As
filed
with the Securities and Exchange Commission on March 5, 2008
Registration
No. 333-101663
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Post-Effective
Amendment No. 1
FORM
S-8/A
REGISTRATION
STATEMENT
Under
THE
SECURITIES ACT OF 1933
JAKKS
PACIFIC, INC.
(Exact
name of Registrant as specified in its charter)
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22619
Pacific Coast Highway
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Delaware
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Malibu,
California 90265
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95-4527222
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(State
or other jurisdiction of
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(Address
of principal executive
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(I.R.S.
Employer
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incorporation
or organization)
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offices
and zip code)
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Identification
Number)
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JAKKS
PACIFIC, INC. 2002 STOCK AWARD AND INCENTIVE PLAN
(Full
title of the plan)
JACK
FRIEDMAN
Chairman
and Chief Executive Officer
JAKKS
Pacific, Inc.
22619
Pacific Coast Highway
Malibu,
California 90265
(310) 456-7799
(Name,
address, and telephone number, including area code, of agent for
service)
Copy
to:
Irving
Rothstein,
Esq.
Feder,
Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP
750
Lexington Avenue
New
York, New York 10022
Telephone:
(212) 888-8200 Facsimile: (212) 888-7776
JAKKS
PACIFIC, INC.
REGISTRATION
STATEMENT ON FORM S-8
EXPLANATORY
NOTE
This
Post-Effective Amendment No. 1 (the “Amendment”) amends the Registration
Statement on Form S-8 (No. 333-101663) originally filed by JAKKS
Pacific, Inc., with the Securities and Exchange Commission (“SEC”) on December
5, 2002.
We
are
filing this Amendment to include a reoffer prospectus to be used by our
employees and directors. The reoffer prospectus may be utilized for reoffering
and resales of shares of our common stock, deemed “restricted securities” or
“control securities” acquired pursuant to the plan registered on the
Registration Statement, in each case by an “affiliate” of us. The inclusion of
any person in the selling security holder table of the reoffer prospectus should
not be deemed a determination or an admission by us that such individual is
in
fact an affiliate of us.
PART
I
INFORMATION
REQUIRED IN THE SECTION 10(a) PROSPECTUS
The
document(s) containing the information specified in Part I of Form S-8
(plan information and registrant information) were sent or given to employees
as
specified by Rule 428(b)(1) under the Securities Act of 1933, as amended
(the “Securities Act”). In accordance with Rule 428 and the requirements of
Part I of Form S-8, such documents are not being filed with the SEC either
as part of this registration statement or as prospectuses or prospectus
supplements pursuant to Rule 424 under the Securities Act. We will maintain
a file of such documents in accordance with the provisions of
Rule 428(a)(2) of the Securities Act. Upon request, we will furnish to the
Commission or its staff a copy of any or all of the documents included in the
file.
REOFFER
PROSPECTUS
1,440,269
Shares
JAKKS
Pacific, Inc.
Common
Stock
This
reoffer prospectus relates to the resale of up to an aggregate of 1,440,269
shares of our common stock which may be issued upon the exercise of awards
issued or to be issued pursuant to our JAKKS Pacific, Inc. 2002 Stock Award
and
Incentive Plan (the “Plan”) by the selling security holders identified in this
reoffer prospectus, which have been issued to the selling security holders.
The
selling security holders are currently employees, officers and/or directors
of
our company who acquired stock awards or options to acquire shares of our common
stock as compensation for services performed for us. The selling security
holders may sell the shares of common stock described in this prospectus in
public or private transactions, at prevailing market prices, or at privately
negotiated prices. The selling security holders may sell shares directly to
purchasers or through brokers or dealers. Brokers or dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling security holders. Although we may receive payment of the exercise price
from those of the selling security holders holding options if and when they
exercise those options for cash, we will not receive any of the proceeds from
the sale of the shares by the selling security holders. The selling security
holders will receive all of the proceeds from the sale of such shares and will
pay all underwriting discounts and selling commissions, if any, applicable
to
the sale of the shares. We will pay the expenses of registration of the sale
of
the shares. It is not possible at the present time to determine the price to
the
public in any sale of the shares by the selling security holders and the selling
security holders reserve the right to accept or reject, in whole or in part,
any
proposed purchase of shares. Accordingly, the public offering price, the amount
of any applicable underwriting discounts and commissions and the net proceeds
to
the selling security holders will be determined at the time of such sale by
the
selling security holders.
Our
common stock is traded on the Nasdaq Global Select exchange under the symbol
“JAKK.” On March 3, 2008, the last reported sales price of our common stock was
$28.40 per share.
Our
principal executive offices are located at 22619
Pacific Coast Highway, Malibu, California 90265 and
our
telephone number is (310) 456-7799.
