##### 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, 2005                                           
|          
|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                |  | Nasdaq               

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


Title of Class


Common Stock, $.001 par value per share


o x


o x


x o


10-K. o


12b-2 o x o


12b-2 o x






Documents Incorporated by Reference












---



##### 










JAKKS PACIFIC, INC.


INDEX TO ANNUAL REPORT ON FORM 10-K


For the Fiscal Year ended December 31, 2005


Items in Form 10-K


|           |  |                                                                                                                      |    |      |      | 
|---------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | ---- | 
|           |  |                                                                                                                      |    | Page |     
|           |  |                                                                                                                      |    |      |     
|PART I    
|Item 1.    |  | Business                                                                                                             |    |      | 2    | 
|Item 1A.   |  | Risk Factors                                                                                                         |    |      | 13   | 
|Item 1B.   |  | Unresolved Staff Comments                                                                                            |    |      | None | 
|Item 2.    |  | Properties                                                                                                           |    |      | 22   | 
|Item 3.    |  | Legal Proceedings                                                                                                    |    |      | 22   | 
|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                                                       |    |      | 36   | 
|Item 8.    |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 38   | 
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure                             |    |      | None | 
|Item 9A.   |  | Controls and Procedures                                                                                              |    |      | 66   | 
|Item 9B.   |  | Other Information                                                                                                    |    |      | None | 
|PART III  
|Item 10.   |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 68   | 
|Item 11.   |  | Executive Compensation                                                                                               |    |      | 71   | 
|Item 12.   |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |      | 75   | 
|Item 13.   |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 78   | 
|Item 14.   |  | Principal Accountant Fees and Services                                                                               |    |      | 78   | 
|PART IV   
|Item 15.   |  | Exhibits and Financial Statement
    Schedules                                                                       |    |      | 79   | 
|Signatures |  |                                                                                                                      | 81 |     
|EX-21     
|EX-31.1   
|EX-31.2   
|EX-32.1   
|EX-32.2   



DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS




1



---



##### Table of Contents






Item 1. Business




Company Overview




Traditional Toys




| |   |                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Action figures and accessories, including licensed characters,
    principally based on World Wrestling
    Entertainment®
    (WWE) and the Dragon
    Ball®
    franchise, and toy vehicles, including Road
    Champs®
    die-cast collectibles and Fly
    Wheelstm
    toy vehicles and accessories;
|
| |  | Electronics products, including Plug It In & Play
    TV Gamestm
    and Laser
    Challenge®;                                                                                                                                                                                                              
|
| |  | Infant and pre-school electronic toys, TV activities, plush toys
    featuring Care
    Bears®
    and
    Teletubbies®,
    soft body dolls featuring Cabbage Patch
    Kids®
    and slumber bags; and                                                                                                    
|
| |  | Fashion and mini dolls and related accessories, includes Disney
    Princess dolls sold to Disney Stores and Disney Parks and
    Resorts and private label fashion dolls for other retailers.                                                                                                              

Craft, Activity and Writing Products




| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Craft, activity and stationery products, including Flying
    Colors®
    activity sets, compounds, playsets and lunch boxes, and
    Colorworkshop®
    craft products such as the
    Blopens®,
    Vivid
    Velvet®,
    and
    Pentech®
    writing instruments, stationery and activity products.

Seasonal Products




| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Seasonal and outdoor toys and leisure products, including Go
    Fly A
    Kite®
    and Air
    Creations®
    and other kites,
    Funnoodle®
    pool toys, The
    Storm®
    water guns and Fly Wheels
    Flighttm;
    and
|
| |  | Junior sports, including
    Gaksplattm
    and The
    Storm®.                                                                                                                                                                  

Pet Products


American Kennel
Club ® The Cat Fanciers
Association tm


2



---



##### Table of Contents







| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | 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 lines.                  

WWE Nickelodeon ® Dora the
Explorer ® Blues
Clues ® SpongeBob
SquarePants ® Mickey
Mouse ®






in-house


Our Growth Strategy




3



---



##### Table of Contents





Expand Core Products.


Enter New Product Categories.


Pursue Strategic Acquisitions.


Acquire Additional Character and Product
Licenses. ® ®


Expand International Sales.


Capitalize On Our Operating
Efficiencies.




4



---



##### Table of Contents











Industry Overview






Products




5



---



##### Table of Contents





Traditional Toys


Electronics Products


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


TV
Games tm ® ® TV Games ® ® TV Games TV Games TeleStory tm Dora The Explorer Lion
King ® Cinderella ® Winnie The
Pooh ® iPets tm


Wheels Division Products




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

Fly Wheels


Remco ® Mighty
Mos ® die-cast big-wheeled




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

Road Champs 1 43 Ford ® Chevrolet ® Porsche ®




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

MXS ®


Action Figures and Accessories




6



---



##### Table of Contents



WWE WWE


Dragon
Ball ® Dragon
Ball Z ® Dragon Ball
GT ®


Infant and pre-school toys


Care Bears Teletubbies Cabbage Patch
Kids




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

Child
Guidance®




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

Dora
the Explorer SpongeBob SquarePants Blues Clues


Fashion Dolls




Craft, Activity and Writing Products


Flying Colors Blues Clues SpongeBob
SquarePants Blopens Vivid
Velvet ® Flying Colors Pentech


7



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##### Table of Contents



Seasonal Products


Seasonal Products


Go Fly A
Kite ® Funnoodle The Storm Fly Wheels Flight Fly Wheels


Junior Sports Products


Gaksplat Storm


Pet Products


American Kennel Club The Cat
Fanciers Association Bratz ® Marvel ®


World Wrestling Entertainment Video Games


WWE


CD-ROMs






8



---



##### Table of Contents







|     |  |                   |   |  |                     |               |   |                       |  |   |      | 
|---- |  | ----------------- | - |  | ------------------- | ------------- | - | --------------------- |  | - | ---- | 
|     |  | New Game Titles   |   |  |                    
|     |  |                   |   |  | Profit from video   |              
|     |  | Console Platforms |   |  | Hand-held Platforms |               |   | game joint 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  | 
|2005 |  |                   | 3 |  |                     |               | 1 |                       |  |   | 9.4  | 



| | 
| | 
| | 



| |     |                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Profit from the video game joint venture reflects our preferred
    return on joint venture revenue less certain costs incurred
    directly by us and payments made by us to THQ for their share of
    the profit on TV Games based on WWE content.

WWE WWE. WWE re-release


Sales, Marketing and Distribution


e-commerce






| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | engaged representatives to oversee sales in certain territories,
|
| |  | engaged distributors in certain territories,                    

9



---



##### Table of Contents





| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | established direct relationships with retailers in certain
    territories, and                        
|
| |  | expanded in-house resources dedicated to product development and
    marketing of our lines internally.









WWE Fly Wheels TV Games Care Bears Cabbage Patch
Kids


Product Development


in-house




10



---



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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


10-Q, 8-K,


Our Corporate Information


456-7799 10-K.







|         |             
|-------- | ------------
|Item 1A. | Risk Factors

10-K, 8-K, 10-Q 10-K.


13



---



##### Table of Contents



10-K




| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.                                                        





| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.



14



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| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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





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





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



15



---



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







| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



16



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##### Table of Contents





| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



day-to




| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The amount of preferred
    return that we receive from the joint venture after
    June 30, 2006 is subject to change, which could adversely
    affect our 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.

period-to




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 a significant component of 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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##### Table of Contents







| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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.                                                                                                                                       
|
| |  | the pricing of intercompany transactions may be challenged by
    taxing authorities in both Hong Kong and the United States, with
    potential increases in income taxes.





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

20



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

over-the




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



21



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Item 2. Properties




|                             |  |                              |  |             |         | 
|---------------------------- |  | ---------------------------- |  | ----------- | ------- | 
|                             |  |                              |  | Approximate |        
|Property                     |  | Location                     |  | Square Feet |        
|                             |  |                              |  |             |        
|Corporate Office             |  | Malibu, California           |  |             | 27,900  | 
|Design Center                |  | Malibu, California           |  |             | 13,300  | 
|Distribution Center          |  | City of Industry, California |  |             | 800,000 | 
|Go Fly A Kite                |  | Clinton, Connecticut         |  |             | 28,800  | 
|JPI                          |  | Carlsbad, California         |  |             | 6,200   | 
|Play Along U.S.              |  | Deerfield Beach, Florida     |  |             | 17,300  | 
|Creative Designs             |  | Feasterville, Pennsylvania   |  |             | 7,500   | 
|Showrooms                    |  | New York, New York           |  |             | 19,100  | 
|Sales Offices                |  | Bentonville, Arkansas        |  |             | 3,300   | 
|                             |  | Palatine, Illinois           |  |             | 1,200   | 
|International Offices        |  |                              |  |             |         | 
|                             |  |                              |  |             |        
|JAKKS Hong Kong              |  | Kowloon, Hong Kong           |  |             | 22,900  | 
|Play Along Hong Kong         |  | Kowloon, Hong Kong           |  |             | 18,300  | 
|Arbor Toys Hong Kong         |  | Kowloon, Hong Kong           |  |             | 12,500  | 
|Production Inspection Office |  | Shanghai, China              |  |             | 1,700   | 




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 | 
|      |                |                |   |       |     | 
|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 | 
|     
|2005: |                |                |   |       |     |  |   |      
|      | First quarter  |                |   | 23.96 |     |  |   | 17.25 | 
|      | Second quarter |                |   | 21.97 |     |  |   | 18.38 | 
|      | Third quarter  |                |   | 20.20 |     |  |   | 15.54 | 
|      | Fourth quarter |                |   | 23.35 |     |  |   | 14.80 | 

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;               

25



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| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.

|                                                           |  |                      |           |  |                   |                      |       |                         |  |  |           | 
|---------------------------------------------------------- |  | -------------------- | --------- |  | ----------------- | -------------------- | ----- | ----------------------- |  |  | --------- | 
|                                                           |  |                      |           |  |                   | 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     |  |                      | 1,789,106 |  |                   | $                    | 16.32 |                         |  |  | 1,435,876 | 
|Equity compensation plans not approved by security holders |  |                      | 100,000   |  |                   |                      | 11.35 |                         |  |  |          | 
|                                                           |  |                      |           |  |                   |                      |       |                         | 
|Total                                                      |  |                      | 1,889,106 |  |                   | $                    | 16.06 |                         |  |  | 1,435,876 | 
|                                                           |  |                      |           |  |                   |                      |       |                         | 






Item 6. Selected Financial Data




|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ------------------------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                               |  | Year Ended December 31,               |        
|                                                               |  |                                       |        
|                                                               |  | 2001                                  |         |  | 2002 |   |         | 2003 |  |   | 2004    |   |  | 2005 |        
|                                                               |  | (In thousands, except per share data) |        
|Consolidated Statement of Income Data:                         |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                                      |  | $                                     | 284,309 |  |      | $ | 310,016 |      |  | $ | 315,776 |   |  | $    | 574,266 |   |  | $ | 661,536 |  
|Cost of sales                                                  |  |                                       | 164,222 |  |      |   | 180,173 |      |  |   | 189,334 |   |  |      | 348,259 |   |  |   | 394,829 |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Gross profit                                                   |  |                                       | 120,087 |  |      |   | 129,843 |      |  |   | 126,442 |   |  |      | 226,007 |   |  |   | 266,707 |  
|Selling, general and administrative expenses                   |  |                                       | 89,575  |  |      |   | 98,111  |      |  |   | 113,053 |   |  |      | 172,282 |   |  |   | 178,722 |  
|Acquisition shut-down and product recall costs                 |  |                                       | 1,214   |  |      |   | 6,718   |      |  |   | 2,000   |   |  |      |        |   |  |   |        |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Income from operations                                         |  |                                       | 29,298  |  |      |   | 25,014  |      |  |   | 11,389  |   |  |      | 53,725  |   |  |   | 87,985  |  
|Profit from video game joint venture                           |  |                                       | 6,675   |  |      |   | 8,004   |      |  |   | 7,351   |   |  |      | 7,865   |   |  |   | 9,414   |  
|Other expense                                                  |  |                                       |        |  |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (1,401  | )
|Interest, net                                                  |  |                                       | 2,057   |  |      |   | 1,141   |      |  |   | (1,405  | ) |  |      | (2,498  | ) |  |   | 639     |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Income before provision for income taxes and minority interest |  |                                       | 38,030  |  |      |   | 34,159  |      |  |   | 17,335  |   |  |      | 59,092  |   |  |   | 96,637  |  
|Provision for income taxes                                     |  |                                       | 9,797   |  |      |   | 6,466   |      |  |   | 1,440   |   |  |      | 15,533  |   |  |   | 33,144  |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Income before minority interest                                |  |                                       | 28,233  |  |      |   | 27,693  |      |  |   | 15,895  |   |  |      | 43,559  |   |  |   | 63,493  |  
|Minority interest                                              |  |                                       |        |  |      |   | (237    | )    |  |   |        |   |  |      |        |   |  |   |        |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Net income                                                     |  | $                                     | 28,233  |  |      | $ | 27,930  |      |  | $ | 15,895  |   |  | $    | 43,559  |   |  | $ | 63,493  |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Basic earnings per share                                       |  | $                                     | 1.55    |  |      | $ | 1.27    |      |  | $ | 0.66    |   |  | $    | 1.69    |   |  | $ | 2.37    |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Weighted average shares outstanding                            |  |                                       | 18,199  |  |      |   | 21,963  |      |  |   | 24,262  |   |  |      | 25,797  |   |  |   | 26,738  |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Diluted earnings per share                                     |  | $                                     | 1.45    |  |      | $ | 1.23    |      |  | $ | 0.66    |   |  | $    | 1.49    |   |  | $ | 2.06    |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        
|Weighted average shares and equivalents outstanding            |  |                                       | 19,410  |  |      |   | 22,747  |      |  |   | 27,426  |   |  |      | 31,406  |   |  |   | 32,193  |  
|                                                               |  |                                       |         |  |      |   |         |      |  |   |         |   |  |      |        

