controls and Procedures                                                                                              |    |      | 70   | 
|Item 9B.     |  | Other Information                                                                                                    |    |      |      | 
|PART III    
|Item 10.     |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 72   | 
|Item 11.     |  | Executive Compensation                                                                                               |    |      | 75   | 
|Item 12.     |  | Security Ownership of Certain Beneficial
    Owners and Management                                                   |    |      | 80   | 
|Item 13.     |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 83   | 
|Item 14.     |  | Principal Accountant Fees and Services                                                                               |    |      | 83   | 
|PART IV     
|Item 15.     |  | Exhibits, Financial Statement Schedules                                                                              |    |      | 84   | 
|Signatures   |  |                                                                                                                      | 86 |     
|EXHIBIT 21  
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1
|EXHIBIT 32.2



DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS




1



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Item 1. Business




Company Overview






| |   |                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Action figures and accessories including licensed characters,
    principally based on World Wrestling
    Entertainmenttm
    (WWE) and the Dragon Ball® franchise,
    and toy vehicles, including Road Champs® die-cast
    collectibles and Remco® toy vehicles and role-play
    toys and accessories;
|
| |  | Craft, activity and stationery products, including Flying
    Colors Toys® activity sets, compounds, playsets and
    lunch boxes, and Colorworkshop® craft products such as the
    Blopen® and Pentech® writing
    instruments, stationery and activity products;                                         
|
| |  | Infant and pre-school electronic toys, TV activities, toy foam
    puzzle mats and blocks, activity sets, outdoor products, plush
    toys featuring Care Bears and Teletubbies, soft
    body dolls featuring Cabbage Patch Kids and slumber bags;                                                          
|
| |  | Seasonal toys and leisure products, including kites,
    Funnoodle® pool toys, and
    Stormtm
    water guns;                                                                                                                                                                                               
|
| |  | Electronics products, including Plug it in & Play
    TV Gamestm
    and Laser
    Challengetm;                                                                                                                                                                                                              
|
| |  | Junior sports, including Disney products,
    Gaksplattm
    and
    Stormtm;
    and                                                                                                                                                                                                                        
|
| |  | Fashion and mini dolls and related accessories, including
    Disney Princesses sold in The Disney Store chain.                                                                                                                                                                                              





| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | creating innovative products under established brand names;                                        
|
| |  | focusing our marketing efforts to enhance consumer recognition
    and retailer interest;          
|
| |  | linking them with our evergreen portfolio of brands;                                               
|
| |  | adding new items to the branded product lines that we expect
    will enjoy greater popularity; and
|
| |  | adding new features and improving the functionality of products
    in the line.                   

WWE tm Nickelodeon Rugrats Dora the
Explorer Blues Clues SpongeBob
SquarePants Mickey Mouse Winnie the
Pooh Hello Kitty NASCAR


2



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##### Table of Contents





Laser Challenge Creepy Crawlers Funnoodle Go Fly a
Kite


The
Storm


Blopen Blitzer tm Vivid Velvet Paints


Care Bears Teletubbies Cabbage Patch Kids




Road Champs Flying Colors Pentech


3



---



##### Table of Contents



Our Growth Strategy




Expand Core Products.


Enter New Product Categories. Tongue Tape


Pursue Strategic Acquisitions.


Acquire Additional Character and Product
Licenses.


Expand International Sales.


Capitalize On Our Operating
Efficiencies.


4



---



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Industry Overview






5



---



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Products




Action Figures and Accessories


WWE WWE


Dragon Ball Dragon Ball Z Dragon Ball GT Mucha Lucha Dragon Boosters


Flying Colors/Pentech Activity Sets, Compounds, Playsets,
Writing Instruments and Lunch Boxes


Blues Clues SpongeBob
SquarePants Hello Kitty Blopens Vivid Velvet


Blues Clues Blues Clues Nickelodeon Splish
Splat tm


Electronics Products


Plug it in & Play TV Games Laser Challenge Laser
Challenge tm


6



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Seasonal Products


Go Fly A Kite Funnoodle Storm


Junior Sports Products


Gaksplat Storm Gaksplat Storm


Wheels Division Products




| |   |                                                  
| | - | -------------------------------------------------
| |  | Road Champs die-cast collectible and toy vehicles

Road Champs 1 43 Ford Chevrolet Porsche NASCAR




| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | Extreme sports die-cast collectibles and toy vehicles and
    action figures

MXS




| |   |                          
| | - | -------------------------
| |  | Toy and activity vehicles

Remco Mighty Mos


Fly Wheels


7



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Infant and pre-school toys


Care Bears Teletubbies Cabbage Patch Kids




| |   |               
| | - | --------------
| |  | Child Guidance





| |   |                              
| | - | -----------------------------
| |  | Foam puzzle mats and playsets

Winnie the Pooh Blues
Clues




| |   |             
| | - | ------------
| |  | Slumber bags

Dora
the Explorer SpongeBob SquarePants Blues Clues


Fashion and Mini Dolls and Related Accessories


1 2 Disney




World Wrestling Entertainment Video Games


WWE


8



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PlayStation® PlayStation 2 Nintendo 64 GameCube® Xbox Game Boy Color Game Boy Advance




|     |  |                   |   |  |                     |               |   |            |  |   |      | 
|---- |  | ----------------- | - |  | ------------------- | ------------- | - | ---------- |  | - | ---- | 
|     |  | New Game Titles   |   |  |                    
|     |  |                   |   |  | Profit from Joint   |              
|     |  | Console Platforms |   |  | Hand-held Platforms |               |   | Venture(1) | 
|     |  |                   |   |  |                     |               |   |            | 
|     |  |                   |   |  |                     | (In millions) |  
|1999 |  |                   | 1 |  |                     |               | 1 |            |  | $ | 3.6  | 
|2000 |  |                   | 4 |  |                     |               | 1 |            |  |   | 15.9 | 
|2001 |  |                   | 1 |  |                     |               | 2 |            |  |   | 6.7  | 
|2002 |  |                   | 3 |  |                     |               | 1 |            |  |   | 8.0  | 
|2003 |  |                   | 5 |  |                     |               |  |            |  |   | 7.4  | 
|2004 |  |                   | 2 |  |                     |               | 1 |            |  |   | 7.9  | 



| | 
| | 
| | 



| |     |                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Profit from the joint venture reflects our preferred return on
    joint venture revenue less certain costs incurred directly by us.

WWE WWE. WWE


9



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Sales, Marketing and Distribution








| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | engaged representatives to oversee sales in certain territories,                            
|
| |  | engaged distributors in certain territories, such as Vivid
    Imaginations Ltd. in England,
|
| |  | established direct relationships with retailers in certain
    territories, and             
|
| |  | expanded in-house resources.                                                                









10



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WWE Care Bears Cabbage Patch Kids Flying Colors


Product Development




Plug
it in & Play TV Games




Manufacturing and Supplies




11



---



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Trademarks and Copyrights




Competition


Flying Colors Pentech


Seasonality and Backlog




12



---



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Government and Industry Regulation




Employees




Environmental Issues




Available Information




13



---



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Our Corporate Information




Risk Factors That May Affect Future Results






| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The outcome of litigation in
    which we have been named as a defendant is unpredictable and a
    materially adverse decision in any such matter could have a
    material adverse affect on our financial position and results of
    operations.





| |                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our inability to redesign,
    restyle and extend our existing core products and product lines
    as consumer preferences evolve, and to develop, introduce and
    gain customer acceptance of new products and product lines, may
    materially and adversely impact our business, financial
    condition and results of operations.





| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | The phenomenon of children outgrowing toys at younger ages,
    particularly in favor of interactive and high technology
    products;
|
| |  | Increasing use of technology;                                                                                                         
|
| |  | Shorter life cycles for individual products; and                                                                                      
|
| |  | Higher consumer expectations for product quality,
    functionality and value.                                                        

14



---



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| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our current products will continue to be popular with
    consumers;                                                                                                          
|
| |  | the product lines or products that we introduce will achieve
    any significant degree of market acceptance; or                                                              
|
| |  | the life cycles of our products will be sufficient to permit
    us to recover licensing, design, manufacturing, marketing and
    other costs associated with those products.





| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The failure of our
    character-related and theme-related products to become and/or
    remain popular with children may materially and adversely impact
    our business, financial condition and results of
    operations.





| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | media associated with our character-related and theme-related
    product lines will be released at the times we expect or will be
    successful;                       
|
| |  | the success of media associated with our existing
    character-related and theme-related product lines will result in
    substantial promotional value to our products;
|
| |  | we will be successful in renewing licenses upon expiration on
    terms that are favorable to us; or                                                                     
|
| |  | we will be successful in obtaining licenses to produce new
    character-related and theme-related products in the future.                                               





| |                                                            
| | -----------------------------------------------------------
| | There are risks associated
    with our license agreements.



| |   |                                                         
| | - | --------------------------------------------------------
| |  | Our current licenses require us to pay minimum royalties





| |   |                                              
| | - | ---------------------------------------------
| |  | Some of our licenses are restricted as to use



15



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| |   |                                                   
| | - | --------------------------------------------------
| |  | New licenses are difficult and expensive to obtain





| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | A limited number of licensors account for a large portion of
    our net sales





| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The toy industry is highly
    competitive and our inability to compete effectively may
    materially and adversely impact our business, financial
    condition results of operations.





| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | greater financial resources;                                    
|
| |  | larger sales, marketing and product development
    departments;
|
| |  | stronger name recognition;                                      
|
| |  | longer operating histories; and                                 
|
| |  | greater economies of scale.                                     





| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | An adverse outcome in the
    litigation commenced against us by WWE or a decline in the
    popularity of WWE could adversely impact our video game joint
    venture with THQ.





16



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| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The termination of
    THQs manufacturing licenses and the inability of the joint
    venture to otherwise obtain these licenses from other
    manufacturers would materially adversely affect the joint
    ventures and our business, financial condition and results
    of operations.





| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The failure of the joint
    venture or THQ to perform as anticipated could have a material
    adverse affect on our financial position and results of
    operations.







| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to
    sustain or manage our rapid growth, which may prevent us from
    continuing to increase our net revenues.





17



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| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to acquire
    and integrate companies and new product lines successfully we
    will be unable to implement our growth strategy.





| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | attractiveness of products;                                                       
|
| |  | suitability of distribution channels;                                             
|
| |  | management ability;                                                               
|
| |  | financial condition and results of operations; and                                
|
| |  | the degree to which acquired operations can be integrated
    with our operations.





| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties in integrating acquired businesses or product
    lines, assimilating new facilities and personnel and harmonizing
    diverse business strategies and methods of operation;
|
| |  | diversion of management attention from operation of our
    existing business;                                                                                                           
|
| |  | loss of key personnel from acquired companies; and                                                                                                                                       
|
| |  | failure of an acquired business to achieve targeted financial
    results.                                                                                                               



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A limited number of
    customers account for a large portion of our net sales, so that
    if one or more of our major customers were to experience
    difficulties in fulfilling their obligations to us, cease doing
    business with us, significantly reduce the amount of their
    purchases from us or return substantial amounts of our products,
    it could have a material adverse effect on our business,
    financial condition and results of operations.



18



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| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our key
    personnel and any loss or interruption of either of their
    services could adversely affect our business, financial
    condition and results of operations.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on third-party
    manufacturers, and if our relationship with any of them is
    harmed or if they independently encounter difficulties in their
    manufacturing processes, we could experience product defects,
    production delays, cost overruns or the inability to fulfill
    orders on a timely basis, any of which could adversely affect
    our business, financial condition and results of
    operations.









| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have substantial sales
    and manufacturing operations outside of the United States
    subjecting us to risks associated with the outbreak of SARS, as
    well as risks common to international operations.



19



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| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | currency conversion risks and currency fluctuations;                                                   
|
| |  | limitations, including taxes, on the repatriation of
    earnings;                                     
|
| |  | political instability, civil unrest and economic
    instability;                                      
|
| |  | greater difficulty enforcing intellectual property rights and
    weaker laws protecting such rights;  
|
| |  | complications in complying with laws in varying jurisdictions
    and changes in governmental policies;
|
| |  | greater difficulty and expenses associated with recovering
    from natural disasters;                 
|
| |  | transportation delays and interruptions; and                                                           
|
| |  | the potential imposition of tariffs.                                                                   





| |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business is subject to
    extensive government regulation and any violation by us of such
    regulations could result in product liability claims, loss of
    sales, diversion of resources, damage to our reputation,
    increased warranty costs or removal of our products from the
    market, and we cannot assure you that our product liability
    insurance for the foregoing will be sufficient.





| |   |                          
| | - | -------------------------
| |  | product liability claims;
|
| |  | loss of sales;           

20



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| |   |                                         
| | - | ----------------------------------------
| |  | diversion of resources;                 
|
| |  | damage to our reputation;               
|
| |  | increased warranty costs; and           
|
| |  | removal of our products from the market.





| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our proprietary
    rights and our inability to safeguard and maintain the same, or
    claims of third parties that we have violated their intellectual
    property rights, could have a material adverse effect on our
    business, financial condition and results of
    operations.





| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | Market conditions and other
    third-party conduct could negatively impact our margins and
    implementation of other business initiatives.





| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not have the funds
    necessary to purchase our outstanding convertible senior notes
    upon a fundamental change or other purchase date, as required by
    the indenture governing the notes.



21



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| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We have a material amount of
    goodwill which, if it becomes impaired, would result in a
    reduction in our net income.








Item 2. Properties







Item 3. Legal Proceedings






22



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inter alia










23



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24



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information




|      |                |                |   |       |     |  |   |       | 
|----- | -------------- | -------------- | - | ----- | --- |  | - | ----- | 
|      |                | Price Range of |  
|      |                | Common Stock   |  
|      |                |                |  
|      |                | High           |   |       | Low | 
|      |                |                |   |       |     | 
|2003: |                |                |   |       |     |  |   |      
|      | First quarter  |                | $ | 14.49 |     |  | $ | 9.50  | 
|      | Second quarter |                |   | 14.49 |     |  |   | 10.22 | 
|      | Third quarter  |                |   | 14.04 |     |  |   | 10.05 | 
|      | Fourth quarter |                |   | 13.77 |     |  |   | 11.74 | 
|     
|2004: |                |                |   |       |     |  |   |      
|      | First quarter  |                |   | 16.25 |     |  |   | 12.72 | 
|      | Second quarter |                |   | 21.00 |     |  |   | 14.48 | 
|      | Third quarter  |                |   | 23.22 |     |  |   | 18.71 | 
|      | Fourth quarter |                |   | 25.55 |     |  |   | 12.75 | 

Security Holders




Dividends




Equity Compensation Plan Information






| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) the number of securities to be issued upon the exercise
    of outstanding options, warrants and rights;                                                                                            
|
| | (b) the weighted-average exercise price of such outstanding
    options, warrants and rights;                                                                                                           
|
| | (c) other than securities to be issued upon the exercise of
    such outstanding options, warrants and rights, the number of
    securities remaining available for future issuance under the
    plans.