Investing
in our common stock involves risks.
See
“Risk Factors” beginning on page 13.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is March 5, 2008
TABLE
OF CONTENTS
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Page
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ABOUT
THIS REOFFER PROSPECTUS
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3
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DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
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3
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SUMMARY
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4
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RISK
FACTORS
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13
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USE
OF PROCEEDS
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23
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SELLING
SECURITY HOLDERS
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23
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PLAN
OF DISTRIBUTION
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26
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LEGAL
MATTERS
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29
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EXPERTS
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29
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INCORPORATION
OF DOCUMENTS BY REFERENCE
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29
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WHERE
YOU CAN FIND MORE INFORMATION
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30
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITY
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30
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INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
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32
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ABOUT
THIS REOFFER PROSPECTUS
In
connection with this offering, no person is authorized to give any information
or to make any representations not contained or incorporated by reference in
this prospectus. If information is given or representations are made, you may
not rely on that information or representations as having been authorized by
us.
This prospectus is neither an offer to sell nor a solicitation of an offer
to
buy any securities other than those registered by this prospectus, nor is it
an
offer to sell or a solicitation of an offer to buy securities where an offer
or
solicitation would be unlawful. You may not imply from the delivery of this
prospectus, nor from any sale made under this prospectus, that our affairs
are
unchanged since the date of this prospectus or that the information contained
in
this prospectus is correct as of any time after the date of this prospectus.
The
information contained and incorporated by reference in this prospectus is
accurate only as of the date of this prospectus or the date of the document
incorporated by reference, as the case may be, regardless of the time of
delivery of the prospectus.
You
should not consider any information in this prospectus to be legal, business
or
tax advice. You should consult your own attorney, business advisor and tax
advisor for legal, business and tax advice regarding an investment in our
securities.
References
in this prospectus to “JAKKS,” “us,” “we,” “our,” or the “Company” refer to
JAKKS Pacific, Inc. and its subsidiaries, as the context requires. The phrase
“this prospectus” refers to this reoffer prospectus and any applicable
prospectus supplement and the documents incorporated by reference in this
prospectus, unless the context otherwise requires.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus 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 prospectus 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 prospectus. You should understand that forward-looking statements made
in
this prospectus 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.
SUMMARY
Company
Overview
We
are a
leading multi-line, multi-brand toy company that designs, produces, markets
and
distributes toys and related products, writing instruments and related products,
pet toys, consumables and related products, electronics and related products,
and other consumer products. We focus our business on acquiring or licensing
well-recognized trademarks and brand names, most with long product histories
(“evergreen brands”). We seek to acquire these evergreen brands because we
believe they are less subject to market fads or trends. We also develop
proprietary products marketed under our own trademarks and brand
names. Our products are typically lower-priced toys and accessories,
and include:
Traditional
Toys
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Action
figures and accessories, including licensed characters, principally
based
on World
Wrestling Entertainment®
(“WWE”), The Chronicles of Narnia: Prince Caspian™ and Pokemon®
franchises;
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Toy
vehicles, including Road
Champs®,
RC
Racers™ and
MXS® toy
vehicles and accessories, as well as those based on
Nascar®;
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Electronics
products, including Plug
It In & Play TV Games™,
EyeClops™
Bionic Eye
products, and Laser
Challenge®,
as well as others based on Disney® and Discovery Kids®
brands;
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Role-play,
dress-up and novelty products featuring entertainment and consumer
products properties such as Dirt
Devil®,
Subway®,
Pizza
Hut®
and McDonalds®
pretend play products, Disney
Princess®,
Hannah
Montana™,
Barbie®
and Dora
the Explorer®
playsets for girls and Black
& Decker®
and Pirates
of the Caribbean™
playsets for boys;
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Infant
and pre-school toys and plush toys featuring Care
Bears®,
Barney®,
The
Wiggles®,
Curious
George®,
and slumber bags;
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Dolls
including large, fashion and mini dolls and related accessories based
on
Cabbage
Patch Kids®,
Hannah
Montana,
The
Cheetah Girls™,
Puppy
in My Pocket and Friends™,
Hairspray™
the movie and Disney
Princess®
dolls and private label fashion dolls for other
retailers;
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Seasonal
and outdoor toys and leisure products, including Go
Fly A Kite®,
Air
Creations®,
and other kites, Funnoodle®
pool toys, The
Storm®
water guns and Fly
Wheels®
XPV®
and Flight™
vehicles; and
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Junior
sports and toy paintball products, including Gaksplat®
and The
Storm.