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|                                       |  |                 |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|-------------------------------------- |  | --------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                       |  | At December 31, |        
|                                       |  |                 |        
|                                       |  | 2001            |         |  | 2002 |   |         | 2003 |  |   | 2004    |  |  | 2005 |        
|                                       |  | (In thousands)  |        
|Consolidated Balance Sheet Data:       |  |                 |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash and cash equivalents              |  | $               | 25,036  |  |      | $ | 68,413  |      |  | $ | 118,182 |  |  | $    | 176,544 |  |  | $ | 240,238 | 
|Working capital                        |  |                 | 116,492 |  |      |   | 129,183 |      |  |   | 232,601 |  |  |      | 229,543 |  |  |   | 301,454 | 
|Total assets                           |  |                 | 284,041 |  |      |   | 408,916 |      |  |   | 529,997 |  |  |      | 696,762 |  |  |   | 753,955 | 
|Long-term debt, net of current portion |  |                 | 77      |  |      |   | 60      |      |  |   | 98,042  |  |  |      | 98,000  |  |  |   | 98,000  | 
|Total stockholders equity             |  |                 | 244,404 |  |      |   | 357,236 |      |  |   | 377,900 |  |  |      | 451,485 |  |  |   | 524,651 | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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;

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| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                    



Recent Developments




Results of Operations




|                                               |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |       |   |  |  |       |  
|---------------------------------------------- |  | ------------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - |  |  | ----- | -
|                                               |  | Years Ended December 31, |      
|                                               |  |                          |      
|                                               |  | 2001                     |       |   | 2002 |  |       | 2003 |  |  | 2004  |   |  | 2005 |      
|Net sales                                      |  |                          | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | % |  |      | 100.0 | % |  |  | 100.0 | %
|Cost of sales                                  |  |                          | 57.8  |   |      |  | 58.1  |      |  |  | 60.0  |   |  |      | 60.6  |   |  |  | 59.7  |  
|                                               |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Gross profit                                   |  |                          | 42.2  |   |      |  | 41.9  |      |  |  | 40.0  |   |  |      | 39.4  |   |  |  | 40.3  |  
|Selling, general and administrative expenses   |  |                          | 31.5  |   |      |  | 31.6  |      |  |  | 35.8  |   |  |      | 30.0  |   |  |  | 27.0  |  
|Acquisition shut-down and product recall costs |  |                          | 0.4   |   |      |  | 2.2   |      |  |  | 0.6   |   |  |      |      |   |  |  |      |  
|                                               |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Income from operations                         |  |                          | 10.3  |   |      |  | 8.1   |      |  |  | 3.6   |   |  |      | 9.4   |   |  |  | 13.3  |  
|Profit from video game joint venture           |  |                          | 2.3   |   |      |  | 2.6   |      |  |  | 2.3   |   |  |      | 1.4   |   |  |  | 1.4   |  
|Other expense                                  |  |                          |      |   |      |  |      |      |  |  |      |   |  |      |      |   |  |  | (0.2  | )
|Interest, net                                  |  |                          | 0.7   |   |      |  | 0.4   |      |  |  | (0.4  | ) |  |      | (0.4  | ) |  |  | 0.1   |  
|                                               |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Income before income taxes                     |  |                          | 13.3  |   |      |  | 11.1  |      |  |  | 5.5   |   |  |      | 10.4  |   |  |  | 14.6  |  
|Provision for income taxes                     |  |                          | 3.4   |   |      |  | 2.1   |      |  |  | 0.5   |   |  |      | 2.7   |   |  |  | 5.0   |  
|                                               |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      
|Net income                                     |  |                          | 9.9   | % |      |  | 9.0   | %    |  |  | 5.0   | % |  |      | 7.7   | % |  |  | 9.6   | %
|                                               |  |                          |       |   |      |  |       |      |  |  |       |   |  |      |      

Comparison of the Years Ended December 31, 2005 and
2004


Net Sales.


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Cabbage Patch Kids Doodle
Bear ® Sky
Dancers ® TV Games Care Bears Teletubbies TV
Games Funnoodle Funnoodle


on-going


Gross Profit.


Selling, General and Administrative Expenses.


Profit from Video Game Joint Venture.


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Other Expense.


Interest, Net.


Provision for Income Taxes.


Comparisons of the Years Ended December 31, 2004 and
2003


Net Sales. TV Games


Gross Profit.


Selling, General and Administrative Expenses.


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World Wrestling Entertainment Dragon Ball Mucha
Lucha ® TV Games Care Bears Cabbage
Patch Kids Flying Colors World Wrestling Entertainment Dragon Ball Flying Colors


Product Recall Costs




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

Profit from Video Game Joint Venture.


Interest, Net.


Provision for Income Taxes.


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Quarterly Fluctuations and Seasonality






|                                                    |                     |                                       |        |      |         |   |        |         |   |   |         |      |   |         |        |       |         |   |        |         |   |   |         |      |   |         |         |      |         |   |         |         |   |   |         |      |   |   |         |      |   |   |         |      |   |   |         |      |  
|--------------------------------------------------- | ------------------- | ------------------------------------- | ------ | ---- | ------- | - | ------ | ------- | - | - | ------- | ---- | - | ------- | ------ | ----- | ------- | - | ------ | ------- | - | - | ------- | ---- | - | ------- | ------- | ---- | ------- | - | ------- | ------- | - | - | ------- | ---- | - | - | ------- | ---- | - | - | ------- | ---- | - | - | ------- | ---- | -
|                                                    |                     | 2003                                  |        |      | 2004    |   |        | 2005    |  
|                                                    |                     |                                       |        |      |         |   |        |         |  
|                                                    |                     | 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                                           |                     |                                       | 67,759 |      |         |   | 73,290 |         |   |   | 90,308  |      |   |         | 84,419 |       |         |   | 73,986 |         |   |   | 109,395 |      |   |         | 206,083 |      |         |   | 184,802 |         |   |   | 134,676 |      |   |   | 127,091 |      |   |   | 233,500 |      |   |   | 166,269 |     
|                                                    | As a % of full year |                                       |        | 21.5 | %       |   |        | 23.2    | % |   |         | 28.6 | % |         |        | 26.7  | %       |   |        | 12.9    | % |   |         | 19.0 | % |         |         | 35.9 | %       |   |         | 32.2    | % |   |         | 20.4 | % |   |         | 19.2 | % |   |         | 35.3 | % |   |         | 25.1 | %
|Gross profit                                        |                     |                                       | 27,442 |      |         |   | 27,906 |         |   |   | 36,226  |      |   |         | 34,868 |       |         |   | 30,466 |         |   |   | 41,281  |      |   |         | 81,801  |      |         |   | 72,459  |         |   |   | 54,212  |      |   |   | 48,073  |      |   |   | 93,452  |      |   |   | 70,970  |     
|                                                    | As a % of full year |                                       |        | 21.7 | %       |   |        | 22.1    | % |   |         | 28.7 | % |         |        | 27.6  | %       |   |        | 13.5    | % |   |         | 18.3 | % |         |         | 36.2 | %       |   |         | 32.1    | % |   |         | 20.3 | % |   |         | 18.0 | % |   |         | 35.0 | % |   |         | 26.6 | %
|                                                    | As a % of net sales |                                       |        | 40.5 | %       |   |        | 38.1    | % |   |         | 40.1 | % |         |        | 41.3  | %       |   |        | 41.2    | % |   |         | 37.7 | % |         |         | 39.7 | %       |   |         | 39.2    | % |   |         | 40.3 | % |   |         | 37.8 | % |   |         | 40.0 | % |   |         | 42.7 | %
|Income (loss) from operations                       |                     |                                       | 5,960  |      |         |   | 2,522  |         |   |   | 10,480  |      |   |         | (7,573 | )     |         |   | 4,885  |         |   |   | 8,321   |      |   |         | 29,915  |      |         |   | 10,604  |         |   |   | 13,675  |      |   |   | 14,614  |      |   |   | 47,218  |      |   |   | 12,478  |     
|                                                    | As a % of full year |                                       |        | 52.3 | %       |   |        | 22.1    | % |   |         | 92.0 | % |         |        | -66.5 | %       |   |        | 9.1     | % |   |         | 15.5 | % |         |         | 55.7 | %       |   |         | 19.7    | % |   |         | 15.5 | % |   |         | 16.6 | % |   |         | 53.7 | % |   |         | 14.2 | %
|                                                    | As a % of net sales |                                       |        | 8.8  | %       |   |        | 3.4     | % |   |         | 11.6 | % |         |        | -9.0  | %       |   |        | 6.6     | % |   |         | 7.6  | % |         |         | 14.5 | %       |   |         | 5.7     | % |   |         | 10.2 | % |   |         | 11.5 | % |   |         | 20.2 | % |   |         | 7.5  | %
|Income before income taxes and minority interest    |                     |                                       | 6,299  |      |         |   | 2,679  |         |   |   | 10,495  |      |   |         | (2,138 | )     |         |   | 4,764  |         |   |   | 7,637   |      |   |         | 30,042  |      |         |   | 16,649  |         |   |   | 13,627  |      |   |   | 15,732  |      |   |   | 46,306  |      |   |   | 20,972  |     
|                                                    | As a % of net sales |                                       |        | 9.3  | %       |   |        | 3.7     | % |   |         | 11.6 | % |         |        | -2.5  | %       |   |        | 6.4     | % |   |         | 7.0  | % |         |         | 14.6 | %       |   |         | 9.0     | % |   |         | 10.1 | % |   |         | 12.4 | % |   |         | 19.8 | % |   |         | 12.6 | %
|Net income                                          |                     |                                       | 4,988  |      |         |   | 2,236  |         |   |   | 8,248   |      |   |         | 422    |       |         |   | 3,791  |         |   |   | 6,004   |      |   |         | 23,255  |      |         |   | 10,508  |         |   |   | 10,084  |      |   |   | 11,642  |      |   |   | 32,753  |      |   |   | 9,014   |     
|                                                    | As a % of net sales |                                       |        | 7.4  | %       |   |        | 3.1     | % |   |         | 9.1  | % |         |        | 0.5   | %       |   |        | 5.1     | % |   |         | 5.5  | % |         |         | 11.3 | %       |   |         | 5.7     | % |   |         | 7.5  | % |   |         | 9.2  | % |   |         | 14.0 | % |   |         | 5.4  | %
|Diluted earnings per share                          |                     | $                                     | 0.20   |      |         | $ | 0.09   |         |   | $ | 0.31    |      |   | $       | 0.02   |       |         | $ | 0.15   |         |   | $ | 0.22    |      |   | $       | 0.76    |      |         | $ | 0.36    |         |   | $ | 0.34    |      |   | $ | 0.39    |      |   | $ | 1.05    |      |   | $ | 0.29    |     
|Weighted average shares and equivalents outstanding |                     |                                       | 24,917 |      |         |   | 24,982 |         |   |   | 29,529  |      |   |         | 29,542 |       |         |   | 30,676 |         |   |   | 31,123  |      |   |         | 31,919  |      |         |   | 31,855  |         |   |   | 32,256  |      |   |   | 32,229  |      |   |   | 32,088  |      |   |   | 32,197  |     

10-Q.