25



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|                                                           |  |                      |           |  |                   |                      |       |                         |  |  |           | 
|---------------------------------------------------------- |  | -------------------- | --------- |  | ----------------- | -------------------- | ----- | ----------------------- |  |  | --------- | 
|                                                           |  |                      |           |  |                   | Number of Securities |      
|                                                           |  |                      |           |  |                   | Remaining Available  |      
|                                                           |  | Number of            |           |  | Weighted-Average  |                      |       | for                     | 
|                                                           |  | Securities to be     |           |  | Exercise Price of |                      |       | Future Issuance Under   | 
|                                                           |  | Issued upon Exercise |           |  | Outstanding       |                      |       | Equity Compensation     | 
|                                                           |  | of Outstanding       |           |  | Options,          |                      |       | Plans (Excluding        | 
|                                                           |  | Options,             |           |  | Warrants and      |                      |       | Securities Reflected in | 
|                                                           |  | Warrants and Rights  |           |  | Rights            |                      |       | Column (a))             | 
|Plan Category                                              |  | (a)                  |           |  | (b)               |                      |       | (c)                     | 
|                                                           |  |                      |           |  |                   |                      |       |                         | 
|Equity compensation plans approved by security holders     |  |                      | 2,073,006 |  |                   | $                    | 13.22 |                         |  |  | 1,728,523 | 
|Equity compensation plans not approved by security holders |  |                      |          |  |                   |                      |      |                         |  |  |          | 
|                                                           |  |                      |           |  |                   |                      |       |                         | 
|Total                                                      |  |                      | 2,073,006 |  |                   | $                    | 13.22 |                         |  |  | 1,728,523 | 
|                                                           |  |                      |           |  |                   |                      |       |                         | 






Item 6. Selected Financial Data




|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                               |  | Year Ended December 31,               |        
|                                                               |  |                                       |        
|                                                               |  | 2000                                  |         |   | 2001 |   |         | 2002 |  |   | 2003    |   |  | 2004 |        
|                                                               |  | (In thousands, except per share data) |        
|Consolidated Statement of Operations Data:                     |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                                      |  | $                                     | 252,288 |   |      | $ | 284,309 |      |  | $ | 310,016 |   |  | $    | 315,776 |   |  | $ | 574,266 |  
|Cost of sales                                                  |  |                                       | 149,881 |   |      |   | 164,222 |      |  |   | 180,173 |   |  |      | 189,334 |   |  |   | 348,259 |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Gross profit                                                   |  |                                       | 102,407 |   |      |   | 120,087 |      |  |   | 129,843 |   |  |      | 126,442 |   |  |   | 226,007 |  
|Selling, general and administrative expenses                   |  |                                       | 80,435  |   |      |   | 89,575  |      |  |   | 98,111  |   |  |      | 113,053 |   |  |   | 172,282 |  
|Acquisition shut-down and product recall costs                 |  |                                       | 1,469   |   |      |   | 1,214   |      |  |   | 6,718   |   |  |      | 2,000   |   |  |   |        |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Income from operations                                         |  |                                       | 20,503  |   |      |   | 29,298  |      |  |   | 25,014  |   |  |      | 11,389  |   |  |   | 53,725  |  
|Profit from Joint Venture                                      |  |                                       | (15,906 | ) |      |   | (6,675  | )    |  |   | (8,004  | ) |  |      | (7,351  | ) |  |   | (7,865  | )
|Interest, net                                                  |  |                                       | (3,833  | ) |      |   | (2,057  | )    |  |   | (1,141  | ) |  |      | 1,405   |   |  |   | 2,498   |  
|Other (income) expense, net                                    |  |                                       | (92     | ) |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Income before provision for income taxes and minority interest |  |                                       | 40,334  |   |      |   | 38,030  |      |  |   | 34,159  |   |  |      | 17,335  |   |  |   | 59,092  |  
|Provision for income taxes                                     |  |                                       | 11,697  |   |      |   | 9,797   |      |  |   | 6,466   |   |  |      | 1,440   |   |  |   | 15,533  |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Income before minority interest                                |  |                                       | 28,637  |   |      |   | 28,233  |      |  |   | 27,693  |   |  |      | 15,895  |   |  |   | 43,559  |  
|Minority interest                                              |  |                                       |        |   |      |   |        |      |  |   | (237    | ) |  |      |        |   |  |   |        |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Net income                                                     |  | $                                     | 28,637  |   |      | $ | 28,233  |      |  | $ | 27,930  |   |  | $    | 15,895  |   |  | $ | 43,559  |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Basic earnings per share                                       |  | $                                     | 1.50    |   |      | $ | 1.55    |      |  | $ | 1.27    |   |  | $    | 0.66    |   |  | $ | 1.69    |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Weighted average shares outstanding                            |  |                                       | 19,060  |   |      |   | 18,199  |      |  |   | 21,963  |   |  |      | 24,262  |   |  |   | 25,797  |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Diluted earnings per share                                     |  | $                                     | 1.41    |   |      | $ | 1.45    |      |  | $ | 1.23    |   |  | $    | 0.66    |   |  | $ | 1.49    |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        
|Weighted average shares and equivalents outstanding            |  |                                       | 20,281  |   |      |   | 19,410  |      |  |   | 22,747  |   |  |      | 27,437  |   |  |   | 31,406  |  
|                                                               |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |        

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|                                       |  |                 |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|-------------------------------------- |  | --------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                       |  | At December 31, |        
|                                       |  |                 |        
|                                       |  | 2000            |         |  | 2001 |   |         | 2002 |  |   | 2003    |  |  | 2004 |        
|                                       |  | (In thousands)  |        
|Consolidated Balance Sheet Data:       |  |                 |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash and cash equivalents              |  | $               | 29,275  |  |      | $ | 25,036  |      |  | $ | 68,413  |  |  | $    | 118,182 |  |  | $ | 176,544 | 
|Working capital                        |  |                 | 86,897  |  |      |   | 116,492 |      |  |   | 129,183 |  |  |      | 232,601 |  |  |   | 229,543 | 
|Total assets                           |  |                 | 248,722 |  |      |   | 284,041 |      |  |   | 408,916 |  |  |      | 529,997 |  |  |   | 696,762 | 
|Long-term debt, net of current portion |  |                 | 1,000   |  |      |   | 77      |      |  |   | 60      |  |  |      | 98,042  |  |  |   | 98,000  | 
|Total stockholders equity             |  |                 | 204,530 |  |      |   | 244,404 |      |  |   | 357,236 |  |  |      | 377,900 |  |  |   | 451,485 | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The following Managements Discussion and Analysis of
Financial Condition and Results of Operations contains
forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of
various factors. You should read this section in conjunction
with our consolidated financial statements and the related notes
(included in Item 8).


Critical Accounting Policies












| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | significant underperformance relative to expected historical or
    projected future operating results;              
|
| |  | significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business; and
|
| |  | significant negative industry or economic trends.                                                                    

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Recent Developments








inter alia




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Results of Operation




|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |       |   |  |  |       |  
|------------------------------------------------ |  | ------------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - |  |  | ----- | -
|                                                 |  | Years Ended December 31, |      
|                                                 |  |                          |      
|                                                 |  | 2000                     |       |   | 2001 |  |       | 2002 |  |  | 2003  |   |  | 2004 |      
|Net sales                                        |  |                          | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | % |  |      | 100.0 | % |  |  | 100.0 | %
|Cost of sales                                    |  |                          | 59.4  |   |      |  | 57.8  |      |  |  | 58.1  |   |  |      | 60.0  |   |  |  | 60.6  |  
|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Gross profit                                     |  |                          | 40.6  |   |      |  | 42.2  |      |  |  | 41.9  |   |  |      | 40.0  |   |  |  | 39.4  |  
|Selling, general and administrative expenses     |  |                          | 31.9  |   |      |  | 31.5  |      |  |  | 31.6  |   |  |      | 35.8  |   |  |  | 30.0  |  
|Acquisition shut-down and product recall costs   |  |                          | 0.5   |   |      |  | 0.4   |      |  |  | 2.2   |   |  |      | 0.6   |   |  |  |      |  
|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Income from operations                           |  |                          | 8.2   |   |      |  | 10.3  |      |  |  | 8.1   |   |  |      | 3.6   |   |  |  | 9.4   |  
|Profit from Joint Venture                        |  |                          | (6.3  | ) |      |  | (2.3  | )    |  |  | (2.6  | ) |  |      | (2.3  | ) |  |  | (1.4  | )
|Interest, net                                    |  |                          | (1.5  | ) |      |  | (0.7  | )    |  |  | (0.4  | ) |  |      | 0.4   |   |  |  | 0.4   |  
|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Income before income taxes and minority interest |  |                          | 16.0  |   |      |  | 13.3  |      |  |  | 11.1  |   |  |      | 5.5   |   |  |  | 10.4  |  
|Provision for income taxes                       |  |                          | 4.6   |   |      |  | 3.4   |      |  |  | 2.1   |   |  |      | 0.5   |   |  |  | 2.7   |  
|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Income before minority interest                  |  |                          | 11.4  |   |      |  | 9.9   |      |  |  | 9.0   |   |  |      | 5.0   |   |  |  | 7.7   |  
|Minority interest                                |  |                          |      |   |      |  |      |      |  |  |      |   |  |      |      |   |  |  |      |  
|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Net income                                       |  |                          | 11.4  | % |      |  | 9.9   | %    |  |  | 9.0   | % |  |      | 5.0   | % |  |  | 7.7   | %
|                                                 |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      

Comparisons of the Years Ended December 31, 2004 and
2003


Net Sales.


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Gross Profit.


Selling, General and Administrative Expenses.


Product Recall Costs




|                     |  |                   |     |  |         |  |   |        |                 |  |                   |   |  |   |   | 
|-------------------- |  | ----------------- | --- |  | ------- |  | - | ------ | --------------- |  | ----------------- | - |  | - | - | 
|                     |  | Accrued Balance   |     |  |         |  |   |        | Accrued Balance
|                     |  | December 31, 2003 |     |  | Accrual |  |   | Actual |                 |  | December 31, 2004
|Product recall costs |  | $                 | 490 |  |         |  |  |        |                 |  | (490              | ) |  | $ |  | 

Profit from Joint Venture.


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Interest Net.


Provision for Income Taxes.


Comparisons of the Years Ended December 31, 2003 and
2002


Net Sales. Trendmasters, Go Fly a Kite, Funnoodle Dragon Ball NASCAR ColorWorkshop


Gross Profit.


Selling, General and Administrative Expenses. WWE Dragon Ball Z Flying Colors WWE Flying Colors


Acquisition Shut-down and Product Recall Costs.


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|                        |  |                   |       |  |         |   |       |        |                 |   |                   |   |  |   |     | 
|----------------------- |  | ----------------- | ----- |  | ------- | - | ----- | ------ | --------------- | - | ----------------- | - |  | - | --- | 
|                        |  | Accrued Balance   |       |  |         |   |       |        | Accrued Balance |  
|                        |  | December 31, 2002 |       |  | Accrual |   |       | Actual |                 |   | December 31, 2003 |  
|Lease abandonment costs |  | $                 | 2,310 |  |         | $ |      |        |                 | $ | (2,310            | ) |  | $ |    | 
|Product recall costs    |  |                   |      |  |         |   | 2,000 |        |                 |   | (1,510            | ) |  |   | 490 | 
|                        |  |                   |       |  |         |   |       |        |                 |   |                   |  
|Total                   |  | $                 | 2,310 |  |         | $ | 2,000 |        |                 | $ | (3,820            | ) |  | $ | 490 | 
|                        |  |                   |       |  |         |   |       |        |                 |   |                   |  

Profit from Joint Venture.


Interest Net.


Provision for Income Taxes.


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Quarterly Fluctuations and Seasonality






|                                                    |                     |                                       |        |      |         |   |        |         |   |   |         |      |   |         |        |      |         |   |        |         |   |   |         |      |   |         |        |      |         |   |        |         |   |   |         |      |   |   |         |      |   |   |         |      |   |   |         |      |  
|--------------------------------------------------- | ------------------- | ------------------------------------- | ------ | ---- | ------- | - | ------ | ------- | - | - | ------- | ---- | - | ------- | ------ | ---- | ------- | - | ------ | ------- | - | - | ------- | ---- | - | ------- | ------ | ---- | ------- | - | ------ | ------- | - | - | ------- | ---- | - | - | ------- | ---- | - | - | ------- | ---- | - | - | ------- | ---- | -
|                                                    |                     | 2002                                  |        |      | 2003    |   |        | 2004    |  
|                                                    |                     |                                       |        |      |         |   |        |         |  
|                                                    |                     | First                                 |        |      | Second  |   |        | Third   |   |   | Fourth  |      |   | First   |        |      | Second  |   |        | Third   |   |   | Fourth  |      |   | First   |        |      | Second  |   |        | Third   |   |   | Fourth  |     
|                                                    |                     | Quarter                               |        |      | Quarter |   |        | Quarter |   |   | Quarter |      |   | Quarter |        |      | Quarter |   |        | Quarter |   |   | Quarter |      |   | Quarter |        |      | Quarter |   |        | Quarter |   |   | Quarter |     
|                                                    |                     | (In thousands, except per share data) |       
|Net sales                                           |                     |                                       | 59,895 |      |         |   | 78,992 |         |   |   | 102,640 |      |   |         | 68,489 |      |         |   | 67,759 |         |   |   | 73,290  |      |   |         | 90,308 |      |         |   | 84,419 |         |   |   | 73,986  |      |   |   | 109,395 |      |   |   | 206,083 |      |   |   | 184,802 |     
|                                                    | As a % of full year |                                       |        | 19.3 | %       |   |        | 25.5    | % |   |         | 33.1 | % |         |        | 22.1 | %       |   |        | 21.5    | % |   |         | 23.2 | % |         |        | 28.6 | %       |   |        | 26.7    | % |   |         | 12.9 | % |   |         | 19.0 | % |   |         | 35.9 | % |   |         | 32.2 | %
|Gross profit                                        |                     |                                       | 26,470 |      |         |   | 35,192 |         |   |   | 41,812  |      |   |         | 26,369 |      |         |   | 27,442 |         |   |   | 27,906  |      |   |         | 36,226 |      |         |   | 34,868 |         |   |   | 30,466  |      |   |   | 41,281  |      |   |   | 81,801  |      |   |   | 72,459  |     
|                                                    | As a % of full year |                                       |        | 20.4 | %       |   |        | 27.1    | % |   |         | 32.2 | % |         |        | 20.3 | %       |   |        | 21.7    | % |   |         | 22.1 | % |         |        | 28.7 | %       |   |        | 27.6    | % |   |         | 13.5 | % |   |         | 18.3 | % |   |         | 36.2 | % |   |         | 32.1 | %
|                                                    | As a % of net sales |                                       |        | 44.2 | %       |   |        | 44.6    | % |   |         | 40.7 | % |         |        | 38.5 | %       |   |        | 40.5    | % |   |         | 38.1 | % |         |        | 40.1 | %       |   |        | 41.3    | % |   |         | 41.2 | % |   |         | 37.7 | % |   |         | 39.7 | % |   |         | 39.2 | %
|Income (loss) from operations                       |                     |                                       | 1,420  |      |         |   | 7,863  |         |   |   | 16,835  |      |   |         | (1,104 | )    |         |   | 5,960  |         |   |   | 2,522   |      |   |         | 10,480 |      |         |   | (7,573 | )       |   |   | 4,885   |      |   |   | 8,321   |      |   |   | 29,915  |      |   |   | 10,604  |     
|                                                    | As a % of full year |                                       |        | 5.7  | %       |   |        | 31.4    | % |   |         | 67.3 | % |         |        | -4.4 | %       |   |        | 52.3    | % |   |         | 22.1 | % |         |        | 92.0 | %       |   |        | -66.5   | % |   |         | 9.1  | % |   |         | 15.5 | % |   |         | 55.7 | % |   |         | 19.7 | %
|                                                    | As a % of net sales |                                       |        | 2.4  | %       |   |        | 10.0    | % |   |         | 16.4 | % |         |        | -1.6 | %       |   |        | 8.8     | % |   |         | 3.4  | % |         |        | 11.6 | %       |   |        | -9.0    | % |   |         | 6.6  | % |   |         | 7.6  | % |   |         | 14.5 | % |   |         | 5.7  | %
|Income before income taxes and minority interest    |                     |                                       | 2,985  |      |         |   | 8,800  |         |   |   | 17,884  |      |   |         | 4,490  |      |         |   | 6,299  |         |   |   | 2,679   |      |   |         | 10,495 |      |         |   | (2,138 | )       |   |   | 4,764   |      |   |   | 7,637   |      |   |   | 30,042  |      |   |   | 16,649  |     
|                                                    | As a % of net sales |                                       |        | 5.0  | %       |   |        | 11.1    | % |   |         | 17.4 | % |         |        | 6.6  | %       |   |        | 9.3     | % |   |         | 3.7  | % |         |        | 11.6 | %       |   |        | -2.5    | % |   |         | 6.4  | % |   |         | 7.0  | % |   |         | 14.6 | % |   |         | 9.0  | %
|Net income                                          |                     |                                       | 2,156  |      |         |   | 6,973  |         |   |   | 13,085  |      |   |         | 5,717  |      |         |   | 4,988  |         |   |   | 2,236   |      |   |         | 8,248  |      |         |   | 422    |         |   |   | 3,791   |      |   |   | 6,004   |      |   |   | 23,255  |      |   |   | 10,508  |     
|                                                    | As a % of net sales |                                       |        | 3.6  | %       |   |        | 8.8     | % |   |         | 12.7 | % |         |        | 8.3  | %       |   |        | 7.4     | % |   |         | 3.1  | % |         |        | 9.1  | %       |   |        | 0.5     | % |   |         | 5.1  | % |   |         | 5.5  | % |   |         | 11.3 | % |   |         | 5.7  | %
|Diluted earnings per share                          |                     | $                                     | 0.11   |      |         | $ | 0.32   |         |   | $ | 0.54    |      |   | $       | 0.23   |      |         | $ | 0.20   |         |   | $ | 0.09    |      |   | $       | 0.33   |      |         | $ | 0.02   |         |   | $ | 0.15    |      |   | $ | 0.22    |      |   | $ | 0.75    |      |   | $ | 0.36    |     
|Weighted average shares and equivalents outstanding |                     |                                       | 20,236 |      |         |   | 21,953 |         |   |   | 24,059  |      |   |         | 24,800 |      |         |   | 24,917 |         |   |   | 24,683  |      |   |         | 24,629 |      |         |   | 24,642 |         |   |   | 30,676  |      |   |   | 31,123  |      |   |   | 31,919  |      |   |   | 31,855  |     