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Craft,
Activity and Writing Products
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Craft,
activity and stationery products, including Flying
Colors®
activity sets, compounds, playsets and lunch boxes based on Nickelodeon®,
Dora
the Explorer, Pokémon, The Littlest Petshop®
and others, and Color
Workshop®
craft products such as Blopens®,
Vivid
Velvet®,
and Pentech®
writing instruments, stationery and activity products, and non-licensed
brands including Girl
Gourmet™
and The
Spa Factory™.
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Pet
Products
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Pet
products, including toys, consumables, beds, clothing and accessories,
with licenses used in conjunction with these products, including
American
Kennel Club®, The Cat Fanciers’ AssociationTM,
Arm & Hammer®,
and The
Humane Society of the United States®brands,
as well as entertainment properties, including Disney
and Snoop
Dogg®, and
private label brands including Totally
My PetTM.
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We
continually review the marketplace to identify and evaluate evergreen brands
that we believe have the potential for significant growth. We endeavor to
generate growth within these brands by:
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creating
innovative products under established brand
names;
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focusing
our marketing efforts to enhance consumer recognition and retailer
interest;
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linking
them with our evergreen portfolio of
brands;
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adding
new items to the branded product lines that we expect will enjoy
greater
popularity; and
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adding
simple innovation and technology to make them more appealing to today’s
kids.
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In
addition to developing our proprietary brands and marks, licensing popular
brands enables us to use these high-profile marks at a lower cost than 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 would
be
available for purchase. We also license technology produced by unaffiliated
inventors and product developers to improve the design and functionality of
our
products.
We
have
obtained an exclusive worldwide license for our joint venture with THQ Inc.
(“THQ”), which develops, publishes and distributes video games based on WWE
characters and themes. Since the joint venture’s first title release in 1999, it
has released 35 new titles. We have recognized approximately $93.3 million
in
profit from the joint venture through December 31, 2007. We and the joint
venture are named as defendants in lawsuits commenced by WWE, pursuant to which
WWE is seeking treble, punitive and other damages (including disgorgement of
profits) in an undisclosed amount and a declaration that the video game license
with the joint venture and an amendment to our toy licenses with WWE are void
and unenforceable (see “Legal Proceedings”).
We
sell
our products through our in-house sales staff and independent sales
representatives to toy and mass-market retail chain stores, department stores,
office supply stores, drug and grocery store chains, club stores, toy specialty
stores and wholesalers. Our three largest customers are Wal-Mart, Target and
Toys ‘R’ Us, which account for approximately 19.3%, 14.5% and 14.1%,
respectively, of our net sales in 2007. No other customer accounted for more
than 10.0% of our net sales in 2007.
Our
Growth Strategy
The
execution of our growth strategy has resulted in increased revenues and
earnings. In 2006 and 2007, we generated net sales of $765.4 million and $857.1
million, respectively, and net income of $72.4 million and $89.0 million,
respectively. Approximately 24.3% and 1.4% of our increased net sales in 2006
and 2007, respectively, were attributable to our acquisitions since 2005. Key
elements of our growth strategy include:
•
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 to maximize their longevity. Our marketing
teams and product designers strive to develop new products or product lines
to
offer added technological, aesthetic and functional improvements to our
extensive portfolio. We use multiple methods including real-scan technology,
articulated joints and a flexible rubberized coating to enhance the life-like
feel of our action toys, and expanded to classic characters and special
techniques such as vinyl figures. These innovations appeal to collectors and/or
produce higher quality and better likenesses of the representative
characters.
•
Enter
New Product Categories. We
use our extensive experience in the toy and other consumer product industries
to
evaluate products and licenses in new product categories and to develop
additional product lines. We began marketing licensed classic video games for
simple plug-in use with television sets and expanded into several related
categories through the licensing of this category from our current licensors,
such MTV Networks which owns Nickelodeon.
•
Pursue
Strategic Acquisitions. We
intend to supplement our internal growth with selected strategic acquisitions.
Most recently, in June 2005, we acquired the assets of Pet Pal Corp. which
expanded our offerings and distribution into pet toy, treats and related
products, and in February 2006, we acquired the business of Creative Designs
International, Ltd., a leading manufacturer of girls’ dress-up and role-play
toys. We will continue focusing our acquisition strategy on
businesses or brands that have compatible product lines and offer valuable
trademarks or brands.
•
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, among others, we have license agreements with WWE,
Nickelodeon,
Disney®,
and
Warner
Bros®,
as
well as with the licensors of the many popular licensed children’s characters
previously mentioned, among others. 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, Latin
America and Asia, offer us significant growth opportunities. In 2007, our sales
generated outside the United States were approximately $126.1 million, or 14.7%
of total net sales. We intend to continue to expand our international sales
by
capitalizing on our experience and our relationships with foreign distributors
and retailers. We expect these initiatives to continue to contribute to our
international growth in 2008.