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Recent Accounting Standards




Liquidity and Capital Resources








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|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       |  |   |         |  |  |   |         | 
|------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ----- |  | ---------- | - | ----- | ----- |  | - | ------- |  |  | - | ------- | 
|                                            |  | 2006 |        |  | 2007 |   |        | 2008 |  |   | 2009   |  |  | 2010 |       |  | Thereafter |   |       | Total | 
|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 
|Long-term debt                              |  | $    |       |  |      | $ |       |      |  | $ |       |  |  | $    |      |  |            | $ |      |       |  | $ | 98,000  |  |  | $ | 98,000  | 
|Operating leases                            |  |      | 6,912  |  |      |   | 6,463  |      |  |   | 4,184  |  |  |      | 3,810 |  |            |   | 3,401 |       |  |   | 8,809   |  |  |   | 33,579  | 
|Minimum guaranteed license/royalty payments |  |      | 13,003 |  |      |   | 8,421  |      |  |   | 5,492  |  |  |      | 1,434 |  |            |   | 500   |       |  |   |        |  |  |   | 28,850  | 
|Employment contracts                        |  |      | 5,591  |  |      |   | 5,419  |      |  |   | 3,166  |  |  |      | 2,244 |  |            |   | 2,280 |       |  |   |        |  |  |   | 18,700  | 
|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 
|Total contractual cash obligations          |  | $    | 25,506 |  |      | $ | 20,303 |      |  | $ | 12,842 |  |  | $    | 7,488 |  |            | $ | 6,181 |       |  | $ | 106,809 |  |  | $ | 179,129 | 
|                                            |  |      |        |  |      |   |        |      |  |   |        |  |  |      |       |  |            |   |       |       | 







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Exchange Rates







Item 7A. Quantitative and Qualitative Disclosures About
Market Risk




Interest Rate Risk




36



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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,                               |        
|                                       |                                                                                                                                             |                                            |        
|                                       |                                                                                                                                             | 2004                                       |         |         | 2005    | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | (In thousands, except                      |        
|                                       |                                                                                                                                             | share data)                                |        
|Assets                                 |                                                                                                                                             |                                            |         |         |         |  |         |        
|Current assets                         |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Cash and cash equivalents                                                                                                                   |                                            | $       | 176,544 |         |  | $       | 240,238 |        
|                                       | Marketable securities                                                                                                                       |                                            |         | 19,047  |         |  |         |        |        
|                                       | Accounts receivable, net of allowance for uncollectible accounts
    of $7,058 and $2,336, respectively                                     |                                            |         | 102,266 |         |  |         | 87,199  |        
|                                       | Inventory                                                                                                                                   |                                            |         | 50,000  |         |  |         | 66,729  |        
|                                       | Deferred income taxes                                                                                                                       |                                            |         | 6,161   |         |  |         | 13,618  |        
|                                       | Prepaid expenses and other                                                                                                                  |                                            |         | 18,521  |         |  |         | 17,533  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total current assets                       |         |         | 372,539 |  |         |         | 425,317 | 
|Property and equipment                 |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Office furniture and equipment                                                                                                              |                                            |         | 6,823   |         |  |         | 7,619   |        
|                                       | Molds and tooling                                                                                                                           |                                            |         | 28,818  |         |  |         | 26,948  |        
|                                       | Leasehold improvements                                                                                                                      |                                            |         | 2,572   |         |  |         | 3,522   |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total                                      |         |         | 38,213  |  |         |         | 38,089  | 
|                                       | Less accumulated depreciation and amortization                                                                                              |                                            |         | 27,273  |         |  |         | 25,394  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Property and equipment, net                |         |         | 10,940  |  |         |         | 12,695  | 
|Intangibles and other, net             |                                                                                                                                             |                                            | 27,368  |         |         |  | 18,512  |        
|Investment in video game joint venture |                                                                                                                                             |                                            | 9,816   |         |         |  | 10,365  |        
|Goodwill, net                          |                                                                                                                                             |                                            | 258,331 |         |         |  | 269,298 |        
|Trademarks, net                        |                                                                                                                                             |                                            | 17,768  |         |         |  | 17,768  |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total assets                               |         | $       | 696,762 |  |         | $       | 753,955 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|Liabilities and Stockholders Equity   |                                                                                                                                             |                                            |         |         |         |  |         |        
|Current liabilities                    |                                                                                                                                             |                                            |         |         |         |  |         |        
|                                       | Accounts payable                                                                                                                            |                                            | $       | 59,569  |         |  | $       | 50,533  |        
|                                       | Accrued expenses                                                                                                                            |                                            |         | 49,407  |         |  |         | 44,415  |        
|                                       | Reserve for sales returns and allowances                                                                                                    |                                            |         | 23,173  |         |  |         | 25,123  |        
|                                       | Income taxes payable                                                                                                                        |                                            |         | 10,847  |         |  |         | 3,792   |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total current liabilities                  |         |         | 142,996 |  |         |         | 123,863 | 
|Convertible senior notes               |                                                                                                                                             |                                            | 98,000  |         |         |  | 98,000  |        
|Deferred rent liability                |                                                                                                                                             |                                            |        |         |         |  | 995     |        
|Deferred income taxes                  |                                                                                                                                             |                                            | 4,281   |         |         |  | 6,446   |        
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total liabilities                          |         |         | 245,277 |  |         |         | 229,304 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|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;
    26,234,016 and 26,944,559 shares issued and outstanding,
    respectively |                                            |         | 26      |         |  |         | 27      |        
|                                       | Additional paid-in capital                                                                                                                  |                                            |         | 276,642 |         |  |         | 287,356 |        
|                                       | Retained earnings                                                                                                                           |                                            |         | 176,564 |         |  |         | 240,057 |        
|                                       | Accumulated other comprehensive loss                                                                                                        |                                            |         | (1,747  | )       |  |         | (2,789  | )      
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total stockholders equity                 |         |         | 451,485 |  |         |         | 524,651 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 
|                                       |                                                                                                                                             | Total liabilities and stockholders equity |         | $       | 696,762 |  |         | $       | 753,955 | 
|                                       |                                                                                                                                             |                                            |         |         |         | 

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME


|                                             |  |                                          |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                             |  | Years Ended December 31,                 |        
|                                             |  |                                          |        
|                                             |  | 2003                                     |         |   | 2004 |   |         | 2005 | 
|                                             |  | (In thousands, except per share amounts) |        
|Net sales                                    |  | $                                        | 315,776 |   |      | $ | 574,266 |      |  | $ | 661,536 |  
|Cost of sales                                |  |                                          | 189,334 |   |      |   | 348,259 |      |  |   | 394,829 |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Gross profit                                 |  |                                          | 126,442 |   |      |   | 226,007 |      |  |   | 266,707 |  
|Selling, general and administrative expenses |  |                                          | 113,053 |   |      |   | 172,282 |      |  |   | 178,722 |  
|Product recall costs                         |  |                                          | 2,000   |   |      |   |        |      |  |   |        |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Income from operations                       |  |                                          | 11,389  |   |      |   | 53,725  |      |  |   | 87,985  |  
|Profit from video game joint venture         |  |                                          | 7,351   |   |      |   | 7,865   |      |  |   | 9,414   |  
|Other expense                                |  |                                          |        |   |      |   |        |      |  |   | (1,401  | )
|Interest, net                                |  |                                          | (1,405  | ) |      |   | (2,498  | )    |  |   | 639     |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Income before provision for income taxes     |  |                                          | 17,335  |   |      |   | 59,092  |      |  |   | 96,637  |  
|Provision for income taxes                   |  |                                          | 1,440   |   |      |   | 15,533  |      |  |   | 33,144  |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Net income                                   |  | $                                        | 15,895  |   |      | $ | 43,559  |      |  | $ | 63,493  |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Basic earnings per share                     |  | $                                        | 0.66    |   |      | $ | 1.69    |      |  | $ | 2.37    |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Basic weighted number of shares              |  |                                          | 24,262  |   |      |   | 25,797  |      |  |   | 26,738  |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Diluted earnings per share                   |  | $                                        | 0.66    |   |      | $ | 1.49    |      |  | $ | 2.06    |  
|                                             |  |                                          |         |   |      |   |         |      | 
|Diluted weighted number of shares            |  |                                          | 27,426  |   |      |   | 31,406  |      |  |   | 32,193  |  
|                                             |  |                                          |         |   |      |   |         |      | 

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, |       
|                                        |  |                          |       
|                                        |  | 2003                     |        |   | 2004 |   |        | 2005 | 
|                                        |  |                          |        |   |      |   |        |      | 
|                                        |  | (In thousands)           |       
|Other comprehensive income:             |  |                          |        |   |      |   |        |      |  |   |        |  
|Net income                              |  | $                        | 15,895 |   |      | $ | 43,559 |      |  | $ | 63,493 |  
|Foreign currency translation adjustment |  |                          | (349   | ) |      |   | (1,398 | )    |  |   | (1,042 | )
|                                        |  |                          |        |   |      |   |        |      | 
|Other comprehensive income              |  | $                        | 15,546 |   |      | $ | 42,161 |      |  | $ | 62,451 |  
|                                        |  |                          |        |   |      |   |        |      | 

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005


(In thousands)


|                                               |  |              |        |   |            |   |         |          |              |          |          |             |            |              |         |               |      |   |               |        |  |   |        |   |  |   |         |  
|---------------------------------------------- |  | ------------ | ------ | - | ---------- | - | ------- | -------- | ------------ | -------- | -------- | ----------- | ---------- | ------------ | ------- | ------------- | ---- | - | ------------- | ------ |  | - | ------ | - |  | - | ------- | -
|                                               |  |              |        |   |            |   |         | Deferred |              |          |          |             |           
|                                               |  | Common Stock |        |   |            |   |         |          | Compensation |          |          | Accumulated |            |              |        
|                                               |  |              |        |   | Additional |   |         |          |              | From     |          |             | Other      |              |         | Total         |     
|                                               |  | Number       |        |   |            |   | Paid-in |          |              | Retained |          |             | Restricted |              |         | Comprehensive |      |   | Stockholders |       
|                                               |  | of Shares    |        |   | Amount     |   |         | Capital  |              |          | Earnings |             |            | Stock Grants |         |               | Loss |   |               | Equity | 
|                                               |  |              |        |   |            |   |         |          |              |          |          |             |            |              |         |               |      |   |               |        | 
|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 |  
|Exercise of options                            |  |              | 567    |   |            |   | 1       |          |              |          | 4,872    |             |            |              |        |               |      |   |              |        |  |   |       |   |  |   | 4,873   |  
|Stock option income tax benefit                |  |              |       |   |            |   |        |          |              |          | 4,119    |             |            |              |        |               |      |   |              |        |  |   |       |   |  |   | 4,119   |  
|Restricted stock grants                        |  |              | 245    |   |            |   |        |          |              |          | 5,130    |             |            |              |        |               |      |   |              |        |  |   |       |   |  |   | 5,130   |  
|Compensation for fully vested stock options    |  |              |       |   |            |   |        |          |              |          | (1,706   | )           |            |              |        |               |      |   |              |        |  |   |       |   |  |   | (1,706  | )
|Retirement of common stock                     |  |              | (101   | ) |            |   |        |          |              |          | (1,701   | )           |            |              |        |               |      |   |              |        |  |   |       |   |  |   | (1,701  | )
|Net income                                     |  |              |       |   |            |   |        |          |              |          |         |             |            |              | 63,493  |               |      |   |              |        |  |   |       |   |  |   | 63,493  |  
|Foreign currency translation adjustment        |  |              |       |   |            |   |        |          |              |          |         |             |            |              |        |               |      |   |              |        |  |   | (1,042 | ) |  |   | (1,042  | )
|                                               |  |              |        |   |            |   |         |          |              |          |          |             |            |              |         |               |      |   |               |        | 
|Balance, December 31, 2005                     |  |              | 26,945 |   |            | $ | 27      |          |              | $        | 287,356  |             |            | $            | 240,057 |               |      | $ |               |        |  | $ | (2,789 | ) |  | $ | 524,651 |  
|                                               |  |              |        |   |            |   |         |          |              |          |          |             |            |              |         |               |      |   |               |        | 