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Recent Accounting Standards










Liquidity and Capital Resources




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|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       |  |   |         |  |  |   |         | 
|------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ----- |  | ---------- | - | ----- | ----- |  | - | ------- |  |  | - | ------- | 
|                                            |  | 2005 |        |  | 2006 |   |        | 2007 |  |   | 2008   |  |  | 2009 |       |  | Thereafter |   |       | Total | 
|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 
|Long-term debt                              |  | $    |       |  |      | $ |       |      |  | $ |       |  |  | $    |      |  |            | $ |      |       |  | $ | 98,000  |  |  | $ | 98,000  | 
|Operating leases                            |  |      | 6,543  |  |      |   | 5,714  |      |  |   | 4,723  |  |  |      | 2,819 |  |            |   | 2,804 |       |  |   | 6,603   |  |  |   | 29,206  | 
|Minimum guaranteed license/royalty payments |  |      | 13,635 |  |      |   | 8,868  |      |  |   | 1,795  |  |  |      | 1,427 |  |            |   | 1,435 |       |  |   |        |  |  |   | 27,160  | 
|Employment contracts                        |  |      | 5,069  |  |      |   | 4,557  |      |  |   | 4,248  |  |  |      | 2,180 |  |            |   | 2,230 |       |  |   | 2,280   |  |  |   | 20,564  | 
|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 
|Total contractual cash obligations          |  | $    | 25,247 |  |      | $ | 19,139 |      |  | $ | 10,766 |  |  | $    | 6,426 |  |            | $ | 6,469 |       |  | $ | 106,883 |  |  | $ | 174,930 | 
|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 



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inter alia










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Exchange Rates




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Item 7A. Quantitative and Qualitative Disclosures About
Market Risk




Interest Rate Risk




Foreign Currency Risk




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Item 8. Consolidated Financial Statements and
Supplementary Data


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














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| |                             
| | ----------------------------
| | /s/ PKF                     
| |                             
| | PKF                         
| | Certified Public Accountants
| | A Professional Corporation  





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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                       |                                                                                                                                             |                                            |         |         |         |  |         |         |         | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                                       |                                                                                                                                             | December 31,                               |        
|                                       |                                                                                                                                             |                                            |        
|                                       |                                                                                                                                             | 2003                                       |         |         | 2004    | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | (In thousands, except                      |        
|                                       |                                                                                                                                             | share data)                                |        
|Assets                                 |                                                                                                                                             |                                            |         |         |         |  |         |        
|Current assets                         |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Cash and cash equivalents                                                                                                                   |                                            | $       | 118,182 |         |  | $       | 176,544 |        
|                                       | Marketable securities                                                                                                                       |                                            |         | 19,345  |         |  |         | 19,047  |        
|                                       | Accounts receivable, net of allowance for uncollectible accounts
    of $7,877 and $7,058, respectively                                     |                                            |         | 86,120  |         |  |         | 102,266 |        
|                                       | Inventory, net of reserves of $5,025 and $8,042, respectively                                                                               |                                            |         | 44,400  |         |  |         | 50,000  |        
|                                       | Prepaid and other                                                                                                                           |                                            |         | 16,763  |         |  |         | 24,682  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total current assets                       |         |         | 284,810 |  |         |         | 372,539 | 
|Property and equipment                 |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Office furniture and equipment                                                                                                              |                                            |         | 6,563   |         |  |         | 6,823   |        
|                                       | Molds and tooling                                                                                                                           |                                            |         | 34,481  |         |  |         | 28,818  |        
|                                       | Leasehold improvements                                                                                                                      |                                            |         | 2,429   |         |  |         | 2,572   |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total                                      |         |         | 43,473  |  |         |         | 38,213  | 
|                                       | Less accumulated depreciation and amortization                                                                                              |                                            |         | 31,751  |         |  |         | 27,273  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Property and equipment, net                |         |         | 11,722  |  |         |         | 10,940  | 
|Intangibles and other, net             |                                                                                                                                             |                                            | 18,172  |         |         |  | 27,368  |        
|Investment in joint venture            |                                                                                                                                             |                                            | 9,097   |         |         |  | 9,816   |        
|Goodwill, net                          |                                                                                                                                             |                                            | 190,728 |         |         |  | 258,331 |        
|Trademarks, net                        |                                                                                                                                             |                                            | 15,468  |         |         |  | 17,768  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total assets                               |         | $       | 529,997 |  |         | $       | 696,762 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|Liabilities and Stockholders Equity   |                                                                                                                                             |                                            |         |         |         |  |         |        
|Current liabilities                    |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Accounts payable                                                                                                                            |                                            | $       | 31,610  |         |  | $       | 53,643  |        
|                                       | Accrued expenses                                                                                                                            |                                            |         | 10,805  |         |  |         | 55,333  |        
|                                       | Reserve for sales returns and allowances                                                                                                    |                                            |         | 7,753   |         |  |         | 23,173  |        
|                                       | Current portion of long-term debt                                                                                                           |                                            |         | 19      |         |  |         |        |        
|                                       | Income taxes payable                                                                                                                        |                                            |         | 2,021   |         |  |         | 10,847  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total current liabilities                  |         |         | 52,208  |  |         |         | 142,996 | 
|Long-term debt, net of current portion |                                                                                                                                             |                                            | 98,042  |         |         |  | 98,000  |        
|Deferred income taxes                  |                                                                                                                                             |                                            | 1,847   |         |         |  | 4,281   |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total liabilities                          |         |         | 152,097 |  |         |         | 245,277 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|Commitments and contingencies          |                                                                                                                                             |                                            |         |         |         |  |         |        
|Stockholders equity                   |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Preferred shares, $.001 par value; 5,000,000 shares authorized;
    nil outstanding                                                         |                                            |         |        |         |  |         |        |        
|                                       | Common stock, $.001 par value; 100,000,000 shares authorized;
    24,926,826 and 26,234,016 shares issued and outstanding,
    respectively |                                            |         | 25      |         |  |         | 26      |        
|                                       | Additional paid-in capital                                                                                                                  |                                            |         | 246,008 |         |  |         | 276,642 |        
|                                       | Retained earnings                                                                                                                           |                                            |         | 133,005 |         |  |         | 176,564 |        
|                                       | Deferred compensation from restricted stock grants                                                                                          |                                            |         | (789    | )       |  |         |        |        
|                                       | Accumulated other comprehensive loss                                                                                                        |                                            |         | (349    | )       |  |         | (1,747  | )      
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total stockholders equity                 |         |         | 377,900 |  |         |         | 451,485 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total liabilities and stockholders equity |         | $       | 529,997 |  |         | $       | 696,762 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                               |  |                                          |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                               |  | Years Ended December 31,                 |        
|                                                               |  |                                          |        
|                                                               |  | 2002                                     |         |   | 2003 |   |         | 2004 | 
|                                                               |  | (In thousands, except per share amounts) |        
|Net sales                                                      |  | $                                        | 310,016 |   |      | $ | 315,776 |      |  | $ | 574,266 |  
|Cost of sales                                                  |  |                                          | 180,173 |   |      |   | 189,334 |      |  |   | 348,259 |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Gross profit                                                   |  |                                          | 129,843 |   |      |   | 126,442 |      |  |   | 226,007 |  
|Selling, general and administrative expenses                   |  |                                          | 98,111  |   |      |   | 113,053 |      |  |   | 172,282 |  
|Acquisition shut-down and product recall costs                 |  |                                          | 6,718   |   |      |   | 2,000   |      |  |   |        |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Income from operations                                         |  |                                          | 25,014  |   |      |   | 11,389  |      |  |   | 53,725  |  
|Profit from Joint Venture                                      |  |                                          | (8,004  | ) |      |   | (7,351  | )    |  |   | (7,865  | )
|Interest, net                                                  |  |                                          | (1,141  | ) |      |   | 1,405   |      |  |   | 2,498   |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Income before provision for income taxes and minority interest |  |                                          | 34,159  |   |      |   | 17,335  |      |  |   | 59,092  |  
|Provision for income taxes                                     |  |                                          | 6,466   |   |      |   | 1,440   |      |  |   | 15,533  |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Income before minority interest                                |  |                                          | 27,693  |   |      |   | 15,895  |      |  |   | 43,559  |  
|Minority interest                                              |  |                                          | (237    | ) |      |   |        |      |  |   |        |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Net income                                                     |  | $                                        | 27,930  |   |      | $ | 15,895  |      |  | $ | 43,559  |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Basic earnings per share                                       |  | $                                        | 1.27    |   |      | $ | 0.66    |      |  | $ | 1.69    |  
|                                                               |  |                                          |         |   |      |   |         |      | 
|Diluted earnings per share                                     |  | $                                        | 1.23    |   |      | $ | 0.64    |      |  | $ | 1.49    |  
|                                                               |  |                                          |         |   |      |   |         |      | 

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME


|                                        |  |                          |        |  |      |   |        |      |  |   |        |  
|--------------------------------------- |  | ------------------------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ | -
|                                        |  | Years Ended December 31, |       
|                                        |  |                          |       
|                                        |  | 2002                     |        |  | 2003 |   |        | 2004 | 
|                                        |  |                          |        |  |      |   |        |      | 
|                                        |  | (In thousands)           |       
|Other comprehensive income:             |  |                          |        |  |      |   |        |      |  |   |        |  
|Net income                              |  | $                        | 27,930 |  |      | $ | 15,895 |      |  | $ | 43,559 |  
|Foreign currency translation adjustment |  |                          |       |  |      |   | (349   | )    |  |   | (1,398 | )
|                                        |  |                          |        |  |      |   |        |      | 
|Other comprehensive income              |  | $                        | 27,930 |  |      | $ | 15,546 |      |  | $ | 42,161 |  
|                                        |  |                          |        |  |      |   |        |      | 

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


DECEMBER 31, 2002, 2003 AND 2004


(In thousands)


|                                                       |  |              |        |   |            |   |         |         |  |          |              |      |          |             |         |            |              |       |               |      |  |               |        |   |  |   |        |   |  |   |         |  
|------------------------------------------------------ |  | ------------ | ------ | - | ---------- | - | ------- | ------- |  | -------- | ------------ | ---- | -------- | ----------- | ------- | ---------- | ------------ | ----- | ------------- | ---- |  | ------------- | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                                       |  |              |        |   |            |   |         |         |  | Deferred |              |      |          |             |        
|                                                       |  | Common Stock |        |   |            |   |         |         |  |          | Compensation |      |          | Accumulated |         |            |             
|                                                       |  |              |        |   | Additional |   |         |         |  |          |              | From |          |             | Other   |            |              | Total |              
|                                                       |  | Number       |        |   |            |   | Paid-in |         |  | Treasury |              |      | Retained |             |         | Restricted |              |       | Comprehensive |      |  | Stockholders |       
|                                                       |  | of Shares    |        |   | Amount     |   |         | Capital |  |          | Stock        |      |          | Earnings    |         |            | Stock Grants |       |               | Loss |  |               | Equity |  
|                                                       |  |              |        |   |            |   |         |         |  |          |              |      |          |             |         |            |              |       |               |      |  |               |        |  
|Balance, December 31, 2001                             |  |              | 18,827 |   |            | $ | 20      |         |  | $        | 168,115      |      |          | $           | (12,911 | )          |              | $     | 89,180        |      |  | $             |       |   |  | $ |       |   |  | $ | 244,404 |  
|Exercise of options and warrants                       |  |              | 955    |   |            |   | 1       |         |  |          | 5,883        |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 5,884   |  
|Compensation for fully vested stock options            |  |              |       |   |            |   |        |         |  |          | (1,308       | )    |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | (1,308  | )
|Retirement of treasury stock                           |  |              |       |   |            |   | (1      | )       |  |          | (12,910      | )    |          |             | 12,911  |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   |        |  
|Fair value of outstanding stock options in acquisition |  |              |       |   |            |   |        |         |  |          | 3,151        |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 3,151   |  
|Issuance of common stock for cash                      |  |              | 3,525  |   |            |   | 3       |         |  |          | 59,091       |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 59,094  |  
|Issuance of common stock for Toymax                    |  |              | 1,166  |   |            |   | 1       |         |  |          | 18,080       |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 18,081  |  
|Net income                                             |  |              |       |   |            |   |        |         |  |          |             |      |          |             |        |            |              |       | 27,930        |      |  |               |       |   |  |   |       |   |  |   | 27,930  |  
|                                                       |  |              |        |   |            |   |         |         |  |          |              |      |          |             |         |            |              |       |               |      |  |               |        |  
|Balance, December 31, 2002                             |  |              | 24,473 |   |            |   | 24      |         |  |          | 240,102      |      |          |             |        |            |              |       | 117,110       |      |  |               |       |   |  |   |       |   |  |   | 357,236 |  
|Exercise of options                                    |  |              | 312    |   |            |   |        |         |  |          | 1,777        |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 1,777   |  
|Restricted stock grants                                |  |              | 696    |   |            |   | 1       |         |  |          | 9,152        |      |          |             |        |            |              |       |              |      |  |               | (789   | ) |  |   |       |   |  |   | 8,364   |  
|Issuance of warrants                                   |  |              |       |   |            |   |        |         |  |          | 1,057        |      |          |             |        |            |              |       |              |      |  |               |        |   |  |   |       |   |  |   | 1,057   |  
|Compensation for fully vested stock options            |  |              |       |   |            |   |        |         |  |          | 6            |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 6       |  
|Repurchase and retirement of common stock              |  |              | (554   | ) |            |   |        |         |  |          | (6,086       | )    |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | (6,086  | )
|Net income                                             |  |              |       |   |            |   |        |         |  |          |             |      |          |             |        |            |              |       | 15,895        |      |  |               |       |   |  |   |       |   |  |   | 15,895  |  
|Foreign currency translation adjustment                |  |              |       |   |            |   |        |         |  |          |             |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   | (349   | ) |  |   | (349    | )
|                                                       |  |              |        |   |            |   |         |         |  |          |              |      |          |             |         |            |              |       |               |      |  |               |        |  
|Balance, December 31, 2003                             |  |              | 24,927 |   |            |   | 25      |         |  |          | 246,008      |      |          |             |        |            |              |       | 133,005       |      |  |               | (789   | ) |  |   | (349   | ) |  |   | 377,900 |  
|Exercise of options                                    |  |              | 192    |   |            |   |        |         |  |          | 1,699        |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 1,699   |  
|Stock option income tax benefit                        |  |              |       |   |            |   |        |         |  |          | 739          |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 739     |  
|Restricted stock grants                                |  |              | 340    |   |            |   |        |         |  |          | 7,487        |      |          |             |        |            |              |       |              |      |  |               | 789    |   |  |   |       |   |  |   | 8,276   |  
|Compensation for fully vested stock options            |  |              |       |   |            |   |        |         |  |          | 5,365        |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 5,365   |  
|Issuance of common stock for Play Along                |  |              | 749    |   |            |   | 1       |         |  |          | 14,850       |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 14,851  |  
|Issuance of common stock for Kidz Biz earn-out         |  |              | 26     |   |            |   |        |         |  |          | 494          |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   |       |   |  |   | 494     |  
|Net income                                             |  |              |       |   |            |   |        |         |  |          |             |      |          |             |        |            |              |       | 43,559        |      |  |               |       |   |  |   |       |   |  |   | 43,559  |  
|Foreign currency translation adjustment                |  |              |       |   |            |   |        |         |  |          |             |      |          |             |        |            |              |       |              |      |  |               |       |   |  |   | (1,398 | ) |  |   | (1,398  | )
|                                                       |  |              |        |   |            |   |         |         |  |          |              |      |          |             |         |            |              |       |               |      |  |               |        |  
|Balance, December 31, 2004                             |  |              | 26,234 |   |            | $ | 26      |         |  | $        | 276,642      |      |          | $           |        |            |              | $     | 176,564       |      |  | $             |       |   |  | $ | (1,747 | ) |  | $ | 451,485 |  
|                                                       |  |              |        |   |            |   |         |         |  |          |              |      |          |             |         |            |              |       |               |      |  |               |        |  