•
Capitalize
On Our Operating Efficiencies. We
believe that our current infrastructure and operating model can accommodate
significant growth without a proportionate increase in our operating and
administrative expenses, thereby increasing our operating margins.
The
execution of our growth strategy, however, is subject to several risks and
uncertainties and we cannot assure you that we will continue to experience
growth in, or maintain our present level of, net sales (see “Risk Factors,”
beginning on page 13). For example, our growth strategy will place additional
demands on our management, operational capacity and financial resources and
systems. The increased demand on management may necessitate our recruitment
and
retention of additional qualified management personnel. We cannot assure you
that we will be able to recruit and retain qualified personnel or expand and
manage our operations effectively and profitably. To effectively manage future
growth, we must continue to expand our operational, financial and management
information systems and to train, motivate and manage our work force. There
can
be no assurance that our operational, financial and management information
systems will be adequate to support our future operations. Failure to expand
our
operational, financial and management information systems or to train, motivate
or manage employees could have a material adverse effect on our business,
financial condition and results of operations.
Moreover,
implementation of our growth strategy is subject to risks beyond our control,
including competition, market acceptance of new products, changes in economic
conditions, our ability to obtain or renew licenses on commercially reasonable
terms and our ability to finance increased levels of accounts receivable and
inventory necessary to support our sales growth, if any.
Furthermore,
we cannot assure you that we can identify attractive acquisition candidates
or
negotiate acceptable acquisition terms, and our failure to do so may adversely
affect our results of operations and our ability to sustain growth.
Finally,
our acquisition strategy involves a number of risks, each of which could
adversely affect our operating results, including difficulties in integrating
acquired businesses or product lines, assimilating new facilities and personnel
and harmonizing diverse business strategies and methods of operation; diversion
of management attention from operation of our existing business; loss of key
personnel from acquired companies; and failure of an acquired business to
achieve targeted financial results.
World
Wrestling Entertainment 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 the WWE under which it acquired the exclusive worldwide right to publish
WWE
video
games on all hardware platforms. The term of the license agreement expires
on
December 31, 2009, and the joint venture has a right to renew the license for
an
additional five years provided that there is an absence of a material
breach of the license agreement and that certain royalty minimums are met.
Those
minimums have been met. We and the joint venture are named as defendants in
lawsuits commenced by WWE, pursuant to which WWE is claiming that there have
been material breaches with respect to the video game license and is seeking
treble, punitive and other damages (including disgorgement of profits) in an
undisclosed amount and a declaration that the video game license with the joint
venture and an extension of our toy licenses with WWE are void and unenforceable
(see “Legal Proceedings”).
The
games
are designed, developed, manufactured and distributed by or through THQ. THQ
arranges for the manufacture of the CD-ROMs and game cartridges used in the
various video game platforms under non-exclusive licenses with Sony, Nintendo
and Microsoft. No other licenses are required for the manufacture of the
personal computer titles.
The
joint
venture agreement provides for us to have received guaranteed preferred returns
through June 30, 2006 at varying rates of the joint venture’s net sales
depending on the cumulative unit sales and platform of each particular game.
The
preferred return was subject to change after June 30, 2006 and was to be
set for the distribution period beginning July 1, 2006 and ending
December 31, 2009 (the “Next Distribution Period”). The agreement provides
that the parties will negotiate in good faith and agree to the preferred return
not less than 180 days prior to the start of the Next Distribution Period.
It further provides that if the parties are unable to agree on a preferred
return, the preferred return will be determined by arbitration. Since the
parties have not reached an agreement with respect to the preferred return
for
the Next Distribution Period, the preferred return for the Next distribution
Period is to be determined through arbitration. The preferred
return is accrued in the quarter in which the licensed games are sold and the
preferred return is earned. Based on the same rates as set forth
under the original joint venture agreement, an estimated receivable of $35.3
million has been accrued for the eighteen months ended December 31, 2007,
pending the resolution of this outstanding issue.
Legal
Proceedings
On
October 19, 2004, we were named as defendants in a lawsuit commenced by WWE
in
the U.S. District Court for the Southern District of New York concerning our
toy
licenses with WWE and the video game license between WWE and the joint venture
company operated by THQ and us, encaptioned World Wrestling Entertainment,
Inc.
v. JAKKS Pacific, Inc., et al., 1:04-CV-08223-KMK (the “WWE Action”). The
complaint also named as defendants THQ, the joint venture, certain of our
foreign subsidiaries, Jack Friedman (our Chairman and Chief Executive Officer),
Stephen Berman (our Executive Vice President and Chief Operating Officer,
President and Secretary and a member of our Board of Directors), Joel Bennett
(our Chief Financial Officer), Stanley Shenker and Associates, Inc., Bell
Licensing, LLC, Stanley Shenker and James Bell.