See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |        |        |         |         |        |         |        |  
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------- | ----------------------------------------- | ------ | ------- | ------- | ------- | ------ | ------ | ------- | ------- | ------ | ------- | ------ | -
|                                             |                                                                                               | Years Ended December 31,                         |                                         
|                                             |                                                                                               |                                                  |                                         
|                                             |                                                                                               | 2003                                             |                                          |                                           | 2004   |         |         | 2005    |       
|                                             |                                                                                               | (In thousands)                                   |                                         
|Cash flows from operating activities         |                                                                                               |                                                  |                                          |                                           |        |         |         |         |        |        |         |        
|                                             | Net income                                                                                    |                                                  | $                                        | 15,895                                    |        |         | $       | 43,559  |        |        | $       | 63,493  |       
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|                                             | Adjustments to reconcile net income to net cash provided by
    operating activities          |                                                  |                                          |                                           |        |         |         |         |        |        |         |         |       
|                                             |                                                                                               | Depreciation and amortization                    |                                          |                                           | 16,029 |         |         |         | 21,518 |        |         |         | 15,527 |        
|                                             |                                                                                               | Compensation for fully vested stock options      |                                          |                                           | 6      |         |         |         | 5,365  |        |         |         | (1,706 | )      
|                                             |                                                                                               | Acquisition Earn-out                             |                                          |                                           |       |         |         |         | 494    |        |         |         |       |        
|                                             |                                                                                               | Investment in video game joint venture           |                                          |                                           | 79     |         |         |         | (719   | )      |         |         | (548   | )      
|                                             |                                                                                               | Loss on disposal of property and equipment       |                                          |                                           |       |         |         |         | 1,096  |        |         |         | 104    |        
|                                             |                                                                                               | Restricted stock compensation                    |                                          |                                           | 8,364  |         |         |         | 8,276  |        |         |         | 5,130  |        
|                                             |                                                                                               | Write-off of investment in Chinese Joint Venture |                                          |                                           |       |         |         |         |       |        |         |         | 1,401  |        
|                                             |                                                                                               | Changes in operating assets and liabilities      |                                          |                                           |        |         |         |         |        |        |         |         |        |        
|                                             |                                                                                               |                                                  | Accounts receivable                      |                                           |        | (28,224 | )       |         |        | (4,333 | )       |         |        | 16,697  |       
|                                             |                                                                                               |                                                  | Inventory                                |                                           |        | (2,654  | )       |         |        | 784    |         |         |        | (13,272 | )     
|                                             |                                                                                               |                                                  | Prepaid expenses and other               |                                           |        | (5,643  | )       |         |        | (3,613 | )       |         |        | 1,088   |       
|                                             |                                                                                               |                                                  | Accounts payable                         |                                           |        | 16,264  |         |         |        | 19,192 |         |         |        | (9,437  | )     
|                                             |                                                                                               |                                                  | Accrued expenses                         |                                           |        | (3,259  | )       |         |        | 19,742 |         |         |        | (1,915  | )     
|                                             |                                                                                               |                                                  | Income taxes payable                     |                                           |        | (1,397  | )       |         |        | 5,945  |         |         |        | (2,936  | )     
|                                             |                                                                                               |                                                  | Reserve for sales returns and allowances |                                           |        | (5,827  | )       |         |        | 13,289 |         |         |        | 1,732   |       
|                                             |                                                                                               |                                                  | Deferred rent liability                  |                                           |        |        |         |         |        |       |         |         |        | 995     |       
|                                             |                                                                                               |                                                  | Deferred income taxes                    |                                           |        | (2,240  | )       |         |        | 795    |         |         |        | (5,292  | )     
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|                                             |                                                                                               |                                                  |                                          | Total adjustments                         |        |         | (8,502  | )       |        |        | 87,831  |         |        |         | 7,568  |  
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|                                             |                                                                                               |                                                  |                                          | Net cash provided by operating activities |        |         | 7,393   |         |        |        | 131,390 |         |        |         | 71,061 |  
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|Cash flows from investing activities         |                                                                                               |                                                  |                                          |                                           |        |         |         |         |        |        |         |        
|                                             | Purchases of property and equipment                                                           |                                                  |                                          | (4,472                                    | )      |         |         | (5,917  | )      |        |         | (8,270  | )     
|                                             | Purchases of other assets                                                                     |                                                  |                                          | (4,936                                    | )      |         |         | (26,863 | )      |        |         | 118     |       
|                                             | Cash paid for net assets                                                                      |                                                  |                                          | (19,676                                   | )      |         |         | (41,438 | )      |        |         | (20,362 | )     
|                                             | Net (purchases) sales of marketable securities                                                |                                                  |                                          | (19,345                                   | )      |         |         | 967     |        |        |         | 19,047  |       
|                                             | Notes receivable  officers                                                                   |                                                  |                                          | 1,113                                     |        |         |         |        |        |        |         |        |       
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|                                             |                                                                                               |                                                  |                                          | Net cash used by investing activities     |        |         | (47,316 | )       |        |        | (73,251 | )       |        |         | (9,467 | )
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|Cash flows from financing activities         |                                                                                               |                                                  |                                          |                                           |        |         |         |         |        |        |         |        
|                                             | Repurchase of common stock                                                                    |                                                  |                                          | (6,086                                    | )      |         |         |        |        |        |         |        |       
|                                             | Proceeds from stock options exercised (net of cash-less exercise
    of $1.7 million in 2005) |                                                  |                                          | 1,777                                     |        |         |         | 1,682   |        |        |         | 3,173   |       
|                                             | Net proceeds from sale of convertible senior notes                                            |                                                  |                                          | 94,366                                    |        |         |         |        |        |        |         |        |       
|                                             | Repayments of debt                                                                            |                                                  |                                          | (16                                       | )      |         |         | (61     | )      |        |         |        |       
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|                                             |                                                                                               |                                                  |                                          | Net cash provided by financing activities |        |         | 90,041  |         |        |        | 1,621   |         |        |         | 3,173  |  
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|Foreign currency translation adjustment      |                                                                                               |                                                  | (349                                     | )                                         |        |         | (1,398  | )       |        |        | (1,073  | )      
|Net increase in cash and cash equivalents    |                                                                                               |                                                  | 49,769                                   |                                           |        |         | 58,362  |         |        |        | 63,694  |        
|Cash and cash equivalents, beginning of year |                                                                                               |                                                  | 68,413                                   |                                           |        |         | 118,182 |         |        |        | 176,544 |        
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|Cash and cash equivalents, end of year       |                                                                                               | $                                                | 118,182                                  |                                           |        | $       | 176,544 |         |        | $      | 240,238 |        
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|Cash paid during the period for:             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |        |        |         |        
|                                             | Interest                                                                                      |                                                  | $                                        | 2,375                                     |        |         | $       | 4,534   |        |        | $       | 4,533   |       
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       
|                                             | Income taxes                                                                                  |                                                  | $                                        | 9,694                                     |        |         | $       | 2,688   |        |        | $       | 41,284  |       
|                                             |                                                                                               |                                                  |                                          |                                           |        |         |         |         |       



See notes to consolidated financial statements.


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2005


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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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




Inventory




|               |  |              |        |  |      |   |        | 
|-------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|               |  | December 31, |       
|               |  |              |       
|               |  | 2004         |        |  | 2005 |  
|Raw materials  |  | $            | 1,557  |  |      | $ | 2,679  | 
|Finished goods |  |              | 48,443 |  |      |   | 64,050 | 
|               |  |              |        |  |      |  
|               |  | $            | 50,000 |  |      | $ | 66,729 | 
|               |  |              |        |  |      |  

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


00-10, 00-10,


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Advertising






Income taxes




Translation of foreign currencies






Accounting for the impairment of long-lived assets




Goodwill and other intangible assets




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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)








Stock Option Plans


Stock-Based


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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




|                                                                                                                                             |  |                         |        |   |      |   |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                             |  | Year Ended December 31, |       
|                                                                                                                                             |  |                         |       
|                                                                                                                                             |  | 2003                    |        |   | 2004 |   |        | 2005 | 
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|                                                                                                                                             |  | (In thousands,          |       
|                                                                                                                                             |  | except per share data)  |       
|Net income, as reported                                                                                                                      |  | $                       | 15,895 |   |      | $ | 43,559 |      |  | $ | 63,493 |  
|Add (Deduct): Stock-based employee compensation expense (income)
    included in reported net income net of related tax effects              |  |                         | 5      |   |      |   | 3,970  |      |  |   | (1,121 | )
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards net of related
    tax effects |  |                         | (2,796 | ) |      |   | (2,999 | )    |  |   | (2,456 | )
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Pro forma net income                                                                                                                         |  | $                       | 13,104 |   |      | $ | 44,530 |      |  | $ | 59,916 |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Earnings per share:                                                                                                                          |  |                         |        |   |      |   |        |      |  |   |        |  
|Basic  as reported                                                                                                                          |  | $                       | 0.66   |   |      | $ | 1.69   |      |  | $ | 2.37   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Basic  pro forma                                                                                                                            |  | $                       | 0.54   |   |      | $ | 1.73   |      |  | $ | 2.24   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Diluted  as reported                                                                                                                        |  | $                       | 0.66   |   |      | $ | 1.49   |      |  | $ | 2.06   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 
|Diluted  pro forma                                                                                                                          |  | $                       | 0.55   |   |      | $ | 1.52   |      |  | $ | 1.95   |  
|                                                                                                                                             |  |                         |        |   |      |   |        |      | 

Earnings per share




|                                                               |  |        |        |          |        |  |        |           |  |   |      | 
|-------------------------------------------------------------- |  | ------ | ------ | -------- | ------ |  | ------ | --------- |  | - | ---- | 
|                                                               |  | 2003   |       
|                                                               |  |        |       
|                                                               |  |        |        | Weighted |        |  |       
|                                                               |  |        |        | Average  |        |  |       
|                                                               |  | Income |        |          | Shares |  |        | Per Share | 
|Basic EPS                                                      |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders                        |  | $      | 15,895 |          |        |  | 24,262 |           |  | $ | 0.66 | 
|                                                               |  |        |        |          |        |  |        |           | 
|Effect of dilutive securities                                  |  |        |        |          |        |  |        |           |  |   |      | 
|Assumed conversion of convertible senior notes                 |  |        | 2,332  |          |        |  | 2,749  |           |  |   |      | 
|Options and warrants                                           |  |        |       |          |        |  | 415    |           |  |   |      | 
|                                                               |  |        |        |          |        |  |        |           | 
|Diluted EPS                                                    |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders plus assumed exercises |  | $      | 18,227 |          |        |  | 27,426 |           |  | $ | 0.66 | 
|                                                               |  |        |        |          |        |  |        |           | 

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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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

|                                                               |  |        |        |          |        |  |        |           |  |   |      | 
|-------------------------------------------------------------- |  | ------ | ------ | -------- | ------ |  | ------ | --------- |  | - | ---- | 
|                                                               |  | 2005   |       
|                                                               |  |        |       
|                                                               |  |        |        | Weighted |        |  |       
|                                                               |  |        |        | Average  |        |  |       
|                                                               |  | Income |        |          | Shares |  |        | Per Share | 
|Basic EPS                                                      |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders                        |  | $      | 63,493 |          |        |  | 26,738 |           |  | $ | 2.37 | 
|                                                               |  |        |        |          |        |  |        |           | 
|Effect of dilutive securities                                  |  |        |        |          |        |  |        |           |  |   |      | 
|Assumed conversion of convertible senior notes                 |  |        | 2,978  |          |        |  | 4,900  |           |  |   |      | 
|Options and warrants                                           |  |        |       |          |        |  | 555    |           |  |   |      | 
|                                                               |  |        |        |          |        |  |        |           | 
|Diluted EPS                                                    |  |        |        |          |        |  |        |           |  |   |      | 
|Income available to common stockholders plus assumed exercises |  | $      | 66,471 |          |        |  | 32,193 |           |  | $ | 2.06 | 
|                                                               |  |        |        |          |        |  |        |           | 

