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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950148-01-000545.txt : 20010409
<SEC-HEADER>0000950148-01-000545.hdr.sgml : 20010409
ACCESSION NUMBER: 0000950148-01-000545
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010402

FILER:

COMPANY DATA:
COMPANY CONFORMED NAME: JAKKS PACIFIC INC
CENTRAL INDEX KEY: 0001009829
STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944]
IRS NUMBER: 954527222
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231

FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-28104
FILM NUMBER: 1592281

BUSINESS ADDRESS:
STREET 1: 22761 PACIFIC COAST HWY
STREET 2: #B202
CITY: MALIBU
STATE: CA
ZIP: 90265
BUSINESS PHONE: 3104567799

MAIL ADDRESS:
STREET 1: 22761 PACIFIC COAST HWY
STREET 2: B202
CITY: MALIBU
STATE: CA
ZIP: 90265
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>v70251e10-k.txt
<DESCRIPTION>FORM 10-K
<TEXT>

<PAGE> 1

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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, 2000

[ ] 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)

<TABLE>
<S> <C>
DELAWARE 95-4527222
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

<TABLE>
<S> <C>
22619 PACIFIC COAST HIGHWAY
MALIBU, CALIFORNIA 90265
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 456-7799

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
NONE
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

TITLE OF CLASS

COMMON STOCK, $.001 PAR VALUE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting and non-voting common equity (the
only such common equity being Common Stock, $.001 par value) held by
non-affiliates of the registrant (computed by reference to the closing sale
price of the Common Stock on March 30, 2001) is $185,963,149.

The number of shares outstanding of the registrant's Common Stock, $.001
par value (being the only class of its common stock) is 18,017,455 (as of March
30, 2001).

DOCUMENTS INCORPORATED BY REFERENCE

None.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

JAKKS PACIFIC, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

ITEMS IN FORM 10-K

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 13
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......... 13

PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 23
Item 8. Consolidated Financial Statements and Supplementary Data.... 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 47

PART III
Item 10. Directors and Executive Officers of the Registrant.......... 47
Item 11. Executive Compensation...................................... 49
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 53
Item 13. Certain Relationships and Related Transactions.............. 54
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 54

Signatures............................................................ 60
</TABLE>

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

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

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<PAGE> 3

ITEM 1. BUSINESS

In this report, "JAKKS," the "Company," "we," "us" and "our" refer to JAKKS
Pacific, Inc. and its subsidiaries.

COMPANY OVERVIEW

JAKKS is a Delaware corporation which was formed in January 1995 and began
operations as of April 1, 1995. We are a multi-line, multi-brand toy company
that designs, develops, produces and markets toys and related products. Our
principal products are (1) action figures and accessories featuring licensed
characters, principally from the World Wrestling Federation, (2) Flying Colors
molded plastic activity sets, compounds playsets and lunch boxes, (3) Wheels
division products, including Road Champs die-cast collectible and toy vehicles
and Remco toy vehicles and role-play toys and accessories, (4) Pentech writing
instruments and activity products, (5) Child Guidance infant and pre-school
electronic toys, toy foam puzzle mats and blocks, activity sets and outdoor
products and (6) fashion dolls and related accessories. We focus our business on
evergreen branded products that are less subject to market fads or trends and
feature well-known brand names and simpler, lower-priced toys and accessories.

We formed our joint venture with THQ in June 1998 to develop, manufacture
and market, under an exclusive license with World Wrestling Federation
Entertainment, video games based on World Wrestling Federation characters and
themes. The joint venture's first products were released in November 1999.

We have been successful at acquiring and capitalizing on evergreen brands,
which are well-recognized trademarks or corporate, trade or brand names, some
with long product histories. We continually review the marketplace to identify
and evaluate evergreen brands that, for various reasons, we believe have
potential for significant growth. We seek to acquire or license these brands and
revitalize them by intensifying the marketing effort to restore and enhance
consumer recognition and retailer interest. We reinforce brands by linking them
with other evergreen brands on our products, adding to the branded product lines
new items that we expect to enjoy greater popularity, eliminating products with
fading popularity, adding new features and improving the functionality of
products in the line. We also try to improve point-of-sale brand visibility
through better shelf positioning and more eye-catching product packaging.

We license much of the intellectual property we use in our business. We
license the World Wrestling Federation trademark, as well as numerous other
trademarks, corporate, trade and brand names and logos, from third parties,
including Car and Driver, Schwinn, GT, Haro, Rod & Custom, Nickelodeon, Rugrats,
Blue's Clues, Mickey Mouse, Barney, Teletubbies, Sesame Street, Looney Tunes and
Toy Story 2. This enables us to use high-profile marks at a lower cost than that
which we would incur if we purchased these marks or developed comparable marks
on our own. By licensing marks, we have access to a far greater range of marks
than those that would be available for purchase, and we maintain the flexibility
to acquire newly-popular marks and to discontinue our use of marks whose
popularity or value has faded. We also license technology produced by
unaffiliated inventors and product developers to improve the design and
functionality of our products. We believe that our experience in the toy
industry, our flexibility and our recent success in developing and marketing
products make us more attractive to toy inventors and developers.

Most of our current products are relatively simple and inexpensive toys. We
believe that these products have proven to have enduring appeal and are less
subject to general economic conditions,

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<PAGE> 4

toy product fads and trends, changes in retail distribution channels and other
factors. In addition, the simplicity of these products enables us to choose
among a wider range of manufacturers and affords us greater flexibility in
product design, pricing and marketing.

We sell our products through our in-house sales staff and independent sales
representatives. Purchasers of our products include toy and mass-market retail
chain stores, department stores, toy specialty stores and wholesalers. The Road
Champs, Flying Colors and Pentech products are also sold to smaller hobby shops,
specialty retailers and corporate accounts, among others. Our five largest
customers are Target, Kmart, Toys 'R Us, Wal-Mart, and Kay Bee Toys, which
accounted for approximately 63.2% of our net sales in 2000. No other customers
accounted for more than 8% of our net sales in 2000. We also sell through
e-commerce sites, including Toysrus.com.

INDUSTRY OVERVIEW

According to the Toy Manufacturers of America, Inc. (the TMA), the leading
industry trade group, total manufacturers' shipments of toys, excluding video
games, in the U.S., were approximately $16.4 billion in 2000. According to the
TMA, the United States is the world's largest toy market, followed by Japan and
Western Europe. Sales by U.S. toy manufacturers to non-U.S. customers totaled
approximately $5.5 billion in 1998. We believe the two largest U.S. toy
companies, Mattel and Hasbro, collectively hold a dominant share of the domestic
non-video toy market. In addition, hundreds of smaller companies compete in the
design and development of new toys, the procurement of character and product
licenses, and the improvement and expansion of previously-introduced products
and product lines. In the video game segment, manufacturers' shipments of video
game software were approximately $3.1 billion in 2000.

Over the past few years, the toy industry has experienced substantial
consolidation among both toy companies and toy retailers. We believe that the
ongoing consolidation of toy companies provides us with increased growth
opportunities due to retailers' desire not to be entirely dependent on a few
dominant toy companies. Retailer concentration also enables us to ship products,
manage account relationships and track retail sales more effectively with a
smaller staff.

OUR GROWTH STRATEGY

- EXPAND CORE PRODUCTS

We manage our existing and new brands through strong product development
initiatives, including introducing new products, modifying existing products and
extending existing product lines. Our product designers strive to develop new
products or product lines to offer added technological, aesthetic and functional
improvements to our product lines. In 2000, we introduced wrestling action
figures manufactured using real-scan technology, which results in higher quality
and better likenesses of the characters. In addition, we introduced action
figures with significantly more points of articulation, and expanded our
electronic recognition play sets.

- ENTER NEW PRODUCT CATEGORIES

We will continue to use our extensive experience in the toy industry to
evaluate toys and licenses in new product categories and to develop additional
product lines. We have entered the video game market through our participation
in a joint venture with THQ. The joint venture launched its line of World
Wrestling Federation licensed video games in November 1999.

3
<PAGE> 5

- CONTINUE TO PURSUE STRATEGIC ACQUISITIONS

Since our inception, we have successfully concluded and integrated six
acquisitions. These include our Road Champs, Remco, Child Guidance, Berk, Flying
Colors and Pentech products. We will continue focusing our acquisition strategy
on businesses or brands which offer valuable trademarks or brands and have
compatible product lines.

- ACQUIRE ADDITIONAL CHARACTER AND PRODUCT LICENSES

We have acquired the rights to use many familiar corporate, trade and brand
names and logos from third parties that we use with our primary trademarks and
brands. Currently, we have license agreements with World Wrestling Federation
Entertainment, Nickelodeon, Disney, Warner Bros., Caterpillar, Peterson
Publishing Co. and B.A.S.S. Masters, as well as with the licensors of the many
popular licensed children's characters previously mentioned. We intend to
continue to pursue new licenses from these entertainment and media companies and
other licensors. We also intend to continue to purchase additional inventions
and product concepts through our existing network of product developers.

- EXPAND INTERNATIONAL SALES

We believe that foreign markets, especially Europe, Australia, Canada and
Latin America, offer us the opportunity for growth. We intend to expand our
international sales by capitalizing on our experience and our relationships with
foreign distributors and retailers.

- CAPITALIZE ON OUR OPERATING EFFICIENCIES

We believe that our current infrastructure and low-overhead operating
methods can accommodate significant growth without a proportionate increase in
our operating and administrative expenses, thereby increasing our operating
margins.

PRODUCTS

WORLD WRESTLING FEDERATION ACTION FIGURES AND ACCESSORIES

We have an extensive toy license with World Wrestling Federation
Entertainment pursuant to which we have the exclusive right, until December 31,
2009, to develop and market a full line of toy products based on the popular
World Wrestling Federation professional wrestlers throughout the world. These
wrestlers perform throughout the year at live events that attract large crowds,
many of which are broadcast on free and cable television, including pay-per-view
specials. We launched this product line in 1996 with various series of six-inch
articulated action figures that have movable body parts and feature real-life
action sounds from our patented bone-crunching mechanism that allows the
figures' "bones" to crack when they are bent. The six-inch figures currently
make up a substantial portion of the overall World Wrestling Federation line,
which has since grown to include many other new products. Our strategy has been
to release new figures and accessories frequently to keep the line fresh and to
retain the interest of the consumers.

Following the launch of the action figures, we marketed wrestling ring play
sets and microphones with action background sounds to enhance the play value of
the action figures. Since then, we have continually added new products,
including action figures of varying sizes, such as three-inch sets with
wrestling rings, amplifying microphones, seven-inch collector's editions, large
soft body figures and small bean-bag figures with electronic sound chips of the
popular wrestlers' catch phrases and in-ring banter. Building on the popularity
of World Wrestling Federation and its

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wrestlers, we have continued to develop the line with exciting and innovative
technological and functional concepts to enhance the value of the line.

In 1999, we introduced a line of 12-inch interactive figures that has
created a new category of toys in the industry. The line was launched with a
figure based on a World Wrestling Federation World Champion, "Stone Cold Steve
Austin." The figures in the line are capable of accepting daily downloads of
sound bites from a World Wrestling Federation web site, to which we contribute
content compatible with our toy products. Another technological innovation added
in 1999 is the "Titan Tron," featuring sensor-based technology that enables this
playset to recognize the character of specially-equipped wrestling figures in
order to play the wrestler's unique theme music and display his picture with
flashing lights. In 2000, the sensor-based technology was added to other
products based on real elements of the live wrestling shows, like back stage, to
further expand the play pattern of wrestling. Also in 2000, other technology was
added to the figures giving them more realism with multiple sensored joints that
when moved activate sound chips containing real sound bites of the wrestlers and
real-scan technology was first used in the mold development process, which
resulted in higher quality figures with better character likenesses. The various
World Wrestling Federation products retail from $5.99 to $19.99.

FLYING COLORS ACTIVITY SETS, COMPOUND PLAYSETS AND LUNCH BOXES

Through our acquisition of Flying Colors Toys we entered into the toy
activity category with plastic molded activity cases containing a broad range of
activities, such as make and paint your own characters, jewelry making, art
studios, posters, puzzles and other projects. These sets include all of the
materials needed for each activity, including paints, markers, stampers and
crayons. The cases, with molded and painted likenesses of popular characters,
such as Nickelodeon's Rugrats and Blue's Clues, Powerpuff Girls, Looney Tunes,
Hello Kitty and Scooby Doo, have immediate visual appeal. Using a related
production technology, our lunch boxes complement this line with similarly-
styled molded and painted likenesses featuring these and other popular
characters. Through our acquisition of Pentech International in 2000, we
expanded the other categories of products offered by Flying Colors, which now
include stationery, back-to-school pens, pencils, markers and notebooks, party
favors and compounds.

Our compounds represent a new area of emphasis for Flying Colors. Launched
under the Blue's Clues license, this line has expanded from play clay in a
bucket to an entire Blue's Clues playset featuring book molds, extrusion and
other devices. We are continuing to expand the compound area and have introduced
innovative compounds with and without licensed characters or marks. In early
2000, we expanded our offerings with the launch of Goooze, and followed it up
late 2000 with our forming foam Zyrofoam, both under the Nickelodeon brand.
These products come in assorted colors and in various uniquely shaped packages.
In 2001, we expect to add higher volume packages and assorted play and activity
sets.

WHEELS DIVISION PRODUCTS

- Road Champs die-cast collectible and toy vehicles

The Road Champs product line consists of highly-detailed, die-cast replicas
of new and classic cars, trucks, motorcycles, emergency vehicles and service
vehicles, primarily in 1/43 scale (including police cars, fire trucks and
ambulances), buses and aircraft (including propeller planes, jets and

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helicopters). As a part of the Road Champs acquisition in February 1997, we
acquired the right to produce the Road Champs line of die-cast and collectible
vehicle replicas, including various well-known vehicles from Ford, Chevrolet and
Jeep, as well as the right to use familiar corporate names on the die-cast
vehicles, such as Pepsi and Hershey. Later, we licensed the right to reproduce
vehicles featured on the covers of automotive magazines, such as Rod & Custom
and Car and Driver, and to market vehicles with the B.A.S.S. Masters logo and
replicas of the World Wrestling Federation Attitude Racing NHRA Team. We believe
that these licenses increase the perceived value of the products and enhance
their marketability. Under the terms of these licenses (many of which include
automatic annual extensions without affirmative action taken by either party),
we pay the licensor a royalty based on our sales of each product bearing such
licensed name. While we are not required to pay any royalty on some of the
products, the royalties on a majority of the products range from 1% to 9% of
sales. The Road Champs products are produced by unaffiliated foreign
manufacturers. These products are sold individually, retailing from $2.99 to
$7.99 each, and in playsets which retail from $9.99 to $24.99 each.

We have divided the markets of this product line into adult collectible and
children's toy segments, recognizing the specific needs of these different
consumers. Each collector product features a collector case in which to store
and display the vehicle and a certificate of authenticity. We produce a limited
number, generally not more than 10,000, of each distinctive product to enhance
its collectibility. This line presently has numerous themes, including
Anniversary Collection, Police, Then & Now, World War II Fighter Planes and
Classics Scenes, with die-cast scenic accessories, such as 1950's soda machines
or gas pumps. The toy segment is marketed by focusing on size and value with its
slogan "Crankin' It Up." Our die-cast vehicles are 1/43 scale, which are larger
than most other competing die-cast vehicles. The size appeals to collectors,
since it enables us to show greater detail on the vehicles, and to children and
their parents, who perceive a greater value in the larger size. The toys are
packaged on two-pack blister cards, further highlighting the value. In addition,
series were created to encourage children to collect our vehicles. Our toy
vehicle line has been expanded to include 1/64 scale cars featuring new
functionality that allows the consumer to adjust the vehicle's suspension for
different terrain as well as track sets. These cars include new sports cars such
as the 2000 Corvette, Ford GT 90 and Porsche 959.

- Extreme sports die-cast collectible and toy vehicles and action figures

In 1999, we launched our extreme sports category with a new line of
die-cast bicycles called BXS. These BMX-style bicycles feature removable and
interchangeable parts for complete customization by users as well as working
cranks. To enhance collectibility, we created a patent-pending trickstick in
several different styles which allows the user to perform signature moves like
professional cyclists and to navigate stairs, half-pipes and ramps. Certain
elements of the playsets contain pressure points that activate sound chips
containing real BXS bike event sounds, such as crowd cheers, music riffs and
announcers. We have licensed the Schwinn, GT and Haro brand names, among others,
as well as the names of some of the top riders, such as Dave Mirra and Ryan
Nyquist, for use in connection with this product line. In 2000, we added
fully-articulated action figures of these and other free-style riders that
"ride" their signature edition bikes. Bicycles are sold individually and in sets
that include accessories.

Also in 2000, we expanded our extreme sports offerings with the
introduction of our MXS line of motorcycles with riders featuring "click n grip"
functionality which allows the user to release the rider from the motorcyle seat
and perform the signature moves of the sport's top riders. Other additions
included off-road vehicles, personal water craft, surfboards and skateboards,
all sold individually and with play sets and accessories.

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- Remco toy vehicles and role play

Our Remco toy line includes toy vehicles, role play and other toys. Our toy
vehicle line is comprised of a large assortment of rugged die-cast and plastic
vehicles. Marketed under a sub-brand called Tuff Ones, our toy vehicles range in
size from 4 3/4 inch to big-wheeled 17 inch vehicles. We have revitalized them
considerably by creating new packaging, redecorating the vehicles and adding
highly-recognized licensed names, such as NASA, Pennzoil, U-Haul and Castrol,
among others. The breadth of the line is extensive, with themes ranging from
emergency, fire, farm and construction, to racing and jungle adventure.

We offer a variety of branded and non-branded role playsets in this new
category under the Remco name. Themes include Caterpillar construction, B.A.S.S.
Masters fishing, police, fire and NASA. Role play sets retail from $6.99 to
$12.99 each. Additionally, capitalizing on the popularity of World Wrestling
Federation, we introduced a World Wrestling Federation role play product which
will give children the opportunity to dress like and imagine being their
favorite wrestling superstars.

CHILD GUIDANCE

- Infant and pre-school toys

We acquired the Child Guidance trade name in 1997 to accelerate our entry
into the infant/ pre-school toy category. This category has been recently
dominated by higher-priced licensed products, which creates an opportunity for
us to sell our lower price, high value line of pre-school toys. Our line of
pre-school electronic toys features products that enhance sensory stimulation
and learning through play, while offering value to the trade as well as to the
consumer. Our products are designed for children ages two and under. We have
combined the fun of music, lights, motion and sound with the early introduction
of numbers, letters, shape and color recognition, all at a value price. The line
consists of more than 50 products that are marketed in continually updated "try
me" interactive packaging that allows the consumers to sample the product prior
to purchase. We support the products with extensive advertising in popular
magazines and other publications, focusing on parenting, women's and family
publications, including Good Housekeeping. These products carry the Good
Housekeeping Seal of Approval(R). In 2001, we will be introducing a line of
musical toys in conjunction with Baby Genius, the marketer of a popular line of
music-oriented CDs and home videos whose aim is to stimulate the development of
young children through music. Distribution of the Child Guidance products
include more upscale and specialty retailers. Child Guidance products are priced
at retail from $2.99 to $14.99.