WWE
sought treble, punitive and other damages (including disgorgement of profits)
in
an undisclosed amount and a declaration that the video game license with the
joint venture, which is scheduled to expire in 2009 (subject to joint venture’s
right to extend that license for an additional five years), and an amendment
to
our toy licenses with WWE, which are scheduled to expire in 2009, are void
and
unenforceable. This action alleged violations by the defendants of the Racketeer
Influenced and Corrupt Organization Act (“RICO”) and the anti-bribery provisions
of the Robinson-Patman Act, and various claims under state law.
On
February 16, 2005, we filed a motion to dismiss the WWE Action. On March 30,
2005, the day before WWE’s opposition to our motion was due, WWE filed an
Amended Complaint seeking, among other things, to add the Chief Executive
Officer of THQ as a defendant and to add a claim under the Sherman Act. The
Court allowed the filing of the Amended Complaint and ordered a two-stage
resolution of the viability of the Complaint, with motions to dismiss the
federal jurisdiction claims based on certain threshold issues to proceed and
all
other matters to be deferred for consideration if the Complaint survived
scrutiny with respect to the threshold issues. The Court also stayed discovery
pending the determination of the motions to dismiss.
The
motions to dismiss the Amended Complaint based on these threshold issues were
fully briefed and argued and, on March 31, 2006, the Court granted the part
of
our motion seeking dismissal of the Robinson-Patman Act and Sherman Act claims
and denied the part of our motion seeking to dismiss the RICO claims on the
basis of the threshold issue that was briefed (the “March 31
Order”).
On
April
7, 2006, we sought certification to appeal from the portion of the March 31
Order denying our motion to dismiss the RICO claim on the one ground that was
briefed. Shortly thereafter, WWE filed a motion for reargument with respect
to
the portion of the March 31 Order that dismissed the Sherman Act claim and,
alternatively, sought judgment with respect to the Sherman Act claim so that
it
could pursue an immediate appeal. At a court conference on April 26, 2006 the
Court deferred the requests for judgment and for certification and set up
briefing schedules with respect to our motion to dismiss the RICO claim on
grounds that were not the subject of the first round of briefing, and our motion
to dismiss the action based on the release contained in a January 15, 2004
Settlement Agreement and General Release between WWE and the Company (the
“Release”). The Court also established a briefing schedule for WWE’s motion for
reargument of the dismissal of the Sherman Act claim. These motions were argued
and submitted in September 2006. Discovery remained stayed.
On
November 30, 2007, the Court indicated that the WWE Action would be dismissed.
On December 21, 2007 the Court dismissed the WWE Action with prejudice (the
"December 2007 Order") based on (1) the failure to plead RICO injury; (2) the
bar of the RICO statute of limitations; (3) the denial of WWE’s motion for
reconsideration of the Sherman Act claim; and (4) the lack of subject matter
jurisdiction with respect to the pendent state law claims. Thereafter, WWE
filed
an appeal to the Second Circuit Court of Appeals. We filed a motion for
reconsideration of the part of the December 2007 Order that stated that the
Release did not bar the WWE Action. That motion has been fully briefed and
submitted to the Court. We also filed a cross-appeal based on the Court's
earlier order denying our request to dismiss based on the lack of a cognizable
enterprise and based on the December 2007 Order's statement with respect to
the
Release. A scheduling order was issued by the Second Circuit with respect to
the
Appeal. Thereafter, WWE moved to dismiss our cross-appeal. That motion is in
the
process of being briefed. We moved for a declaration that the Appeal was stayed
by virtue of the motion for reconsideration. That motion is in the process
of
briefing.
In
November 2004, several purported class action lawsuits were filed in the United
States District Court for the Southern District of New York: (1) Garcia v.
JAKKS
Pacific, Inc. et al., Civil Action No. 04-8807 (filed on November 5, 2004),
(2)
Jonco Investors, LLC v. JAKKS Pacific, Inc. et al., Civil Action No. 04-9021
(filed on November 16, 2004), (3) Kahn v. JAKKS Pacific, Inc. et al., Civil
Action No. 04-8910 (filed on November 10, 2004), (4) Quantum Equities L.L.C.
v.
JAKKS Pacific, Inc. et al., Civil Action No. 04-8877 (filed on November 9,
2004), and (5) Irvine v. JAKKS Pacific, Inc. et al., Civil Action No. 04-9078
(filed on November 16, 2004) (the “Class Actions”). The complaints in the Class
Actions alleged that defendants issued positive statements concerning increasing
sales of our WWE licensed products which were false and misleading because
the
WWE licenses had allegedly been obtained through a pattern of commercial
bribery, our relationship with the WWE was being negatively impacted by the
WWE’s contentions and there was an increased risk that the WWE would either seek
modification or nullification of the licensing agreements with us. Plaintiffs
also alleged that we misleadingly failed to disclose the alleged fact that
the
WWE licenses were obtained through an unlawful bribery scheme. The plaintiffs
in
the Class Actions were described as purchasers of our common stock, who
purchased from as early as October 26, 1999 to as late as October 19, 2004.