Recent Accounting
Standards




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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Reclassifications




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












|                      |  |                              |         |  |                   |   |         |          |  |   |          |  |       |   |   |  |  |   |         | 
|--------------------- |  | ---------------------------- | ------- |  | ----------------- | - | ------- | -------- |  | - | -------- |  | ----- | - | - |  |  | - | ------- | 
|                      |  | Year Ended December 31, 2003 |        
|                      |  |                              |        
|                      |  | Traditional                  |         |  | Craft/Activities/ |   |         | Seasonal |  |   | Pet      |  |      
|                      |  | Toys                         |         |  | Writing Products  |   |         | Products |  |   | Products |  | Total |  
|                      |  |                              |         |  |                   |   |         |          |  |   |          |  |       |  
|Net Sales             |  |                              |         |  |                   |   |         |          |  |   |          |  |       |   |   |  |  |   |         | 
|North America Toys    |  | $                            | 109,175 |  |                   | $ | 125,947 |          |  | $ | 41,053   |  |       | $ |  |  |  | $ | 276,175 | 
|Pet Products (Note 5) |  |                              |        |  |                   |   |        |          |  |   |         |  |       |   |  |  |  |   |        | 
|International         |  |                              | 36,523  |  |                   |   | 866     |          |  |   | 2,212    |  |       |   |  |  |  |   | 39,601  | 
|                      |  |                              |         |  |                   |   |         |          |  |   |          |  |       |   |  
|                      |  | $                            | 145,698 |  |                   | $ | 126,813 |          |  | $ | 43,265   |  |       | $ |  |  |  | $ | 315,776 | 
|                      |  |                              |         |  |                   |   |         |          |  |   |          |  |       |   |  

|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |       |   |   |  |  |   |         | 
|--------------------- |  | ---------------------------- | ------- |  | ----------------- | - | ------ | -------- |  | - | -------- |  | ----- | - | - |  |  | - | ------- | 
|                      |  | Year Ended December 31, 2004 |        
|                      |  |                              |        
|                      |  | Traditional                  |         |  | Craft/Activities/ |   |        | Seasonal |  |   | Pet      |  |      
|                      |  | Toys                         |         |  | Writing Products  |   |        | Products |  |   | Products |  | Total |  
|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |       |  
|North America Toys    |  | $                            | 419,061 |  |                   | $ | 77,405 |          |  | $ | 24,995   |  |       | $ |  |  |  | $ | 521,461 | 
|Pet Products (Note 5) |  |                              |        |  |                   |   |       |          |  |   |         |  |       |   |  |  |  |   |        | 
|International         |  |                              | 44,238  |  |                   |   | 6,792  |          |  |   | 1,775    |  |       |   |  |  |  |   | 52,805  | 
|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |       |   |  
|                      |  | $                            | 463,299 |  |                   | $ | 84,197 |          |  | $ | 26,770   |  |       | $ |  |  |  | $ | 574,266 | 
|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |       |   |  

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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |  |       |       |  |  |   |         | 
|--------------------- |  | ---------------------------- | ------- |  | ----------------- | - | ------ | -------- |  | - | -------- |  |  | ----- | ----- |  |  | - | ------- | 
|                      |  | Year Ended December 31, 2005 |        
|                      |  |                              |        
|                      |  | Traditional                  |         |  | Craft/Activities/ |   |        | Seasonal |  |   | Pet      |  |  |      
|                      |  | Toys                         |         |  | Writing Products  |   |        | Products |  |   | Products |  |  | Total |      
|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |  |       |      
|North America Toys    |  | $                            | 495,490 |  |                   | $ | 58,114 |          |  | $ | 19,665   |  |  | $     |      |  |  | $ | 573,269 | 
|Pet Products (Note 5) |  |                              |        |  |                   |   |       |          |  |   |         |  |  |       | 9,763 |  |  |   | 9,763   | 
|International         |  |                              | 74,438  |  |                   |   | 3,944  |          |  |   | 122      |  |  |       |      |  |  |   | 78,504  | 
|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |  |       |      
|                      |  | $                            | 569,928 |  |                   | $ | 62,058 |          |  | $ | 19,787   |  |  | $     | 9,763 |  |  | $ | 661,536 | 
|                      |  |                              |         |  |                   |   |        |          |  |   |          |  |  |       |      

|                      |  |                         |        |  |      |   |        |      |  |   |        | 
|--------------------- |  | ----------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                      |  | Year Ended December 31, |       
|                      |  |                         |       
|                      |  | 2003                    |        |  | 2004 |   |        | 2005 | 
|                      |  |                         |        |  |      |   |        |      | 
|Operating Income      |  |                         |        |  |      |   |        |      |  |   |        | 
|North America Toys    |  | $                       | 9,823  |  |      | $ | 48,785 |      |  | $ | 76,116 | 
|Pet Products (Note 5) |  |                         |       |  |      |   |       |      |  |   | 1,222  | 
|International         |  |                         | 1,566  |  |      |   | 4,940  |      |  |   | 10,647 | 
|                      |  |                         |        |  |      |   |        |      | 
|                      |  | $                       | 11,389 |  |      | $ | 53,725 |      |  | $ | 87,985 | 
|                      |  |                         |        |  |      |   |        |      | 

|                      |  |              |         |  |      |   |         | 
|--------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                      |  | December 31, |        
|                      |  |              |        
|                      |  | 2004         |         |  | 2005 |  
|                      |  |              |         |  |      |  
|Assets                |  |              |         |  |      |   |         | 
|North America Toys    |  | $            | 632,693 |  |      | $ | 677,420 | 
|Pet Products (Note 5) |  |              |        |  |      |   | 23,432  | 
|International         |  |              | 64,069  |  |      |   | 53,103  | 
|                      |  |              |         |  |      |  
|                      |  | $            | 696,762 |  |      | $ | 753,955 | 
|                      |  |              |         |  |      |  



|                  |  |              |         |  |      |   |         | 
|----------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                  |  | December 31, |        
|                  |  |              |        
|                  |  | 2004         |         |  | 2005 |  
|                  |  |              |         |  |      |  
|Long-lived Assets |  |              |         |  |      |   |         | 
|United States     |  | $            | 278,734 |  |      | $ | 283,350 | 
|Hong Kong         |  |              | 30,484  |  |      |   | 34,038  | 
|Europe            |  |              | 2,783   |  |      |   |        | 
|                  |  |              |         |  |      |  
|                  |  | $            | 312,001 |  |      | $ | 317,388 | 
|                  |  |              |         |  |      |  

|                             |  |                         |         |  |      |   |         |      |  |   |         | 
|---------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                             |  | Year Ended December 31, |        
|                             |  |                         |        
|                             |  | 2003                    |         |  | 2004 |   |         | 2005 | 
|                             |  |                         |         |  |      |   |         |      | 
|Net Sales by Geographic Area |  |                         |         |  |      |   |         |      |  |   |         | 
|United States                |  | $                       | 271,051 |  |      | $ | 505,803 |      |  | $ | 562,396 | 
|Europe                       |  |                         | 35,547  |  |      |   | 37,700  |      |  |   | 38,620  | 
|Canada                       |  |                         | 5,125   |  |      |   | 15,658  |      |  |   | 20,589  | 
|Hong Kong                    |  |                         | 1,275   |  |      |   | 4,410   |      |  |   | 24,388  | 
|Other                        |  |                         | 2,778   |  |      |   | 10,695  |      |  |   | 15,543  | 
|                             |  |                         |         |  |      |   |         |      | 
|                             |  | $                       | 315,776 |  |      | $ | 574,266 |      |  | $ | 661,536 | 
|                             |  |                         |         |  |      |   |         |      | 

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JAKKS PACIFIC, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


|                                  |  |                         |         |  |      |   |         |      |  |   |         | 
|--------------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                  |  | Year Ended December 31, |        
|                                  |  |                         |        
|                                  |  | 2003                    |         |  | 2004 |   |         | 2005 | 
|                                  |  |                         |         |  |      |   |         |      | 
|Net Sales by Product Group        |  |                         |         |  |      |   |         |      |  |   |         | 
|Traditional Toys                  |  | $                       | 147,813 |  |      | $ | 463,300 |      |  | $ | 569,928 | 
|Craft/Activities/Writing Products |  |                         | 124,698 |  |      |   | 84,197  |      |  |   | 62,058  | 
|Seasonal Products                 |  |                         | 43,265  |  |      |   | 26,769  |      |  |   | 19,788  | 
|Pet Products (Note 5)             |  |                         |        |  |      |   |        |      |  |   | 9,762   | 
|                                  |  |                         |         |  |      |   |         |      | 
|                                  |  | $                       | 315,776 |  |      | $ | 574,266 |      |  | $ | 661,536 | 
|                                  |  |                         |         |  |      |   |         |      | 

Major Customers




|            |  |        |         |            |              |  |      |        |            |   |              |  |  |            |      |   |              |   |         |  |  |  |      |  
|----------- |  | ------ | ------- | ---------- | ------------ |  | ---- | ------ | ---------- | - | ------------ |  |  | ---------- | ---- | - | ------------ | - | ------- |  |  |  | ---- | -
|            |  | 2003   |         |            | 2004         |  |      | 2005   |           
|            |  |        |         |            |              |  |      |        |           
|            |  |        |         | Percentage |              |  |      |        | Percentage |   |              |  |  | Percentage |     
|            |  | Amount |         |            | of Net Sales |  |      | Amount |            |   | of Net Sales |  |  | Amount     |      |   | of Net Sales |  
|Wal-Mart    |  | $      | 91,378  |            |              |  | 28.9 | %      |            | $ | 193,776      |  |  |            | 33.7 | % |              | $ | 212,620 |  |  |  | 32.1 | %
|Target      |  |        | 30,371  |            |              |  | 9.6  |        |            |   | 74,429       |  |  |            | 13.0 |   |              |   | 95,716  |  |  |  | 14.5 |  
|Toys R Us |  |        | 30,009  |            |              |  | 9.5  |        |            |   | 68,279       |  |  |            | 11.9 |   |              |   | 82,732  |  |  |  | 12.5 |  
|            |  |        |         |            |              |  |      |        |            |   |              |  |  |            |      |   |              |  
|            |  | $      | 151,758 |            |              |  | 48.0 | %      |            | $ | 336,484      |  |  |            | 58.6 | % |              | $ | 391,068 |  |  |  | 59.1 | %
|            |  |        |         |            |              |  |      |        |            |   |              |  |  |            |      |   |              |  





Note 4 Joint Ventures




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)






Note 5 Business Combinations






pre-school




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)






|                                     |                                       |   |         |         |  
|------------------------------------ | ------------------------------------- | - | ------- | ------- | -
|Estimated fair value (in thousands): |                                       |   |         |        
|                                     | Current assets                        |   | $       | 24,063  |  
|                                     | Property and equipment, net           |   |         | 546     |  
|                                     | Other assets                          |   |         | 3,184   |  
|                                     | Liabilities assumed                   |   |         | (22,263 | )
|                                     | Intangible assets other than goodwill |   |         | 22,100  |  
|                                     | Goodwill                              |   |         | 74,723  |  
|                                     |                                       |   |        
|                                     |                                       | $ | 102,353 |        
|                                     |                                       |   |        





|                                                    |  |                   |         |  |  | 
|--------------------------------------------------- |  | ----------------- | ------- |  |  | 
|                                                    |  | Year Ended        |        
|                                                    |  | December 31, 2004 |        
|                                                    |  |                   |        
|                                                    |  | (In thousands,    |        
|                                                    |  | except            |        
|                                                    |  | per share data)   |        
|Net sales                                           |  | $                 | 618,952 | 
|Net income                                          |  | $                 | 44,228  | 
|Basic earnings per share                            |  | $                 | 1.69    | 
|Weighted average shares outstanding                 |  |                   | 26,127  | 
|Diluted earnings per share                          |  | $                 | 1.50    | 
|Weighted average shares and equivalents outstanding |  |                   | 31,736  | 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Note 6 Goodwill




|                                                 |  |         |         |   |          |   |       |               |  |   |        |   |  |   |         |  
|------------------------------------------------ |  | ------- | ------- | - | -------- | - | ----- | ------------- |  | - | ------ | - |  | - | ------- | -
|                                                 |  | North   |         |   |          |   |       |               | 
|                                                 |  | America |         |   | Pet      |   |       |               |  |  
|                                                 |  | Toys    |         |   | Products |   |       | International |  |   | Total  |  
|                                                 |  |         |         |   |          |   |       |               |  |   |        |  
|Balance at beginning of period                   |  | $       | 237,833 |   |          | $ |      |               |  | $ | 20,498 |   |  | $ | 258,331 |  
|Goodwill acquired during the period (See Note 5) |  |         | 6,667   |   |          |   | 4,603 |               |  |   |       |   |  |   | 11,270  |  
|Adjustments to goodwill during the period        |  |         | (154    | ) |          |   |      |               |  |   | (149   | ) |  |   | (303    | )
|                                                 |  |         |         |   |          |   |       |               |  |   |        |  
|Balance at end of period                         |  | $       | 244,346 |   |          | $ | 4,603 |               |  | $ | 20,349 |   |  | $ | 269,298 |  
|                                                 |  |         |         |   |          |   |       |               |  |   |        |  