In addition to creating products internally, we often acquire products and
concepts from numerous toy inventors with whom we have ongoing relationships.
License agreements for products and concepts call for royalties ranging from 1%
to 6% of net sales, and some may require minimum guarantees and advances. Both
development of internally-created items and acquiring items are ongoing efforts.
In either case, it may take as long as nine months for an item to reach the
market. As part of an effort to keep the product line fresh and to extend the
life of the item, we create new packaging, change sound chips and change product
colors from time to time.

- Foam puzzle mats and playsets

The acquisition of Berk added the foam toy category to our business. We
incorporated this new toy category into our Child Guidance product line, based
on the demographics and target market for foam toy products. This new line
further expands the breadth of our Child Guidance brand. The foam toy products
include puzzle mats featuring licensed characters, such as Winnie the

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Pooh, Blue's Clues, Barney, Teletubbies and Sesame Street, among others, as well
as letters of the alphabet and numbers. The inter-locking puzzle pieces can also
be used to build houses and other play areas. Other products include foam
puzzles of the United States, foam vehicles and outdoor foam products. In 1999,
we introduced three-dimension, mechanism and sound elements to this line.

FASHION DOLLS AND RELATED ACCESSORIES

We produce various proprietary and licensed fashion dolls and accessories
for children between the ages of three and 10. The product lines include 11 1/2
inch fashion dolls customized with high-fashion designs that correspond with
particular holidays, events or themes, such as Christmas, birthdays, Fairytale,
Victorian Romance and Gibson Girl Romance and fashion dolls based on children's
classic fairy tales and holidays. In 2000, we added to our doll line by
producing additional dolls based on the fashion magazine Elle. These 15 1/2 inch
dolls feature contemporary fashions.

Also in 2000, we launched our G.I.R.L. Force line of dolls with the release
of 11 1/2 inch dolls based on the feature film, Charlie's Angels. These dolls
feature our new patent-pending skeleton with more realistic features and
movement. In 2001, we will be releasing a line of 11 1/2 inch dolls and
accessories based on the feature film, Josie and the Pussycats.

Our in-house product developers originate the design and functionality of
most of our fashion dolls. In many cases, they work with retailers and
incorporate their input on doll characteristics, packaging and other design
elements to create exclusive product lines for them.

WORLD WRESTLING FEDERATION VIDEO GAMES

In June 1998, we formed a joint venture with THQ, a developer, publisher
and distributor of interactive entertainment software for the leading hardware
game platforms in the home video game market. The joint venture entered into a
license agreement with World Wrestling Federation Entertainment under which it
acquired the exclusive worldwide right to publish World Wrestling Federation
video games on all hardware platforms. The games are designed, developed,
manufactured and marketed by the joint venture. We are entitled to receive a
guaranteed preferred return, based on sales of the video games, and THQ is
entitled to receive the balance of the profits. The term of the license
agreement expires on December 31, 2009, subject to a right of the joint venture
to renew the license for an additional five years under various conditions.

The joint venture publishes titles for the Sony PlayStation and Nintendo 64
consoles, hand-held Game Boy and personal computers (PCs). The joint venture
launched its first products, a video game for the Nintendo 64 platform and a
video game for GameBoy Color, in November 1999. It will also publish titles for
new hardware platforms, such as Microsoft Xbox and Sony PlayStation 2, when and
as they are introduced to the market and have established a sufficiently
installed base to support new software. These titles are marketed to our
existing customers as well as to game, electronics and other specialty stores,
such as Electronics Boutique and Best Buy. The home video game software market
consists both of (1) cartridge-based and CD-ROM-based software for use solely on
dedicated hardware systems, such as Sony PlayStation and Nintendo 64, and (2)
software distributed on CD-ROMs for use on PCs. According to NPD Group, a
leading independent toy industry research firm, Nintendo 64 and Sony PlayStation
accounted for a substantial portion of the installed base of all hardware
platforms and software sales in 2000.

8
<PAGE> 10

Under non-exclusive licenses with Sony, Nintendo and Sega held by THQ, the
joint venture arranges for the manufacture of the CD-ROMs and cartridges. No
other licenses are required for the manufacture of the PC titles. Profit margins
for cartridge products can vary based on the cost of the memory chip used for a
particular title. As software has grown more complex, the trend in the software
industry has been to utilize chips with greater capacity and thus greater cost.
CD-ROMs have significantly lower per unit manufacturing costs than
cartridge-based products. However, these savings may be offset by typically
higher development costs for titles published on CD-ROMs; these higher costs
result from increasing and enhancing content to take advantage of the greater
storage capacity of CD-ROMs.

Wrestling video games have demonstrated consistent popularity, with three
of our wrestling-theme video games each having sold in excess of 1 million units
in 1999 and 2000, at retail prices ranging from approximately $42 to $60. We
believe that the success of the World Wrestling Federation titles is dependent
on the graphic look and feel of the software, the depth and variation of game
play and the popularity of the World Wrestling Federation. We believe that as a
franchise property, the World Wrestling Federation titles will have brand
recognition and sustainable consumer appeal, which may allow the joint venture
to use titles over an extended period of time through the release of sequels and
extensions and to re-release such products at different price points in the
future. In 2001, our PlayStation title SmackDown was re-released as a greatest
hit. Also, as new hardware platforms are introduced, software for these
platforms requires new standards of design and technology to fully exploit these
platforms' capabilities and requires that software developers devote substantial
resources to product design and development.

The joint venture uses external software developers to conceptualize and
develop titles. These developers receive advances based on specific development
milestones and royalties in excess of the advances based on a fixed amount per
unit sold or on a percentage, typically ranging from 8% to 12%, of net sales.
Upon completion of development, each title is extensively play-tested by us and
THQ and sent to the manufacturer for its review and approval.

SALES, MARKETING AND DISTRIBUTION

We sell all of our products through our own in-house sales staff and
independent sales representatives. Purchasers of our products include toy and
mass-market retail chain stores, department stores, toy specialty stores and
wholesalers. The Road Champs, Flying Colors and Pentech product lines are also
sold to smaller hobby shops, specialty retailers and corporate accounts, among
others. Our five largest customers are Target, Kmart, Toys R' Us, Wal-Mart, and
Kay Bee Toys, which accounted for approximately 70.2% of our net sales in 1999
and 63.2% of our net sales in 2000. Except for purchase orders relating to
products on order, we do not have written agreements with our customers.
Instead, we generally sell products to our customers pursuant to letters of
credit or, in some cases, on open account with payment terms typically varying
from 30 to 90 days. From time to time, we allow our customers credits against
future purchases from us in order to facilitate their retail markdown and sales
of slow-moving inventory. We also sell through e-commerce sites, including
Toysrus.com.

9
<PAGE> 11

products from time to time in support of promotions or other domestic programs
with retailers. To date, substantially all of our sales have been to domestic
customers. We intend to expand distribution of our products into foreign
territories and, accordingly, we have (1) engaged representatives to oversee
sales in certain territories, (2) engaged distributors in certain territories,
and (3) established direct relationships with retailers in certain territories.

We establish reserves for sales allowances, including promotional
allowances and allowances for anticipated defective product returns, at the time
of shipment. The reserves are determined as a percentage of net sales based upon
either historical experience or on estimates or programs agreed upon by our
customers.

We obtain, directly, or through our sales representatives, orders for our
products from our customers and arrange for the manufacture of these products as
discussed below. Cancellations are generally made in writing, and we take
appropriate steps to notify our manufacturers of these cancellations.

We maintain a full-time sales and marketing staff, many of whom make
on-site visits to customers for the purpose of showing product and soliciting
orders for products. We also retain a number of independent sales
representatives to sell and promote our products, both domestically and
internationally. Together with retailers, we sometimes test the consumer
acceptance of new products in selected markets before committing resources to
large-scale production.

We advertise our products in trade and consumer magazines and other
publications, market our products at major and regional toy trade shows,
conventions and exhibitions and carry on cooperative advertising with toy
retailers and other customers. We produce and broadcast television commercials
for our World Wrestling Federation action figure line as well as for some of our
Flying Colors and Road Champs extreme sports products. We may also advertise
some of our other products on television, if we expect that the resulting
increase in our net sales will justify the relatively high cost of television
advertising.

Outside of the United States, we currently sell our products primarily in
Canada, Great Britain, Latin America, Australia, Japan and South Africa. Sales
of our products abroad accounted for approximately $13.1 million, or 7.1% of our
net sales, in 1999 and approximately $22.5 million, or 8.9% of our net sales, in
2000. We believe that foreign markets present an attractive opportunity, and we
plan to intensify our marketing efforts and expand our distribution channels
abroad.

PRODUCT DEVELOPMENT

Each of our product lines has an in-house manager responsible for product
development, including identifying and evaluating inventor products and concepts
and other opportunities to enhance or expand existing product lines or to enter
new product categories. In addition, we create proprietary products, the
principal source of products for our fashion doll line, and products to more
fully exploit our concept and character licenses. While we do have the
capability to create and develop products from inception to production, we
generally use third parties to provide a substantial portion of the sculpting,
sample making, illustration and package design required for our products in
order to accommodate our increasing product innovations and introductions.
Typically, the development process takes from three to nine months to culminate
in production of the products for shipment to our customers.

We employ a staff of approximately 20 designers for our Flying Colors
product lines. We generally acquire our other product concepts from unaffiliated
third parties. If we accept and

10
<PAGE> 12

develop a third party's concept for new toys, we generally pay a royalty on the
toys developed from this concept that are sold, and may, on an individual basis,
guarantee a minimum royalty. Royalties payable to developers generally range
from 1% to 6% of the wholesale sales price for each unit of a product sold by
us. We believe that utilizing experienced third-party inventors gives us access
to a wide range of development talent. We currently work with numerous toy
inventors and designers for the development of new products and the enhancement
of existing products. We believe that toy inventors and designers have come to
appreciate our practice of acting quickly and decisively to acquire and market
licensed products. In addition, we believe that our experience in the toy
industry, our flexibility and our recent success in developing and marketing
products make us more attractive to toy inventors and developers than some of
our competitors.

Safety testing of our products is done at the manufacturers' facilities by
an engineer employed by us or independent third-party contractors engaged by us,
and is designed to meet safety regulations imposed by federal and state
governmental authorities. We also monitor quality assurance procedures for our
products for safety purposes.

MANUFACTURING AND SUPPLIES

Our products are currently produced by manufacturers which we choose on the
basis of quality, reliability and price. Consistent with industry practice, the
use of third-party manufacturers enables us to avoid incurring fixed
manufacturing costs. All of the manufacturing services performed overseas for us
are paid for either by letter of credit or on open account with the
manufacturers. To date, we have not experienced any material delays in the
delivery of our products; however, delivery schedules are subject to various
factors beyond our control, and any delays in the future could adversely affect
our sales. Currently, we have ongoing relationships with approximately 20
manufacturers. We believe that alternative sources of supply are available,
although we cannot assure you that adequate supplies of manufactured products
can be obtained.

Although we do not conduct the day-to-day manufacturing of our products, we
participate in the design of the product prototype and production tooling and
molds for our products and we seek to ensure quality control by actively
reviewing the production process and testing the products produced by our
manufacturers. We employ quality control inspectors who rotate among our
manufacturers' factories to monitor production.

The principal raw materials used in the production and sale of our toy
products are zinc alloy, plastics, plush, printed fabrics, paper products and
electronic components, all of which are currently available at reasonable prices
from a variety of sources. Although we do not manufacture our products, we own
the molds and tooling used in the manufacturing process, and these are
transferable among manufacturers if we choose to employ alternative
manufacturers. Molds and tooling represents substantially all of our long-lived
assets, and amounted to $3.4 million in 1998, $10.3 million in 1999 and $14.4
million in 2000. Substantially all of these assets are located in China.

TRADEMARKS AND COPYRIGHTS

Most of our products are produced and sold under trademarks owned by or
licensed to us. We typically register our properties, and seek protection under
the trademark, copyright and patent laws of the United States and other
countries where our products are produced or sold. These intellectual property
rights can be significant assets. Accordingly, while we believe we are
sufficiently protected, the loss of some of these rights could have an adverse
effect on our business, financial condition and results of operations.

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<PAGE> 13

COMPETITION

Competition in the toy industry is intense. Many of our competitors have
greater financial resources, larger sales and marketing and product development
departments, stronger name recognition and longer operating histories and
benefit from greater economies of scale. These factors, among others, may enable
our competitors to market their products at lower prices or on terms more
advantageous to customers than those we could offer for our competitive
products. Competition often extends to the procurement of entertainment and
product licenses, as well as to the marketing and distribution of products and
the obtaining of adequate shelf space. Competition may result in price
reductions, reduced gross margins and loss of market share, any of which could
have a material adverse effect on our business, financial condition and results
of operations. In each of our product lines we compete against one or both of
the toy industry's two dominant companies, Mattel and Hasbro. In addition, we
compete, in our action figures line, with the Toy-Biz division of Marvel
Enterprises, in our Flying Colors and Pentech product categories, with Rose Art
Industries, Hasbro (Play-doh), Binney & Smith (Crayola) and, in our toy vehicle
lines, with Racing Champions. We also compete with numerous smaller domestic and
foreign toy manufacturers, importers and marketers in each of our product
categories. We expect that the joint venture's principal competition in the
video game market is Electronic Arts, which produces video games based on World
Championship Wrestling characters, and Acclaim Entertainment.

SEASONALITY AND BACKLOG

Sales of toy products are seasonal. In 2000, approximately 59.8% our net
sales were made in the third and fourth quarters. Generally, the first quarter
is the period of lowest shipments and sales in our business and the toy industry
generally and therefore the least profitable due to various fixed costs.
Seasonality factors may cause our operating results to fluctuate significantly
from quarter to quarter. However, Pentech's writing instrument and activity
products may be counter-seasonal to the toy industry seasonality due to the
higher volume generally shipped for back-to-school beginning in the second
quarter. Our results of operations may also fluctuate as a result of factors
such as the timing of new products (and expenses incurred in connection
therewith) introduced by us or our competitors, the advertising activities of
our competitors, delivery schedules set by our customers and the emergence of
new market entrants. We believe, however, that the low retail price product
lines that we sell may be less subject to seasonal fluctuations than higher
priced toy products.

We ship products in accordance with delivery schedules specified by our
customers, which usually request delivery of their products within three to six
months of the date of their orders. Because customer orders may be canceled at
any time without penalty, our backlog may not accurately indicate sales for any
future period.

GOVERNMENT AND INDUSTRY REGULATION

Our products are subject to the provisions of the Consumer Product Safety
Act ("CPSA"), the Federal Hazardous Substances Act ("FHSA"), the Flammable
Fabrics Act ("FFA") and the regulations promulgated thereunder. The CPSA and the
FHSA enable the Consumer Product Safety Commission to exclude from the market
consumer products that fail to comply with applicable product safety regulations
or otherwise create a substantial risk of injury, and articles that contain
excessive amounts of a banned hazardous substance. The FFA enables the Consumer
Products Safety Commission to regulate and enforce flammability standards for
fabrics used in consumer products. The Consumer Products Safety Commission may
also require the repurchase by the manufacturer of articles. Similar laws exist
in some states and cities and in various international markets. We maintain a
quality control program designed to ensure compliance with all applicable

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<PAGE> 14

laws. In addition, many of our Child Guidance products are sold under the Good
Housekeeping Seal of Approval(R). To qualify for this designation, our products
are tested by Good Housekeeping to ensure compliance with its product safety and
quality standards.

EMPLOYEES

As of March 30, 2001, we employed 200 persons, all of whom are full-time
employees, including three executive officers. One hundred and fifty-five of our
employees were located in the United States, while the remaining 45 were located
in Hong Kong. We believe that we have good relationships with our employees.
None of our employees is represented by a union.

ENVIRONMENTAL ISSUES

We are subject to legal and financial obligations under environmental,
health and safety laws in the United States and in other jurisdictions where we
operate. We are not currently aware of any material environmental liabilities
associated with any of our operations.

ITEM 2. PROPERTIES

Our principal executive offices occupy approximately 17,000 square feet of
space in Malibu, California under a lease expiring on February 28, 2008. We have
a lease, expiring August 31, 2002, for approximately 9,000 square feet of
additional office space in Malibu, California which contains our design offices.
We lease office space of approximately 5,000 square feet in Dexter, Michigan
where certain design operations of Flying Colors Toys are based. We lease
showroom and office space of approximately 8,000 square feet at the
International Toy Center in New York City. We also have leased office and
showroom space of approximately 5,000 square feet in Hong Kong from which we
oversee our China-based third-party manufacturing operations, 318,000 square
feet of warehouse space in Industry, California and approximately 100,000 square
feet of warehouse space in New Brunswick, New Jersey. We believe that our
facilities in the United States and Hong Kong are adequate for our reasonably
foreseeable future needs.

ITEM 3. LEGAL PROCEEDINGS

On or about March 26, 2001, Rose Art Industries, Inc. and Licensing
International, Ltd. commenced an action against us in the United States District
Court for the District of New Jersey in which they allege our willful
infringement of a patent owned by Licensing International and licensed to Rose
Art through our production and sale of our Zyrofoam modeling compound. The
plaintiffs seek injunctive relief, monetary damages in a unspecified amount,
together with interest thereon, and reasonable attorneys' fees. We have not yet
answered the plaintiff's first amended complaint, but we believe that their
claims are without merit and we intend vigorously to defend against their
action. At this early stage in these proceedings, we are unable to predict the
likely outcome of the action or its impact on our business, financial condition
or results of operations. We are a party to, and certain of our property is the
subject of, various pending claims and legal proceedings that routinely arise in
the ordinary course of our business, but we do not believe that any of these
claims or proceedings will have a material effect on our business, financial
condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of 2000 to a vote of our
security holders.

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<PAGE> 15

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our common stock is traded on the Nasdaq National Market under the symbol
"JAKK." The following table sets forth, for the periods indicated, the range of
high and low sales prices for our common stock on the Nasdaq National Market.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------------
HIGH LOW
------ ------
<S> <C> <C>
1999:
First quarter............................................ $13.67 $ 7.00
Second quarter........................................... 19.92 12.17
Third quarter............................................ 26.83 15.50
Fourth quarter........................................... 29.33 16.13
2000:
First quarter............................................ 25.19 13.94
Second quarter........................................... 25.00 13.25
Third quarter............................................ 20.75 9.00
Fourth quarter........................................... 10.56 7.00
</TABLE>

On March 30, 2001, the last sale price of our common stock reported on the
Nasdaq National Market was $10.625 per share.

SECURITY HOLDERS

As of March 30, 2001, there were approximately 101 holders of record of our
common stock.

DIVIDENDS

We have never paid any cash dividends on any of our common stock. We intend
to retain our future earnings, if any, to finance the growth and development of
our business, and, accordingly, we do not plan to pay any cash dividends on our
common stock in the foreseeable future.