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |        |         |         |         |        |        |         |  
|-------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------ | ------- | -
|                                             |                                                                                      | Years Ended December 31,                    |                                             
|                                             |                                                                                      |                                             |                                             
|                                             |                                                                                      | 2002                                        |                                              |                                           | 2003   |         |         | 2004    |       
|                                             |                                                                                      | (In thousands)                              |                                             
|Cash flows from operating activities         |                                                                                      |                                             |                                              |                                           |        |         |         |         |        |         |         |        
|                                             | Net income                                                                           |                                             | $                                            | 27,930                                    |        |         | $       | 15,895  |        |         | $       | 43,559  |       
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|                                             | Adjustments to reconcile net income to net cash provided by
    operating activities |                                             |                                              |                                           |        |         |         |         |        |         |         |         |       
|                                             |                                                                                      | Depreciation and amortization               |                                              |                                           | 15,456 |         |         |         | 16,029 |         |         |         | 21,518 |       
|                                             |                                                                                      | Compensation for fully vested stock options |                                              |                                           | (1,308 | )       |         |         | 6      |         |         |         | 5,365  |       
|                                             |                                                                                      | Acquisition Earn-out                        |                                              |                                           |       |         |         |         |       |         |         |         | 494    |       
|                                             |                                                                                      | Investment in joint venture                 |                                              |                                           | (225   | )       |         |         | 79     |         |         |         | (719   | )     
|                                             |                                                                                      | Loss on disposal of property and equipment  |                                              |                                           |       |         |         |         |       |         |         |         | 1,096  |       
|                                             |                                                                                      | Forgiveness of officer note receivable      |                                              |                                           | 285    |         |         |         |       |         |         |         |       |       
|                                             |                                                                                      | Restricted stock compensation               |                                              |                                           |       |         |         |         | 8,364  |         |         |         | 8,276  |       
|                                             |                                                                                      | Minority interest                           |                                              |                                           | (237   | )       |         |         |       |         |         |         |       |       
|                                             |                                                                                      | Changes in operating assets and liabilities |                                              |                                           |        |         |         |         |        |         |         |         |        |       
|                                             |                                                                                      |                                             | Net sale (purchase) of marketable securities |                                           |        | 37,119  |         |         |        |        |         |         |        |       |        
|                                             |                                                                                      |                                             | Accounts receivable                          |                                           |        | (3,307  | )       |         |        | (28,224 | )       |         |        | (4,333 | )      
|                                             |                                                                                      |                                             | Inventory                                    |                                           |        | (10,996 | )       |         |        | (2,654  | )       |         |        | 784    |        
|                                             |                                                                                      |                                             | Prepaid expenses and other                   |                                           |        | 507     |         |         |        | (5,643  | )       |         |        | (3,613 | )      
|                                             |                                                                                      |                                             | Accounts payable                             |                                           |        | (3,698  | )       |         |        | 16,264  |         |         |        | 19,192 |        
|                                             |                                                                                      |                                             | Accrued expenses                             |                                           |        | (9,534  | )       |         |        | (3,259  | )       |         |        | 19,742 |        
|                                             |                                                                                      |                                             | Income taxes payable                         |                                           |        | 7,056   |         |         |        | (1,397  | )       |         |        | 5,945  |        
|                                             |                                                                                      |                                             | Reserve for sales returns and allowances     |                                           |        | 8,626   |         |         |        | (5,827  | )       |         |        | 13,289 |        
|                                             |                                                                                      |                                             | Deferred income taxes                        |                                           |        | 3,879   |         |         |        | (2,240  | )       |         |        | 795    |        
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|                                             |                                                                                      |                                             |                                              | Total adjustments                         |        |         | 43,623  |         |        |         | (8,502  | )       |        |        | 87,831  |  
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|                                             |                                                                                      |                                             |                                              | Net cash provided by operating activities |        |         | 71,553  |         |        |         | 7,393   |         |        |        | 131,390 |  
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|Cash flows from investing activities         |                                                                                      |                                             |                                              |                                           |        |         |         |         |        |         |         |        
|                                             | Purchases of property and equipment                                                  |                                             |                                              | (6,594                                    | )      |         |         | (4,472  | )      |         |         | (5,917  | )     
|                                             | Purchases of other assets                                                            |                                             |                                              | (21,159                                   | )      |         |         | (4,936  | )      |         |         | (26,863 | )     
|                                             | Cash paid for net assets                                                             |                                             |                                              | (66,232                                   | )      |         |         | (19,676 | )      |         |         | (41,438 | )     
|                                             | Net (purchases) sales of marketable securities                                       |                                             |                                              |                                          |        |         |         | (19,345 | )      |         |         | 967     |       
|                                             | Notes receivable  officers                                                          |                                             |                                              | 861                                       |        |         |         | 1,113   |        |         |         |        |       
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|                                             |                                                                                      |                                             |                                              | Net cash used by investing activities     |        |         | (93,124 | )       |        |         | (47,316 | )       |        |        | (73,251 | )
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|Cash flows from financing activities         |                                                                                      |                                             |                                              |                                           |        |         |         |         |        |         |         |        
|                                             | Proceeds from sale of common stock                                                   |                                             |                                              | 59,094                                    |        |         |         |        |        |         |         |        |       
|                                             | Repurchase of common stock                                                           |                                             |                                              |                                          |        |         |         | (6,086  | )      |         |         |        |       
|                                             | Proceeds from stock options and warrants exercised                                   |                                             |                                              | 5,884                                     |        |         |         | 1,777   |        |         |         | 1,682   |       
|                                             | Net proceeds from sale of convertible notes                                          |                                             |                                              |                                          |        |         |         | 94,366  |        |         |         |        |       
|                                             | Repayments of debt                                                                   |                                             |                                              | (30                                       | )      |         |         | (16     | )      |         |         | (61     | )     
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|                                             |                                                                                      |                                             |                                              | Net cash provided by financing activities |        |         | 64,948  |         |        |         | 90,041  |         |        |        | 1,621   |  
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|Foreign currency translation adjustment      |                                                                                      |                                             |                                             |                                           |        |         | (349    | )       |        |         | (1,398  | )      
|Net increase in cash and cash equivalents    |                                                                                      |                                             | 43,377                                       |                                           |        |         | 49,769  |         |        |         | 58,362  |        
|Cash and cash equivalents, beginning of year |                                                                                      |                                             | 25,036                                       |                                           |        |         | 68,413  |         |        |         | 118,182 |        
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|Cash and cash equivalents, end of year       |                                                                                      | $                                           | 68,413                                       |                                           |        | $       | 118,182 |         |        | $       | 176,544 |        
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|Cash paid during the period for:             |                                                                                      |                                             |                                              |                                           |        |         |         |         |        |         |         |        
|                                             | Interest                                                                             |                                             | $                                            | 80                                        |        |         | $       | 2,375   |        |         | $       | 4,534   |       
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       
|                                             | Income taxes                                                                         |                                             | $                                            | 3,235                                     |        |         | $       | 9,694   |        |         | $       | 2,688   |       
|                                             |                                                                                      |                                             |                                              |                                           |        |         |         |         |       



See notes to consolidated financial statements.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2004


Note 1Principal Industry






Note 2Summary of Significant Accounting Policies


Principles of consolidation




Cash and cash equivalents




Use of estimates




Revenue recognition








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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


DECEMBER 31, 2004


Inventory




|               |  |              |        |  |      |   |        | 
|-------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|               |  | December 31, |       
|               |  |              |       
|               |  | 2003         |        |  | 2004 |  
|Raw materials  |  | $            | 1,033  |  |      | $ | 1,557  | 
|Finished goods |  |              | 43,367 |  |      |   | 48,443 | 
|               |  |              |        |  |      |  
|               |  | $            | 44,400 |  |      | $ | 50,000 | 
|               |  |              |        |  |      |  

Marketable securities




Fair value of financial instruments




Property and equipment




|                       |  |  |                                        | 
|---------------------- |  |  | -------------------------------------- | 
|Office equipment       |  |  | 5 years                                | 
|Automobiles            |  |  | 5 years                                | 
|Furniture and fixtures |  |  | 5 - 7 years                            | 
|Molds and tooling      |  |  | 2 - 4 years                            | 
|Leasehold improvements |  |  | Shorter of length of lease or 10 years | 

Shipping and handling costs




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


DECEMBER 31, 2004


Advertising






Income taxes




Translation of foreign currencies






Accounting for the impairment of long-lived assets




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


DECEMBER 31, 2004


Goodwill and other intangible assets








Stock Option Plans






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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


DECEMBER 31, 2004




|                                                                                                                                             |  |                         |        |   |      |   |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                             |  | Year Ended December 31, |       
|                                                                                                                                             |  |                         |       
|                                                                                                                                             |  | 2002                    |        |   | 2003 |   |        | 2004 | 
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|                                                                                                                                             |  | (In thousands,          |       
|                                                                                                                                             |  | except per share data)  |       
|Net income, as reported                                                                                                                      |  | $                       | 27,930 |   |      | $ | 15,895 |      |  | $ | 43,559 |  
|Add (Deduct): Stock-based employee compensation expense (income)
    included in reported net income net of related tax effects              |  |                         | (1,061 | ) |      |   | 5      |      |  |   | 3,970  |  
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards net of related
    tax effects |  |                         | (2,034 | ) |      |   | (2,796 | )    |  |   | (2,999 | )
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Pro forma net income                                                                                                                         |  | $                       | 24,835 |   |      | $ | 13,104 |      |  | $ | 44,530 |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Earnings per share:                                                                                                                          |  |                         |        |   |      |   |        |      |  |   |        |  
|Basic  as reported                                                                                                                          |  | $                       | 1.27   |   |      | $ | 0.66   |      |  | $ | 1.69   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Basic  pro forma                                                                                                                            |  | $                       | 1.13   |   |      | $ | 0.54   |      |  | $ | 1.73   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Diluted  as reported                                                                                                                        |  | $                       | 1.23   |   |      | $ | 0.66   |      |  | $ | 1.49   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Diluted  pro forma                                                                                                                          |  | $                       | 1.09   |   |      | $ | 0.55   |      |  | $ | 1.52   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 

Earnings per share




|                                                               |  |        |        |          |        |  |        |           |  |   |      | 
|-------------------------------------------------------------- |  | ------ | ------ | -------- | ------ |  | ------ | --------- |  | - | ---- | 
|                                                               |  | 2002   |       
|                                                               |  |        |       
|                                                               |  |        |        | Weighted |        |  |       
|                                                               |  |        |        | Average  |        |  |       
|                                                               |  | Income |        |          | Shares |  |        | Per Share | 
|Basic EPS                                                      |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders                        |  | $      | 27,930 |          |        |  | 21,963 |           |  | $ | 1.27 | 
|                                                               |  |        |        |          |        |  |        |           | 
|Effect of dilutive securities                                  |  |        |        |          |        |  |        |           |  |   |      | 
|Options and warrants                                           |  |        |       |          |        |  | 784    |           |  |   |      | 
|                                                               |  |        |        |          |        |  |        |           | 
|Diluted EPS                                                    |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders plus assumed exercises |  | $      | 27,930 |          |        |  | 22,747 |           |  | $ | 1.23 | 
|                                                               |  |        |        |          |        |  |        |           | 

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DECEMBER 31, 2004


|                                                               |  |        |        |          |        |  |        |           |  |   |      | 
|-------------------------------------------------------------- |  | ------ | ------ | -------- | ------ |  | ------ | --------- |  | - | ---- | 
|                                                               |  | 2003   |       
|                                                               |  |        |       
|                                                               |  |        |        | Weighted |        |  |       
|                                                               |  |        |        | Average  |        |  |       
|                                                               |  | Income |        |          | Shares |  |        | Per Share | 
|Basic EPS                                                      |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders                        |  | $      | 15,895 |          |        |  | 24,262 |           |  | $ | 0.66 | 
|                                                               |  |        |        |          |        |  |        |           | 
|Effect of dilutive securities                                  |  |        |        |          |        |  |        |           |  |   |      | 
|Convertible senior notes payable                               |  |        | 2,114  |          |        |  | 2,760  |           |  |   |      | 
|Options and warrants                                           |  |        |       |          |        |  | 415    |           |  |   |      | 
|                                                               |  |        |        |          |        |  |        |           | 
|Diluted EPS                                                    |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders plus assumed exercises |  | $      | 18,009 |          |        |  | 27,437 |           |  | $ | 0.66 | 
|                                                               |  |        |        |          |        |  |        |           | 

|                                                               |  |        |        |          |        |  |        |           |  |   |      | 
|-------------------------------------------------------------- |  | ------ | ------ | -------- | ------ |  | ------ | --------- |  | - | ---- | 
|                                                               |  | 2004   |       
|                                                               |  |        |       
|                                                               |  |        |        | Weighted |        |  |       
|                                                               |  |        |        | Average  |        |  |       
|                                                               |  | Income |        |          | Shares |  |        | Per Share | 
|Basic EPS                                                      |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders                        |  | $      | 43,559 |          |        |  | 25,797 |           |  | $ | 1.69 | 
|                                                               |  |        |        |          |        |  |        |           | 
|Effect of dilutive securities                                  |  |        |        |          |        |  |        |           |  |   |      | 
|Convertible senior notes payable                               |  |        | 3,354  |          |        |  | 4,900  |           |  |   |      | 
|Options and warrants                                           |  |        |       |          |        |  | 709    |           |  |   |      | 
|                                                               |  |        |        |          |        |  |        |           | 
|Diluted EPS                                                    |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders plus assumed exercises |  | $      | 46,913 |          |        |  | 31,406 |           |  | $ | 1.49 | 
|                                                               |  |        |        |          |        |  |        |           | 



Recent Accounting
Standards




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DECEMBER 31, 2004








Reclassifications




Note 3Business Segments, Geographic Data, Sales by
Product Group, and Major Customers