Note 7 Intangible Assets




|                                      |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        |  |   |         |   |  |   |        | 
|------------------------------------- |  | ----------------- | ---------- |  | ----------------- | - | ------ | ------------ |  | - | ------- | - |  | -------------- | ------ |  | ------------ | - | ------ | ------ |  | - | ------- | - |  | - | ------ | 
|                                      |  | December 31, 2004 |            |  | December 31, 2005 |  
|                                      |  |                   |            |  |                   |  
|                                      |  | Weighted          |            |  | Gross Carrying    |   |        | Accumulated  |  |   | Net     |   |  | Gross Carrying |        |  | Accumulated  |   |        | Net    | 
|                                      |  | Useful Lives      |            |  | Amount            |   |        | Amortization |  |   | Amount  |   |  | Amount         |        |  | Amortization |   |        | Amount | 
|                                      |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        | 
|Amortized Intangible Assets:          |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        |  |   |         |   |  |   |        | 
|Acquired order backlog                |  |                   | 0.50       |  |                   |   | 5,300  |              |  |   | (5,300  | ) |  |                |       |  |              |   |       |        |  |   |        |   |  |   |       | 
|Licenses                              |  |                   | 4.75       |  |                   | $ | 22,435 |              |  | $ | (5,169  | ) |  | $              | 17,266 |  |              | $ | 23,635 |        |  | $ | (12,082 | ) |  | $ | 11,553 | 
|Product lines                         |  |                   | 3.50       |  |                   |   | 17,700 |              |  |   | (16,732 | ) |  |                | 968    |  |              |   | 17,700 |        |  |   | (17,700 | ) |  |   |       | 
|Customer relationships                |  |                   | 5.25       |  |                   |   | 1,300  |              |  |   | (389    | ) |  |                | 911    |  |              |   | 1,846  |        |  |   | (700    | ) |  |   | 1,146  | 
|Non-compete/
    Employment contracts |  |                   | 4.00       |  |                   |   | 2,748  |              |  |   | (344    | ) |  |                | 2,404  |  |              |   | 2,748  |        |  |   | (1,049  | ) |  |   | 1,699  | 
|Debt offering costs                   |  |                   | 20 Years   |  |                   |   | 3,705  |              |  |   | (292    | ) |  |                | 3,413  |  |              |   | 3,705  |        |  |   | (477    | ) |  |   | 3,228  | 
|                                      |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        | 
|Total amortized intangible assets     |  |                   |            |  |                   |   | 53,188 |              |  |   | (28,226 | ) |  |                | 24,962 |  |              |   | 49,634 |        |  |   | (32,008 | ) |  |   | 17,626 | 
|Unamortized Intangible Assets:        |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        |  |   |         |   |  |   |        | 
|Trademarks                            |  |                   | indefinite |  |                   |   | 17,768 |              |  |   | N/A     |   |  |                | 17,768 |  |              |   | 17,768 |        |  |   | N/A     |   |  |   | 17,768 | 
|                                      |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        | 
|                                      |  |                   |            |  |                   | $ | 70,956 |              |  | $ | (28,226 | ) |  | $              | 42,730 |  |              | $ | 67,402 |        |  | $ | (32,008 | ) |  | $ | 35,394 | 
|                                      |  |                   |            |  |                   |   |        |              |  |   |         |   |  |                |        |  |              |   |        |        | 



|     |  |   |       | 
|---- |  | - | ----- | 
|2006 |  | $ | 7,193 | 
|2007 |  |   | 4,527 | 
|2008 |  |   | 2,741 | 
|2009 |  |   | 644   | 
|2010 |  |   | 222   | 

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Note 8 Concentration of Credit Risk








Note 9Accrued Expenses




|                               |  |      |        |  |      |   |        | 
|------------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                               |  | 2004 |        |  | 2005 |  
|Royalties                      |  | $    | 16,024 |  |      | $ | 15,918 | 
|Bonuses                        |  |      | 9,720  |  |      |   | 11,554 | 
|Acquisition earnout            |  |      | 10,000 |  |      |   | 6,667  | 
|Employee salaries and benefits |  |      | 1,865  |  |      |   | 1,781  | 
|Promotional commitment         |  |      | 1,066  |  |      |   | 1,066  | 
|Sales commissions              |  |      | 4,503  |  |      |   | 682    | 
|Other                          |  |      | 6,229  |  |      |   | 6,747  | 
|                               |  |      |        |  |      |  
|                               |  | $    | 49,407 |  |      | $ | 44,415 | 
|                               |  |      |        |  |      |  

Note 10 Related Party Transactions




Note 11 Convertible Senior Notes




|                         |  |      |        |  |      |   |        | 
|------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                         |  | 2004 |        |  | 2005 |  
|Convertible senior notes |  | $    | 98,000 |  |      | $ | 98,000 | 



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|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ |       | 
|2007       |  |   |       | 
|2008       |  |   |       | 
|2009       |  |   |       | 
|2010       |  |   |       | 
|Thereafter |  |   | 98,000 | 
|           |  |   |       
|           |  | $ | 98,000 | 
|           |  |   |       

Note 12Income Taxes




|                |  |      |        |   |      |   |        |      |  |   |        |  
|--------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                |  | 2003 |        |   | 2004 |   |        | 2005 | 
|Federal         |  | $    | 608    |   |      | $ | 696    |      |  | $ | 20,821 |  
|State and local |  |      | 55     |   |      |   | 1,088  |      |  |   | 4,326  |  
|Foreign         |  |      | 3,017  |   |      |   | 12,954 |      |  |   | 13,290 |  
|                |  |      |        |   |      |   |        |      | 
|                |  |      | 3,680  |   |      |   | 14,738 |      |  |   | 38,437 |  
|Deferred        |  |      | (2,240 | ) |      |   | 795    |      |  |   | (5,293 | )
|                |  |      |        |   |      |   |        |      | 
|                |  | $    | 1,440  |   |      | $ | 15,533 |      |  | $ | 33,144 |  
|                |  |      |        |   |      |   |        |      | 

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|                                            |                                                  |      |       |        |      |   |       |        |  
|------------------------------------------- | ------------------------------------------------ | ---- | ----- | ------ | ---- | - | ----- | ------ | -
|                                            |                                                  | 2004 |       |        | 2005 |  
|Net deferred tax assets/(liabilities):      |                                                  |      |       |        |      |   |       |       
|Current:                                    |                                                  |      |       |        |      |   |       |       
|                                            | Reserve for sales allowances and possible losses |      | $     | 1,940  |      |   | $     | 3,305  |  
|                                            | Accrued expenses                                 |      |       | 1,044  |      |   |       | 1,895  |  
|                                            | Restricted stock grant                           |      |       | 136    |      |   |       | 31     |  
|                                            | Foreign tax credit                               |      |       | 2,166  |      |   |       | (127   | )
|                                            | Federal net operating loss carryforward          |      |       |       |      |   |       | 4,117  |  
|                                            | Deductible intangible assets                     |      |       |       |      |   |       | 2,240  |  
|                                            | State income taxes                               |      |       |       |      |   |       | 2,309  |  
|                                            | Other                                            |      |       | 875    |      |   |       | (152   | )
|                                            |                                                  |      |       |        |      |  
|                                            |                                                  |      |       | 6,161  |      |   |       | 13,618 |  
|                                            |                                                  |      |       |        |      |  
|Long Term:                                  |                                                  |      |       |        |      |   |       |       
|                                            | Undistributed earnings                           |      |       | (7,191 | )    |   |       | (3,802 | )
|                                            | Property and equipment                           |      |       | (983   | )    |   |       | (2,419 | )
|                                            | Original issue discount interest                 |      |       | (2,761 | )    |   |       | (4,355 | )
|                                            | Deductible goodwill and intangibles              |      |       | (2,004 | )    |   |       | 1,103  |  
|                                            | Federal net operating loss carryforwards         |      |       | 8,416  |      |   |       |       |  
|                                            | Foreign tax credit                               |      |       |       |      |   |       | 2,718  |  
|                                            | Other                                            |      |       | 242    |      |   |       | 309    |  
|                                            |                                                  |      |       |        |      |  
|                                            |                                                  |      |       | (4,281 | )    |   |       | (6,446 | )
|                                            |                                                  |      |       |        |      |  
|Total net deferred tax assets/(liabilities) |                                                  | $    | 1,880 |        |      | $ | 7,172 |       
|                                            |                                                  |      |       |        |      |  





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|                                                          |  |      |       |   |      |  |       |      |  |  |      |  
|--------------------------------------------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ---- | -
|                                                          |  | 2003 |       |   | 2004 |  |       | 2005 | 
|Federal income tax expense                                |  |      | 35.0  | % |      |  | 35.0  | %    |  |  | 35.0 | %
|State income tax expense, net of federal tax effect       |  |      | 0.2   |   |      |  | 1.3   |      |  |  | 2.1  |  
|One time dividend from foreign subsidiaries               |  |      |      |   |      |  |      |      |  |  | 8.3  |  
|Effect of differences in U.S. and Foreign statutory rates |  |      | (30.6 | ) |      |  | (12.1 | )    |  |  | (9.0 | )
|Other                                                     |  |      | 3.7   |   |      |  | 1.8   |      |  |  | (2.1 | )
|                                                          |  |      |       |   |      |  |       |      | 
|                                                          |  |      | 8.3   | % |      |  | 26.0  | %    |  |  | 34.3 | %
|                                                          |  |      |       |   |      |  |       |      | 







|         |  |      |        |   |      |   |         |      |  |   |        | 
|-------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | 
|         |  | 2003 |        |   | 2004 |   |         | 2005 | 
|Domestic |  | $    | (5,255 | ) |      | $ | (22,669 | )    |  | $ | 24,953 | 
|Foreign  |  |      | 22,590 |   |      |   | 81,761  |      |  |   | 71,684 | 
|         |  |      |        |   |      |   |         |      | 
|         |  | $    | 17,335 |   |      | $ | 59,092  |      |  | $ | 96,637 | 
|         |  |      |        |   |      |   |         |      | 

Note 13Leases




|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ | 6,912  | 
|2007       |  |   | 6,463  | 
|2008       |  |   | 4,184  | 
|2009       |  |   | 3,810  | 
|2010       |  |   | 3,401  | 
|Thereafter |  |   | 8,809  | 
|           |  |   |       
|           |  | $ | 33,579 | 
|           |  |   |       

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Note 14Common Stock, Preferred Stock and Warrants














|                               |  |           |         |          |          |   |       | 
|------------------------------ |  | --------- | ------- | -------- | -------- | - | ----- | 
|                               |  |           |         | Weighted |         
|                               |  |           |         | Average  |         
|                               |  | Number    |         |          | Exercise |  
|                               |  | of Shares |         |          | Price    |  
|Outstanding, December 31, 2005 |  |           | 100,000 |          |          | $ | 11.35 | 
|                               |  |           |         |          |          |  