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<PAGE> 16

ITEM 6. SELECTED FINANCIAL DATA

You should read the financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
(included in Item 8).

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1997 1998 1999 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales................................................ $12,052 $41,945 $85,253 $183,685 $252,288
Cost of sales............................................ 7,231 25,875 52,000 107,602 149,881
------- ------- ------- -------- --------
Gross profit............................................. 4,821 16,070 33,253 76,083 102,407
Selling, general and administrative expenses............. 3,612 11,895 24,007 51,154 80,435
------- ------- ------- -------- --------
Income from operations................................... 1,209 4,175 9,246 24,929 21,972
Profit from Joint Venture................................ -- -- -- (3,605) (15,906)
Interest, net............................................ (134) 418 423 (1,588) (3,833)
Other (income) expense................................... -- 328 591 (182) 1,377
------- ------- ------- -------- --------
Income before provision for income taxes................. 1,343 3,429 8,232 30,304 40,334
Provision for income taxes............................... 163 643 1,857 8,334 11,697
------- ------- ------- -------- --------
Net income............................................... $ 1,180 $ 2,786 $ 6,375 $ 21,970 $ 28,637
======= ======= ======= ======== ========
Basic earnings per share................................. $ 0.24 $ 0.40 $ 0.75 $ 1.55 $ 1.50
======= ======= ======= ======== ========
Weighted average shares outstanding...................... 4,927 6,932 8,539 13,879 19,060
======= ======= ======= ======== ========
Diluted earnings per share............................... $ 0.22 $ 0.35 $ 0.59 $ 1.39 $ 1.41
======= ======= ======= ======== ========
Weighted average shares and equivalents outstanding...... 5,256 9,013 11,403 15,840 20,281
======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
1996 1997 1998 1999 2000
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 6,355 $ 2,536 $12,452 $ 57,546 $ 29,275
Working capital.................................. 7,824 3,368 13,736 113,170 86,897
Total assets..................................... 14,200 43,605 58,736 232,878 248,722
Long-term debt, net of current portion........... -- 6,000 5,940 9 1,000
Total stockholders' equity....................... 11,746 25,959 37,754 187,501 204,530
</TABLE>

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<PAGE> 17

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).

OVERVIEW

JAKKS was founded to design, develop, produce and market children's toys
and related products. We commenced business operations on July 1, 1995 when we
assumed operating control over the toy business of Justin Products Limited
(Justin) which consisted primarily of fashion dolls and accessories and
electronic products for children.

One of our key strategies has been to grow through the acquisition or
licensing of product lines, concepts and characters. In 1996, we expanded our
product lines to include products based on licensed characters and properties,
such as World Wrestling Federation action figures and accessories.

We acquired Road Champs in February 1997, and have included the results of
operations of Road Champs from February 1, 1997, the effective date of the
acquisition. We acquired the Child Guidance and Remco trademarks in October
1997, both of which contributed to operations nominally in 1997, but contributed
more significantly to operations commencing in 1998. We acquired Berk in June
1999 and have included the results of operations of Berk since June 29, 1999. In
October 1999, we acquired Flying Colors Toys. The Flying Colors product lines
contributed to operations beginning in the fourth quarter of 1999. In July 2000,
we acquired Pentech International whose products include writing instruments and
activity items. The Pentech products contributed nominally to operations
beginning in the second quarter of 2000.

Our products currently include (1) action figures and accessories featuring
licensed characters, principally from the World Wrestling Federation, (2) Flying
Colors molded plastic activity sets, compound playsets and lunch boxes, (3)
Wheels division products, including Road Champs die-cast collectible and toy
vehicles and Remco toy vehicles and role-play toys and accessories, (4) Pentech
writing instruments and activity products, (5) Child Guidance infant and
pre-school electronic toys, toy foam puzzle mats and blocks, activity sets and
outdoor products and (6) fashion dolls and related accessories.

In June 1998, we formed a joint venture with THQ, a developer, publisher
and distributor of interactive entertainment software, and the joint venture
licensed the rights from World Wrestling Federation Entertainment to publish
World Wrestling Federation electronic video games on all platforms. The first
games produced under this license were released in November 1999. We are
entitled to receive a guaranteed preferred return, based on sales of the video
games, and THQ is entitled to receive the balance of the profits.

In general, we acquire products or product concepts from others or we
engage unaffiliated third parties to develop our own products, thus minimizing
operating costs. Royalties payable to our

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<PAGE> 18

developers generally range from 1% to 6% of the wholesale price for each unit of
a product sold by us. We expect that outside inventors will continue to be a
source of new products in the future. We also generate internally new product
concepts, for which we pay no royalties.

We contract the manufacture of most of our products to unaffiliated
manufacturers located in China. We sell the finished products on a letter of
credit basis or on open account to our customers, who take title to the goods in
Hong Kong. These methods allow us to reduce certain operating costs and working
capital requirements. A portion of our sales, primarily sales of our Road
Champs, Flying Colors and Pentech products, originate in the United States, so
we hold certain inventory in our warehouse and fulfillment facility. In
addition, we hold inventory of other products from time to time in support of
promotions or other domestic programs with retailers. To date, substantially all
of our sales have been to domestic customers. We intend to expand distribution
of our products into foreign territories and, accordingly, we have (1) engaged
representatives to oversee sales in certain territories, (2) engaged
distributors in certain territories, and (3) established direct relationships
with retailers in certain territories.

Our cost of sales consists primarily of the cost of goods produced for us
by unaffiliated third-party manufacturers, royalties earned by licensors on the
sale of these goods and amortization of the tools, dies and molds owned by us
that are used in the manufacturing process. Other costs include inbound freight
and provisions for obsolescence. Significant factors affecting our cost of sales
as a percentage of net sales include (1) the proportion of net sales generated
by various products with disparate gross margins, (2) the proportion of net
sales made domestically, which typically carry higher gross margins than sales
made in Hong Kong, and (3) the effect of amortizing the fixed cost components of
cost of sales, primarily amortization of tools, dies and molds, over varying
levels of net sales.

Selling, general and administrative expenses include costs directly
associated with the selling process, such as sales commissions, advertising and
travel expenses, as well as general corporate expenses, goodwill and trademark
amortization and product development. We have recorded goodwill of approximately
$78.2 million and trademarks of approximately $13.9 million in connection with
acquisitions made to date. Goodwill is being amortized over a 30-year period,
while trademark acquisition costs are being amortized over periods ranging from
5 to 30 years.

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<PAGE> 19

RESULTS OF OPERATION

The following table sets forth, for the periods indicated, certain
statement of operations data as a percentage of net sales.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 60.0 61.7 61.0 58.6 59.4
----- ----- ----- ----- -----
Gross profit............................. 40.0 38.3 39.0 41.4 40.6
Selling, general and administrative
expenses............................... 30.0 28.4 28.2 27.8 31.9
----- ----- ----- ----- -----
Income from operations................... 10.0 9.9 10.8 13.6 8.7
Profit from Joint Venture................ -- -- -- (2.0) (6.3)
Interest, net............................ (1.1) 1.0 0.4 (0.9) (1.5)
Other (income) expense................... -- 0.7 0.7 -- 0.5
----- ----- ----- ----- -----
Income before income taxes............... 11.1 8.2 9.7 16.5 16.0
Provision for income taxes............... 1.3 1.6 2.2 4.5 4.6
----- ----- ----- ----- -----
Net income............................... 9.8% 6.6% 7.5% 12.0% 11.4%
===== ===== ===== ===== =====
</TABLE>

YEARS ENDED DECEMBER 31, 2000 AND 1999

Net Sales. Net sales increased $68.6 million, or 37.3% to $252.3 million
in 2000 from $183.7 million in 1999. The significant growth in net sales was due
primarily to the continuing growth in our Wheels division, consisting primarily
of our Road Champs die-cast toy and collectible vehicles with the launch of the
lines of extreme sports products, including our BXS die-cast bicycles, fashion
and holiday dolls, as well as the addition of Flying Colors products, which
began contributing to operations beginning in the fourth quarter of 1999, and
Pentech products, which began contributing to operations in August 2000, offset
by a decrease in sales of our World Wrestling Federation wrestling products.

Gross Profit. Gross profit increased $26.3 million, or 34.6%, to $102.4
million in 2000, or 40.6% of net sales, from $76.1 million, or 41.4% of net
sales, in 1999. The overall increase in gross profit was attributable to the
significant increase in net sales. Gross profit margin decreased slightly mainly
due to an increase in the amortization expense of molds and tools used in the
manufacture of our products and royalty expense as a percentage of net sales due
to changes in the product mix and the launch of a larger number of products in
2000.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $80.4 million in 2000 and $51.1 million in 1999,
constituting 31.9% and 27.8% of net sales, respectively. The overall significant
increase of $29.3 million in such costs was due to costs incurred in support of
the Company's development, marketing and distribution of products under its
recently acquired Flying Colors and Pentech brands. The overall dollar increase
was due to the significant increase in net sales with its proportionate impact
on variable selling costs such as freight and shipping related expenses, sales
commissions, cooperative advertising and travel expenses, among others. We
produced television commercials in support of several of our products, including
World Wrestling Federation action figures, Flying Colors' Goooze and It's a Girl
Thing in 1999 and 2000 and we increased our overall media buys in 2000. From
time to time, we may increase our advertising efforts, including the use of more
expensive advertising media, such as television, if we deem it appropriate for
particular products.

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<PAGE> 20

Profit from Joint Venture. Beginning in the fourth quarter of 1999, we
began to earn our preferred return on the sale of World Wrestling Federation
video games by our joint venture with THQ with the release of two games, whereas
in 2000, four titles were released plus sales continued on 1999 releases.

Interest, Net. We had significantly higher average cash balances during
2000 than in 1999 due to the net proceeds from the sale of our common stock in
December 1999. In addition, we assumed certain interest-bearing obligations in
2000 in conjunction with the Pentech acquisition and we had convertible
debentures outstanding in 1999.

Other Expense Net. Other expense in 2000 consists mainly of expenses
related to the lease termination of certain Flying Colors facilities and other
related shut-down costs in addition to costs related to the recall of one of our
products in 2000. No such expenses were incurred in 1999.

Provision for Income Taxes. Provision for income taxes included Federal,
state and foreign income taxes in 1999 and 2000, at effective tax rates of 27.5%
in 1999 and 29.0% in 2000, benefiting from a flat 16.5% Hong Kong Corporation
Tax on our income arising in, or derived from, Hong Kong. As of December 31,
2000, we had deferred tax assets of approximately $0.4 million for which no
allowance has been provided since, in the opinion of management, realization of
the future benefit is probable. In making this determination, management
considered all available evidence, both positive and negative, as well as the
weight and importance given to such evidence.

YEARS ENDED DECEMBER 31, 1999 AND 1998

Net Sales. Net sales increased $98.4 million, or 115.5%, to $183.7 million
in 1999 from $85.3 million in 1998. The significant growth in net sales was due
primarily to the continuing growth of the World Wrestling Federation action
figure product line with its expanded product offerings and frequent character
releases, as well as to increasing sales in our Wheels division, consisting
primarily of our Road Champs die-cast toy and collectible vehicles, fashion and
holiday dolls and Child Guidance pre-school toys and the addition of Berk
products, which contributed nominally to operations beginning in the third
quarter of 1999 and Flying Colors products, which contributed moderately to
operations beginning in the fourth quarter of 1999.

Gross Profit. Gross profit increased $42.8 million, or 128.8%, to $76.1
million, or 41.4% of net sales, in 1999 from $33.3 million, or 39.0% of net
sales, in 1998. The overall increase in gross profit was attributable to the
significant increase in net sales. The increase in the gross profit margin of
2.4% of net sales was due in part to the changing product mix, which included
products, such as World Wrestling Federation action figures and BXS die-cast
bicycles, with higher margins than some of our other products, and the
amortization expense of molds and tools used in the manufacture of our products,
which decreased on a percentage basis due to the fixed nature of these costs.
The higher margin resulting from lower product costs was offset in part by
higher royalties.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $27.1 million, or 112.7%, to $51.1 million, or
27.8% of net sales, in 1999 from $24.0 million, or 28.2% of net sales, in 1998.
Selling, general and administrative expenses decreased nominally as a percentage
of net sales due in part to increases in advertising expenses and product
development costs of our various products in 1999, which were offset in part by
a decrease as a percentage of net sales due to the fixed nature of certain of
these expenses in
19
<PAGE> 21

conjunction with the significant increase in net sales. The overall dollar
increase of $27.1 million was due to the significant increase in net sales with
their proportionate impact on variable selling costs, such as freight and
shipping related expenses, sales commissions, cooperative advertising and travel
expenses in addition to the costs added in connection with our acquisitions of
Flying Colors and Berk in 1999. We produced television commercials in support of
several of our products, including World Wrestling Federation action figures, in
1998 and 1999. We may increase our advertising efforts, including the use of
more expensive advertising media, such as television, if we deem it appropriate
for particular products.

Profit from Joint Venture. In 1999, we began to earn our preferred return
on the sale of World Wrestling Federation video games by our joint venture with
THQ.

Interest, Net. We had significantly lower interest-bearing obligations in
1999 than in 1998 with the conversion of our convertible debentures in 1999. In
addition, we had significantly higher average cash balances during 1999 than in
1998 due to the net proceeds from the sale of our common stock in May 1999 and
in December 1999.

Other (Income) Expense. In 1999, we recorded a nominal amount of Other
Income, while in 1998, Other Expense resulted from the loss on the disposition
of certain assets.

Provision for Income Taxes. Provision for income taxes included federal,
state and foreign income taxes at effective tax rates of 27.3% and 22.6% in 1999
and 1998, respectively, benefiting from a flat 16.5% Hong Kong Corporation Tax
on our income arising in, or derived from, Hong Kong. As of December 31, 1999,
we had deferred tax assets of approximately $1,460,000 for which no allowance
has been provided since, in the opinion of management, realization of the future
benefit is probable. In making this determination, management considered all
available evidence, both positive and negative, as well as the weight and
importance given to such evidence.

QUARTERLY FLUCTUATIONS AND SEASONALITY

We have experienced significant quarterly fluctuations in operating results
and anticipate these fluctuations in the future. The operating results for any
quarter are not necessarily indicative of results for any future period. Our
first quarter is typically expected to be the least profitable as a result of
lower net sales but substantially similar fixed operating expenses. This is
consistent with the performance of many companies in the toy industry.

20
<PAGE> 22

The following table presents our unaudited quarterly results for the years
indicated. The seasonality of our business is reflected in this quarterly
presentation.
<TABLE>
<CAPTION>
1998 1999
------------------------------------- -----------------
FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $11,030 $16,131 $34,218 $23,873 $24,960 $35,981
As a % of full year....... 12.9% 18.9% 40.1% 28.0% 13.6% 19.6%
Gross profit............... $ 4,350 $ 6,118 $13,242 $ 9,542 $10,764 $14,649
As a % of full year....... 13.1% 18.4% 39.8% 28.7% 14.2% 19.3%
As a % of net sales....... 39.4% 37.9% 38.7% 40.0% 43.1% 40.7%
Income from operations..... $ 768 $ 1,427 $ 5,069 $ 1,983 $ 2,743 $ 4,225
As a % of full year....... 8.3% 15.4% 54.8% 21.4% 11.0% 17.0%
As a % of net sales....... 7.0% 8.8% 14.8% 8.3% 11.0% 11.7%
Income before income
taxes..................... $ 610 $ 1,316 $ 4,648 $ 1,658 $ 2,743 $ 4,587
As a % of net sales....... 5.5% 8.2% 13.6% 6.9% 11.0% 12.7%
Net income................. $ 462 $ 958 $ 3,434 $ 1,521 $ 2,005 $ 3,355
As a % of net sales....... 4.2% 5.9% 10.0% 6.4% 8.0% 9.3%
Diluted earnings per
share..................... $ 0.05 $ 0.09 $ 0.30 $ 0.14 $ 0.17 $ 0.21
Weighted average shares and
equivalents outstanding... 10,740 11,679 11,808 11,756 12,624 15,732

<CAPTION>
1999 2000
----------------- -------------------------------------
THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $60,236 $62,508 $50,782 $50,578 $91,838 $59,090
As a % of full year....... 32.8% 34.0% 20.1% 20.0% 36.4% 23.4%
Gross profit............... $24,759 $25,912 $20,104 $21,748 $37,672 $22,883
As a % of full year....... 32.5% 34.0% 19.6% 21.2% 36.8% 22.3%
As a % of net sales....... 41.1% 41.5% 8.0% 8.6% 14.9% 9.1%
Income from operations..... $ 9,893 $ 8,068 $ 4,004 $ 6,716 $11,201 $ 51
As a % of full year....... 40.0% 32.0% 18.2% 30.6% 51.0% 0.2%
As a % of net sales....... 16.4% 13.1% 1.6% 2.7% 4.4% 0.0%
Income before income
taxes..................... $10,426 $12,548 $ 9,715 $ 8,877 $13,615 $ 8,127
As a % of net sales....... 17.3% 19.9% 3.9% 3.5% 5.4% 3.2%
Net income................. $ 7,642 $ 8,968 $ 6,603 $ 6,237 $ 9,769 $ 6,028
As a % of net sales....... 12.7% 14.4% 2.6% 2.5% 3.9% 2.4%
Diluted earnings per
share..................... $ 0.44 $ 0.49 $ 0.32 $ 0.31 $ 0.48 $ 0.32
Weighted average shares and
equivalents outstanding... 17,541 18,378 20,374 20,371 20,330 18,621
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2000, we had working capital of $86.9 million, as
compared to $113.2 million as of December 31, 1999. This decrease was primarily
attributable to the acquisition of Pentech International Inc. in July 2000 and
the repurchase of our common stock throughout the year.

Operating activities provided net cash of $30.0 million in the year ended
December 31, 2000 as compared to having used $30.4 million in 1999. Net cash was
provided primarily by net income, non-cash charges, such as depreciation and
amortization, and the sale of marketable securities, as well as the increase of
accounts payable, income taxes payable, and deferred income taxes, which were
offset in part by increases in profit from joint venture, accounts receivable,
inventory, advance royalty payments, and prepaid expenses and other, and a
decrease in accrued expenses, and reserve for sales returns and allowances. As
of December 31, 2000, we had cash and cash equivalents of $29.3 million and
marketable securities of $13.6 million.

Operating activities used net cash of $30.4 million in the year ended
December 31, 1999 as compared to having provided $12.0 million in 1998. Net cash
was provided primarily by net income and non-cash charges, such as depreciation,
amortization and recognition of compensation expense for options, as well as an
increase in accounts payable and accrued liabilities, which were offset in part
by increases in accounts receivable and inventory and the purchase of marketable
securities.

Our investing activities used net cash of $60.8 million in the year ended
December 31, 2000, as compared to $46.6 million in 1999, consisting primarily of
the purchase of molds and tooling used in the manufacture of our products in
2000 and 1999, and goodwill acquired in the acquisition of Pentech, the
repurchase of our common stock, and notes receivable from officers in 2000. As
part of our strategy to develop and market new products, we have entered into
various character and product licenses with royalties ranging from 1% to 12%
payable on net sales of such products. As of December 31, 2000, these agreements
required future aggregate minimum guarantees of $13.4 million, exclusive of $1.1
million in advances already paid. During 2000, we repurchased 1,493,600 shares
of our common stock for a total of $12,911,483.