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DECEMBER 31, 2004










|                   |  |                         |         |  |      |   |         |      |  |   |         | 
|------------------ |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                   |  | Year Ended December 31, |        
|                   |  |                         |        
|                   |  | 2002                    |         |  | 2003 |   |         | 2004 | 
|                   |  |                         |         |  |      |   |         |      | 
|Net Sales          |  |                         |         |  |      |   |         |      |  |   |         | 
|North America Toys |  | $                       | 263,314 |  |      | $ | 272,317 |      |  | $ | 521,292 | 
|International      |  |                         | 46,251  |  |      |   | 43,424  |      |  |   | 52,805  | 
|Other              |  |                         | 451     |  |      |   | 35      |      |  |   | 169     | 
|                   |  |                         |         |  |      |   |         |      | 
|                   |  | $                       | 310,016 |  |      | $ | 315,776 |      |  | $ | 574,266 | 
|                   |  |                         |         |  |      |   |         |      | 

|                   |  |                         |        |  |      |   |        |      |  |   |        | 
|------------------ |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                   |  | Year Ended December 31, |       
|                   |  |                         |       
|                   |  | 2002                    |        |  | 2003 |   |        | 2004 | 
|                   |  |                         |        |  |      |   |        |      | 
|Operating Income   |  |                         |        |  |      |   |        |      |  |   |        | 
|North America Toys |  | $                       | 21,246 |  |      | $ | 9,821  |      |  | $ | 48,770 | 
|International      |  |                         | 3,732  |  |      |   | 1,566  |      |  |   | 4,940  | 
|Other              |  |                         | 36     |  |      |   | 2      |      |  |   | 15     | 
|                   |  |                         |        |  |      |   |        |      | 
|                   |  | $                       | 25,014 |  |      | $ | 11,389 |      |  | $ | 53,725 | 
|                   |  |                         |        |  |      |   |        |      | 

|                   |  |              |         |  |      |   |         | 
|------------------ |  | ------------ | ------- |  | ---- | - | ------- | 
|                   |  | December 31, |        
|                   |  |              |        
|                   |  | 2003         |         |  | 2004 |  
|                   |  |              |         |  |      |  
|Assets             |  |              |         |  |      |   |         | 
|North America Toys |  | $            | 457,056 |  |      | $ | 632,489 | 
|International      |  |              | 72,884  |  |      |   | 64,069  | 
|Other              |  |              | 57      |  |      |   | 204     | 
|                   |  |              |         |  |      |  
|                   |  | $            | 529,997 |  |      | $ | 696,762 | 
|                   |  |              |         |  |      |  

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DECEMBER 31, 2004




|                  |  |              |         |  |      |   |         | 
|----------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                  |  | December 31, |        
|                  |  |              |        
|                  |  | 2003         |         |  | 2004 |  
|                  |  |              |         |  |      |  
|Long-lived Assets |  |              |         |  |      |   |         | 
|United States     |  | $            | 197,751 |  |      | $ | 278,734 | 
|Hong Kong         |  |              | 32,382  |  |      |   | 30,484  | 
|Europe            |  |              | 4,011   |  |      |   | 2,783   | 
|                  |  |              |         |  |      |  
|                  |  | $            | 234,144 |  |      | $ | 312,001 | 
|                  |  |              |         |  |      |  

|                             |  |                         |         |  |      |   |         |      |  |   |         | 
|---------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                             |  | Year Ended December 31, |        
|                             |  |                         |        
|                             |  | 2002                    |         |  | 2003 |   |         | 2004 | 
|                             |  |                         |         |  |      |   |         |      | 
|Net Sales by Geographic Area |  |                         |         |  |      |   |         |      |  |   |         | 
|United States                |  | $                       | 256,799 |  |      | $ | 271,051 |      |  | $ | 505,803 | 
|Europe                       |  |                         | 39,414  |  |      |   | 35,547  |      |  |   | 37,700  | 
|Canada                       |  |                         | 6,966   |  |      |   | 5,125   |      |  |   | 15,658  | 
|Hong Kong                    |  |                         | 324     |  |      |   | 1,275   |      |  |   | 4,410   | 
|Other                        |  |                         | 6,513   |  |      |   | 2,778   |      |  |   | 10,695  | 
|                             |  |                         |         |  |      |   |         |      | 
|                             |  | $                       | 310,016 |  |      | $ | 315,776 |      |  | $ | 574,266 | 
|                             |  |                         |         |  |      |   |         |      | 

|                                  |  |                         |         |  |      |   |         |      |  |   |         | 
|--------------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                  |  | Year Ended December 31, |        
|                                  |  |                         |        
|                                  |  | 2002                    |         |  | 2003 |   |         | 2004 | 
|                                  |  |                         |         |  |      |   |         |      | 
|Net Sales by Product Group        |  |                         |         |  |      |   |         |      |  |   |         | 
|Traditional Toys                  |  | $                       | 103,429 |  |      | $ | 106,963 |      |  | $ | 406,023 | 
|Craft/Activities/Writing Products |  |                         | 153,370 |  |      |   | 164,087 |      |  |   | 99,779  | 
|Seasonal Products                 |  |                         | 53,217  |  |      |   | 44,726  |      |  |   | 68,464  | 
|                                  |  |                         |         |  |      |   |         |      | 
|                                  |  | $                       | 310,016 |  |      | $ | 315,776 |      |  | $ | 574,266 | 
|                                  |  |                         |         |  |      |   |         |      | 

Major Customers




|             |  |        |         |            |              |  |      |        |            |   |              |  |  |            |      |   |              |   |         |  |  |  |      |  
|------------ |  | ------ | ------- | ---------- | ------------ |  | ---- | ------ | ---------- | - | ------------ |  |  | ---------- | ---- | - | ------------ | - | ------- |  |  |  | ---- | -
|             |  | 2002   |         |            | 2003         |  |      | 2004   |           
|             |  |        |         |            |              |  |      |        |           
|             |  |        |         | Percentage |              |  |      |        | Percentage |   |              |  |  | Percentage |     
|             |  | Amount |         |            | of Net Sales |  |      | Amount |            |   | of Net Sales |  |  | Amount     |      |   | of Net Sales |  
|Wal-Mart     |  | $      | 46,396  |            |              |  | 15.0 | %      |            | $ | 91,378       |  |  |            | 28.9 | % |              | $ | 193,776 |  |  |  | 33.7 | %
|Target       |  |        | 34,018  |            |              |  | 11.0 |        |            |   | 30,371       |  |  |            | 9.6  |   |              |   | 74,429  |  |  |  | 13.0 |  
|Toys R Us  |  |        | 41,506  |            |              |  | 13.4 |        |            |   | 30,009       |  |  |            | 9.5  |   |              |   | 68,279  |  |  |  | 11.9 |  
|Kmart        |  |        | 34,773  |            |              |  | 11.2 |        |            |   | 17,996       |  |  |            | 5.7  |   |              |   | 27,274  |  |  |  | 4.8  |  
|Kay Bee Toys |  |        | 16,077  |            |              |  | 5.1  |        |            |   | 12,670       |  |  |            | 4.0  |   |              |   | 12,756  |  |  |  | 2.2  |  
|             |  |        |         |            |              |  |      |        |            |   |              |  |  |            |      |   |              |  
|             |  | $      | 172,770 |            |              |  | 55.7 | %      |            | $ | 182,424      |  |  |            | 57.7 | % |              | $ | 376,514 |  |  |  | 65.6 | %
|             |  |        |         |            |              |  |      |        |            |   |              |  |  |            |      |   |              |  

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DECEMBER 31, 2004




Note 4  Acquisitions and Joint Venture










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DECEMBER 31, 2004












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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


DECEMBER 31, 2004




|                      |                                       |     |        |        |            |   |        |         |   |   |         |         |  
|--------------------- | ------------------------------------- | --- | ------ | ------ | ---------- | - | ------ | ------- | - | - | ------- | ------- | -
|                      |                                       | P&M |        |        | Play Along |   |        | Total   |  
|                      |                                       |     |        |        |            |   |        |         |  
|Estimated fair value: |                                       |     |        |        |            |   |        |         |   |   |         |        
|                      | Current assets                        |     | $      | 5,616  |            |   | $      | 24,063  |   |   | $       | 29,679  |  
|                      | Property and equipment, net           |     |        | 17     |            |   |        | 546     |   |   |         | 563     |  
|                      | Other assets                          |     |        | 11     |            |   |        | 3,184   |   |   |         | 3,195   |  
|                      | Liabilities assumed                   |     |        | (1,378 | )          |   |        | (31,995 | ) |   |         | (33,373 | )
|                      | Intangible assets other than goodwill |     |        | 2,900  |            |   |        | 22,100  |   |   |         | 25,000  |  
|                      | Goodwill                              |     |        | 13,541 |            |   |        | 67,788  |   |   |         | 81,329  |  
|                      |                                       |     |        |        |            |   |        |         |  
|                      |                                       | $   | 20,707 |        |            | $ | 85,686 |         |   | $ | 106,393 |        
|                      |                                       |     |        |        |            |   |        |         |  





|                                                    |  |                           |         |  |      |   |         |  |  | 
|--------------------------------------------------- |  | ------------------------- | ------- |  | ---- | - | ------- |  |  | 
|                                                    |  | Year Ended                |        
|                                                    |  | December 31,              |        
|                                                    |  |                           |        
|                                                    |  | 2003                      |         |  | 2004 |  
|                                                    |  | (In thousands, except per |        
|                                                    |  | share data)               |        
|Net Sales                                           |  | $                         | 326,105 |  |      | $ | 618,952 | 
|Net income                                          |  | $                         | 13,693  |  |      | $ | 44,391  | 
|Basic earnings per share                            |  | $                         | 0.56    |  |      | $ | 1.69    | 
|Weighted average shares outstanding                 |  |                           | 24,262  |  |      |   | 26,239  | 
|Diluted earnings per share                          |  | $                         | 0.55    |  |      | $ | 1.65    | 
|Weighted average shares and equivalents outstanding |  |                           | 24,677  |  |      |   | 26,947  | 

Note 5Concentration of Credit Risk






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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


DECEMBER 31, 2004




Note 6Accrued Expenses




|                                |  |      |        |  |      |   |        | 
|------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                |  | 2003 |        |  | 2004 |  
|Royalties and sales commissions |  | $    | 5,043  |  |      | $ | 20,527 | 
|Bonuses                         |  |      | 1,357  |  |      |   | 9,720  | 
|Acquisition earnout             |  |      |       |  |      |   | 10,000 | 
|Other                           |  |      | 4,405  |  |      |   | 15,086 | 
|                                |  |      |        |  |      |  
|                                |  | $    | 10,805 |  |      | $ | 55,333 | 
|                                |  |      |        |  |      |  

Note 7Related Party Transactions




Note 8Long-term Debt




|                                                                                                                                 |  |      |        |   |      |   |        | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | 
|                                                                                                                                 |  | 2003 |        |   | 2004 |  
|Convertible senior notes(1)                                                                                                      |  | $    | 98,000 |   |      | $ | 98,000 | 
|Loan payable, due in sixty monthly payments with the final
    payment due December 4, 2006, with interest at 6.7% per
    annum |  |      | 61     |   |      |   |       | 
|                                                                                                                                 |  |      |        |   |      |  
|                                                                                                                                 |  |      | 98,061 |   |      |   | 98,000 | 
|Less current portion of long-term debt                                                                                           |  |      | (19    | ) |      |   |       | 
|                                                                                                                                 |  |      |        |   |      |  
|Long-term debt, net of current portion                                                                                           |  | $    | 98,042 |   |      | $ | 98,000 | 
|                                                                                                                                 |  |      |        |   |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to the terms of a Purchase Agreement, dated
    June 9, 2003, the Company sold an aggregate of
    $98.0 million of 4.625% Convertible Senior Notes due
    June 15, 2023. The holders of the notes may convert the
    notes into shares of the Companys common stock at any time
    at an initial conversion price of $20.00 per share, subject to
    certain circumstances described in the notes. The Company will
    pay cash interest on the notes at an annual rate of 4.625% of
    the principal amount at issuance, from the issue date to
    June 15, 2010, payable on June 15 and December 15
    of each year, commencing on December 15, 2003. After
    June 15, 2010, the Company will not pay cash interest on
    the notes. At maturity, on June 15, 2023, the Company will
    redeem the notes at their accreted principal amount, which will
    be equal to $1,811.95 (181.195%) per $1,000 principal amount at
    issuance.

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DECEMBER 31, 2004




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company may redeem the notes at its option in whole or in
    part beginning on June 15, 2010, at 100% of their accreted
    principal amount plus accrued and unpaid interest (including
    contingent interest and additional amounts), if any, payable in
    cash. Holders of the notes may also require the Company to
    repurchase all or part of their notes on June 15, 2010, for
    cash, at a repurchase price of 100% of the principal amount per
    note plus accrued and unpaid interest (including contingent
    interest and additional amounts), if any. Holders of the notes
    may also require the Company to repurchase all or part of their
    notes on June 15, 2013 and June 15, 2018 at a
    repurchase price of 100% of the accreted principal amount per
    note plus accrued and unpaid interest (including contingent
    interest and additional amounts), if any. Any repurchases at
    June 15, 2013 and June 15, 2018 may be paid in cash,
    in shares of common stock or a combination of cash and shares of
    common stock.



|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ |       | 
|2006       |  |   |       | 
|2007       |  |   |       | 
|2008       |  |   |       | 
|2009       |  |   |       | 
|Thereafter |  |   | 98,000 | 
|           |  |   |       
|           |  | $ | 98,000 | 
|           |  |   |       

Note 9Income Taxes




|                |  |      |        |   |      |   |        |      |  |   |        | 
|--------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | 
|                |  | 2002 |        |   | 2003 |   |        | 2004 | 
|Federal         |  | $    | 2,241  |   |      | $ | 608    |      |  | $ | 696    | 
|State and local |  |      | 270    |   |      |   | 55     |      |  |   | 1,088  | 
|Foreign         |  |      | 6,105  |   |      |   | 3,017  |      |  |   | 12,954 | 
|                |  |      |        |   |      |   |        |      | 
|                |  |      | 8,616  |   |      |   | 3,680  |      |  |   | 14,738 | 
|Deferred        |  |      | (2,150 | ) |      |   | (2,240 | )    |  |   | 795    | 
|                |  |      |        |   |      |   |        |      | 
|                |  | $    | 6,466  |   |      | $ | 1,440  |      |  | $ | 15,533 | 
|                |  |      |        |   |      |   |        |      | 

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|                                            |                                                  |      |       |        |      |   |       |        |  
|------------------------------------------- | ------------------------------------------------ | ---- | ----- | ------ | ---- | - | ----- | ------ | -
|                                            |                                                  | 2003 |       |        | 2004 |  
|Net deferred tax assets/(liabilities):      |                                                  |      |       |        |      |   |       |       
|Current:                                    |                                                  |      |       |        |      |   |       |       
|                                            | Reserve for sales allowances and possible losses |      | $     | 1,114  |      |   | $     | 1,940  |  
|                                            | Accrued expenses                                 |      |       | 182    |      |   |       | 1,044  |  
|                                            | Restricted stock grant                           |      |       | 3,094  |      |   |       | 136    |  
|                                            | Foreign tax credit, net of valuation             |      |       |       |      |   |       | 2,166  |  
|                                            | Other                                            |      |       | 132    |      |   |       | 875    |  
|                                            |                                                  |      |       |        |      |  
|                                            |                                                  |      |       | 4,522  |      |   |       | 6,161  |  
|                                            |                                                  |      |       |        |      |  
|Long Term:                                  |                                                  |      |       |        |      |   |       |       
|                                            | Undistributed earnings                           |      |       | (7,191 | )    |   |       | (7,191 | )
|                                            | Property and equipment                           |      |       | (1,088 | )    |   |       | (983   | )
|                                            | Original issue discount interest                 |      |       | (925   | )    |   |       | (2,761 | )
|                                            | Deductible goodwill                              |      |       | (2,783 | )    |   |       | (2,004 | )
|                                            | Other                                            |      |       | 2,152  |      |   |       | 242    |  
|                                            | Federal net operating loss carryforwards         |      |       | 7,321  |      |   |       | 8,416  |  
|                                            | State net operating loss carryforwards           |      |       | 667    |      |   |       |       |  
|                                            |                                                  |      |       |        |      |  
|                                            |                                                  |      |       | (1,847 | )    |   |       | (4,281 | )
|                                            |                                                  |      |       |        |      |  
|Total net deferred tax assets/(liabilities) |                                                  | $    | 2,675 |        |      | $ | 1,880 |       
|                                            |                                                  |      |       |        |      |  





|                                                          |  |      |       |   |      |  |       |      |  |  |       |  
|--------------------------------------------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                          |  | 2002 |       |   | 2003 |  |       | 2004 | 
|Federal income tax expense                                |  |      | 35    | % |      |  | 35    | %    |  |  | 35    | %
|State income tax expense, net of federal tax effect       |  |      | 0.5   |   |      |  | 0.2   |      |  |  | 1.3   |  
|Effect of differences in U.S. and Foreign statutory rates |  |      | (18.9 | ) |      |  | (30.6 | )    |  |  | (12.1 | )
|Other                                                     |  |      | 2.3   |   |      |  | 3.7   |      |  |  | 1.8   |  
|                                                          |  |      |       |   |      |  |       |      | 
|                                                          |  |      | 18.9  | % |      |  | 8.3   | %    |  |  | 26    | %
|                                                          |  |      |       |   |      |  |       |      | 