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Note 15Commitments






|     |  |   |        | 
|---- |  | - | ------ | 
|2006 |  | $ | 13,003 | 
|2007 |  |   | 8,421  | 
|2008 |  |   | 5,492  | 
|2009 |  |   | 1,434  | 
|2010 |  |   | 500    | 
|     |  |   |       
|     |  | $ | 28,850 | 
|     |  |   |       



|     |  |   |        | 
|---- |  | - | ------ | 
|2006 |  | $ | 5,591  | 
|2007 |  |   | 5,419  | 
|2008 |  |   | 3,166  | 
|2009 |  |   | 2,244  | 
|2010 |  |   | 2,280  | 
|     |  |   |       
|     |  | $ | 18,700 | 
|     |  |   |       

Note 16Stock Award and Incentive Plan




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|                               |           |           |           |          |          |   |       |       | 
|------------------------------ | --------- | --------- | --------- | -------- | -------- | - | ----- | ----- | 
|                               |           |           |           | Weighted |         
|                               |           |           |           | Average  |         
|                               |           | Number    |           |          | Exercise |  
|                               |           | of Shares |           |          | Price    |  
|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 |      
|                               | Granted   |           |           | 360,000  |          |   |       | 21.74 | 
|                               | Exercised |           |           | (566,546 | )        |   |       | 8.60  | 
|                               | Canceled  |           |           | (77,354  | )        |   |       | 15.74 | 
|                               |           |           |           |          |          |  
|Outstanding, December 31, 2005 |           |           | 1,789,106 |          |          | $ | 16.32 |      
|                               |           |           |           |          |          |  





|                   |  |             |         |          |             |  |          |          |  |   |           |          |  |          |         |  |  |   |       | 
|------------------ |  | ----------- | ------- | -------- | ----------- |  | -------- | -------- |  | - | --------- | -------- |  | -------- | ------- |  |  | - | ----- | 
|                   |  | 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  $13.47    |  |             | 603,416 |          |             |  | 3.37     |          |  | $ | 11.17     |          |  |          | 427,866 |  |  | $ | 10.31 | 
|$13.48  $19.02    |  |             | 603,550 |          |             |  | 2.18     |          |  | $ | 16.82     |          |  |          | 423,150 |  |  | $ | 16.94 | 
|$19.21  $22.11    |  |             | 582,140 |          |             |  | 5.83     |          |  | $ | 21.13     |          |  |          | 148,144 |  |  | $ | 20.55 | 

Note 17Employee Pension Plan




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Note 18Supplemental Information to Consolidated
Statements of Cash Flows








Note 19Selected Quarterly Financial Data (Unaudited)




|                                                    |  |                                       |        |  |         |   |         |         |  |   |         |  |  |         |         |  |         |   |         |         |  |   |         |  |  |   |         |  |  |   |         | 
|--------------------------------------------------- |  | ------------------------------------- | ------ |  | ------- | - | ------- | ------- |  | - | ------- |  |  | ------- | ------- |  | ------- | - | ------- | ------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                    |  | 2004                                  |        |  | 2005    |  
|                                                    |  |                                       |        |  |         |  
|                                                    |  | First                                 |        |  | Second  |   |         | Third   |  |   | Fourth  |  |  | First   |         |  | Second  |   |         | Third   |  |   | Fourth  | 
|                                                    |  | Quarter                               |        |  | Quarter |   |         | Quarter |  |   | Quarter |  |  | Quarter |         |  | Quarter |   |         | Quarter |  |   | Quarter | 
|                                                    |  | (in thousands, except per share data) |       
|Net sales                                           |  | $                                     | 73,986 |  |         | $ | 109,395 |         |  | $ | 206,083 |  |  | $       | 184,802 |  |         | $ | 134,676 |         |  | $ | 127,091 |  |  | $ | 233,500 |  |  | $ | 166,269 | 
|Gross profit                                        |  | $                                     | 30,466 |  |         | $ | 41,281  |         |  | $ | 81,801  |  |  | $       | 72,459  |  |         | $ | 54,212  |         |  | $ | 48,073  |  |  | $ | 93,452  |  |  | $ | 70,970  | 
|Income from operations                              |  | $                                     | 4,885  |  |         | $ | 8,321   |         |  | $ | 29,915  |  |  | $       | 10,604  |  |         | $ | 13,675  |         |  | $ | 14,614  |  |  | $ | 47,218  |  |  | $ | 12,478  | 
|Income before income taxes                          |  | $                                     | 4,764  |  |         | $ | 7,637   |         |  | $ | 30,042  |  |  | $       | 16,649  |  |         | $ | 13,627  |         |  | $ | 15,732  |  |  | $ | 46,306  |  |  | $ | 20,972  | 
|Net income                                          |  | $                                     | 3,791  |  |         | $ | 6,004   |         |  | $ | 23,255  |  |  | $       | 10,508  |  |         | $ | 10,084  |         |  | $ | 11,642  |  |  | $ | 32,753  |  |  | $ | 9,014   | 
|Basic earnings per share                            |  | $                                     | 0.15   |  |         | $ | 0.24    |         |  | $ | 0.89    |  |  | $       | 0.40    |  |         | $ | 0.38    |         |  | $ | 0.44    |  |  | $ | 1.22    |  |  | $ | 0.33    | 
|Weighted average shares outstanding                 |  |                                       | 25,276 |  |         |   | 25,502  |         |  |   | 26,167  |  |  |         | 26,232  |  |         |   | 26,560  |         |  |   | 26,678  |  |  |   | 26,778  |  |  |   | 26,930  | 
|Diluted earnings per share                          |  | $                                     | 0.15   |  |         | $ | 0.22    |         |  | $ | 0.76    |  |  | $       | 0.36    |  |         | $ | 0.34    |         |  | $ | 0.39    |  |  | $ | 1.05    |  |  | $ | 0.29    | 
|Weighted average shares and equivalents outstanding |  |                                       | 30,676 |  |         |   | 31,123  |         |  |   | 31,919  |  |  |         | 31,855  |  |         |   | 32,256  |         |  |   | 32,229  |  |  |   | 32,088  |  |  |   | 32,197  | 







Note 20Litigation




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Note 21Subsequent Event




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|                              |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |         |         |   |   |        |        | 
|----------------------------- | -------------------------------------------- | -------------- | ------ | ------ | ---------- | - | ------ | ---------- |  | - | ---------- | ------ | ------- | --------- | ------- | ------- | - | - | ------ | ------ | 
|                              |                                              | Balance at     |        |        | Charged to |   |        | Charged to |  |   |            |        | Balance |          
|                              |                                              | Beginning      |        |        | Costs and  |   |        | Other      |  |   |            |        | at End  |          
|                              |                                              | of Period      |        |        | Expenses   |   |        | Accounts   |  |   | Deductions |        |         | of Period |        
|                              |                                              | (In thousands) |       
|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 |            |  | $ |           |        |         | $         | (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     |  |   |            | 2,131  | (a)     |           |         | (36,667 | ) |   |        | 23,173 | 
|                              |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |        
|                              |                                              | $              | 20,655 |        |            | $ | 58,201 |            |  | $ | 2,131      |        |         | $         | (42,714 | )       |   | $ | 38,273 |       
|                              |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |        
|Year ended December 31, 2005: |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |         |         |   |   |        |       
|Allowance for:                |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |         |         |   |   |        |       
|                              | Uncollectible accounts                       |                | $      | 7,058  |            |   | $      | 902        |  |   | $          | (1,291 | )(b)    |           | $       | (4,333  | ) |   | $      | 2,336  | 
|                              | Reserve for potential product obsolescence   |                |        | 8,042  |            |   |        | 6,981      |  |   |            |       |         |           |         | (7,576  | ) |   |        | 7,447  | 
|                              | Reserve for sales returns and
    allowances |                |        | 23,173 |            |   |        | 54,767     |  |   |            | 218    | (c)     |           |         | (53,035 | ) |   |        | 25,123 | 
|                              |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |        
|                              |                                              | $              | 38,273 |        |            | $ | 62,650 |            |  | $ | (1,073     | )      |         | $         | (64,944 | )       |   | $ | 34,906 |       
|                              |                                              |                |        |        |            |   |        |            |  |   |            |        |         |           |        






|    |                             
|--- | ----------------------------
|(a) | Play Along acquired reserve.



|    |                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------
|(b) | Pet Pal acquired reserve, $0.1 million; customer preference
    payments booked to Accrued Expenses, ($1.4 million).



|    |                          
|--- | -------------------------
|(c) | Pet Pal acquired reserve.






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



15d-15(e))


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13a-15(d) 15d-15








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     |  |     | 66 |  |                            | Chairman and Chief Executive Officer                      
|Stephen G. Berman |  |     | 41 |  |                            | Chief Operating Officer, President, Secretary and Director
|Joel M. Bennett   |  |     | 44 |  |                            | Executive Vice President and Chief Financial Officer      
|Dan Almagor       |  |     | 52 |  |                            | Director                                                  
|David C. Blatte   |  |     | 41 |  |                            | Director                                                  
|Robert E. Glick   |  |     | 60 |  |                            | Director                                                  
|Michael G. Miller |  |     | 58 |  |                            | Director                                                  
|Murray L. Skala   |  |     | 59 |  |                            | Director                                                  

Jack Friedman


Stephen G. Berman


Joel M. Bennett


Dan Almagor


David C. Blatte


68



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Robert E. Glick


Michael G. Miller


Murray L. Skala




Committees of the Board of Directors




Audit Committee.


Compensation Committee.


69



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


Meetings of the Board and Attendance at Annual Meetings






Section 16(a) Beneficial Ownership Reporting
Compliance




Code of Ethics


10-K


70



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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      |                              |                     | 2005 |                        |            |  | 1,015,000 |            |  |              | 3,045,000 |           |        |        | 9,750 | (2)     |     |  | 2,653,200 | (3)       |     |  |  |  
|                   | Chairman and Chief           |                     |      | 2004                   |            |  |           | 990,000    |  |              |           | 1,980,000 |        |        |       | 9,750   | (2) |  |           | 1,578,000 | (4) |  |   |  | 
|                   | Executive Officer            |                     |      | 2003                   |            |  |           | 965,000    |  |              |           | 1,327,140 | (1     |        |       | ) 9,000 | (2) |  |           | 2,524,800 | (5) |  |   |  | 
|Stephen G. Berman  |                              |                     | 2005 |                        |            |  | 1,015,000 |            |  |              | 3,045,000 |           |        |        | 7,000 | (2)     |     |  | 2,653,200 | (3)       |     |  |  |  
|                   | Chief Operating Officer,     |                     |      | 2004                   |            |  |           | 990,000    |  |              |           | 1,980,000 |        |        |       | 6,500   | (2) |  |           | 1,578,000 | (4) |  |   |  | 
|                   | President and Secretary      |                     |      | 2003                   |            |  |           | 965,000    |  |              |           | 1,327,140 | (1     |        |       | ) 6,000 | (2) |  |           | 2,524,800 | (5) |  |   |  | 
|Joel M. Bennett    |                              |                     | 2005 |                        |            |  | 340,000   |            |  |              | 340,000   |           |        |        | 7,000 | (2)     |     |  |          |           |     |  |  |  
|                   | Executive Vice President and |                     |      | 2004                   |            |  |           | 320,000    |  |              |           | 300,000   |        |        |       | 6,500   | (2) |  |           |          |     |  |   |  | 
|                   | Chief Financial Officer      |                     |      | 2003                   |            |  |           | 300,000    |  |              |           |          |        |        |       | 6,000   | (2) |  |           | 1,262,400 | (6) |  |   |  | 




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | 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, 2005 was 1,481,630 shares.
    Such shares had an aggregate value of $31,025,332, representing
    the product of (a) 1,481,630 shares, multiplied by
    (b) $20.94, the closing price of our common stock on
    December 30, 2005, as reported by Nasdaq.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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. After due consideration and evaluation of the
    employment agreements of Messrs. Friedman and Berman and
    all other relevant agreements, regulatory issues and other
    pertinent factors, the Board (and the Compensation Committee
    thereof) determined that the Restatement and the attendant
    reduction in our pre-tax income should have no impact on the
    bonuses paid to Messrs. Friedman and Berman for 2003 and
    2002.
|   
|(2) | Represents matching contributions made by us to the Named
    Officers 401(k) defined contribution plan. See
     Employee Pension Plan, infra.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) | Represents the product of (a) 120,000 shares of restricted
    stock multiplied by (b) $22.11, the last sales price of our
    common stock, as reported by Nasdaq on January 1, 2005, the
    date the shares were granted, all of which vested on
    January 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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|    |                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | 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.                                 
|   
|(5) | 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.                                    
|   
|(6) | 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.