The
Class Actions sought compensatory and other damages in an undisclosed amount,
alleging violations of Section 10(b) of the Securities Exchange Act of 1934
(the
“Exchange Act”) and Rule 10b-5 promulgated thereunder by each of the defendants
(namely the Company and Messrs. Friedman, Berman and Bennett), and violations
of
Section 20(a) of the Exchange Act by Messrs. Friedman, Berman and Bennett.
On
January 25, 2005, the Court consolidated the Class Actions under the caption
In
re JAKKS Pacific, Inc. Shareholders Class Action Litigation, Civil Action No.
04-8807. On May 11, 2005, the Court appointed co-lead counsels and provided
until July 11, 2005 for an amended complaint to be filed; and a briefing
schedule thereafter with respect to a motion to dismiss. The motion to dismiss
was fully briefed and argument occurred on November 30, 2006. The motion was
granted in January 2008 to the extent that the Class Actions were dismissed
without prejudice to plaintiffs’ right to seek leave to file an amended
complaint based on statements that the WWE licenses were obtained from the
WWE
as a result of the long-term relationship with WWE. A motion seeking leave
to
file an amended complaint was filed on February 25, 2008.
We
believe that the claims in the WWE Action and the Class Actions are without
merit and we intend to defend vigorously against them. However, because these
Actions are in their preliminary stages or are on appeal, we cannot assure
you
as to the outcome of the Actions, nor can we estimate the range of our potential
losses.
On
December 2, 2004, a shareholder derivative action was filed in the Southern
District of New York by Freeport Partner, LLC against us, nominally, and against
Messrs. Friedman, Berman and Bennett, Freeport Partners v. Friedman, et al.,
Civil Action No. 04-9441 (the “Derivative Action”). The Derivative Action seeks
to hold the individual defendants liable for damages allegedly caused to us
by
their actions and in particular to hold them liable on a contribution theory
with respect to any liability we incur in connection with the Class Actions.
On
or about February 10, 2005, a second shareholder derivative action was filed
in
the Southern District of New York by David Oppenheim against us, nominally,
and
against Messrs. Friedman, Berman, Bennett, Blatte, Glick, Miller and Skala,
Civil Action 05-2046 (the “Second Derivative Action”). The Second Derivative
Action seeks to hold the individual defendants liable for damages allegedly
caused to us by their actions as a result of alleged breaches of their fiduciary
duties. On or about March 16, 2005, a third shareholder derivative action was
filed. It is captioned Warr v. Friedman, Berman, Bennett, Blatte, Glick, Miller,
Skala, and JAKKS (as a nominal defendant), and it was filed in the Superior
Court of California, Los Angeles County (the “Third Derivative Action”). The
Third Derivative Action seeks to hold the individual defendants liable for
(1)
damages allegedly caused to us by their alleged breaches of fiduciary duty,
abuse of control, gross mismanagement, waste of corporate assets and unjust
enrichment; and (2) restitution to us of profits, benefits and other
compensation obtained by them. Stays/and or extensions of time to answer are
in
place with respect to the derivative actions.
On
March
1, 2005, we delivered a Notice of Breach of Settlement Agreement and Demand
for
Indemnification to WWE (the “Notification”). The Notification asserted that
WWE’s filing of the WWE Action violated a Covenant Not to Sue contained in a
January 15, 2004 Settlement Agreement and General Release (“General Release”)
entered into between WWE and us and, therefore, that we were demanding
indemnification, pursuant to the Indemnification provision contained in the
General Release, for all losses that the WWE’s actions have caused or will cause
to us and our officers, including but not limited to any losses sustained by
us
in connection with the Class Actions. On March 4, 2005, in a letter from its
outside counsel, WWE asserted that the General Release does not cover the claims
in the WWE Action.
On
March
30, 2006, WWE’s counsel wrote a letter alleging breaches by the joint venture of
the video game agreement relating to the manner of distribution and the payment
of royalties to WWE with respect to sales of the WWE video games in Japan.
WWE
has demanded that the alleged breaches be cured within the time periods provided
in the video game license, while reserving all of its rights, including its
alleged right of termination of the video game license.