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DECEMBER 31, 2004




|         |  |      |        |   |      |   |        |      |  |   |         |  
|-------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|         |  | 2002 |        |   | 2003 |   |        | 2004 | 
|Domestic |  | $    | (3,433 | ) |      | $ | (5,255 | )    |  | $ | (22,669 | )
|Foreign  |  |      | 37,592 |   |      |   | 22,590 |      |  |   | 81,761  |  
|         |  |      |        |   |      |   |        |      | 
|         |  | $    | 34,159 |   |      | $ | 17,335 |      |  | $ | 59,092  |  
|         |  |      |        |   |      |   |        |      | 



Note 10Credit Facility




Note 11Leases




|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ | 6,543  | 
|2006       |  |   | 5,714  | 
|2007       |  |   | 4,723  | 
|2008       |  |   | 2,819  | 
|2009       |  |   | 2,804  | 
|Thereafter |  |   | 6,603  | 
|           |  |   |       
|           |  | $ | 29,206 | 
|           |  |   |       

Note 12Common Stock, Preferred Stock and Warrants






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DECEMBER 31, 2004












|                                        |           |           |         |          |          |   |       |       | 
|--------------------------------------- | --------- | --------- | ------- | -------- | -------- | - | ----- | ----- | 
|                                        |           |           |         | Weighted |         
|                                        |           |           |         | Average  |         
|                                        |           | Number    |         |          | Exercise |  
|                                        |           | of Shares |         |          | Price    |  
|Outstanding, December 31, 2001          |           |           | 166,875 |          |          | $ | 6.67  |      
|                                        | Exercised |           |         | (166,875 | )        |   |       | 6.67  | 
|                                        |           |           |         |          |          |  
|Outstanding, December 31, 2002          |           |           |        |          |          |   |      |      
|                                        | Granted   |           |         | 100,000  |          |   |       | 11.35 | 
|                                        | Exercised |           |         |         |          |   |       |      | 
|                                        |           |           |         |          |          |  
|Outstanding, December 31, 2003 and 2004 |           |           | 100,000 |          |          | $ | 11.35 |      
|                                        |           |           |         |          |          |  

Note 13Commitments




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DECEMBER 31, 2004




|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ | 13,635 | 
|2006       |  |   | 8,868  | 
|2007       |  |   | 1,795  | 
|2008       |  |   | 1,427  | 
|2009       |  |   | 1,435  | 
|Thereafter |  |   |       | 
|           |  |   |       
|           |  | $ | 27,160 | 
|           |  |   |       



|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ | 5,069  | 
|2006       |  |   | 4,557  | 
|2007       |  |   | 4,248  | 
|2008       |  |   | 2,180  | 
|2009       |  |   | 2,230  | 
|Thereafter |  |   | 2,280  | 
|           |  |   |       
|           |  | $ | 20,564 | 
|           |  |   |       

Note 14Stock Award and Incentive Plan




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DECEMBER 31, 2004




|                               |           |           |           |           |          |   |       |       | 
|------------------------------ | --------- | --------- | --------- | --------- | -------- | - | ----- | ----- | 
|                               |           |           |           | Weighted  |         
|                               |           |           |           | Average   |         
|                               |           | Number    |           |           | Exercise |  
|                               |           | of Shares |           |           | Price    |  
|Outstanding, December 31, 2001 |           |           | 2,313,556 |           |          | $ | 9.97  |      
|                               | Granted   |           |           | 1,124,197 |          |   |       | 11.06 | 
|                               | Exercised |           |           | (787,836  | )        |   |       | 6.71  | 
|                               | Canceled  |           |           | (42,030   | )        |   |       | 15.00 | 
|                               |           |           |           |           |          |  
|Outstanding, December 31, 2002 |           |           | 2,607,887 |           |          |   | 11.35 |      
|                               | Granted   |           |           | 184,500   |          |   |       | 13.31 | 
|                               | Exercised |           |           | (312,491  | )        |   |       | 11.78 | 
|                               | Canceled  |           |           | (214,630  | )        |   |       | 12.71 | 
|                               |           |           |           |           |          |  
|Outstanding, December 31, 2003 |           |           | 2,265,266 |           |          |   | 12.15 |      
|                               | Granted   |           |           | 287,644   |          |   |       | 19.49 | 
|                               | Exercised |           |           | (192,129  | )        |   |       | 8.89  | 
|                               | Canceled  |           |           | (287,775  | )        |   |       | 13.76 | 
|                               |           |           |           |           |          |  
|Outstanding, December 31, 2004 |           |           | 2,073,006 |           |          | $ | 13.22 |      
|                               |           |           |           |           |          |  





|                   |  |             |         |          |             |  |          |          |  |   |           |          |  |          |         |  |  |   |       | 
|------------------ |  | ----------- | ------- | -------- | ----------- |  | -------- | -------- |  | - | --------- | -------- |  | -------- | ------- |  |  | - | ----- | 
|                   |  | Outstanding |         |          | Exercisable | 
|                   |  |             |         |          |             | 
|                   |  |             |         | Weighted |             |  | Weighted |          |  |   |           | Weighted | 
|                   |  |             |         | Average  |             |  | Average  |          |  |   |           | Average  | 
|                   |  | Number      |         |          | Life        |  |          | Exercise |  |   | Number    |          |  | Exercise |        
|Option Price Range |  | of Shares   |         |          | in Years    |  |          | Price    |  |   | of Shares |          |  | Price    |        
|$7.875  $9.125    |  |             | 740,941 |          |             |  | 1.38     |          |  | $ | 7.92      |          |  |          | 658,903 |  |  | $ | 7.93  | 
|$11.35  $16.25    |  |             | 998,925 |          |             |  | 4.38     |          |  | $ | 14.29     |          |  |          | 489,600 |  |  | $ | 13.93 | 
|$17.26  $20.94    |  |             | 433,144 |          |             |  | 5.52     |          |  | $ | 19.52     |          |  |          | 164,044 |  |  | $ | 19.05 | 

Note 15Employee Pension Plan




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DECEMBER 31, 2004


Note 16Supplemental Information to Consolidated
Statements of Cash Flows








Note 17Selected Quarterly Financial Data (Unaudited)




|                                                    |  |                                       |        |  |         |   |        |         |  |   |         |  |  |         |        |   |         |   |        |         |  |   |         |  |  |   |         |  |  |   |         | 
|--------------------------------------------------- |  | ------------------------------------- | ------ |  | ------- | - | ------ | ------- |  | - | ------- |  |  | ------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                    |  | 2003                                  |        |  | 2004    |  
|                                                    |  |                                       |        |  |         |  
|                                                    |  | First                                 |        |  | Second  |   |        | Third   |  |   | Fourth  |  |  | First   |        |   | Second  |   |        | Third   |  |   | Fourth  | 
|                                                    |  | Quarter                               |        |  | Quarter |   |        | Quarter |  |   | Quarter |  |  | Quarter |        |   | Quarter |   |        | Quarter |  |   | Quarter | 
|                                                    |  | (in thousands, except per share data) |       
|Net sales                                           |  | $                                     | 67,759 |  |         | $ | 73,290 |         |  | $ | 90,308  |  |  | $       | 84,419 |   |         | $ | 73,986 |         |  | $ | 109,395 |  |  | $ | 206,083 |  |  | $ | 184,802 | 
|Gross profit                                        |  | $                                     | 27,442 |  |         | $ | 27,906 |         |  | $ | 36,226  |  |  | $       | 34,868 |   |         | $ | 30,466 |         |  | $ | 41,281  |  |  | $ | 81,801  |  |  | $ | 72,459  | 
|Income (loss) from operations                       |  | $                                     | 5,960  |  |         | $ | 2,522  |         |  | $ | 10,480  |  |  | $       | (7,573 | ) |         | $ | 4,885  |         |  | $ | 8,321   |  |  | $ | 29,915  |  |  | $ | 10,604  | 
|Income before income taxes and minority interest    |  | $                                     | 6,299  |  |         | $ | 2,679  |         |  | $ | 10,495  |  |  | $       | (2,138 | ) |         | $ | 4,764  |         |  | $ | 7,637   |  |  | $ | 30,042  |  |  | $ | 16,649  | 
|Net income                                          |  | $                                     | 4,988  |  |         | $ | 2,236  |         |  | $ | 8,248   |  |  | $       | 422    |   |         | $ | 3,791  |         |  | $ | 6,004   |  |  | $ | 23,255  |  |  | $ | 10,508  | 
|Basic earnings per share                            |  | $                                     | 0.20   |  |         | $ | 0.09   |         |  | $ | 0.34    |  |  | $       | 0.02   |   |         | $ | 0.15   |         |  | $ | 0.24    |  |  | $ | 0.89    |  |  | $ | 0.40    | 
|Weighted average shares outstanding                 |  |                                       | 24,430 |  |         |   | 24,175 |         |  |   | 24,177  |  |  |         | 24,304 |   |         |   | 25,276 |         |  |   | 25,502  |  |  |   | 26,167  |  |  |   | 26,232  | 
|Diluted earnings per share                          |  | $                                     | 0.20   |  |         | $ | 0.09   |         |  | $ | 0.28    |  |  | $       | 0.01   |   |         | $ | 0.15   |         |  | $ | 0.22    |  |  | $ | 0.75    |  |  | $ | 0.36    | 
|Weighted average shares and equivalents outstanding |  |                                       | 24,917 |  |         |   | 25,814 |         |  |   | 29,529  |  |  |         | 29,542 |   |         |   | 30,676 |         |  |   | 31,123  |  |  |   | 31,919  |  |  |   | 31,855  | 









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DECEMBER 31, 2004


Note 18Litigation






inter alia




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DECEMBER 31, 2004














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|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |        | 
|----------------------------- | ------------------------------------------ | -------------- | ------ | ------ | ---------- | - | ------ | ---------- |  | - | ---------- | ----- | ------- | --------- | ------ | ------ |  | - | ------ | ------ | 
|                              |                                            | Balance at     |        |        | Charged to |   |        | Charged to |  |   |            |       | Balance |          
|                              |                                            | Beginning of   |        |        | Costs and  |   |        | Other      |  |   |            |       | at End  |          
|                              |                                            | Period         |        |        | Expenses   |   |        | Accounts   |  |   | Deductions |       |         | of Period |       
|                              |                                            | (in thousands) |       
|Year ended December 31, 2002: |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |       
|Allowance for:                |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |       
|                              | Uncollectible accounts                     |                | $      | 7,273  |            |   | $      | 2,373      |  |   | $          |      |         |           | $      | 2,865  |  |   | $      | 6,781  | 
|                              | Reserve for potential product obsolescence |                |        | 2,590  |            |   |        | 4,085      |  |   |            |      |         |           |        | 1,893  |  |   |        | 4,782  | 
|                              | Reserve for sales returns and allowances   |                |        | 4,953  |            |   |        | 31,917     |  |   |            | 7,500 | (a)     |           |        | 30,790 |  |   |        | 13,580 | 
|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |       
|                              |                                            | $              | 14,816 |        |            | $ | 38,375 |            |  | $ | 7,500      |       |         | $         | 35,548 |        |  | $ | 25,143 |       
|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |       
|Year ended December 31, 2003: |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |       
|Allowance for:                |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |       
|                              | Uncollectible accounts                     |                | $      | 6,781  |            |   | $      | 2,896      |  |   | $          |      |         |           | $      | 1,800  |  |   | $      | 7,877  | 
|                              | Reserve for potential product obsolescence |                |        | 4,782  |            |   |        | 4,288      |  |   |            |      |         |           |        | 4,045  |  |   |        | 5,025  | 
|                              | Reserve for sales returns and allowances   |                |        | 13,580 |            |   |        | 27,064     |  |   |            |      |         |           |        | 32,891 |  |   |        | 7,753  | 
|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |       
|                              |                                            | $              | 25,143 |        |            | $ | 34,248 |            |  | $ | 0          |       |         | $         | 38,736 |        |  | $ | 20,655 |       
|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |       
|Year ended December 31, 2004: |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |       
|Allowance for:                |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |        |        |  |   |        |       
|                              | Uncollectible accounts                     |                | $      | 7,877  |            |   | $      | 2,903      |  |   | $          |      |         |           | $      | 3,722  |  |   | $      | 7,058  | 
|                              | Reserve for potential product obsolescence |                |        | 5,025  |            |   |        | 5,342      |  |   |            |      |         |           |        | 2,325  |  |   |        | 8,042  | 
|                              | Reserve for sales returns and allowances   |                |        | 7,753  |            |   |        | 49,956     |  |   |            |      |         |           |        | 34,536 |  |   |        | 23,173 | 
|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |       
|                              |                                            | $              | 20,655 |        |            | $ | 58,201 |            |  | $ |           |       |         | $         | 40,583 |        |  | $ | 38,273 |       
|                              |                                            |                |        |        |            |   |        |            |  |   |            |       |         |           |       



|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(a) | Obligations assumed in conjunction with the asset acquisitions
    of Trendmasters and Dragon Ball Franchise.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures





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Internal Control  Integrated
Framework










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PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

Directors and Executive Officers




|                  |  |     |    |  |                            |                                                           
|----------------- |  | --- | -- |  | -------------------------- | ----------------------------------------------------------
|Name              |  | Age |    |  | Positions with the Company
|                  |  |     |    |  |                           
|Jack Friedman     |  |     | 65 |  |                            | Chairman and Chief Executive Officer                      
|Stephen G. Berman |  |     | 40 |  |                            | Chief Operating Officer, President, Secretary and Director
|Joel M. Bennett   |  |     | 43 |  |                            | Executive Vice President and Chief Financial Officer      
|Dan Almagor       |  |     | 51 |  |                            | Director                                                  
|David C. Blatte   |  |     | 40 |  |                            | Director                                                  
|Robert E. Glick   |  |     | 59 |  |                            | Director                                                  
|Michael G. Miller |  |     | 57 |  |                            | Director                                                  
|Murray L. Skala   |  |     | 58 |  |                            | Director                                                  

Jack Friedman


Stephen G. Berman


Joel M. Bennett


Dan Almagor


David C. Blatte


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Robert E. Glick


Michael G. Miller


Murray L. Skala




Committees of the Board of Directors




Audit Committee.


Compensation Committee.


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Nominating and Corporate Governance Committee. www.jakkspacific.com.