21
<PAGE> 23

Our investing activities used net cash of $46.6 million in the year ended
December 31, 1999, as compared to $5.1 million in 1998, consisting primarily of
the purchase of molds and tooling used in the manufacture of our products in
1999 and 1998 and goodwill acquired in the acquisitions of Flying Colors and
Berk in 1999.

Our financing activities provided net cash of $2.6 million in the year
ended December 31, 2000 compared to $122.1 million in 1999, consisting primarily
of the proceeds from stock options and warrants exercised and the assumption of
debt related to the acquisition of Pentech in 2000. Net cash provided in 1999
consisted primarily of proceeds from the issuance of our common stock and
proceeds from stock options and warrants exercised.

Our financing activities provided net cash of $122.1 million in the year
ended December 31, 1999, consisting primarily of the issuance of our common
stock in our public offerings in May and December 1999 and the exercises of
options and warrants, partially offset by dividends paid to holders of our
Series A Cumulative Convertible Preferred Stock. In 1998, financing activities
provided net cash of $3.0 million, consisting primarily of the issuance of our
Series A Cumulative Convertible Preferred Stock partially offset by the
repayment of various notes and other debt issued in connection with our
acquisitions in 1997.

In October 1997, we acquired the Child Guidance and Remco trademarks for
approximately $13.4 million. Consideration paid at closing was $10.6 million in
cash plus the issuance of a 10% note payable in the amount of $1.2 million,
which was paid in five quarterly installments ended December 31, 1998. In
addition, we incurred legal and accounting fees of approximately $203,000 and
assumed liabilities of $1.4 million. The acquisition was funded in part by the
issuance of shares of our 4% Redeemable Convertible Preferred Stock, which were
converted into 939,998 shares of our common stock in March 1998.

In April 1998, we received $4.7 million in net proceeds from the sale of
shares of our Series A Cumulative Convertible Preferred Stock to two investors
in a private placement, which were converted into 837,987 shares of our common
stock at a conversion price of $5.97 per share. The use of proceeds was for
working capital and general corporate purposes.

In May 1999, we received $51.9 million in net proceeds from the sale of
3,999,844 shares of our common stock. We used substantially all of these
proceeds to fund our acquisition of Flying Colors Toys. In December 1999, we
received $65.9 million in net proceeds from the sale of 2,811,111 shares of our
Common Stock. These proceeds, which we invested temporarily in marketable
securities and cash equivalents, were applied to our product acquisition,
development, working capital and general corporate needs.

In June 1999, we purchased all the outstanding capital stock of Berk for
approximately $3.1 million. Berk is a leading producer of educational toy foam
puzzle mats and blocks featuring popular licensed characters, including Mickey
Mouse, Minnie Mouse, Winnie the Pooh, Blue's Clues, Barney, Teletubbies, Sesame
Street, Looney Tunes and Toy Story 2 characters, and non-licensed activity sets
and outdoor products.

On October 5, 1999, we completed the acquisition of the Flying Colors
product line through the purchase of all the outstanding capital stock of Flying
Colors Toys, a privately-held company based in Dexter, Michigan. At or shortly
after the closing we paid approximately $34.7 million for the stock and paid off
approximately $17.6 million of indebtedness. We also agreed to pay an earn-out
of up to $4.5 million in each of the three twelve-month periods following the
closing if gross profit of Flying Colors products achieve certain targeted
levels during these periods. The maximum

22
<PAGE> 24

earn-out of $4.5 million was earned in the initial earn-out period ended
September 30, 2000. One of Flying Colors Toys' senior executives and most of its
creative design and product development staff have remained with Flying Colors
Toys. Flying Colors Toys' principal products include molded plastic activity
kits, compound playsets and lunch boxes featuring licensed characters, including
Rugrats, Blue's Clues and Looney Tunes characters. The kits cover a broad range
of products and activities, such as make and paint your own characters, jewelry
making, art studios, posters, puzzles and other projects.

On July 28, 2000, we acquired all of the outstanding capital stock of
Pentech for an aggregate purchase price of approximately $20.6 million, which
was paid in cash on the closing of the transaction. In addition, we paid on the
closing $10.0 million to pay down certain indebtedness of Pentech, assumed
liabilities of approximately $25.5 million and incurred estimated legal and
other acquisition costs of approximately $1.2 million. In December 1999, Pentech
renewed a three-year $25,000,000 Revolving Credit Agreement with Bank America
Business Credit, Inc. now known as Bank of America, N.A. ("BABC") (the "Credit
Agreement"). Borrowings under the Credit Agreement are subject to limitations
based upon eligible inventory and accounts receivable as defined in the Credit
Agreement. Amounts borrowed under the Credit Agreement accrue interest, at
Pentech's option, at either prime plus 0.5% or LIBOR plus 2.5%. Pentech designs,
produces and markets licensed pens, markers, pencils, and other writing
instruments, craft and activity kits, and related stationery products.

We believe that our cash flows from operations and cash and cash
equivalents on hand will be sufficient to meet our working capital and capital
expenditure requirements and provide us with adequate liquidity to meet our
anticipated operating needs for at least the next 12 months. Although operating
activities are expected to provide cash, to the extent we grow significantly in
the future, our operating and investing activities may use cash and,
consequently, this growth may require us to obtain additional sources of
financing. There can be no assurance that any necessary additional financing
will be available to us on commercially reasonable terms, if at all.

EXCHANGE RATES

We sell all of our products in U.S. dollars and pay for all of our
manufacturing costs in either U.S. or Hong Kong dollars. Operating expenses of
the Hong Kong office are paid in Hong Kong dollars. The exchange rate of the
Hong Kong dollar to the U.S. dollar has been fixed by the Hong Kong government
since 1983 at HK$7.80 to US$1.00 and, accordingly, has not represented a
currency exchange risk to the U.S. dollar. We cannot assure you that the
exchange rate between the United States and Hong Kong currencies will continue
to be fixed or that exchange rate fluctuations will not have a material adverse
effect on our business, financial condition or results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial
position, results of operations or cash flows due to adverse changes in
financial and commodity market prices and rates. We are exposed to market risk
in the areas of changes in United States and international borrowing rates and
changes in foreign currency exchange rates. In addition, we are exposed to
market risk in certain geographic areas that have experienced or remain
vulnerable to an economic downturn, such as China. We purchase substantially all
of our inventory from companies in China, and, therefore, we are subject to the
risk that such suppliers will be unable to provide inventory at competitive
prices. While we believe that, if such an event were to occur we would be able
to find

23
<PAGE> 25

alternative sources of inventory at competitive prices, we cannot assure you
that we would be able to do so. These exposures are directly related to our
normal operating and funding activities. Historically and as of December 31,
2000, we have not used derivative instruments or engaged in hedging activities
to minimize our market risk.

INTEREST RATE RISK

As of December 31, 2000, we do not have any outstanding balances on our
credit facility, nor do we expect to draw on the facility prior to its
termination or expiration, and we have only nominal interest-bearing
obligations. Accordingly, we are not generally subject to any direct risk of
loss arising from changes in interest rates.

FOREIGN CURRENCY RISK

We have wholly-owned subsidiaries in Hong Kong. Sales from these operations
are denominated in U.S. dollars. However, purchases of inventory and operating
expenses are typically denominated in Hong Kong dollars, thereby creating
exposure to changes in exchange rates. Changes in the Hong Kong dollar/U.S.
dollar exchange rate may positively or negatively affect our gross margins,
operating income and retained earnings. The exchange rate of the Hong Kong
dollar to the U.S. dollar has been fixed by the Hong Kong government since 1983
at HK$7.80 to US$1.00 and, accordingly, has not represented a currency exchange
risk to the U.S. dollar. We do not believe that near-term changes in exchange
rates, if any, will result in a material effect on our future earnings, fair
values or cash flows, and therefore, we have chosen not to enter into foreign
currency hedging transactions. We cannot assure you that this approach will be
successful, especially in the event of a significant and sudden change in the
value of the Hong Kong dollar.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

24
<PAGE> 26

INDEPENDENT AUDITORS' REPORT

The Stockholders
JAKKS Pacific, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of JAKKS
Pacific, Inc. and Subsidiaries as of December 31, 1999 and 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows and
the financial statement schedule for each of the three years in the period ended
December 31, 2000. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and schedule referred
to above present fairly, in all material respects, the financial position of
JAKKS Pacific, Inc. and Subsidiaries as of December 31, 1999 and 2000, and the
results of their operations and cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.

/s/ PANNELL KERR FORSTER
--------------------------------------
PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation
February 16, 2001, except note 18
for which the date is March 26, 2001

25
<PAGE> 27

JAKKS PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 2000
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 57,546,406 $ 29,275,424
Marketable securities..................................... 39,333,944 13,617,912
Accounts receivable, net of allowance for uncollectible
accounts of $1,887,374 and $3,011,702 for 1999 and
2000, respectively..................................... 38,024,903 47,053,699
Inventory, net of reserves of $2,942,606 and $7,321,637
for 1999 and 2000, respectively........................ 19,863,508 30,534,826
Prepaid expenses and other................................ 1,617,692 5,655,480
Advanced royalty payments................................. 1,137,238 2,495,027
------------ ------------
Total current assets.............................. 157,523,691 128,632,368
PROPERTY AND EQUIPMENT
Office furniture and equipment............................ 1,233,068 3,779,585
Molds and tooling......................................... 15,283,211 23,929,329
Leasehold improvements.................................... 344,263 1,927,805
------------ ------------
Total............................................. 16,860,542 29,636,719
Less accumulated depreciation and amortization............ 5,320,103 10,653,467
------------ ------------
Property and equipment, net....................... 11,540,439 18,983,252
Notes Receivable - Officers................................. -- 2,450,000
Intangibles and deposits, net............................... 1,502,147 2,203,679
Investment in joint venture................................. 3,658,339 9,758,359
Goodwill, net............................................... 46,020,232 74,590,189
Trademarks, net............................................. 12,633,248 12,104,546
------------ ------------
Total assets...................................... $232,878,096 $248,722,393
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 9,962,655 $ 14,619,519
Accrued expenses.......................................... 15,856,505 12,539,290
Reserve for sales returns and allowances.................. 15,318,001 6,553,231
Current portion of long-term debt......................... 4,967 400,000
Income taxes payable...................................... 3,211,926 7,623,355
------------ ------------
Total current liabilities......................... 44,354,054 41,735,395
Long-term debt, net of current portion...................... 8,713 1,000,000
Deferred income taxes....................................... 1,013,834 1,456,817
------------ ------------
Total liabilities................................. 45,376,601 44,192,212
------------ ------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 25,000,000 shares
authorized; 19,272,692 and 19,485,582 shares issued,
respectively........................................... 19,273 19,485
Additional paid-in capital................................ 155,172,781 156,475,343
Treasury Stock, at cost, nil and 1,493,600 shares,
respectively........................................... -- (12,911,483)
Retained earnings......................................... 32,309,441 60,946,836
------------ ------------
Total stockholders' equity........................ 187,501,495 204,530,181
------------ ------------
Total liabilities and stockholders' equity........ $232,878,096 $248,722,393
============ ============
</TABLE>

See notes to consolidated financial statements.

26
<PAGE> 28

JAKKS PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1998 1999 2000
<S> <C> <C> <C>
Net sales................................ $85,252,563 $183,685,124 $252,287,943
Cost of sales............................ 52,000,135 107,601,639 149,880,804
----------- ------------ ------------
Gross profit............................. 33,252,428 76,083,485 102,407,139
Selling, general and administrative
expenses............................... 24,006,497 51,154,627 80,434,872
----------- ------------ ------------
Income from operations................... 9,245,931 24,928,858 21,972,267
Profit from Joint Venture................ -- (3,604,487) (15,905,860)
Interest, net............................ 422,553 (1,588,043) (3,833,359)
Other (income) expense................... 590,948 (182,305) 1,377,128
----------- ------------ ------------
Income before provision for income
taxes.................................. 8,232,430 30,303,693 40,334,358
Provision for income taxes............... 1,857,404 8,333,844 11,696,963
----------- ------------ ------------
Net income............................... $ 6,375,026 $ 21,969,849 $ 28,637,395
=========== ============ ============
Basic earnings per share................. $ 0.75 $ 1.55 $ 1.50
=========== ============ ============
Diluted earnings per share............... $ 0.59 $ 1.39 $ 1.41
=========== ============ ============
</TABLE>

See notes to consolidated financial statements.

27
<PAGE> 29

JAKKS PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DECEMBER 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
CONVERTIBLE PAR
COMMON PREFERRED VALUE ADDITIONAL
SHARES SHARES PER STOCK PAID-IN TREASURY RETAINED
OUTSTANDING OUTSTANDING SHARE AMOUNT CAPITAL STOCK EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997............. 7,413,141 3,525 $0.001 $ 7,417 $ 21,690,590 $ -- $ 4,402,636
Conversion of preferred stock.......... -- (3,525) 0.001 (4) 4 --
Issuance of common stock from
conversion of preferred stock......... 1,409,997 -- 0.001 1,410 (1,410) --
Issuance of 7% convertible preferred
stock for cash........................ -- 1,000 0.001 1 4,731,151 --
Exercise of options.................... 215,925 -- 0.001 216 647,176 --
Earned compensation from grant of
options............................... -- -- -- -- -- --
Cancellation of options, unearned
compensation.......................... -- -- -- -- (25,988) --
Net income............................. -- -- -- -- -- 6,375,026
---------- ------ ------ ------- ------------ ------------ -----------
Balance, December 31, 1998............. 9,039,063 1,000 0.001 9,040 27,041,523 -- 10,777,662
Conversion of preferred stock.......... -- (1,000) 0.001 (1) 1 --
Issuance of common stock from
conversion of preferred stock......... 837,987 -- 0.001 838 (838) --
Issuance of common stock for cash...... 6,810,955 -- 0.001 6,811 117,785,304 --
Issuance of common stock from
conversion of convertible
debentures............................ 1,565,218 -- 0.001 1,565 5,598,685 --
Dividends paid......................... -- -- -- -- -- (438,070)
Exercise of options and
warrants.............................. 1,019,469 -- 0.001 1,020 4,748,106 --
Earned compensation from grant of
options............................... -- -- -- -- -- --
Net income............................. -- -- -- -- -- 21,969,849
---------- ------ ------ ------- ------------ ------------ -----------
Balance, December 31, 1999............. 19,272,692 -- 0.001 19,273 155,172,781 -- 32,309,441
Exercise of options and warrants....... 212,890 0.001 212 1,171,031
Earned compensation for fully vested
stock options......................... -- -- -- -- 131,531 -- --
Repurchase of common stock............. (1,493,600) -- -- -- -- (12,911,483) --
Net income............................. -- -- -- -- -- -- 28,637,395
---------- ------ ------ ------- ------------ ------------ -----------
Balance, December 31, 2000............. 17,991,982 -- $0.001 $19,485 $156,475,343 $(12,911,483) $60,946,836
========== ====== ====== ======= ============ ============ ===========

<CAPTION>
UNEARNED
COMPENSATION TOTAL
FROM GRANT STOCKHOLDERS'
OF OPTIONS EQUITY
<S> <C> <C>
Balance, December 31, 1997............. $(141,937) $ 25,958,706
Conversion of preferred stock.......... -- --
Issuance of common stock from
conversion of preferred stock......... -- --
Issuance of 7% convertible preferred
stock for cash........................ -- 4,731,152
Exercise of options.................... -- 647,392
Earned compensation from grant of
options............................... 41,677 41,677
Cancellation of options, unearned
compensation.......................... 25,988 --
Net income............................. -- 6,375,026
--------- ------------
Balance, December 31, 1998............. (74,272) 37,753,953
Conversion of preferred stock.......... -- --
Issuance of common stock from
conversion of preferred stock......... -- --
Issuance of common stock for cash...... -- 117,792,115
Issuance of common stock from
conversion of convertible
debentures............................ -- 5,600,250
Dividends paid......................... -- (438,070)
Exercise of options and
warrants.............................. -- 4,749,126
Earned compensation from grant of
options............................... 74,272 74,272
Net income............................. -- 21,969,849
--------- ------------
Balance, December 31, 1999............. -- 187,501,495
Exercise of options and warrants....... 1,171,243
Earned compensation for fully vested
stock options......................... -- 131,531
Repurchase of common stock............. -- (12,911,483)
Net income............................. -- 28,637,395
--------- ------------
Balance, December 31, 2000............. $ -- $204,530,181
========= ============
</TABLE>

See notes to consolidated financial statements.

28
<PAGE> 30

JAKKS PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1998 1999 2000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 6,375,026 $ 21,969,849 $ 28,637,395
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation and amortization............... 2,986,137 4,571,374 9,272,917
Earned compensation from stock option
grants.................................... 41,677 74,272 131,531
Profit from joint venture................... -- (3,604,487) (6,100,020)
Loss on disposal of property and
equipment................................. 719,331 12,081 --
Sale (purchase) of marketable securities.... -- (39,333,944) 25,716,032
Changes in operating assets and liabilities
Accounts receivable....................... (3,191,197) (26,098,178) (9,028,796)
Inventory................................. (970,691) (16,944,567) (10,671,318)
Advance royalty payments.................. (54,939) (829,696) (1,357,789)
Prepaid expenses and other................ 412,313 (586,337) (4,037,788)
Accounts payable.......................... (561,340) 6,257,539 4,656,864
Accrued expenses.......................... 1,904,465 11,484,794 (3,317,215)
Income taxes payable...................... 815,149 1,793,163 4,411,429
Reserve for sales returns and
allowances............................. 3,480,696 9,976,484 (8,764,770)
Deferred income taxes..................... 57,809 869,129 442,983
------------ ------------ ------------
Total adjustments...................... 5,639,410 (52,358,373) 1,354,060
------------ ------------ ------------
Net cash provided (used) by operating
activities........................... 12,014,436 (30,388,524) 29,991,455
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment......................... (3,875,852) (10,397,828) (13,787,805)
Due from officers.............................. 15,112 -- --
Other assets................................... (197,928) (763,249) (1,134,864)
Trademarks..................................... (12,252) -- --
Investment in joint venture.................... (1,044,708) 990,856 --
Cash paid in excess of cost over toy business
assets acquired (goodwill).................. -- (36,446,401) (30,535,848)
Repurchase of common shares.................... -- -- (12,911,483)
Notes Receivable -- Officers................... -- -- (2,450,000)
------------ ------------ ------------
Net cash used by investing
activities........................... (5,115,628) (46,616,622) (60,820,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock............. -- 117,792,115 --
Proceeds from sale of convertible preferred
stock....................................... 4,731,152 -- --
Conversion of convertible debentures........... -- (17,500) --
Proceeds from debt............................. -- 13,680 --
Proceeds from stock options and warrants
exercised................................... 647,392 4,749,126 1,171,243
Dividends paid................................. -- (438,070) --
Repayments of debt............................. (2,361,076) -- (13,680)
Acquired debt.................................. -- -- 1,400,000
------------ ------------ ------------
Net cash provided by financing
activities........................... 3,017,468 122,099,351 2,557,563
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................... 9,916,276 45,094,205 (28,270,982)
Cash and cash equivalents, beginning of year..... 2,535,925 12,452,201 57,546,406
------------ ------------ ------------
Cash and cash equivalents, end of year........... $ 12,452,201 $ 57,546,406 $ 29,275,424
============ ============ ============
Cash paid during the period for:
Interest....................................... $ 647,404 $ 176,688 $ 189,630
============ ============ ============
Income taxes................................... $ 1,042,255 $ 4,742,351 $ 8,600,895
============ ============ ============
</TABLE>

See note 15 for additional supplemental information to consolidated
statements of cash flows.