On
April
28, 2006 the joint venture responded, asserting, among other things, that WWE
had acquiesced in the manner of distribution in Japan and the payment of
royalties with respect to such sales and, in addition, had separately released
the joint venture from any claims with respect to such matter, including the
payment of royalties with respect to such sales, and that there is therefore
no
basis for an allegation of a breach of the license agreement. While the joint
venture does not believe that WWE has a valid claim, it tendered a protective
“cure” of the alleged breaches with a full reservation of rights. WWE “rejected”
that cure and reserved its rights.
On
October 12, 2006, WWE commenced a lawsuit in Connecticut state court against
THQ
and THQ/JAKKS Pacific LLC (the “LLC”), involving a claim set forth above
concerning allegedly improper sales of WWE video games in Japan and other
countries in Asia (the “Connecticut Action”). The lawsuit seeks, among other
things, a declaration that WWE is entitled to terminate the video game license
and monetary damages and raised Connecticut Unfair Trade Practices Act (“CUTPA”)
and contract claims against THQ and the LLC. A motion to strike the CUTPA claim
was denied in May 2007.
In
March
2007, WWE filed a motion seeking leave to amend its complaint in the Connecticut
Action to add the principal part of the state law claims present in the WWE
Action to the Connecticut Action. That motion further sought, inter alia, to
add
our Company and Messrs. Friedman, Berman and Bennett (the “Individual
Defendants”) as defendants in the Connecticut Action. The motion was argued on
May 8, 2007 and was granted from the bench, subject to a decision that the
schedule was suspended and no discovery matters would be addressed until
pleading motions were resolved. In June 2007, our Company and the Individual
Defendants moved for a stay of the Connecticut Action, inter
alia
, based
on the pendency of the WWE Action. On July 30, 2007, in light of the
pending motion to dismiss in the WWE Action, the Court ordered a 120-day stay
of
the Connecticut Action (the "Stay"). In November 2007 we moved for a
continuation of the Stay. WWE served discovery and sought leave to file an
amended complaint alleging the state law claims from the WWE Action. Thereafter
we moved for a conference and a stay of discovery. A conference was held on
January 14, 2008 at which WWE was allowed to amend its complaint to assert
the
state law claims set forth in the WWE Action and a briefing schedule was
established with respect to a combined motion to strike and a motion for summary
judgment (the "Dispositive Motion"). The Court subsequently denied the motion
for a protective order except to the extent that we are to submit a response
to
the discovery requests at the end of March 2008. Also, the Court granted
permission for WWE to submit a proposed case management order. WWE did so in
February 2008 and it provided for a trial on or after October 2009. On February
22, 2008, we submitted a response in which we requested that no case management
order be adopted prior to the determination of the Dispositive Motion because
it
would moot such a case management order but that if a case management order
is
to be adopted it should provide for a trial, if the matter is not fully
dismissed, not before June 2010.
We
believe that the claims in the Connecticut Action are without merit and we
intend to defend vigorously against them. However, because this action is in
its
preliminary stage, we cannot assure you as to the outcome of the action, nor
can
we estimate the range of our potential losses. THQ and the LLC have stated
that
they believe the claims in the Connecticut Action prior to the additional claims
in the amended complaint are without merit and intend to defend themselves
vigorously. However, because this action is in its preliminary stage, we cannot
assure you as to the outcome, nor can we estimate the range of our potential
losses, if any.
Our
agreement with THQ provides for payment of a preferred return to us in
connection with our joint venture. The preferred return is subject to change
after June 30, 2006 and is to be set for the distribution period beginning
July
1, 2006 and ending December 31, 2009 (the “Next Distribution Period”). The
agreement provides that the parties will negotiate in good faith and agree
to
the preferred return not less than 180 days prior to the start of the Next
Distribution Period. It further provides that if the parties are unable to
agree
on a preferred return, the preferred return will be determined by arbitration.
The parties have not reached an agreement with respect to the preferred return
for the Next Distribution Period and the preferred return is to be determined
through arbitration. On April 30, 2007, THQ filed an action in the Superior
Court, Los Angeles County, to compel arbitration and to appoint an arbitrator
pursuant to the relevant provisions of the agreement. An order was issued that
identified five potential arbitrators. The parties did not agree on an
arbitrator. JAKKS served notices of disqualification on four of the potential
arbitrators; THQ objected; the Court struck the disqualification notices and
appointed an arbitrator, who was then stricken by JAKKS. JAKKS appealed the
Court’s order with respect to the disclosure and disqualification process and
the appellate court took the appeal and stayed the proceedings. The Court
rendered a decision on the matter on February 28, 2008 which decision affirmed
the lower court's decision ruling that disclosure was not required until after
the arbitrator was nominated to serve by the Court.
We
are a
party to, and certain of our property is the subject of, various other 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.