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(2) |                        |                    | Exercisable |                      |                       | Unexercisable |  |  | Exercisable |        |  | Unexercisable |  
|                  |  |              |         |  |             |                        |                    |             |                      |                       |               |  |  |             |        |  |               |  
|Jack Friedman     |  |              | 163,299 |  |             | $                      | 1,431,897          |             |                      |                       | 141,455       |  |  |             | 52,500 |  |               | $ | 822,172 |  |  | $ | 246,225 | 
|Stephen G. Berman |  |              | 257,083 |  |             |                        | 2,908,526          |             |                      |                       | 141,455       |  |  |             | 52,500 |  |               |   | 822,172 |  |  |   | 246,225 | 
|Joel M. Bennett   |  |              | 20,333  |  |             |                        | 305,201            |             |                      |                       | 78,870        |  |  |             | 6,000  |  |               |   | 913,187 |  |  |   | 28,140  | 




|    |                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The product of (x) the difference between $20.94 (the
    closing sale price of the common stock on December 30,
    2005) and the aggregate exercise price of such options,
    multiplied by (y) the number of unexercised options.
|   
|(2) | Represents the product of (x) the difference between the
    closing sale price of the common stock on the date of exercise
    less the exercise price, multiplied by (y) the number of
    shares acquired on exercise.            

Compensation of Directors


non-employee






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Employment Agreements and Termination of Employment
Arrangements








73



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Impact of Restatement on Compensation of Executive
Officers


10-K


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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)   | 
|                                                            |  |                 |           |      |             | 
|Barclays Global Investors, N.A.                             |  |                 | 5,512,510 | (5)  |             |  | 20.1 | %
|Third Avenue Management LLC                                 |  |                 | 3,843,286 | (6)  |             |  | 14.0 |  
|Dimensional Fund Advisors, Inc.                             |  |                 | 2,285,767 | (7)  |             |  | 8.3  |  
|FMR Corp.                                                   |  |                 | 1,804,161 | (8)  |             |  | 6.6  |  
|American Century Companies, Inc.                            |  |                 | 1,400,420 | (9)  |             |  | 5.1  |  
|Mellon Financial Corp.                                      |  |                 | 1,376,115 | (10) |             |  | 5.0  |  
|AXA Financial, Inc.                                         |  |                 | 1,351,652 | (11) |             |  | 4.9  |  
|Jack Friedman                                               |  |                 | 974,343   | (12) |             |  | 3.5  |  
|Stephen G. Berman                                           |  |                 | 742,669   | (13) |             |  | 2.7  |  
|Joel M. Bennett                                             |  |                 | 201,773   | (14) |             |  | *    |  
|Dan Almagor                                                 |  |                 | 36,686    | (15) |             |  | *    |  
|David C. Blatte                                             |  |                 | 90,232    | (16) |             |  | *    |  
|Robert E. Glick                                             |  |                 | 106,751   | (17) |             |  | *    |  
|Michael G. Miller                                           |  |                 | 97,376    | (18) |             |  | *    |  
|Murray L. Skala                                             |  |                 | 108,689   | (19) |             |  | *    |  
|All directors and executive officers as a group (8 persons) |  |                 | 2,355,333 | (20) |             |  | 8.4  | %




| |   |                                        
| | - | ---------------------------------------
| | * | 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 calculated by
    including among the shares owned by such person any shares which
    such person

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | or entity has the right to acquire
    within 60 days after March 13, 2006. 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 Barclays Global
    Investors, N.A. is 45 Fremont Street, San Francisco, CA
    94105. Possesses sole voting power with respect to 5,059,042 of
    such shares and sole dispositive power with respect to all of
    such 5,512,510 shares. All the information presented in
    this Item with respect to this beneficial owner was extracted
    solely from the Schedule 13G/A filed on January 26,
    2006.    
|
| | (6) | The address of Third Avenue
    Management LLC is 622 Third Avenue, New York, NY 10017.
    Possesses sole voting power with respect to 3,758,242 of such
    shares and sole dispositive power with respect to all of such
    3,843,286 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 15, 2006.                
|
| | (7) | 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 6, 2006.                                                                                                                                                  
|
| | (8) | 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 February 14,
    2006.                                                                                                                                                                                                   
|
| | (9) | The address of American Century
    Companies, Inc. is 4500 Main Street, 9th Floor, Kansas City, MO
    64111. Possesses sole voting power with respect to 1,097,102 of
    such shares and sole dispositive power with respect to all of
    such 1,400,420 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, 2006.



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | The address of Mellon Financial Corp. is One Mellon Center,
    Pittsburgh, PA 15258. Possesses sole voting power with respect
    to 1,132,220 of such shares and sole dispositive power with
    respect to 1,313,651 of such shares. All the information
    presented in this Item with respect to this beneficial owner was
    extracted solely from the Schedule 13G filed on
    February 15, 2006.                                                                                                                                                                                                                                                 
|    
|(11) | The address of AXA Financial, Inc. is 1290 Avenue of the
    Americas, New York, NY 10104. Possesses sole voting power with
    respect to 596,831 of such shares and sole dispositive power
    with respect to all of such 1,351,652 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, 2006.                                                                                                                                                                                                                                          
|    
|    
|(12) | Includes 3,186 shares held in trusts for the benefit of children
    of Mr. Friedman. Also includes 141,455 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, 2006 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, 2006 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

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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | conditions precedent are met prior
    to January 1, 2007, including the condition that our
    Pre-Tax Income (as defined in the Friedman Agreement) for 2006
    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,
    2007 and (b) the remaining 60,000 shares prior to
    January 1, 2008; provided, however, that if our Pre-Tax
    Income for 2006 exceeds $2,000,000 and our Adjusted EPS Growth
    (as defined in the Friedman Agreement) for 2006 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, 2008 will be accelerated to the date the
    Adjusted EPS Growth is determined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(13) | Includes 141,455 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, 2006 pursuant to the terms of
    Mr. Bermans January 1, 2003 Employment
    Agreement, which shares are further subject to the terms of our
    January 1, 2006 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, 2007, including the condition
    that our Pre-Tax Income (as defined in the Berman Agreement) for
    2006 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,
    2007 and (b) the remaining 60,000 shares prior to
    January 1, 2008; provided, however, that if our Pre-Tax
    Income for 2006 exceeds $2,000,000 and our Adjusted EPS Growth
    (as defined in the Berman Agreement) for 2006 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, 2008 will be accelerated to
    the date the Adjusted EPS Growth is determined.
|    
|(14) | Includes 78,870 shares which
    Mr. Bennett may purchase upon the exercise of certain stock
    options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(15) | Includes 29,644 shares which
    Mr. Almagor may purchase upon the exercise of certain stock
    options and 7,042 shares of common stock issued pursuant to
    our 2002 Stock Award and Incentive Plan, pursuant to which
    5,732 shares may not be sold, mortgaged, transferred or
    otherwise encumbered prior to January 1, 2007, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(16) | Includes 82,500 shares which
    Mr. Blatte may purchase upon the exercise of certain stock
    options and 7,732 shares of common stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 5,732 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(17) | Includes 99,019 shares which
    Mr. Glick may purchase upon the exercise of certain stock
    options and 7,732 shares of Common Stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 5,732 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|(18) | Includes 89,644 shares which
    Mr. Miller may purchase upon the exercise of certain stock
    options and 7,732 shares of Common Stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 5,732 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(19) | Includes 97,771 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

77



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##### Table of Contents



|     |                                                                                                                                                                                                                                                                         
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | Mr. Friedmans minor
    child and 7,732 shares of common stock issued pursuant to our
    2002 Stock Award and Incentive Plan, pursuant to which 5,732 of
    such shares may not be sold, mortgaged, transferred or otherwise
    encumbered prior to January 1, 2007.
|    
|(20) | Includes 3,186 shares held in
    a trust for the benefit of Mr. Friedmans minor child
    and an aggregate of 760,358 shares which the directors and
    executive officers may purchase upon the exercise of certain
    stock options.                              




Item 13. Certain Relationships and Related
Transactions









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



|                   |  |      |         |  |      |   |         | 
|------------------ |  | ---- | ------- |  | ---- | - | ------- | 
|                   |  | 2004 |         |  | 2005 |  
|                   |  |      |         |  |      |  
|Audit Fees         |  | $    | 781,082 |  |      | $ | 731,579 | 
|Audit Related Fees |  | $    | 182,797 |  |      | $ | 36,249  | 
|Tax Fees           |  | $    | 223,942 |  |      | $ | 53,436  | 
|All Other Fees     |  | $    | 215,360 |  |      | $ | 12,180  | 

Audit Fees 10-Q


Audit Related Fees


Tax Fees


All Other Fees




78



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##### Table of Contents






PART IV





Item 15. Exhibits and Financial Statement
Schedules


10-K:






| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Public Accounting Firm                                                       
|
| |  | Consolidated Balance Sheets as of December 31, 2004 and 2005                                                  
|
| |  | Consolidated Statements of Operations for the years ended
    December 31, 2003, 2004 and 2005                
|
| |  | Consolidated Statements of Other Comprehensive Income for the
    years ended December 31, 2003, 2004 and 2005
|
| |  | Consolidated Statements of Stockholders Equity for the
    years ended December 31, 2003, 2004 and 2005      
|
| |  | Consolidated Statements of Cash Flows for the years ended
    December 31, 2003, 2004 and 2005                
|
| |  | 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. Bennett, dated March 26, 2003 (9)       
|10.6    |  | Office Lease dated November 18, 1999 between the Company
    and Winco Maliview Partners (10)                         
|10.7    |  | Lease dated as of November 21, 2000 between Grand Avenue
    Venture, LLC and JP Ferrero Parkway, Inc. (11)           
|10.8    |  | Form of Restricted Stock Agreement (9)                                                                                
|14      |  | Code of Ethics (12)                                                                                                   
|21      |  | Subsidiaries of the Company (*)                                                                                       

79



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##### Table of Contents



|        |  |                                                            
|------- |  | -----------------------------------------------------------
|Exhibit |  |                                                            
|Number  |  | Description                                                
|        |  |                                                            
|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 Annual
    Report on
    Form 10-K for its
    fiscal year ended December 31, 1999, filed March 30,
    2000, 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, 2000, filed April 2, 2001, 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, 2003, filed March 15,
    2004, and incorporated herein by reference.



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

80



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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 15, 2006
|                                      
|/s/ JOEL M. BENNETTJoel M. Bennett     |  | Chief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer)           |  | March 15, 2006
|                                      
|/s/ STEPHEN G. BERMANStephen G. Berman |  | Director                                                                                                 |  | March 15, 2006
|                                      
|/s/ DAN ALMAGORDan Almagor             |  | Director                                                                                                 |  | March 15, 2006
|                                      
|/s/ DAVID C. BLATTEDavid C. Blatte     |  | Director                                                                                                 |  | March 15, 2006
|                                      
|/s/ ROBERT E. GLICKRobert E. Glick     |  | Director                                                                                                 |  | March 15, 2006
|                                      
|/s/ MICHAEL G. MILLERMichael G. Miller |  | Director                                                                                                 |  | March 15, 2006
|                                      
|/s/ MURRAY L. SKALAMurray L. Skala     |  | Director                                                                                                 |  | March 15, 2006

81



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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. Bennett, dated March 26, 2003 (9)       
|10.6    |  | Office Lease dated November 18, 1999 between the Company
    and Winco Maliview Partners (10)                         
|10.7    |  | Lease dated as of November 21, 2000 between Grand Avenue
    Venture, LLC and JP Ferrero Parkway, Inc. (11)           
|10.8    |  | Form of Restricted Stock Agreement (9)                                                                                
|14      |  | Code of Ethics (12)                                                                                                   
|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.

82



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##### Table of Contents





|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 Annual
    Report on
    Form 10-K for its
    fiscal year ended December 31, 1999, filed March 30,
    2000, 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, 2000, filed April 2, 2001, 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, 2003, filed March 15,
    2004, and incorporated herein by reference.



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

83