See notes to consolidated financial statements.

29
<PAGE> 31

JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000

NOTE 1--PRINCIPAL INDUSTRY

JAKKS Pacific, Inc. (the Company), a Delaware corporation, is engaged in
the development, production and marketing of toys and related products, some of
which are based on highly-recognized entertainment properties and character
licenses. The Company commenced its primary business operations in July 1995
through the purchase of substantially all of the assets of a Hong Kong toy
company. The Company markets its product lines domestically and internationally.

The Company was incorporated under the laws of the State of Delaware in
January 1995.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include accounts of the Company and
its wholly-owned subsidiaries. In consolidation, all significant inter-company
balances and transactions are eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid assets, having an original maturity
of less than three months, to be cash equivalents. The Company maintains its
cash in bank deposits which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. The Company believes it
is not exposed to any significant credit risk on cash and cash equivalents.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenue and expenses during the
reporting periods. Actual future results could differ from those estimates.

REVENUE RECOGNITION

Revenue is recognized upon the shipment of goods to customers. Provisions
for estimated defective products, markdowns and other allowances are made at the
time of sale.

COMPREHENSIVE INCOME

In March 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. This standard requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balances of other comprehensive
income separately from retained earnings and additional paid-in

30
<PAGE> 32
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

capital in the equity section of a statement of financial position. The adoption
of this statement did not have any impact on the Company's results of
operations, financial position, or cash flows.

INVENTORY

Inventory is valued at the lower of cost (first-in, first-out) or market.

MARKETABLE SECURITIES

In 1999 the Company adopted SFAS No. 115 (Accounting for Certain
Investments in Debt Securities). The marketable securities have been categorized
as trading and as a result are stated at fair value, with unrealized holding
gains and losses included in earnings. At December 31, 1999 and 2000, such gains
and losses were not material.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's cash and cash equivalents, accounts receivable and notes
payable represent financial instruments. The carrying value of these financial
instruments is a reasonable approximation of fair value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are being depreciated using
the straight-line method over their estimated useful lives as follows:

<TABLE>
<S> <C>
Personal computers................ 5 years
Office equipment.................. 5 years
Furniture and fixtures............ 5 - 7 years
Molds and tooling................. 2 - 4 years
Leasehold improvements............ Shorter of length of lease or 10 years
</TABLE>

ADVERTISING

Production costs of commercials and programming are charged to operations
in the year during which the production is first aired. The costs of other
advertising, promotion and marketing programs are charged to operations in the
year incurred. Advertising expense for the years ended December 31, 1998, 1999
and 2000, was approximately $3,903,000, $7,038,000, and $14,416,000
respectively.

INCOME TAXES

The Company does not file a consolidated return with its foreign
subsidiaries. The Company files Federal and state returns and its foreign
subsidiaries each file Hong Kong returns. Deferred taxes are provided on a
liability method whereby deferred tax assets are recognized as deductible
temporary differences and operating loss and tax credit carry-forwards and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax basis. Deferred tax assets are reduced by

31
<PAGE> 33
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

a valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

TRANSLATION OF FOREIGN CURRENCIES

Monetary assets and liabilities denominational in Hong Kong dollars are
translated into United States dollars at the rate of exchange ruling at the
balance sheet date. Transactions during the period are translated at the rates
ruling at the dates of the transactions.

Profits and losses resulting from the above translation policy are
recognized in the consolidated statements of operations.

BUSINESS SEGMENTS

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement requires public business
enterprises to report financial and descriptive information about reportable
segments. This statement also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company
operates in one reportable segment: the development, production and marketing of
toys and related products, which include our Pentech writing instrument and
activity products.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1999 consolidated financial
statements to conform to the current year presentation.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess purchase price paid over the fair market
value of the assets of acquired toy companies. Goodwill is being amortized over
30 years on a straight-line basis. Accumulated amortization at December 31, 1999
and 2000 totaled $1,381,585 and $3,569,811, respectively.

The carrying value of goodwill is based on management's current assessment
of recoverability. Management evaluates recoverability using both objective and
subjective factors. Objective factors include management's best estimates of
projected future earnings and cash flows and analysis of recent sales and
earnings trends. Subjective factors include competitive analysis and the
Company's strategic focus.

Intangible assets other than goodwill consist of product technology rights
and trademarks. Intangible assets are amortized on a straight-line basis, over
five to thirty years, the estimated economic lives of the related assets.
Accumulated amortization as of December 31, 1999 and 2000 was $1,528,893 and
$2,490,926, respectively.

32
<PAGE> 34
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

STOCK SPLIT

The Board of Directors approved a common stock dividend of 1/2 share for
each share of common stock outstanding to effect a three-for-two stock split of
the Company's common stock, which was paid on November 4, 1999. All common stock
and common stock equivalent shares and per share amounts have been adjusted
retroactively to give effect to the split.

EARNINGS PER SHARE (EPS)

In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
statement establishes simplified standards for computing and presenting earnings
per share (EPS). It requires dual presentation of basic and diluted EPS on the
face of the income statement for entities with complex capital structures and
disclosures of the calculation of each EPS amount.

<TABLE>
<CAPTION>
1998
--------------------------------------
WEIGHTED
AVERAGE
INCOME SHARES PER SHARE
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders........ $ 6,375,026 8,538,901 $0.75
=====
Effect of dilutive securities
Options and warrants........................... -- 326,847
9% convertible debentures...................... 372,732 1,565,219
4% convertible preferred stock................. -- 340,878
7% convertible preferred stock................. -- 630,792
----------- ----------
Diluted EPS
Income available to common stockholders plus
assumed exercises and conversions............ $ 6,747,758 11,402,637 $0.59
=========== ========== =====
</TABLE>

<TABLE>
<CAPTION>
1999
--------------------------------------
WEIGHTED
AVERAGE
INCOME SHARES PER SHARE
<S> <C> <C> <C>
Basic EPS
Net income..................................... $21,969,849
Preferred dividends declared/paid.............. (438,070)
-----------
Income available to common stockholders........ 21,531,779 13,879,304 $1.55
=====
Effect of dilutive securities
Options and warrants........................... -- 1,088,179
9% convertible debentures...................... 116,867 466,556
7% convertible preferred stock................. 437,500 405,640
----------- ----------
Diluted EPS
Income available to common stockholders plus
assumed exercises and conversions............ $22,086,146 15,839,679 $1.39
=========== ========== =====
</TABLE>

33
<PAGE> 35
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

<TABLE>
<CAPTION>
2000
--------------------------------------
WEIGHTED
AVERAGE
INCOME SHARES PER SHARE
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders........ $28,637,395 19,059,544 $1.50
=====
Effect of dilutive securities
Options and warrants........................... -- 1,221,931
----------- ----------
Diluted EPS
Income available to common stockholders plus
assumed exercises............................ $28,637,395 20,281,475 $1.41
=========== ========== =====
</TABLE>

NOTE 3--ACQUISITIONS AND JOINT VENTURE

In June 1998, the Company formed a joint venture with a company that
develops, publishes and distributes interactive entertainment software for the
leading hardware game platforms in the home video game market. The joint venture
has entered into a license agreement under which it acquired the exclusive
worldwide right to publish video games on all hardware platforms. The joint
venture agreement provides for the Company to receive preferred returns based on
the joint venture's sales. The joint venture's profit and loss will be allocated
at 100% to the Company to the extent any preferred return is distributed,
accrued or distributable for such fiscal year. Losses shall be allocated in
accordance with membership interests for so long as the Company has a positive
capital account and thereafter shall be allocated solely to the other partner.
During 2000 the Company earned $15,905,860 in profit from the joint venture.

In October 1999, the Company acquired all of the stock of Flying Colors
Toys, Inc. for $52,879,182. Consideration paid at closing was in cash.
Professional fees totaling $310,667 were incurred as part of the acquisition
costs. Contingent consideration includes an earn-out in an amount of up to
$4,500,000 in each of the three 12-month periods following the closing, if gross
profits of Flying Colors Toys branded products achieve certain prescribed levels
in each of such periods. The maximum earn-out of $4,500,000 was earned by the
sellers in the initial earn-out period ended September 30, 2000.

The assets acquired and liabilities assumed from Flying Colors Toys, Inc.
were as follows:

<TABLE>
<S> <C>
Cash................................................... $ 23,534
Accounts receivable, net of reserve of $686,222........ 12,816,573
Inventory, net of reserve of $2,774,017................ 11,052,983
Prepaid expenses....................................... 194,840
Property and equipment................................. 1,943,025
Deferred income taxes.................................. 1,460,000
Non-compete agreement.................................. 1,000,000
Goodwill............................................... 32,081,192
Liabilities assumed.................................... (7,692,965)
-----------
Net assets acquired.................................... $52,879,182
===========
</TABLE>

34
<PAGE> 36
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

In June 1999, the Company purchased all of the outstanding shares of Berk
Corporation, for $3,269,450, consideration paid at closing was in cash.
Professional fees totaling $112,768 were incurred as part of the acquisition
costs.

The assets acquired and liabilities assumed from Berk Corporation were as
follows:

<TABLE>
<S> <C>
Cash............................................ $ 478,972
Accounts receivable............................. 869,050
Inventory....................................... 549,720
Prepaids and deposits........................... 73,367
Property and equipment.......................... 31,186
Goodwill........................................ 4,365,208
Liabilities assumed............................. (3,098,053)
-----------
$ 3,269,450
===========
</TABLE>

On July 28, 2000, the Company acquired all of the outstanding capital stock
of Pentech International for an aggregate purchase price of approximately $20.6
million, which was paid in cash on the closing of the transaction. In addition,
the Company paid on the closing $10.0 million to pay down certain indebtedness
of Pentech, assumed liabilities of approximately $25.5 million and incurred
estimated legal and other acquisition costs of approximately $1.2 million. In
December 1999, Pentech renewed a three-year $25,000,000 Revolving Credit
Agreement with Bank America Business Credit, Inc. now known as Bank of America,
N.A. ("BABC") (the "Credit Agreement"). Borrowings under the Credit Agreement
are subject to limitations based upon eligible inventory and accounts receivable
as defined in the Credit Agreement. Amounts borrowed under the Credit Agreement
accrue interest, at Pentech's option, at either prime plus 0.5% or LIBOR plus
2.5%. Pentech designs, produces and markets licensed pens, markers, pencils, and
other writing instruments, craft and activity kits, and related stationery
products.

The following unaudited pro forma information represents the Company's
consolidated results of operations as if the acquisition of Pentech had occurred
on January 1, 2000 and after giving effect to certain adjustments including the
elimination of other income and expense items not attributable to on-going
operations, interest and depreciation expense, and related tax effects. Such

35
<PAGE> 37
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

pro forma information does not purport to be indicative of operating results
that would have been reported had the acquisition of Pentech occurred on January
1, 2000 or future operating results.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 2000
<S> <C>
Net Sales........................................... $291,578,787
============
Net income.......................................... $ 24,390,573
============
Basic earnings per share............................ $ 1.28
============
Weighted average shares outstanding................. 19,059,544
============
Diluted earnings per share.......................... $ 1.20
============
Weighted average shares and equivalents
outstanding....................................... 20,281,475
============
</TABLE>

NOTE 4--CONCENTRATION OF CREDIT RISK

Financial instruments that subject the Company to concentration of credit
risk are cash equivalents, marketable securities and trade receivables. Cash
equivalents consist principally of short-term money market funds. These
instruments are short-term in nature and bear minimal risk. To date, the Company
has not experienced losses on these instruments.

The Company performs on-going credit evaluations of its customers'
financial condition, but does not require collateral to support customer
receivables. Most goods are sold on irrevocable letter of credit basis.

Included in the Company's consolidated balance sheets at December 31, 1999
and 2000 are its operating net assets, most of which are located in facilities
in Hong Kong and China and which totaled approximately $14,510,000, and
$40,014,000 for 1999 and 2000, respectively.

NOTE 5--ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
1999 2000
<S> <C> <C>
Bonuses.................................. $ 2,747,710 $ 2,230,563
Trademarks acquisition reserve........... 177,245 177,245
Royalties and sales commissions.......... 6,667,598 3,713,634
Hong Kong subsidiaries accruals.......... 3,436,335 3,886,757
Other.................................... 2,827,617 2,531,091
----------- -----------
$15,856,505 $12,539,290
=========== ===========
</TABLE>

NOTE 6--RELATED PARTY TRANSACTIONS

A director of the Company is a partner in the law firm that acts as counsel
to the Company. The Company incurred legal fees and expenses to the law firm in
the amount of approximately $510,000 in 1998, $1,037,000 in 1999 and $975,000 in
2000.

36
<PAGE> 38
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

As of December 31, 2000, there were two notes receivable from officers
totaling $2,200,000 issued at interest rates of 6.5% each, with interest payable
on each April 28 and October 28 of each year, and principal payable at a
maturity date of April 28, 2003. Additionally, there is a third note receivable
from an officer for $250,000 issued at an interest rate of 7.0%, with interest
and principal payable at a maturity date of May 12, 2002.

NOTE 7--LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1999 2000
<S> <C> <C>
Note Payable due in twenty-six quarterly payments with the
final payment due April 1, 2004, with interest at 7% per
annum..................................................... $ -- $1,400,000
Loan Payable, due in sixty monthly payments with the final
payment due December 29, 2002, with interest at 6.9% per
annum..................................................... 13,680 --
------- ----------
13,680 1,400,000
Less current portion of long-term debt...................... 4,967 400,000
------- ----------
Long-term debt, net of current portion...................... $ 8,713 $1,000,000
======= ==========
</TABLE>

The following is a schedule of payments for the note payable:

NOTE 8--INCOME TAXES

The provision differs from the expense that would result from applying
Federal statutory rates to income before taxes because of the inclusion of a
provision for state income taxes and the income of the Company's foreign
subsidiaries is taxed at a rate of 16.5% applicable in Hong Kong. In addition,
the provision includes deferred income taxes resulting from adjustments in the
amount of temporary differences. Temporary differences arise primarily from
differences in timing in the deduction of state income taxes and the use of the
straight-line method of depreciation for financial reporting purposes and
accelerated methods of depreciation for tax purposes.

37
<PAGE> 39
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

The Company does not file a consolidated return with its foreign
subsidiaries. The Company files Federal and state returns and its foreign
subsidiaries file Hong Kong returns. Income taxes reflected in the accompanying
consolidated statements of operations are comprised of the following:

<TABLE>
<CAPTION>
1998 1999 2000
<S> <C> <C> <C>
Federal................................ $ 715,000 $4,280,650 $ 4,979,188
State and local........................ 210,000 1,350,000 1,112,798
Hong Kong.............................. 874,595 1,834,065 5,161,994
---------- ---------- -----------
1,799,595 7,464,715 11,253,980
Deferred............................... 57,809 869,129 442,983
---------- ---------- -----------
$1,857,404 $8,333,844 $11,696,963
========== ========== ===========
</TABLE>

As of December 31, 1999, the Company has utilized all net operating loss
carry-forwards.

<TABLE>
<CAPTION>
1999 2000
<S> <C> <C>
Deferred tax assets resulting from deductible
temporary differences from loss carry-forwards,
noncurrent........................................ $ 1,460,000 $ 351,761
Deferred tax liabilities resulting from taxable
temporary differences, noncurrent................. (2,473,834) (1,808,578)
----------- -----------
$(1,013,834) $(1,456,817)
=========== ===========
</TABLE>

The Company's management concluded that a deferred tax asset valuation
allowance as of December 31, 1998 and 1999 was not necessary.

A reconciliation of the statutory United States Federal income tax rate to
the Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
1998 1999 2000
<S> <C> <C> <C>
Statutory income tax rate............................... 35% 35% 40%
State and local income taxes, net of Federal income tax
effect................................................ 1 4 3
Effect of temporary differences and Hong Kong's lower
tax rate.............................................. (22) (28) (30)
Effect of net operating loss carry-forwards............. (11) -- --
Income taxes on foreign earnings at rates other than the
United States Statutory rate not subject to United
States income taxes................................... 19 16 16
--- --- ---
22% 27% 29%
=== === ===
</TABLE>

The components of income before provision for income taxes are as follows:

<TABLE>
<CAPTION>
1998 1999 2000
<S> <C> <C> <C>
Domestic............................ $3,681,456 $13,105,423 $ 8,480,038
Foreign............................. 4,550,974 17,198,270 31,854,320
---------- ----------- -----------
$8,232,430 $30,303,693 $40,334,358
========== =========== ===========
</TABLE>

38
<PAGE> 40
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

NOTE 9--LEASES

The Company leases office, warehouse and showroom facilities and certain
equipment under operating leases. The following is a schedule of minimum annual
lease payments. Rent expense for the years ended December 31, 1998, 1999 and
2000 totaled $550,360, $737,340, and $769,070, respectively.

<TABLE>
<S> <C>
2001........................... $ 2,460,629
2002........................... 2,538,829
2003........................... 2,379,842
2004........................... 2,438,535
2005........................... 2,468,139
Thereafter..................... 3,064,773
-----------
$15,350,747
===========
</TABLE>

NOTE 10--COMMON STOCK AND PREFERRED STOCK

The Company has 26,000,000 authorized shares of stock consisting of
25,000,000 shares of $.001 par value common stock and 1,000,000 shares of $.001
par value preferred stock.

During 2000, the Company issued 212,890 shares of common stock on exercise
of options and warrants for a total of $1,171,243. The Company repurchased
1,493,600 shares of common stock for a total of $12,911,483. In addition, as of
December 31, 2000, 256,355 shares were reserved for issuance upon exercise of
outstanding warrants granted in connection with the Company's initial public
offering, follow-on public offering, private placement of convertible debentures
and certain license agreements, at exercise prices ranging from $4.50 to $6.67
per share.

Warrant activity is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding, December 31, 1997................ 540,000 $ 5.52
Issued...................................... 412,500 6.67
Exercised................................... -- --
Canceled.................................... -- --
---------- ------
Outstanding, December 31, 1998................ 952,500 6.02
Exercised................................... (434,368) 5.16
Canceled.................................... (225,000) 6.67
---------- ------
Outstanding, December 31, 1999................ 293,132 5.92
Exercised................................... (36,777) 5.79
Canceled.................................... -- --
---------- ------
Outstanding, December 31, 2000................ 256,355 $ 5.94
========== ======
</TABLE>

39
<PAGE> 41
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

During 1999, 6,810,955 shares of the Company's stock were issued in two
separate offerings for a total of $117,792,115. Additionally, the Company issued
1,019,469 shares of common stock on exercise of options and warrants for a total
of $4,749,126.