Attendance at Meetings




Section 16(a) Beneficial Ownership Reporting
Compliance




Code of Ethics




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Item 11. Executive Compensation




Summary Compensation Table


|                       |                                 |                     |      |                        |            |  |           |            |  |              |           |           |        |        |       |         |     |  |           |           |      |  |   |   | 
|---------------------- | ------------------------------- | ------------------- | ---- | ---------------------- | ---------- |  | --------- | ---------- |  | ------------ | --------- | --------- | ------ | ------ | ----- | ------- | --- |  | --------- | --------- | ---- |  | - | - | 
|                       |                                 |                     |      | Long-Term Compensation |           
|                       |                                 | Annual Compensation |      |                        |            | 
|                       |                                 |                     |      |                        | Restricted |  |           | Securities | 
|                       |                                 |                     |      | Other Annual           |            |  | Stock     |            |  | Underlying   |          
|Name and               |                                 |                     |      | Salary                 |            |  | Bonus     |            |  | Compensation |           |           | Awards |        |       | Options |    
|Principal Position     |                                 | Year                |      |                        | ($)        |  |           | ($)        |  |              | ($)       |           |        | ($)(*) |       |         | (#) | 
|                       |                                 |                     |      |                        |            |  |           |            |  |              |           |           |        |        |       |         |     | 
|Jack Friedman          |                                 |                     | 2004 |                        |            |  | 990,000   |            |  |              | 1,980,000 |           |        |        | 9,750 | (5)     |     |  | 1,578,000 | (6)       |      |  |  |  
|                       | Chairman and Chief              |                     |      | 2003                   |            |  |           | 965,000    |  |              |           | 1,327,140 | (3     |        |       | ) 9,000 | (5) |  |           | 2,524,800 | (7)  |  |   |  | 
|                       | Executive Officer               |                     |      | 2002                   |            |  |           | 846,000    |  |              |           | 1,429,696 | (3     |        |       | ) 8,250 | (5) |  |           |          |      |  |   |  | 
|Stephen G. Berman      |                                 |                     | 2004 |                        |            |  | 990,000   |            |  |              | 1,980,000 |           |        |        | 6,500 | (5)     |     |  | 1,578,000 | (6)       |      |  |  |  
|                       | Chief Operating Officer,        |                     |      | 2003                   |            |  |           | 965,000    |  |              |           | 1,327,140 | (3     |        |       | ) 6,000 | (5) |  |           | 2,524,800 | (7)  |  |   |  | 
|                       | President and Secretary         |                     |      | 2002                   |            |  |           | 821,000    |  |              |           | 1,429,696 | (3     |        |       | ) 5,500 | (5) |  |           |          |      |  |   |  | 
|Joel M. Bennett        |                                 |                     | 2004 |                        |            |  | 320,000   |            |  |              | 300,000   |           |        |        | 6,500 | (5)     |     |  |          |           |      |  |  |  
|                       | Executive Vice President and    |                     |      | 2003                   |            |  |           | 300,000    |  |              |           |          |        |        |       | 6,000   | (5) |  |           | 1,262,400 | (8)  |  |   |  | 
|                       | Chief Financial Officer         |                     |      | 2002                   |            |  |           | 272,500    |  |              |           | 495,000   | (4)    |        |       | 5,500   | (5) |  |           |          |      |  |   |  | 
|Michael Bianco, Jr.(1) |                                 |                     | 2004 |                        |            |  | 1,024,000 | (2)        |  |              |          |           |        |        | 6,500 | (5)     |     |  | 1,262,400 | (9)       |      |  |  |  
|                       | Former Executive Vice President |                     |      | 2003                   |            |  |           | 700,000    |  |              |           |          |        |        |       | 6,000   | (5) |  |           | 1,009,920 | (10) |  |   |  | 
|                       | and Chief Merchandising Officer |                     |      | 2002                   |            |  |           | 575,000    |  |              |           | 600,000   |        |        |       | 5,500   | (5) |  |           |          |      |  |   |  | 




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | The shares of restricted stock referenced in this column were
    all issued pursuant to the 2002 Plan. The total number of
    restricted shares issued under the 2002 Plan that were
    outstanding at December 31, 2004 was 1,236,630 shares.
    Such shares had an aggregate value of $27,341,890, representing
    the product of (a) 1,236,630 shares, multiplied by
    (b) $22.11, the closing price of our common stock on
    December 31, 2004, as reported by Nasdaq.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(1) | Effective October 13, 2004, we entered into a Termination
    Agreement and General Release with Mr. Bianco (the Bianco
    Agreement), which had the effect of terminating Mr.
    Biancos employment with us. The Bianco Agreement further
    (i) canceled all of the 222,279 unexercised stock options
    (vested and unvested) held by Mr. Bianco,
    (ii) included the waiver by Mr. Bianco of all claims
    by him for future compensation under his prior employment
    agreement with us, including the right to receive
    288,000 shares of restricted stock to which he was
    otherwise entitled to receive between now and January 2007,
    (iii) revised the vesting schedule of the
    96,000 shares of restricted stock he received in January
    2004 to delay the vesting of 24,000 of those shares from
    January 1, 2006 to January 1, 2007 and
    (iv) provided for mutual general releases between us and
    Mr. Bianco for all matters arising from his prior
    employment agreement.
|   
|(2) | Consists of $544,000 in salary and $480,000 paid to
    Mr. Bianco under his consulting agreement with us, entered
    into simultaneously with the Bianco Agreement (the
    Consulting Agreement). Pursuant to the terms of the
    Consulting Agreement, which is effective until
    September 30, 2007, Mr. Bianco is to serve as a
    product development and marketing consultant for us, in
    particular with regard to our product and marketing activities
    at the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | annual Toy Fair held in New York
    City, for which he will be compensated in the amount of
    $1,280,000 in the aggregate (including the $480,000 paid him in
    2004).



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | On March 31, 2005, we restated the financial statements
    included in our Annual Report on Form 10-K for the fiscal
    year ended December 31, 2003, which included our financial
    statements for 2003 and 2002, to account for the acquisition of
    Toymax, Trendmasters and P&M Products in accordance with
    paragraph 39 of SFAS 141 (the
    Restatement). Specifically, a portion of the
    purchase price for each of these transactions has now been
    allocated to acquired product rights and other intangible assets
    other than goodwill. The Restatement had the effect of reducing
    our income before provision for income taxes and minority
    interest (pre-tax income) for both 2003 and 2002.
    The bonuses paid to Messrs. Friedman and Berman in 2003 and
    2002 were determined based upon our pre-tax income for those
    periods. We are evaluating the impact that the Restatement and
    the attendant reduction in our pre-tax income for 2003 and 2002
    may have on the bonuses paid to Messrs. Friedman and Berman
    for those years.
|   
|(4) | Includes the forgiveness of a note receivable and accrued
    interest in the aggregate amount of $285,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(5) | Represents matching contributions made by us to the Named
    Officers 401(k) defined contribution plan. See
     Employee Pension Plan, infra.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | Represents the product of (a) 120,000 shares of
    restricted stock multiplied by (b) $13.15, the last sales
    price of our common stock, as reported by Nasdaq on
    January 1, 2004, the date the shares were granted, all of
    which vested on January 1, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(7) | Represents the product of (a) 240,000 shares of restricted
    stock multiplied by (b) $10.52, the closing price of our
    common stock, as reported by Nasdaq, on March 27, 2003, the
    date the shares were granted, all of which vested on
    January 1, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(8) | Represents the product of (a) 120,000 shares of restricted
    stock multiplied by (b) $10.52, the closing price of our
    common stock, as reported by Nasdaq, on March 27, 2003, the
    date the shares were granted, which vested as follows:
    60,000 shares on each of January 1, 2004 and 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(9) | Represents the product of (a) 96,000 shares of
    restricted stock multiplied by (b) $13.15, the last sales
    price of our common stock, as reported by Nasdaq on
    January 1, 2004, the date the shares were granted, which
    vested or will vest as follows: 72,000 shares on
    January 1, 2005 and 24,000 shares on January 1,
    2007 (see Note (1) to this table, above).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



|     |                                                                                                                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Represents the product of (a) 96,000 shares of restricted
    stock multiplied by (b) $10.52, the closing price of our
    common stock, as reported by Nasdaq, on March 27, 2003, the
    date the shares were granted, all of which vested on
    January 1, 2004.

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Aggregated Option/SAR Exercises in Last Fiscal Year


and Fiscal Year End Option/SAR Values


|                    |  |              |   |  |              |                        |                    |             |                      |                       |               |  |  |             |         |  |               |  |           |  |  |  |         | 
|------------------- |  | ------------ | - |  | ------------ | ---------------------- | ------------------ | ----------- | -------------------- | --------------------- | ------------- |  |  | ----------- | ------- |  | ------------- |  | --------- |  |  |  | ------- | 
|                    |  |              |   |  |              | Number of Securities   |                    |             | Value of Unexercised |                      
|                    |  |              |   |  |              | Underlying Unexercised |                    |             | In-the-Money         |                      
|                    |  | Shares       |   |  |              |                        | Options/SARs       |             |                      | Options/SARs          |              
|                    |  | Acquired     |   |  |              |                        | at Fiscal Year End |             |                      | at Fiscal Year End(1) |              
|                    |  | on           |   |  | Value        |                        |                    |             |                      |                       |               | 
|Name                |  | Exercise (#) |   |  | Realized ($) |                        |                    | Exercisable |                      |                       | Unexercisable |  |  | Exercisable |         |  | Unexercisable | 
|                    |  |              |   |  |              |                        |                    |             |                      |                       |               |  |  |             |         |  |               | 
|Jack Friedman       |  |              |  |  |              |                        |                   |             |                      |                       | 255,318       |  |  |             | 101,936 |  |               |  | 2,974,920 |  |  |  | 644,965 | 
|Stephen G. Berman   |  |              |  |  |              |                        |                   |             |                      |                       | 349,102       |  |  |             | 101,936 |  |               |  | 4,309,936 |  |  |  | 644,965 | 
|Joel M. Bennett     |  |              |  |  |              |                        |                   |             |                      |                       | 57,176        |  |  |             | 33,894  |  |               |  | 738,525   |  |  |  | 390,356 | 
|Michael Bianco, Jr. |  |              |  |  |              |                        |                   |             |                      |                       |              |  |  |             |        |  |               |  |          |  |  |  |        | 




|    |                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The product of (x) the difference between $22.11 (the
    closing sale price of the common stock on December 31,
    2004) and the aggregate exercise price of such options,
    multiplied by (y) the number of unexercised options.

Compensation of Directors






Employment Agreements and Termination of Employment
Arrangements






77



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78



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Impact of Restatement on Compensation of Executive
Officers




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Employee Pension Plan




Compensation Committee Interlocks and Insider
Participation









|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                                            |  |                 |           |      |             |  |      |  
|----------------------------------------------------------- |  | --------------- | --------- | ---- | ----------- |  | ---- | -
|                                                            |  | Amount and      |           |      |            
|                                                            |  | Nature of       |           |      | Percent of  | 
|Name and Address of                                         |  | Beneficial      |           |      | Outstanding | 
|Beneficial Owner(1)(2)                                      |  | Ownership(s)(3) |           |      | Shares(4)   | 
|                                                            |  |                 |           |      |             | 
|Third Avenue Management LLC                                 |  |                 | 3,685,321 | (5)  |             |  | 13.8 | %
|Dimensional Fund Advisors, Inc.                             |  |                 | 2,050,711 | (6)  |             |  | 7.7  |  
|FMR Corp.                                                   |  |                 | 1,800,238 | (7)  |             |  | 6.8  |  
|Barclays Global Investors, N.A.                             |  |                 | 1,437,196 | (8)  |             |  | 5.4  |  
|Jack Friedman                                               |  |                 | 960,776   | (9)  |             |  | 3.6  |  
|Stephen G. Berman                                           |  |                 | 829,102   | (10) |             |  | 3.1  |  
|Michael Bianco, Jr.                                         |  |                 | 232,050   | (11) |             |  | *    |  
|Joel M. Bennett                                             |  |                 | 174,937   | (12) |             |  | *    |  
|Dan Almagor                                                 |  |                 | 23,454    | (13) |             |  | *    |  
|David C. Blatte                                             |  |                 | 77,000    | (14) |             |  | *    |  
|Robert E. Glick                                             |  |                 | 93,519    | (15) |             |  | *    |  
|Michael G. Miller                                           |  |                 | 84,144    | (16) |             |  | *    |  
|Murray L. Skala                                             |  |                 | 95,457    | (17) |             |  | *    |  
|All directors and executive officers as a group (8 persons) |  |                 | 2,335,203 | (18) |             |  | 8.5  | %




| |   |                                        
| | - | ---------------------------------------
| | * | Less than 1% of our outstanding shares.



| |     |                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Unless otherwise indicated, such persons address is
    c/o JAKKS Pacific, Inc., 22619 Pacific Coast Highway,
    Malibu, California 90265.                                                                                                                                                                                                                                          
|
| | (2) | The number of shares of common stock beneficially owned by each
    person or entity is determined under the rules promulgated by
    the Securities and Exchange Commission. Under such rules,
    beneficial ownership includes any shares as to which the person
    or entity has sole or shared voting power or investment power.
    The percentage of our outstanding shares is

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | calculated by including among the
    shares owned by such person any shares which such person or
    entity has the right to acquire within 60 days after
    March 28, 2005. The inclusion herein of any shares deemed
    beneficially owned does not constitute an admission of
    beneficial ownership of such shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (3) | Except as otherwise indicated,
    exercises sole voting power and sole investment power with
    respect to such shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (4) | Does not include any shares of
    common stock issuable upon the conversion of $98 million of
    our 4.625% convertible senior notes due 2023, initially
    convertible at the rate of 50 shares of common stock per
    $1,000 principal amount at issuance of the notes (but subject to
    adjustment under certain circumstances as described in the
    notes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (5) | The address of Third Avenue
    Management LLC is 622 Third Avenue, New York, NY 10017.
    Possesses sole voting power with respect to 3,587,152 of such
    shares and sole dispositive power with respect to all of such
    3,685,321 shares. All the information presented in this
    Item with respect to this beneficial owner was extracted solely
    from the Schedule 13G/ A filed on February 16, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (6) | The address of Dimensional
    Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa
    Monica, CA 90401. All the information presented in this Item
    with respect to this beneficial owner was extracted solely from
    the Schedule 13G/ A filed on February 9, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (7) | The address of FMR Corp. is 82
    Devonshire Street, Boston, Massachusetts 02109. All the
    information with respect to this beneficial owner was extracted
    solely from its Schedule 13G/A filed on March 10, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (8) | The address of Barclays Global
    Investors, N.A. is 45 Fremont Street, San Francisco, CA
    94105. Possesses sole voting power with respect to 1,308,390 of
    such shares and sole dispositive power with respect to all of
    such 1,437,196 shares. All the information presented in
    this Item with respect to this beneficial owner was extracted
    solely from the Schedule 13G filed on February 14,
    2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (9) | Includes 3,186 shares held in
    trusts for the benefit of children of Mr. Friedman. Also
    includes 255,318 shares of common stock issuable upon the
    conversion of options held by Mr. Friedman. Also includes
    120,000 shares of common stock issued on January 1, 2005
    pursuant to the terms of Mr. Friedmans
    January 1, 2003 Employment Agreement, which shares are
    further subject to the terms of our January 1, 2005
    Restricted Stock Award Agreement with Mr. Friedman (the
    Friedman Agreement). The Friedman Agreement provides
    that Mr. Friedman will forfeit his rights to all 120,000 shares
    unless certain conditions precedent are met prior to
    January 1, 2006, including the condition that our Pre-Tax
    Income (as defined in the Friedman Agreement) for 2005 exceeds
    $2,000,000, whereupon the forfeited shares will become
    authorized but unissued shares of our common stock. The Friedman
    Agreement further prohibits Mr. Friedman from selling,
    assigning, transferring, pledging or otherwise encumbering
    (a) 60,000 of the 120,000 shares prior to January 1,
    2006 and (b) the remaining 60,000 shares prior to
    January 1, 2007; provided, however, that if our Pre-Tax
    Income for 2005 exceeds $2,000,000 and our Adjusted EPS Growth
    (as defined in the Friedman Agreement) for 2005 increases by
    certain percentages as set forth in the Friedman Agreement, the
    vesting of some or all of the 60,000 shares that would otherwise
    vest on January 1, 2007 will be accelerated to the date the
    Adjusted EPS Growth is determined.