In 1999, the Company issued 1,565,218 shares of common stock upon
conversion of convertible debentures totaling $5,600,250.

On April 1, 1998, the Company sold 1,000 shares of its Series A 7%
cumulative convertible preferred stock to two investors for $4,731,152, net of
issuance costs. In 1999, the holders of these shares converted such shares into
837,987 shares of common stock. Preferred stockholders received cumulative cash
dividends of $438,070 in 1999.

During 1998, 215,925 shares of the Company's common stock were issued on
exercise of options and warrants for a total of $647,392.

During 1997, in a private placement, the Company issued 3,525 shares of its
4% redeemable convertible preferred stock at a purchase price of $2,000 per
share. In March 1998, all of the 3,525 shares of such issue were converted into
an aggregate of 1,409,997 shares of the Company's common stock based on a
conversion price of $5.00 per share.

NOTE 11--COMMITMENTS

The Company has entered into various license agreements whereby the Company
may use certain characters and properties in conjunction with its products. Such
license agreements call for royalties to be paid at 1% to 12% of net sales with
minimum guarantees and advance payments. Additionally, under one such license,
the Company has committed to spend 12.5% of related net sales, not to exceed
$1,000,000, on advertising per year.

Future annual minimum royalty guarantees as of December 31, 2000 are as
follows:

<TABLE>
<S> <C>
2001........................... $ 3,673,002
2002........................... 3,003,877
2003........................... 1,122,500
2004........................... 955,000
2005........................... 925,000
Thereafter..................... 3,700,000
-----------
$13,379,379
===========
</TABLE>

NOTE 12--STOCK OPTION PLAN

Under its Third Amended and Restated 1995 Stock Option Plan (the Plan), the
Company has reserved 3,275,000 shares of its common stock for issuance upon
exercise of options granted under the Plan. In 2000, stockholders approved an
increase of 650,000 shares in the number of shares available for grant. Under
the Plan, employees (including officers), non-employee directors and independent
consultants may be granted options to purchase shares of common stock. Prior to
the adoption of the Plan in 1995, options for 414,750 shares were granted at an
exercise price of $1.33 per share. The Company recorded deferred compensation
costs and a related increase in paid-

40
<PAGE> 42
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

in capital of $212,905 for the difference between the grant price and the deemed
fair market value of the common stock of $1.85 per share at the date of grant.
Such compensation costs were recognized on a straight-line basis over the
four-year vesting period of the options. In 1998, 1999 and 2000, the fair value
of each employee option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used:
risk-free rate of interest of 6%; dividend yield of 0%; and expected lives of
five years.

As of December 31, 2000, 558,775 shares were available for future grant.
Additional shares may become available to the extent that options presently
outstanding under the Plan terminate or expire unexercised.

Stock option activity pursuant to the Plan is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding, December 31, 1997................ 795,750 $ 6.08
Granted..................................... 726,750 5.59
Exercised................................... (47,700) 5.45
Canceled.................................... (109,500) 5.85
---------- ------
Outstanding, December 31, 1998................ 1,365,300 5.86
Granted..................................... 1,198,125 16.07
Exercised................................... (374,608) 5.20
Canceled.................................... (50,499) 5.50
---------- ------
Outstanding, December 31, 1999................ 2,138,318 11.70
Granted..................................... 2,036,497 10.49
Exercised................................... (91,177) 6.88
Canceled.................................... (1,880,898) 15.82
---------- ------
Outstanding, December 31, 2000................ 2,202,740 $ 7.15
========== ======
</TABLE>

41
<PAGE> 43
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

Stock option activity outside of the Plan is summarized as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding, December 31, 1997.................. 513,562 $2.71
Granted....................................... -- --
Exercised..................................... (151,350) 2.62
Canceled...................................... (50,625) 1.33
-------- -----
Outstanding, December 31, 1998.................. 311,587 2.98
Granted....................................... -- --
Exercised..................................... (210,525) 2.64
Canceled...................................... -- --
-------- -----
Outstanding, December 31, 1999.................. 101,062 3.69
Granted....................................... -- --
Exercised..................................... (84,936) 3.96
Canceled...................................... -- --
-------- -----
Outstanding, December 31, 2000.................. 16,126 $2.24
======== =====
</TABLE>

The weighted average fair value of options granted to employees in 1998,
1999 and 2000 was $4.10, $9.12 and $7.23 per share, respectively.

The following table summarizes information about stock options outstanding
and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------------- --------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
NUMBER AVERAGE EXERCISE NUMBER EXERCISE
OPTION PRICE RANGE OF SHARES LIFE PRICE OF SHARES PRICE
<S> <C> <C> <C> <C> <C>
$1.33 - $26.00....................... 2,218,866 4.3 years $7.15 906,185 $6.47
</TABLE>

Had the compensation cost for the Company's Plan been determined on a basis
consistent with SFAS No. 123, the Company's net income and earnings per share
(EPS) for 1998, 1999 and 2000 would approximate the pro forma amounts below,
which are not indicative of future amounts:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1998 1999 2000
----------------------- ----------------------- -------------------------
AS AS AS
REPORTED PRO FORMA REPORTED PRO FORMA REPORTED PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
SFAS No. 123 charge, net of tax... $ -- $ 551,541 $ -- $1,178,025 $ -- $ 1,806,108
Net income........................ 6,375,026 5,823,485 21,969,849 20,791,824 28,637,395 26,831,287
Basic EPS......................... 0.75 0.68 1.55 1.47 1.50 1.41
Diluted EPS....................... $ 0.59 $ 0.55 $ 1.39 $ 1.32 $ 1.41 $ 1.32
</TABLE>

NOTE 13 -- PROFIT SHARING PLAN

Effective January 1, 1997, the Company adopted a 401(k) profit sharing plan
and trust (Plan). The Plan is for the exclusive benefit of eligible employees
and beneficiaries. Under the Plan,

42
<PAGE> 44
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

employees may elect to defer a portion of their compensation and have those
amounts contributed to the Plan on their behalf. Contributions made to the Plan
will be held and invested by the Plan's trustee. The Company acts as the Plan's
administrator. The Plan year begins on January 1st and ends on December 31st.
Employees may be eligible to participate in the Plan after they have completed
three months of service. The Company makes matching contributions equal to 50%
of the amount of salary deferral up to a maximum of 10% of compensation. The
Company may also make discretionary contributions to the Plan each year.
Participants may defer up to 15% of their compensation each year. However,
deferrals in any taxable year may not exceed a dollar limit which is set by law.
The limit for 2000 was $10,500. Participants are immediately 100% vested in
their salary reduction amounts contributed to the Plan. Vesting of the Company
contributions made to the Plan is based on years of service, as follows:

<TABLE>
<CAPTION>
CUMULATIVE
YEARS OF SERVICE PERCENT VESTED
<S> <C>
1.............................. 20%
2.............................. 40
3.............................. 60
4.............................. 80
5.............................. 100
</TABLE>

The Company has the right to amend or terminate the Plan at any time. Upon
termination of the Plan, all amounts credited to participants accounts will
become 100% vested.

As of December 31, 2000, the Plan has not been "qualified" under the
provisions of the Internal Revenue Code, and for the year then ended, the
Company contributed $212,212 in matching contributions to the Plan.

NOTE 14--MAJOR CUSTOMERS AND INTERNATIONAL SALES

Net sales to major customers were as follows:

<TABLE>
<CAPTION>
1998 1999 2000
- ------------------------ ------------------------- -------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
<S> <C> <C> <C> <C> <C>
$23,604,000 27.7% $ 45,270,000 24.6% $ 43,505,000 17.2%
11,103,000 13.0 27,684,000 15.1 36,321,000 14.4
10,944,000 12.8 22,739,000 12.4 30,481,000 12.1
9,951,000 11.7 17,938,000 9.8 27,338,000 10.8
3,717,000 4.4 15,229,000 8.3 21,875,000 8.7
- ----------- ---- ------------ ---- ------------ ----
$59,319,000 69.6% $128,860,000 70.2% $159,520,000 63.2%
=========== ==== ============ ==== ============ ====
</TABLE>

Net sales to international customers totaled approximately $6,309,000,
$13,056,000 and $22,495,000 in 1998, 1999 and 2000, respectively.

NOTE 15--SUPPLEMENTAL INFORMATION TO CONSOLIDATED STATEMENTS OF CASH FLOWS

In 1999, the holders of the Company's 9% convertible debentures converted
all $6,000,000 principal amount of the debentures into 1,565,218 shares of the
Company's common stock.

43
<PAGE> 45
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

Additionally, all 1,000 outstanding shares of 7% cumulative convertible
preferred stock with a total stockholders' equity value of $4,731,152 were
converted into an aggregate of 837,987 shares of the Company's common stock.

In 1998, the 3,525 shares of 4% redeemable convertible preferred stock with
a total stockholders' equity value of $6,818,350 were converted into an
aggregate of 1,409,997 shares of the Company's common stock.

NOTE 16--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected unaudited quarterly financial data for the years 1999 and 2000 are
summarized below:

<TABLE>
<CAPTION>
1999 2000
------------------------------------- -------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........................................ $24,960 $35,981 $60,236 $62,508 $50,782 $50,578 $91,838 $59,090
Gross profit..................................... $10,764 $14,649 $24,759 $25,912 $20,104 $21,748 $37,672 $22,883
Income from operations........................... $ 2,743 $ 4,225 $ 9,893 $ 8,068 $ 4,004 $ 6,716 $11,201 $ 51
Income before income taxes....................... $ 2,743 $ 4,587 $10,426 $12,548 $ 9,715 $ 8,877 $13,615 $ 8,127
Net income....................................... 2,005 $ 3,355 $ 7,642 $ 8,968 $ 6,603 $ 6,237 $ 9,769 $ 6,028
Basic earnings per share......................... $ 0.18 $ 0.35 $ 0.48 $ 0.53 $ 0.34 $ 0.32 $ 0.50 $ 0.33
Weighted average shares outstanding.............. 9,171 13,243 16,037 16,952 19,290 19,379 19,389 18,178
Diluted earnings per share....................... $ 0.17 $ 0.21 $ 0.44 $ 0.49 $ 0.32 $ 0.31 $ 0.48 $ 0.32
Weighted average shares and equivalents
outstanding..................................... 12,624 15,732 17,541 18,378 20,374 20,371 20,330 18,621
</TABLE>

NOTE 17--RECENT ACCOUNTING PRONOUNCEMENTS

In July 2000, the EITF reached a consensus on EITF Issue 00-10, "Accounting
for Shipping and Handling Fees and Costs" ("Issue 00-10"). Specifically, Issue
00-10 addresses in a sale transaction for goods, how the seller should classify
amounts billed and incurred for shipping and handling in the income statement,
and the composition or types of costs that would be required to be classified as
costs of sales. The EITF concluded that all shipping and handling billings to a
customer in a sale transaction represent the fees earned for the goods provided
and, accordingly, amounts billed related to shipping and handling should be
classified as revenue. The consensus does not address how costs incurred by the
seller for shipping and handling should be classified. The adoption of this
consensus will not impact the Company's financial position or results of
operations as the Company already records all charges for outbound shipping and
handling as revenue. All outbound shipping costs are classified as costs of
sales. All other fulfillment costs incurred for handling by the Company are
classified within marketing and sales expenses.

NOTE 18--LITIGATION

On or about March 26, 2001, Rose Art Industries, Inc. and Licensing
International, Ltd. commenced an action against the Company in the United States
District Court for the District of New Jersey in which they allege the Company's
willful infringement of a patent owned by Licensing International and licensed
to Rose Art through the Company's production and sale of Zyrofoam modeling
compound. The plaintiffs seek injunctive relief, monetary damages in a
unspecified amount, together with interest thereon, and reasonable attorneys'
fees. The Company

44
<PAGE> 46
JAKKS PACIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000

has not yet answered the plaintiff's first amended complaint but believes that
their claims are without merit and intends vigorously to defend against their
action. At this early state in these proceedings, the Company is unable to
predict the likely outcome of the action or its impact on its business,
financial condition or results of operations. The Company is a party to, and
certain property is the subject of, various pending claims and legal proceedings
that routinely arise in the ordinary course of business, but the Company does
not believe that any of these claims or proceedings will have a material effect
on its business, financial condition or results of operations.

45
<PAGE> 47

JAKKS PACIFIC, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

Allowances are deducted from the assets to which they apply, except for
sales returns and allowances.

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END
PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1998:
Allowance for:
Uncollectible
accounts............ $ 51,153 $ 82,833 $ -- $ -- $ 133,986
Reserve for potential
product
obsolescence........ 129,695 334,438 -- -- 464,133
Reserve for sales
returns and
allowances.......... 1,860,821 6,525,867 -- 3,045,171 5,341,517
----------- ----------- ----------- ----------- -----------
$ 2,041,669 $ 6,943,138 $ -- $ 3,045,171 $ 5,939,636
=========== =========== =========== =========== ===========
Year ended December 31,
1999:
Allowance for:
Uncollectible
accounts............ $ 133,986 $ 1,287,208 $ 686,222 $ 220,042 $ 1,887,374
Reserve for potential
product
obsolescence........ 464,133 2,775,340 -- 296,867 2,942,606
Reserve for sales
returns and
allowances.......... 5,341,517 17,036,875 334,464 $ 7,394,855 15,318,001
----------- ----------- ----------- ----------- -----------
$ 5,939,636 $21,099,423 $ 1,020,686 $ 7,911,764 $20,147,981
=========== =========== =========== =========== ===========
Year ended December 31,
2000:
Allowance for:
Uncollectible
accounts............ $ 1,887,374 $ 2,270,611 $ 2,773,744(a) $ 3,920,027 $ 3,011,702
Reserve for potential
product
obsolescence........ 2,942,606 1,318,730 4,095,771(b) 1,035,470 7,321,637
Reserve for sales
returns and
allowances.......... 15,318,001 17,296,039 1,360,000(c) 27,420,809 6,553,231
----------- ----------- ----------- ----------- -----------
$20,147,981 $20,885,380 $ 8,229,515 $32,376,306 $16,886,570
=========== =========== =========== =========== ===========
</TABLE>

(a) Obligations assumed in conjunction with the acquisitions of Flying Colors
Toys and Pentech International.

(b) Fair market value adjustment for inventory acquired in connection with the
acquisition of Pentech International.

46
<PAGE> 48

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Jack Friedman 61 Chairman and Chief Executive Officer
Stephen G. Berman 36 Chief Operating Officer, President, Secretary and Director
Joel M. Bennett 39 Executive Vice President and Chief Financial Officer
David C. Blatte 37 Director
Robert E. Glick 55 Director
Michael G. Miller 53 Director
Murray L. Skala 55 Director
</TABLE>

Jack Friedman has been our Chairman and Chief Executive Officer since
co-founding JAKKS with Mr. Berman in January 1995. Until December 31, 1998, he
was also our President. From January 1989 until January 1995, Mr. Friedman was
Chief Executive Officer, President and a director of THQ. From 1970 to 1989, Mr.
Friedman was President and Chief Operating Officer of LJN Toys, Ltd., a toy and
software company. After LJN was acquired by MCA/Universal, Inc. in 1986, Mr.
Friedman continued as President until his departure in late 1988.

Stephen G. Berman has been our Chief Operating Officer and Secretary and
one of our directors since co-founding JAKKS with Mr. Friedman in January 1995.
Since January 1, 1999, he has also served as our President. From our inception
until December 31, 1998, Mr. Berman was also our Executive Vice President. From
October 1991 to August 1995, Mr. Berman was a Vice President and Managing
Director of THQ International, Inc., a subsidiary of THQ. From 1988 to 1991, he
was President and an owner of Balanced Approach, Inc., a distributor of personal
fitness products and services.

Joel M. Bennett joined us in September 1995 as Chief Financial Officer and
was given the additional title of Executive Vice President in May 2000. From
August 1993 to September 1995, he served in several financial management
capacities at Time Warner Entertainment Company, L.P., including as Controller
of Warner Brothers Consumer Products Worldwide Merchandising and Interactive
Entertainment. From June 1991 to August 1993, Mr. Bennett was Vice President and
Chief Financial Officer of TTI Technologies, Inc., a direct-mail computer
hardware and software distribution company. From 1986 to June 1991, Mr. Bennett
held various financial management positions at The Walt Disney Company,
including Senior Manager of Finance for its international television syndication
and production division. Mr. Bennett holds a Master of Business Administration
degree and is a Certified Public Accountant.

David C. Blatte has been one of our directors since January 2001. From
January 1993 to May 2000, Mr. Blatte was a Senior Vice President in the
specialty retail group of the investment banking division of Donaldson, Lufkin
and Jenrette Securities Corporation. Since May 2000, Mr. Blatte has

47
<PAGE> 49

been a principal in Catterton Partners, a private equity fund. Mr. Blatte is a
director of Case Logic, Inc., a privately-held consumer products company.

Robert E. Glick has been one of our directors since October 1996. For more
than 20 years, Mr. Glick has been an officer, director and principal stockholder
in a number of privately-held companies which manufacture and market women's
apparel.

Michael G. Miller has been one of our directors since February 1996. From
1979 until May 1998, Mr. Miller was President and a director of several
privately-held affiliated companies, including a list brokerage and list
management consulting firm, a database management consulting firm, and a direct
mail graphic and creative design firm. Mr. Miller's interests in such companies
were sold in May 1998. Since 1991, he has been President of an advertising
company.

Murray L. Skala has been one of our directors since October 1995. Since
1976, Mr. Skala has been a partner of the law firm Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP, our general counsel. Mr. Skala is a director of
Traffix, Inc., a publicly-held company in the business of telecommunications
services and entertainment.

Our directors hold office until the next annual meeting of stockholders and
until their successors are elected and qualified.

COMMITTEES OF THE BOARD OF DIRECTORS

We have an Audit Committee, a Compensation Committee and a Stock Option
Committee. The Board does not have a Nominating Committee and performs the
functions of a Nominating Committee itself.

Audit Committee. The primary functions of the Audit Committee are to
select or to recommend to our Board the selection of outside auditors; to
monitor our relationships with our outside auditors and their interaction with
our management in order to ensure their independence and objectivity; to review,
and to assess the scope and quality of, our outside auditor's services,
including the audit of our annual financial statements; to review our financial
management and accounting procedures; and to review our financial statements
with our management and outside auditors. Messrs. Blatte, Glick and Miller are
the current members of the Audit Committee.

Compensation Committee. The functions of the Compensation Committee are to
make recommendations to the Board regarding compensation of management employees
and to administer plans and programs relating to employee benefits, incentives
and compensation, other than our Third Amended and Restated 1995 Stock Option
Plan (the "Option Plan"). Messrs. Friedman, Miller and Skala are the current
members of the Compensation Committee.

Stock Option Committee. The function of the Stock Option Committee is to
determine the recipients of and the size of awards granted under the Option
Plan. Messrs. Glick and Miller, both of whom are non-employee directors, are the
current members of the Stock Option Committee.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To the best of our knowledge, all Forms 3, 4 or 5 required to be filed
pursuant to Section 16(a) of the Exchange Act during or with respect to the
fiscal year ended December 31, 2000 were filed on a timely basis, except that
Forms 4 reporting the increase in the number of shares of our common stock
beneficially owned by Messrs. Friedman, Berman, Glick, Miller, Skala

48
<PAGE> 50

and Bennett as a result of the 3-for-2 stock split which became effective on
November 4, 1999 were not filed until January 7, 2000; amended Forms 4 reporting
the grant of options to Messrs. Glick, Miller and Skala (correcting earlier
filed Forms 4 to reflect the 3-for-2 stock split) were filed on February 15,
2000; and Forms 4 reporting the changes in beneficial ownership of our common
stock by Messrs. Friedman, Berman, Glick, Miller, Skala and Bennett effected by
option repricing in December 2000 and, as to Mr. Friedman, two charitable gifts
of 10,000 and 500 shares, respectively, in December 2000 were not filed until
January 16, 2001.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation we paid for our fiscal
years ended December 31, 1998, 1999 and 2000 to our Chief Executive Officer and
to each of our other executive officers whose compensation exceeded $100,000 on
an annual basis (collectively, the "Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM AWARDS
ANNUAL COMPENSATION --------------------
------------------------------------------ RESTRICTED
OTHER ANNUAL STOCK
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#)
------------------ ---- ------- --------- ------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Jack Friedman........................ 2000 771,000 1,613,401 -- -- 207,254(1)
Chairman and Chief 1999 521,000 1,750,000 -- -- 232,500
Executive Officer 1998 446,000 550,000 -- -- 187,500
Stephen G. Berman.................... 2000 746,000 1,613,401 -- -- 346,024(2)
Chief Operating Officer, 1999 496,000 1,750,000 -- -- 394,500
President and Secretary 1998 421,000 550,000 -- -- 187,500
Joel M. Bennett...................... 2000 225,000 140,000 -- -- 211,700(3)
Executive Vice President and 1999 155,000 130,000 -- -- 42,500
Chief Financial Officer 1998 135,000 45,000 -- -- --
</TABLE>

- ---------------
(1) Includes options to purchase 182,254 shares issued in replacement of options
to purchase 257,500 shares pursuant to a reset in the price of those
options.

(2) Includes options to purchase 321,024 shares issued in replacement of options
to purchase 419,500 shares pursuant to a reset in the price of those
options.

(3) Includes options to purchase 110,874 shares issued in replacement of options
to purchase 143,326 shares pursuant to a reset in the price of those
options.

- - Employment Agreements

On July 1, 1999, we entered into 10-year employment agreements with Jack
Friedman and Stephen G. Berman, respectively, pursuant to which Mr. Friedman
serves as our Chairman and Chief Executive Officer and Mr. Berman serves as our
President and Chief Operating Officer. Mr. Friedman's annual base salary in 2001
is $821,000 and Mr. Berman's is $796,000. Their annual base salaries are subject
to annual increases in an amount, not less than $25,000, determined by our Board
of Directors. Each of them is also entitled to receive an annual bonus equal to
4% of our pre-tax income, but not more than $2,000,000, if our pre-tax earnings
are at least $2,000,000. On May 8, 2000, we entered into an employment agreement
with Joel M. Bennett pursuant to which Mr. Bennett serves as our Executive Vice
President and Chief Financial Officer during a

49
<PAGE> 51

four-year term from January 1, 2000 to December 31, 2003. Mr. Bennett's annual
base salary in 2001 is $247,500. His annual base salary is subject to annual
increases in an amount determined by our Board of Directors. He is also entitled
to receive an annual bonus equal to the product of his base salary and the
percentage year-over-year increase in our pre-tax income, but not less than
$75,000 nor more than his base salary. If we terminate Mr. Friedman's, Mr.
Berman's, or Mr. Bennett's employment other than "for cause" or if he resigns
because of our material breach of the employment agreement or because we cause a
material change in his employment, we are required to make a lump-sum severance
payment in an amount equal to his base salary and bonus during the balance of
the term of the employment agreement, based on his then applicable annual base
salary and bonus. In the event of the termination of his employment under
certain circumstances after a "Change of Control" (as defined in the employment
agreement), we are required to make to him a one-time payment of an amount equal
to 2.99 times his "base amount" determined in accordance with the applicable
provisions of the Internal Revenue Code.

- - Third Amended and Restated 1995 Stock Option Plan

Our Third Amended and Restated 1995 Stock Option Plan (the "Option Plan")
was originally adopted and approved by the stockholders and directors in July
1998 and amended in August 1999. Options to purchase, in the aggregate, up to
3,275,000 shares of our common stock may be granted under the Option Plan. The
Option Plan allows us to grant options that are intended to qualify as incentive
stock options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code or as options that are not intended to meet the
requirements of such section ("Nonstatutory Stock Options"). Under the Option
Plan, Incentive Stock Options may only be granted to our employees (including
officers), while Nonstatutory Stock Options may be granted to employees
(including officers), non-employee directors, consultants or advisors.

The Option Plan is administered by the Stock Option Committee, whose
members are non-employee directors chosen by our Board. Subject to the
restrictions prescribed in the Option Plan, this committee has discretionary
authority to select the persons to whom, the number of shares for which, the
times and the exercise price at which options will be granted.

Options granted to an employee expire immediately upon the termination of
employment voluntarily by such employee or for cause. Employee options may be
exercised up to one year after the termination of employment due to death or
disability, or up to three months after termination for any other reason.

Upon the occurrence of a merger, consolidation or other reorganization, or
a sale of all or substantially all of the assets, of JAKKS, or a transaction
giving any person the right to elect a majority of our Board, as a result of
which a distribution of cash, securities or other property is to be made to our
stockholders, the options held by any consultant or any person who shall have
been an employee for at least one year will vest and become immediately
exercisable by such holder, even if such options would not otherwise then be
exercisable under any applicable vesting schedule or other condition to the
exercise thereof.

Incentive Stock Options must have an exercise price greater than or equal
to the fair market value of the shares underlying the option on the date of
grant (or, if granted to a holder of 10% or more of our common stock, an
exercise price of at least 110% of the underlying shares' fair market value on
the date of grant). The maximum exercise period of Incentive Stock Options is 10
years from the date of grant (or five years in the case of a holder of 10% or
more of our common stock). The aggregate fair market value (determined at the
date the option is granted) of shares with

50
<PAGE> 52

respect to which Incentive Stock Options are exercisable for the first time by
the holder of the option during any calendar year may not exceed $100,000. If
that amount exceeds $100,000, our Board or the Stock Option Committee may
designate those shares that will be treated as Nonstatutory Stock Options.

The Option Plan provides for the inclusion in any grant of options to one
of our employees of a provision requiring the optionee, for a period of one year
after the optionee's employment is terminated, not to disclose certain of our
confidential information and, under certain circumstances, not to compete with
us or be employed by an individual or entity that competes with us.

As of March 30, 2001, options to purchase 528,983 shares of our common
stock under the Option Plan have been exercised, and options to purchase
2,071,530 shares of our common stock under the Option Plan remain outstanding.
All the shares issuable upon exercise of outstanding options granted under the
Option Plan are currently registered under the Securities Act.

The following table sets forth certain information regarding options
granted to the Named Officers in 2000.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS/SARS OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS/SARS EMPLOYEES IN OR BASE PRICE --------------------------
NAME GRANTED (#) FISCAL YEAR(1) ($/SHARE) EXPIRATION DATE 5%($) 10%($)
---- ------------ -------------- -------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jack Friedman........ 55,308 2.9% 7.875 8/11/05 148,225 336,273
107,991 5.6% 7.875 9/13/05 289,416 656,585
18,955 1.0% 7.875 6/22/06 50,799 115,246
25,000(2) 1.3% 15.25 6/22/06 129,650 294,250
Stephen G. Berman.... 138,770 7.2% 7.875 2/8/05 371,904 843,722
55,308 2.9% 7.875 8/11/05 148,225 336,273
107,991 5.6% 7.875 9/13/05 289,416 656,585
18,955 1.0% 7.875 6/22/06 50,799 115,246
25,000(2) 1.3% 15.25 6/22/06 129,650 294,250
Joel M. Bennett...... 25,698 1.3% 7.875 2/8/05 68,871 156,244
8,858 0.5% 7.875 12/29/05 23,739 53,857
3,531 0.2% 7.875 5/07/06 9,463 21,468
72,787 3.8% 7.875 6/22/06 195,069 442,545
4,826(2) 0.3% 17.00 5/7/06 27,894 63,317
96,000(2) 5.0% 15.25 6/22/06 497,856 1,129,920
</TABLE>

- ---------------
(1) Options to purchase a total of 1,917,559 shares of our common stock were
granted to our employees, including the Named Officers, during 2000, which
includes options to purchase 1,202,983 shares that reprice previously
granted options.

(2) Replaced pursuant to price reset.

51
<PAGE> 53

The following table sets forth certain information regarding options
exercised and exercisable during 2000, and the value of options held as of
December 31, 2000 by the Named Officers:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>
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(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Friedman.................. -- -- 336,996 220,258 888,429 440,951
Stephen G. Berman.............. -- -- 232,826 338,212 659,565 618,081
Joel M. Bennett................ 29,311 394,585 25,185 105,690 58,983 132,113
</TABLE>

- ---------------
(1) The difference between (x) the product of the number of exercised options
and the average sale price per share of the common stock sold on the
exercise dates and (y) the aggregate exercise price of such options.

(2) The difference between (x) the product of the number of unexercised options
and $9.125 (the closing sale price of the common stock on December 31, 2000)
and (y) the aggregate exercise price of such options.

- - Compensation of Directors

Directors currently receive an annual cash stipend in the amount of $10,000
for serving on the Board, and are reimbursed for reasonable expenses incurred in
attending meetings. In addition, our Option Plan provides for each newly elected
non-employee director to receive at the commencement of his term an option to
purchase 37,500 shares of our common stock at their then current fair market
value, and for grants to our non-employee directors on January 1 of each year of
an option to purchase 9,375 shares of our common stock at their then current
fair market value. Options granted to a non-employee director expire upon the
termination of the director's services for cause, but may be exercised at any
time during a one-year period after such person ceases to serve as a director
for any other reason.

- - Compensation Committee Interlocks and Insider Participation

Mr. Jack Friedman, our Chairman and Chief Executive Officer, is the only
member of our Compensation Committee who is or formerly was an officer or
employee of JAKKS or any of its subsidiaries. Our Board believes that Mr.
Friedman's assessment of the performance and contribution of our other employees
and his views on the appropriate manner and level of compensation for their
services are essential to the Compensation Committee's ability to evaluate and
make determinations with respect to compensation matters. However, Mr. Friedman
does not participate in any deliberations or determinations by the Compensation
Committee or our Board with respect to his own compensation.

None of our executive officers has served as a director or member of a
compensation committee (or other board committee performing equivalent
functions) of any other entity, one of whose executive officers served as a
director or a member of our Compensation Committee.

52
<PAGE> 54

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 30, 2001
with respect to the beneficial ownership of our common stock by (1) each person
known by us to own beneficially more than 5% of the outstanding shares of our
common stock, (2) each of our directors, (3) each Named Officer, and (4) all our
directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER OWNERSHIP SHARES
---------------- ------------ -----------
<S> <C> <C>
Scudder Kemper Investments, Inc. (1)........................ 1,288,650(2) 7.2
Jack Friedman............................................... 821,226(3)(4) 4.5
Stephen G. Berman........................................... 253,642(3)(5) 1.4
Joel M. Bennett............................................. 59,851(3)(6) *
David C. Blatte............................................. 37,500(3)(7) *
Robert E. Glick............................................. 76,431(3)(8) *
Michael G. Miller........................................... 65,931(3)(9) *
Murray L. Skala............................................. 123,564(3)(10) *
All directors and executive officers as a group (7
persons).................................................. 1,375,337(11) 7.3
</TABLE>

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

(1) The address of Scudder Kemper Investments, Inc. is 345 Park Avenue, New
York, New York 10154. All the information presented in this Item with
respect to this beneficial owner was extracted solely from its Schedule 13G
filed on February 14, 2001.

(2) Exercises sole dispositive power over all such shares, exercises sole
voting power over 1,122,150 shares and shared voting power over 15,300
shares.

(3) Exercises sole voting power and sole investment power with respect to such
shares.

(4) Includes 25,308 shares held in trusts for the benefit of children of Mr.
Friedman. Also includes 336,996 shares which Mr. Friedman may purchase upon
the exercise of certain stock options.

(5) Represents shares which Mr. Berman may purchase upon the exercise of
certain stock options.

(6) Includes 29,040 shares which Mr. Bennett may purchase upon the exercise of
certain stock options.

(7) Represents shares which Mr. Blatte may purchase upon the exercise of
certain stock options.

(8) Represents shares which Mr. Glick may purchase upon the exercise of certain
stock options.

(9) Represents shares which Mr. Miller may purchase upon the exercise of
certain stock options.

(10) Includes 98,256 shares which Mr. Skala may purchase upon the exercise of
certain stock options and 25,308 shares held by Mr. Skala as trustee under
trusts for the benefit of children of Mr. Friedman.

(11) Includes 25,308 shares held in trusts for the benefit of children of Mr.
Friedman and an aggregate of 860,296 shares which the directors and
executive officers may purchase upon the exercise of certain stock options.

53
<PAGE> 55

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

One of our directors, Murray L. Skala, is a partner in the law firm of
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, which has performed, and is
expected to continue to perform, legal services for us. In 2000, we incurred
approximately $975,000 for legal fees and reimbursable expenses payable to that
firm.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Annual Report on Form
10-K:

(1) Financial Statements (included in Item 8):

- Independent Auditors' Report

- Consolidated Balance Sheets as of December 31, 1999 and 2000

- Consolidated Statements of Operations for the years ended December 31,
1998, 1999 and 2000

- Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1999 and 2000

- Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1999 and 2000

- Notes to Consolidated Financial Statements

(2) Financial Statement Schedules (included in Item 8)

- Schedule II -- Valuation and Qualifying Accounts

(3) Exhibits

54
<PAGE> 56

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.1B 2000 Amendment to Third Amended and Restated 1995 Stock
Option Plan (18)(*)
10.2 Employment Agreement between the Company and Jack Friedman
dated January 1, 1998 (8)(*)
10.2.1 Amendment, dated January 1, 1999, to Employment Agreement
between the Company and Jack Friedman (12)(*)
10.3 Employment Agreement between the Company and Stephen G.
Berman dated January 1, 1998 (8)(*)
10.3.1 Amendment, dated January 1, 1999, to Employment Agreement
between the Company and Stephen G. Berman (12)(*)
10.4 Employment Agreement between the Company and Jack Friedman
dated as of July 1, 1999 (16)(*)
10.4.1 Amendment, dated as of February 7, 2000, to Employment
Agreement between the Company and Jack Friedman (17)
10.5 Employment Agreement between the Company and Stephen G.
Berman dated as of July 1, 1999 (16)(*)
10.5.1 Amendment, dated as of February 7, 2000, to Employment
Agreement between the Company and Stephen G. Berman (17)
10.6 Purchase Agreement among the Company, JAKKS Acquisition
Corp., Road Champs, Inc., Road Champs Ltd., Die Cast
Associates, Inc. and the shareholders of Road Champs, Inc.
dated January 21, 1997 (3)
10.7.1 Office Lease dated June 18, 1997 between the Company and
Malibu Vista Partners (8)(P)
10.7.2 Supplemental Lease dated August 10, 1998 between Malibu
Vista Partners and the Company (10)
10.7.3 Third Amendment dated January 25, 1999 to Lease between the
Company and Malibu Vista Partners (12)
10.8 Lease of the Company's warehouse space at 7 Patton Drive,
West Caldwell, New Jersey and amendment thereto (3)
10.8A Office Lease dated March 27, 1998 between the Company and
Hundal of Union L.P. (8)(P)
10.9 Lease of the Company's showroom at the Toy Center South, 200
Fifth Avenue, New York, New York (1)
10.10 Lease of the Company's showroom at the Toy Center North,
1107 Broadway, New York, New York (3)
10.11 Tenancy Agreement dated March 14, 1998 between the Company
and Astoria Investment Company, Ltd. (8)(P)
10.11A Office Lease dated September 24, 1998 between Astoria
Investment Company Limited and Road Champs Ltd. (10)
10.11B Lease Agreement dated June 2, 1999 between Astoria
Investment Company Limited and Road Champs Limited (13)
10.12 License Agreement with Titan Sports, Inc. dated October 24,
1995 (1)
10.12.1 Amendment to License Agreement with Titan Sports, Inc. dated
April 22, 1996 (4)
10.12.2 Amendment to License Agreement with Titan Sports, Inc. dated
January 21, 1997 (4)
10.12.3 Amendment to License Agreement with Titan Sports, Inc. dated
December 3, 1997 (8)
10.12.4 Amendment to License Agreement with Titan Sports, Inc. dated
January 29, 1998 (8)
</TABLE>

55
<PAGE> 57

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.12.5 Amendment to License Agreement with Titan Sports, Inc. dated
June 24, 1998 (12)
10.12.6 Amendment to License Agreement with Titan Sports, Inc. dated
February 11, 1999 (12)
10.13 International License Agreement with Titan Sports, Inc.
dated February 10, 1997 (4)
10.13.1 Amendment to International License Agreement with Titan
Sports, Inc. dated December 3, 1997 (8)
10.13.2 Amendment to International License Agreement with Titan
Sports, Inc. dated January 29, 1998 (8)
10.17 Employment Agreement dated as of October 1, 1999 between the
Company and Michael Bianco (15)(*)
10.18 Employment Agreement dated as of October 1, 1999 between the
Company and Joshua H. Pokempner (15)(*)
10.18A Letter Agreement dated June 26, 2000 between the Company and
Joshua H. Pokempner (35)
10.19 Warrant to purchase 150,000 shares of Common Stock dated
January 8, 1997 issued to Joseph Charles & Associates, Inc.
(8)
10.20 Office Lease dated November 18, 1999 between the Company and
Winco Maliview Partners (17)
10.21 Option Agreement dated August 28, 1997 between the Company
and Silverman Heller Associates (8)
10.22 Consulting Agreement dated July 30, 1997 between the Company
and Silverman Heller Associates (8)
10.23 Option Agreement dated August 28, 1997 between the Company
and Joseph Charles & Associates, Inc. (5)
10.24 Engagement Letter dated August 28, 1997 between the Company
and Joseph Charles & Associates, Inc. (5)
10.25 Consulting Agreement between the Company and Sheldon Weiner
Sales Organization, Inc. dated June 18, 1996 (5)
10.26.1 Stock Option Agreement between the Company and Sheldon
Weiner Sales Organization, Inc. dated June 18, 1996 (5)
10.26.2 Restated Stock Option Agreement between the Company and
Sheldon Weiner Sales Organization, Inc. dated June 18, 1996
(5)
10.27 Restated Option Agreement between the Company and Murray
Bass dated September 1, 1995 (5)
10.28 Restated Option Agreement between the Company and Joel
Bennett dated September 1, 1995 (5)
10.29 Restated Option Agreement between the Company and Gina
Hancock dated September 1, 1995 (5)
10.30 Restated Option Agreement between the Company and Wills Hon
dated September 1, 1995 (5)
10.31 Restated Option Agreement between the Company and Bruce Katz
dated September 1, 1995 (5)
10.36 Stock Purchase Agreement dated as of September 22, 1999
among the Company, Flying Colors Toys, Inc. and its
Shareholders (15)
</TABLE>