|     |                                                                                                                                                                                                                                                                                    
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 255,318 shares of common stock issuable upon the
    conversion of options held by Mr. Berman. Also includes
    120,000 shares of common stock issued on January 1,
    2005 pursuant to the terms of Mr. Bermans
    January 1, 2003 Employment Agreement, which shares

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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | are further subject to the terms
    of our January 1, 2005 Restricted Stock Award Agreement
    with Mr. Berman (the Berman Agreement). The
    Berman Agreement provides that Mr. Berman will forfeit his
    rights to all 120,000 shares unless certain conditions
    precedent are met prior to January 1, 2006, including the
    condition that our Pre-Tax Income (as defined in the Berman
    Agreement) for 2005 exceeds $2,000,000, whereupon the forfeited
    shares will become authorized but unissued shares of our common
    stock. The Berman Agreement further prohibits Mr. Berman from
    selling, assigning, transferring, pledging or otherwise
    encumbering (a) 60,000 of the 120,000 shares prior to
    January 1, 2006 and (b) the remaining 60,000 shares
    prior to January 1, 2007; provided, however, that if our
    Pre-Tax Income for 2005 exceeds $2,000,000 and our Adjusted EPS
    Growth (as defined in the Berman Agreement) for 2005 increases
    by certain percentages as set forth in the Berman Agreement, the
    vesting of some or all of the 60,000 shares that would
    otherwise vest on January 1, 2007 will be accelerated to
    the date the Adjusted EPS Growth is determined.
|    
|(11) | Such information was derived
    exclusively from Mr. Biancos most recently filed
    Form 4. Includes 48,000 shares of common stock, 50% of
    which vest on each of January 1, 2006 and 2007, all in
    accordance with the terms of that October 13, 2004
    Termination Agreement and October 13, 2004 Consulting
    Agreement by and between Mr. Bianco and us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(12) | Includes 58,234 shares which Mr.
    Bennett may purchase upon the exercise of certain stock options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(13) | Includes 22,144 shares which
    Mr. Almagor may purchase upon the exercise of certain stock
    options and 1,310 shares of common stock issued on
    January 1, 2004, to all of our non-employee directors
    pursuant to our 2002 Stock Award and Incentive Plan,
    pursuant to which such 310 and 1,000 shares may not be
    sold, mortgaged, transferred or otherwise encumbered prior to
    December 20, 2005 and January 1, 2006, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(14) | Includes 75,000 shares which
    Mr. Blatte may purchase upon the exercise of certain stock
    options and 2,000 shares of common stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 1,000 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(15) | Includes 91,519 shares which
    Mr. Glick may purchase upon the exercise of certain stock
    options and 2,000 shares of Common Stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 1,000 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(16) | Includes 82,144 shares which
    Mr. Miller may purchase upon the exercise of certain stock
    options and 2,000 shares of Common Stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 1,000 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(17) | Includes 90,271 shares which
    Mr. Skala may purchase upon the exercise of certain stock
    options, 3,186 shares held by Mr. Skala as trustee
    under a trust for the benefit of Mr. Friedmans minor
    child and 2,000 shares of common stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 1,000 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|(18) | Includes 3,186 shares held in
    a trust for the benefit of Mr. Friedmans minor child
    and an aggregate of 929,948 shares which the directors and
    executive officers may purchase upon the exercise of certain
    stock options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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Item 13. Certain Relationships and Related
Transactions









|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accountant Fees and Services.



|                   |  |      |         |  |      |   |         | 
|------------------ |  | ---- | ------- |  | ---- | - | ------- | 
|                   |  | 2003 |         |  | 2004 |  
|                   |  |      |         |  |      |  
|Audit Fees         |  | $    | 656,792 |  |      | $ | 415,635 | 
|Audit Related Fees |  | $    | 85,185  |  |      | $ | 122,483 | 
|Tax Fees           |  | $    | 205,673 |  |      | $ | 260,949 | 
|All Other Fees     |  | $    | 56,811  |  |      | $ | 191,778 | 

Audit Fees


Audit Related Fees


Tax Fees


All Other Fees




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PART IV





Item 15. Exhibits, Financial Statement
Schedules








| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Public Accounting Firm                                                       
|
| |  | Consolidated Balance Sheets as of December 31, 2003 and 2004                                                  
|
| |  | Consolidated Statements of Operations for the years ended
    December 31, 2002, 2003 and 2004                
|
| |  | Consolidated Statements of Other Comprehensive Income for the
    years ended December 31, 2002, 2003 and 2004
|
| |  | Consolidated Statements of Stockholders Equity for the
    years ended December 31, 2002, 2003 and 2004      
|
| |  | Consolidated Statements of Cash Flows for the years ended
    December 31, 2002, 2003 and 2004                
|
| |  | Notes to Consolidated Financial Statements                                                                    





| |   |                                                
| | - | -----------------------------------------------
| |  | Schedule II  Valuation and Qualifying Accounts



|        |  |                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                       
|Number  |  | Description                                                                                                           
|        |  |                                                                                                                       
|3.1     |  | Amended and Restated Certificate of Incorporation of the Company
    (1)                                              
|3.2.1   |  | By-Laws of the Company (2)                                                                                            
|3.2.2   |  | Amendment to By-Laws of the Company (3)                                                                               
|10.1.1  |  | Third Amended and Restated 1995 Stock Option Plan (4)                                                                 
|10.1.2  |  | 1999 Amendment to Third Amended and Restated 1995 Stock Option
    Plan (5)                                           
|10.1.3  |  | 2000 Amendment to Third Amended and Restated 1995 Stock Option
    Plan (6)                                           
|10.1.4  |  | 2001 Amendment to Third Amended and Restated 1995 Stock Option
    Plan (7)                                           
|10.2    |  | 2002 Stock Award and Incentive Plan (8)                                                                               
|10.3    |  | Amended and Restated Employment Agreement between the Company
    and Jack Friedman, dated as of March 26, 2003 (9)   
|10.4    |  | Amended and Restated Employment Agreement between the Company
    and Stephen G. Berman dated as of March 26, 2003 (9)
|10.5    |  | Amended and Restated Employment Agreement between the Company
    and Joel M. Bennet, dated March 26, 2003 (9)        
|10.6.1  |  | October 13, 2004 Termination Agreement and General Release
    between the Company and Michael Bianco (10)            
|10.6.2  |  | October 13, 2004 Consulting Agreement between the Company
    and Michael Bianco (10)                                 
|10.7    |  | Office Lease dated November 18, 1999 between the Company
    and Winco Maliview Partners (11)                         
|10.8    |  | Lease dated as of November 21, 2000 between Grand Avenue
    Venture, LLC and JP Ferrero Parkway, Inc. (12)           
|10.9    |  | Form of Restricted Stock Agreement (9)                                                                                

84



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##### Table of Contents



|        |  |                                                            
|------- |  | -----------------------------------------------------------
|Exhibit |  |                                                            
|Number  |  | Description                                                
|        |  |                                                            
|14      |  | Code of Ethics (13)                                        
|21      |  | Subsidiaries of the Company (*)                            
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certification of Jack Friedman (*)
|31.2    |  | Rule 13a-14(a)/15d-14(a) Certification of Joel Bennett (*) 
|32.1    |  | Section 1350 Certification of Jack Friedman (*)            
|32.2    |  | Section 1350 Certification of Joel Bennett (*)             




|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed previously as Appendix 2 to the Companys
    Schedule 14A Proxy Statement, filed August 23, 2002,
    and incorporated herein by reference.                                             
|   
|(2) | Filed previously as an exhibit to the Companys
    Registration Statement on Form SB-2 (Reg.
    No. 333-2048-LA), effective May 1, 1996, and
    incorporated herein by reference.           
|   
|(3) | Filed previously as an exhibit to the Companys
    Registration Statement on Form SB-2 (Reg.
    No. 333-22583), effective May 1, 1997, and
    incorporated herein by reference.             
|   
|(4) | Filed previously as Appendix A to the Companys
    Schedule 14A Proxy Statement, filed June 23, 1998, and
    incorporated herein by reference.                                               
|   
|(5) | Filed previously as an exhibit to the Companys
    Registration Statement on Form S-8 (Reg. No. 333-90055), filed
    November 1, 1999, and incorporated herein by reference.                 
|   
|(6) | Filed previously as an exhibit to the Companys
    Registration Statement on Form S-8 (Reg.
    No. 333-40392), filed June 29, 2000, and incorporated
    herein by reference.                
|   
|(7) | Filed previously as Appendix B to the Companys Schedule
    14A Proxy Statement, filed June 11, 2001, and incorporated
    herein by reference.                                               
|   
|(8) | Filed previously as an exhibit to the Companys
    Registration Statement on Form S-8 (Reg.
    No. 333-101665), filed December 5, 2002, and
    incorporated herein by reference.            
|   
|(9) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 2002, filed March 31, 2003, and
    incorporated herein by reference.



|     |                                                                                                                                                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Filed previously as an exhibit to the Companys Current
    Report on Form 8-K, filed on October 15, 2004, and
    incorporated herein by reference.                                           
|    
|(11) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 1999, filed March 30, 2000, and
    incorporated herein by reference.
|    
|(12) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 2000, filed April 2, 2001, and
    incorporated herein by reference. 
|    
|(13) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 2003, filed March 15, 2004, and
    incorporated herein by reference.



|    |                
|--- | ---------------
|(*) | Filed herewith.

85



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##### Table of Contents






SIGNATURES






| |                    
| | -------------------
| | JAKKS PACIFIC, INC.



| |     |                  
| | --- | -----------------
| | By: | /s/ JACK FRIEDMAN

| |                        
| | -----------------------
| |                        
| | Jack Friedman          
| | Chairman and           
| | Chief Executive Officer



|                                           |  |                                                                                                          |  |                |  | 
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                  |  | Title                                                                                                    |  | Date          
|                                           |  |                                                                                                          |  |               
|                                          
|/s/ JACK FRIEDMANJack
    Friedman         |  | Chairman of the Board
    of Directors and
    Chief Executive Officer
    (Principal Executive Officer) |  | March 31, 2005
|                                          
|/s/ JOEL M. BENNETTJoel
    M. Bennett     |  | Chief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer)           |  | March 31, 2005
|                                          
|/s/ STEPHEN G. BERMANStephen
    G. Berman |  | Director                                                                                                 |  | March 31, 2005
|                                          
|/s/ DAN ALMAGORDan
    Almagor             |  | Director                                                                                                 |  | March 31, 2005
|                                          
|/s/ DAVID C. BLATTEDavid
    C. Blatte     |  | Director                                                                                                 |  | March 31, 2005
|                                          
|/s/ ROBERT E. GLICKRobert
    E. Glick     |  | Director                                                                                                 |  | March 31, 2005
|                                          
|/s/ MICHAEL G. MILLERMichael
    G. Miller |  | Director                                                                                                 |  | March 31, 2005
|                                          
|/s/ MURRAY L. SKALAMurray
    L. Skala     |  | Director                                                                                                 |  | March 31, 2005

86



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##### Table of Contents



EXHIBIT INDEX


|        |  |                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                       
|Number  |  | Description                                                                                                           
|        |  |                                                                                                                       
|3.1     |  | Amended and Restated Certificate of Incorporation of the Company
    (1)                                              
|3.2.1   |  | By-Laws of the Company (2)                                                                                            
|3.2.2   |  | Amendment to By-Laws of the Company (3)                                                                               
|10.1.1  |  | Third Amended and Restated 1995 Stock Option Plan (4)                                                                 
|10.1.2  |  | 1999 Amendment to Third Amended and Restated 1995 Stock Option
    Plan (5)                                           
|10.1.3  |  | 2000 Amendment to Third Amended and Restated 1995 Stock Option
    Plan (6)                                           
|10.1.4  |  | 2001 Amendment to Third Amended and Restated 1995 Stock Option
    Plan (7)                                           
|10.2    |  | 2002 Stock Award and Incentive Plan (8)                                                                               
|10.3    |  | Amended and Restated Employment Agreement between the Company
    and Jack Friedman, dated as of March 26, 2003 (9)   
|10.4    |  | Amended and Restated Employment Agreement between the Company
    and Stephen G. Berman dated as of March 26, 2003 (9)
|10.5    |  | Amended and Restated Employment Agreement between the Company
    and Joel M. Bennet, dated March 26, 2003 (9)        
|10.6.1  |  | October 13, 2004 Termination Agreement and General Release
    between the Company and Michael Bianco (10)            
|10.6.2  |  | October 13, 2004 Consulting Agreement between the Company
    and Michael Bianco (10)                                 
|10.7    |  | Office Lease dated November 18, 1999 between the Company
    and Winco Maliview Partners (11)                         
|10.8    |  | Lease dated as of November 21, 2000 between Grand Avenue
    Venture, LLC and JP Ferrero Parkway, Inc. (12)           
|10.9    |  | Form of Restricted Stock Agreement (9)                                                                                
|14      |  | Code of Ethics (13)                                                                                                   
|21      |  | Subsidiaries of the Company (*)                                                                                       
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certification of Jack Friedman (*)                                                           
|31.2    |  | Rule 13a-14(a)/15d-14(a) Certification of Joel Bennett (*)                                                            
|32.1    |  | Section 1350 Certification of Jack Friedman (*)                                                                       
|32.2    |  | Section 1350 Certification of Joel Bennett (*)                                                                        




|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed previously as Appendix 2 to the Companys
    Schedule 14A Proxy Statement, filed August 23, 2002,
    and incorporated herein by reference.                                  
|   
|(2) | Filed previously as an exhibit to the Companys
    Registration Statement on Form SB-2 (Reg.
    No. 333-2048-LA), effective May 1, 1996, and
    incorporated herein by reference.
|   
|(3) | Filed previously as an exhibit to the Companys
    Registration Statement on Form SB-2 (Reg.
    No. 333-22583), effective May 1, 1997, and
    incorporated herein by reference.  
|   
|(4) | Filed previously as Appendix A to the Companys
    Schedule 14A Proxy Statement, filed June 23, 1998, and
    incorporated herein by reference.                                    
|   
|(5) | Filed previously as an exhibit to the Companys
    Registration Statement on Form S-8 (Reg. No. 333-90055), filed
    November 1, 1999, and incorporated herein by reference.      
|   
|(6) | Filed previously as an exhibit to the Companys
    Registration Statement on Form S-8 (Reg.
    No. 333-40392), filed June 29, 2000, and incorporated
    herein by reference.     
|   
|(7) | Filed previously as Appendix B to the Companys Schedule
    14A Proxy Statement, filed June 11, 2001, and incorporated
    herein by reference.                                    

87



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##### Table of Contents





|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | Filed previously as an exhibit to the Companys
    Registration Statement on Form S-8 (Reg.
    No. 333-101665), filed December 5, 2002, and
    incorporated herein by reference.            
|   
|(9) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 2002, filed March 31, 2003, and
    incorporated herein by reference.



|     |                                                                                                                                                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Filed previously as an exhibit to the Companys Current
    Report on Form 8-K, filed on October 15, 2004, and
    incorporated herein by reference.                                           
|    
|(11) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 1999, filed March 30, 2000, and
    incorporated herein by reference.
|    
|(12) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 2000, filed April 2, 2001, and
    incorporated herein by reference. 
|    
|(13) | Filed previously as an exhibit to the Companys Annual
    Report on Form 10-K for its fiscal year ended
    December 31, 2003, filed March 15, 2004, and
    incorporated herein by reference.



|    |                
|--- | ---------------
|(*) | Filed herewith.

88