56
<PAGE> 58

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.36.1 First Amendment dated as of September 30, 1999 to Stock
Purchase Agreement (15)
10.37 Escrow Agreement dated as of September 30, 1999 among Joshua
H. Pokempner, as agent, the Company and Bank One Trust
Company, NA, as escrow agent (15)
10.38 Transition Services Agreement dated as of October 1, 1999
between Colorbok LLC and Flying Colors Toys, Inc. (15)
10.39 Lease dated as of October 1, 1999 between Shore Properties
LLC and Flying Colors Toys, Inc. (15)
10.40 Stock Purchase Warrant for 111,250 shares issued to Titan
Sports, Inc. (13)
10.41 Stock Purchase Warrant for 13,750 shares issued to Stanley
Shenker Associates, Inc. (13)
10.42 Agreement of Merger dated as of May 22, 2000 among the
Company, JAKKS Acquisition II, Inc. and Pentech
International Inc. (19)
10.43 First Amendment dated as of July 13, 2000 to Agreement of
Merger (20)
10.44 Voting and Lock-Up Agreement dated May 22, 2000 among the
Company and certain stockholders of Pentech International
Inc. (21)
10.45 Term Note dated April 13, 2000 in the principal amount of
$1,500,000 made by Jack Friedman payable to the order of the
Company (22)
10.46 Installment Note dated April 26, 2000 in the principal
amount of $1,500,000 made by Stephen Berman and Ana Berman
payable to the order of the Company (23)
10.47 Deed of Trust dated April 26, 2000 made by Stephen Berman
and Ana Berman in favor of First American Title Insurance
Company, as Trustee (24)
10.48 Term Note dated May 12, 2000 in the principal amount of
$250,000 made by Joel M. Bennett payable to the Company (25)
10.49 Employment Agreement dated as of January 1, 2000 between the
Company and Joel M. Bennett (26)(*)
10.50 Loan and Security Agreement dated as of January 13, 1997
among Pentech International Inc., certain subsidiaries
thereof and Bank of America, N.A. (formerly BankAmerica
Business Credit, Inc.) (27)
10.51 Waiver and First Amendment dated as of January 11, 1999 to
Loan and Security Agreement (28)
10.52 Waiver, Consent and Second Amendment dated as of December
20, 1999 to Loan and Security Agreement (29)
10.53 Consent, Waiver and Third Amendment dated as of July 27,
2000 to Loan and Security Agreement (30)
10.54 Lease dated February 1993 between Edison Equities and
Pentech International Inc. (31)
10.55 Agreement of Lease dated August 28, 1995 between 1101 CR NB,
L.L.C. (successor in interest to Pensud Company Limited
Partnership) and Pentech International Inc. (32)
10.56 First Amendment to Lease dated April 19, 2000 between 1101
CR NB, L.L.C. and Pentech International Inc. (33)
10.57 Second Amendment effective May 1, 2000 to Stock Purchase
Agreement dated as of September 22, 1999 among the Company,
Flying Colors Toys, Inc. and the former shareholders thereof
(34)
10.58 Lease dated as of November 21, 2000 between Grand Avenue
Venture, LLC and JP Ferrero Parkway, Inc. (35)
</TABLE>

57
<PAGE> 59

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
21 Subsidiaries of the Company (35)
23 Consent of Pannell Kerr Forster, Certified Public
Accountants, A Professional Corporation, Los Angeles,
California (35)
</TABLE>

- ---------------
(1) 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.

(2) 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.

(3) Filed previously as an exhibit to the Company's Current Report on Form 8-K,
filed February 21, 1997, or as schedule 4.2(iii) thereto, and incorporated
herein by reference.

(4) Filed previously as an exhibit to the Company's Annual Report on Form
10-KSB for its fiscal year ended December 31, 1996, and incorporated herein
by reference.

(5) Filed previously as an exhibit to the Company's Registration Statement on
Form S-8 (Reg. No. 333-35053), effective September 5, 1997, and
incorporated herein by reference.

(6) Filed previously as an exhibit to the Company's Current Report on Form 8-K,
filed November 7, 1997, and incorporated herein by reference.

(7) Filed previously as an exhibit to the Company's Current Report on Form 8-K,
filed April 7, 1998, and incorporated herein by reference.

(8) Filed previously as an exhibit to the Company's Annual Report on Form
10-KSB for its fiscal year ended December 31, 1997, and incorporated herein
by reference.

(9) Filed previously as Appendix A to the Company's definitive Proxy Statement
for its 1998 Annual Meeting of Stockholders, filed June 23, 1998, and
incorporated herein by reference.

(10) Filed previously as an exhibit to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1998, filed November 16, 1998,
and incorporated herein by reference.

(11) Filed previously as exhibit 4.1.2 to the Company's Registration Statement
on Form S-3 (Reg. No. 333-74717), filed March 19, 1999, and incorporated
herein by reference.

(12) Filed previously as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999, filed April 22, 1999, and
incorporated herein by reference.

(13) Filed previously as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999, filed August 9, 1999, and
incorporated herein by reference.

(14) Filed previously as an exhibit to the Company's Current Report on Form 8-K,
filed October 19, 1999, and incorporated herein by reference.

(15) 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.

(16) Filed previously as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, filed November 3, 1999, and
incorporated herein by reference.

(17) 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.

(18) Filed previously as exhibit 4.1 to the Company's Registration Statement on
Form S-8 (Reg. No. 333-40392), filed June 29, 2000, and incorporated herein
by reference.

58
<PAGE> 60

(19) Incorporated by reference to exhibit 2.1 of the Company's Current Report on
Form 8-K, filed August 11, 2000.

(20) Incorporated by reference to exhibit 2.2 of the Company's Current Report on
Form 8-K, filed August 11, 2000.

(21) Incorporated by reference to exhibit 2.3 of the Company's Current Report on
Form 8-K, filed August 11, 2000.

(22) Incorporated by reference to exhibit 10.1 of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000, filed August 14, 2000.

(23) Incorporated by reference to exhibit 10.2 of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000, filed August 14, 2000.

(24) Incorporated by reference to exhibit 10.3 of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000, filed August 14, 2000.

(25) Incorporated by reference to exhibit 10.4 of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000, filed August 14, 2000.

(26) Incorporated by reference to exhibit 10.5 of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000, filed August 14, 2000.

(27) Incorporated by reference to exhibit 10.7 of the Annual Report on Form 10-K
of Pentech International Inc. for its fiscal year ended September 30, 1996.

(28) Incorporated by reference to exhibit 10.5 of the Annual Report on Form 10-K
of Pentech International Inc. for its fiscal year ended September 30, 1998.

(29) Incorporated by reference to exhibit 10.6 of the Annual Report on Form 10-K
of Pentech International Inc. for its fiscal year ended September 30, 1999.

(30) Incorporated by reference to exhibit 10.4 of the Company's Current Report
on Form 8-K, filed August 11, 2000.

(31) Incorporated by reference to exhibit 10.10 of the Annual Report on Form
10-K of Pentech International Inc. for its fiscal year ended September 30,
1993.

(32) Incorporated by reference to exhibit 10.7 of the Annual Report on Form 10-K
of Pentech International Inc. for its fiscal year ended September 30, 1995.

(33) Incorporated by reference to exhibit 10.15 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000, filed August 14,
2000.

(34) Incorporated by reference to exhibit 10.16 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000, filed August 14,
2000.

(35) Filed herewith.

(P) Filed in paper format pursuant to a hardship exemption under Regulation
232.202 of Regulation S-T.

(*) Management contract or compensatory plan, contract or arrangement.

(b) Reports on Form 8-K

A Current Report on Form 8-K relating to the Company's acquisition of
Pentech International was filed on August 11, 2000 and an amendment thereto on
Form 8-K/A was filed on October 11, 2000, which amendment included financial
statements of Pentech International for its fiscal year ended September 30, 1999
and its three and nine month periods ended June 30, 2000 and pro forma financial
information relating to the Company's acquisition of Pentech International.

59
<PAGE> 61

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated: March 30, 2001 JAKKS PACIFIC, INC.

By: /s/ JACK FRIEDMAN
------------------------------------
Jack Friedman
Chairman and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JACK FRIEDMAN Chairman of the Board March 30, 2001
- ----------------------------------------------------- of Directors and
Jack Friedman Chief Executive Officer
(Principal Executive Officer)

/s/ JOEL M. BENNETT Chief Financial Officer March 30, 2001
- ----------------------------------------------------- (Principal Financial Officer
Joel M. Bennett and
Principal Accounting Officer)

/s/ STEPHEN G. BERMAN Director March 30, 2001
- -----------------------------------------------------
Stephen G. Berman

/s/ DAVID C. BLATTE Director March 30, 2001
- -----------------------------------------------------
David C. Blatte

/s/ MICHAEL G. MILLER Director March 30, 2001
- -----------------------------------------------------
Michael G. Miller

/s/ MURRAY L. SKALA Director March 30, 2001
- -----------------------------------------------------
Murray L. Skala
</TABLE>

60
<PAGE> 62

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (1)
3.1.1 Certificate of Designation of 4% Redeemable Convertible
Preferred Stock of the Company (6)
3.1.2 Certificate of Designation and Preferences of Series A
Cumulative Convertible Preferred Stock of the Company (7)
3.1.3 Certificate of Elimination of All Shares of 4% Redeemable
Convertible Preferred Stock of the Company (7)
3.1.4 Certificate of Amendment of Restated Certificate of
Incorporation of the Company (11)
3.2 By-Laws of the Company (1)
3.2.1 Amendment to By-Laws of the Company (2)
10.1 Third Amended and Restated 1995 Stock Option Plan (9)(*)
10.1A 1999 Amendment to Third Amended and Restated 1995 Stock
Option Plan (15)(*)
10.1B 2000 Amendment to Third Amended and Restated 1995 Stock
Option Plan (18)(*)
10.2 Employment Agreement between the Company and Jack Friedman
dated January 1, 1998 (8)(*)
10.2.1 Amendment, dated January 1, 1999, to Employment Agreement
between the Company and Jack Friedman (12)(*)
10.3 Employment Agreement between the Company and Stephen G.
Berman dated January 1, 1998 (8)(*)
10.3.1 Amendment, dated January 1, 1999, to Employment Agreement
between the Company and Stephen G. Berman (12)(*)
10.4 Employment Agreement between the Company and Jack Friedman
dated as of July 1, 1999 (16)(*)
10.4.1 Amendment, dated as of February 7, 2000, to Employment
Agreement between the Company and Jack Friedman (17)
10.5 Employment Agreement between the Company and Stephen G.
Berman dated as of July 1, 1999 (16)(*)
10.5.1 Amendment, dated as of February 7, 2000, to Employment
Agreement between the Company and Stephen G. Berman (17)
10.6 Purchase Agreement among the Company, JAKKS Acquisition
Corp., Road Champs, Inc., Road Champs Ltd., Die Cast
Associates, Inc. and the shareholders of Road Champs, Inc.
dated January 21, 1997 (3)
10.7.1 Office Lease dated June 18, 1997 between the Company and
Malibu Vista Partners (8)(P)
10.7.2 Supplemental Lease dated August 10, 1998 between Malibu
Vista Partners and the Company (10)
10.7.3 Third Amendment dated January 25, 1999 to Lease between the
Company and Malibu Vista Partners (12)
10.8 Lease of the Company's warehouse space at 7 Patton Drive,
West Caldwell, New Jersey and amendment thereto (3)
10.8A Office Lease dated March 27, 1998 between the Company and
Hundal of Union L.P. (8)(P)
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EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.9 Lease of the Company's showroom at the Toy Center South, 200
Fifth Avenue, New York, New York (1)
10.10 Lease of the Company's showroom at the Toy Center North,
1107 Broadway, New York, New York (3)
10.11 Tenancy Agreement dated March 14, 1998 between the Company
and Astoria Investment Company, Ltd. (8)(P)
10.11A Office Lease dated September 24, 1998 between Astoria
Investment Company Limited and Road Champs Ltd. (10)
10.11B Lease Agreement dated June 2, 1999 between Astoria
Investment Company Limited and Road Champs Limited (13)
10.12 License Agreement with Titan Sports, Inc. dated October 24,
1995 (1)
10.12.1 Amendment to License Agreement with Titan Sports, Inc. dated
April 22, 1996 (4)
10.12.2 Amendment to License Agreement with Titan Sports, Inc. dated
January 21, 1997 (4)
10.12.3 Amendment to License Agreement with Titan Sports, Inc. dated
December 3, 1997 (8)
10.12.4 Amendment to License Agreement with Titan Sports, Inc. dated
January 29, 1998 (8)
10.12.5 Amendment to License Agreement with Titan Sports, Inc. dated
June 24, 1998 (12)
10.12.6 Amendment to License Agreement with Titan Sports, Inc. dated
February 11, 1999 (12)
10.13 International License Agreement with Titan Sports, Inc.
dated February 10, 1997 (4)
10.13.1 Amendment to International License Agreement with Titan
Sports, Inc. dated December 3, 1997 (8)
10.13.2 Amendment to International License Agreement with Titan
Sports, Inc. dated January 29, 1998 (8)
10.17 Employment Agreement dated as of October 1, 1999 between the
Company and Michael Bianco (15)(*)
10.18 Employment Agreement dated as of October 1, 1999 between the
Company and Joshua H. Pokempner (15)(*)
10.18A Letter Agreement dated June 26, 2000 between the Company and
Joshua H. Pokempner (35)
10.19 Warrant to purchase 150,000 shares of Common Stock dated
January 8, 1997 issued to Joseph Charles & Associates, Inc.
(8)
10.20 Office Lease dated November 18, 1999 between the Company and
Winco Maliview Partners (17)
10.21 Option Agreement dated August 28, 1997 between the Company
and Silverman Heller Associates (8)
10.22 Consulting Agreement dated July 30, 1997 between the Company
and Silverman Heller Associates (8)
10.23 Option Agreement dated August 28, 1997 between the Company
and Joseph Charles & Associates, Inc. (5)
10.24 Engagement Letter dated August 28, 1997 between the Company
and Joseph Charles & Associates, Inc. (5)
10.25 Consulting Agreement between the Company and Sheldon Weiner
Sales Organization, Inc. dated June 18, 1996 (5)
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.26.1 Stock Option Agreement between the Company and Sheldon
Weiner Sales Organization, Inc. dated June 18, 1996 (5)
10.26.2 Restated Stock Option Agreement between the Company and
Sheldon Weiner Sales Organization, Inc. dated June 18, 1996
(5)
10.27 Restated Option Agreement between the Company and Murray
Bass dated September 1, 1995 (5)
10.28 Restated Option Agreement between the Company and Joel
Bennett dated September 1, 1995 (5)
10.29 Restated Option Agreement between the Company and Gina
Hancock dated September 1, 1995 (5)
10.30 Restated Option Agreement between the Company and Wills Hon
dated September 1, 1995 (5)
10.31 Restated Option Agreement between the Company and Bruce Katz
dated September 1, 1995 (5)
10.36 Stock Purchase Agreement dated as of September 22, 1999
among the Company, Flying Colors Toys, Inc. and its
Shareholders (15)
10.36.1 First Amendment dated as of September 30, 1999 to Stock
Purchase Agreement (15)
10.37 Escrow Agreement dated as of September 30, 1999 among Joshua
H. Pokempner, as agent, the Company and Bank One Trust
Company, NA, as escrow agent (15)
10.38 Transition Services Agreement dated as of October 1, 1999
between Colorbok LLC and Flying Colors Toys, Inc. (15)
10.39 Lease dated as of October 1, 1999 between Shore Properties
LLC and Flying Colors Toys, Inc. (15)
10.40 Stock Purchase Warrant for 111,250 shares issued to Titan
Sports, Inc. (13)
10.41 Stock Purchase Warrant for 13,750 shares issued to Stanley
Shenker Associates, Inc. (13)
10.42 Agreement of Merger dated as of May 22, 2000 among the
Company, JAKKS Acquisition II, Inc. and Pentech
International Inc. (19)
10.43 First Amendment dated as of July 13, 2000 to Agreement of
Merger (20)
10.44 Voting and Lock-Up Agreement dated May 22, 2000 among the
Company and certain stockholders of Pentech International
Inc. (21)
10.45 Term Note dated April 13, 2000 in the principal amount of
$1,500,000 made by Jack Friedman payable to the order of the
Company (22)
10.46 Installment Note dated April 26, 2000 in the principal
amount of $1,500,000 made by Stephen Berman and Ana Berman
payable to the order of the Company (23)
10.47 Deed of Trust dated April 26, 2000 made by Stephen Berman
and Ana Berman in favor of First American Title Insurance
Company, as Trustee (24)
10.48 Term Note dated May 12, 2000 in the principal amount of
$250,000 made by Joel M. Bennett payable to the Company (25)
10.49 Employment Agreement dated as of January 1, 2000 between the
Company and Joel M. Bennett (26)(*)
10.50 Loan and Security Agreement dated as of January 13, 1997
among Pentech International Inc., certain subsidiaries
thereof and Bank of America, N.A. (formerly BankAmerica
Business Credit, Inc.) (27)
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.51 Waiver and First Amendment dated as of January 11, 1999 to
Loan and Security Agreement (28)
10.52 Waiver, Consent and Second Amendment dated as of December
20, 1999 to Loan and Security Agreement (29)
10.53 Consent, Waiver and Third Amendment dated as of July 27,
2000 to Loan and Security Agreement (30)
10.54 Lease dated February 1993 between Edison Equities and
Pentech International Inc. (31)
10.55 Agreement of Lease dated August 28, 1995 between 1101 CR NB,
L.L.C. (successor in interest to Pensud Company Limited
Partnership) and Pentech International Inc. (32)
10.56 First Amendment to Lease dated April 19, 2000 between 1101
CR NB, L.L.C. and Pentech International Inc. (33)
10.57 Second Amendment effective May 1, 2000 to Stock Purchase
Agreement dated as of September 22, 1999 among the Company,
Flying Colors Toys, Inc. and the former shareholders there
(34)
10.58 Lease dated as of November 21, 2000 between Grand Avenue
Venture, LLC and JP Ferrero Parkway, Inc. (35)
21 Subsidiaries of the Company (35)
23 Consent of Pannell Kerr Forster, Certified Public
Accountants, A Professional Corporation, Los Angeles,
California (35)
</TABLE>