RISK
FACTORS
From
time
to time we publish forward-looking statements. We note that a variety of factors
could cause our actual results and experience to differ materially from the
anticipated results or other expectations expressed or anticipated in our
forward-looking statements. The factors listed below are illustrative of the
risks and uncertainties that may arise and that may be detailed from time to
time in our public announcements and our filings with the Securities and
Exchange Commission, such as on Forms 8-K, 10-Q and 10-K. We undertake no
obligation to make any revisions to the forward-looking statements contained
in
this prospectus to reflect events or circumstances occurring after the date
of
the filing of this prospectus.
The
outcome of litigation in which we have been named as a defendant is
unpredictable and a materially adverse decision in any such matter could have
a
material adverse affect on our financial position and results of
operations.
We
are
defendants in litigation matters, as described under “Legal Proceedings” above
and in our periodic reports filed pursuant to the Securities Exchange Act of
1934, including the lawsuit commenced by WWE and the purported securities class
action and derivative action claims stemming from the WWE lawsuit (see “Legal
Proceedings”). These claims may divert financial and management resources that
would otherwise be used to benefit our operations. Although we believe that
we
have meritorious defenses to the claims made in each and all of the litigation
matters to which we have been named a party, and intend to contest each lawsuit
vigorously, no assurances can be given that the results of these matters will
be
favorable to us. A materially adverse resolution of any of these lawsuits could
have a material adverse effect on our financial position and results of
operations.
Our
inability to redesign, restyle and extend our existing core products and product
lines as consumer preferences evolve, and to develop, introduce and gain
customer acceptance of new products and product lines, may materially and
adversely impact our business, financial condition and results of
operations.
Our
business and operating results depend largely upon the appeal of our products.
Our continued success in the toy industry will depend on our ability to
redesign, restyle and extend our existing core products and product lines as
consumer preferences evolve, and to develop, introduce and gain customer
acceptance of new products and product lines. Several trends in recent years
have presented challenges for the toy industry, including:
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The
phenomenon of children outgrowing toys at younger ages, particularly
in
favor of interactive
and
high technology products;
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Increasing
use of technology;
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Shorter
life cycles for individual products;
and
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Higher
consumer expectations for product quality, functionality and
value.
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We
cannot
assure you that:
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our
current products will continue to be popular with
consumers;
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the
product lines or products that we introduce will achieve any significant
degree of market
acceptance;
or
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the
life cycles of our products will be sufficient to permit us to recover
licensing, design,
manufacturing,
marketing and other costs associated with those
products.
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Our
failure to achieve any or all of the foregoing benchmarks may cause the
infrastructure of our operations to fail, thereby adversely affecting our
business, financial condition and results of operations.
The
failure of our character-related and theme-related products to become and/or
remain popular with children may materially and adversely impact our business,
financial condition and results of operations.
The
success of many of our character-related and theme-related products depends
on
the popularity of characters in movies, television programs, live wrestling
exhibitions, auto racing events and other media. We cannot assure you
that:
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media
associated with our character-related and theme-related product lines
will
be released
at
the times we expect or will be
successful;
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the
success of media associated with our existing character-related and
theme-related product
lines
will result in substantial promotional value to our
products;
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we
will be successful in renewing licenses upon expiration on terms
that are
favorable to us; or
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we
will be successful in obtaining licenses to produce new character-related
and theme-related
products
in the future.
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Our
failure to achieve any or all of the foregoing benchmarks may cause the
infrastructure of our operations to fail, thereby adversely affecting our
business, financial condition and results of operations.
There
are risks associated with our license agreements.
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Our
current licenses require us to pay minimum
royalties
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Sales
of
products under trademarks or trade or brand names licensed from others account
for substantially all of our net sales. Product licenses allow us to capitalize
on characters, designs, concepts and inventions owned by others or developed
by
toy inventors and designers. Our license agreements generally require us to
make
specified minimum royalty payments, even if we fail to sell a sufficient number
of units to cover these amounts. In addition, under certain of our license
agreements, if we fail to achieve certain prescribed sales targets, we may
be
unable to retain or renew these licenses.
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Some
of our licenses are restricted as to
use
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Under
the
majority of our license agreements the licensors have the right to review and
approve our use of their licensed products, designs or materials before we
may
make any sales. If a licensor refuses to permit our use of any licensed property
in the way we propose, or if their review process is delayed, our development
or
sale of new products could be impeded.
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New
licenses are difficult and expensive to
obtain
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Our
continued success will depend substantially on our ability to obtain additional
licenses. Intensive competition exists for desirable licenses in our industry.
We cannot assure you that we will be able to secure or renew significant
licenses on terms acceptable to us. In addition, as we add licenses, the need
to
fund additional royalty advances and guaranteed minimum royalty payments may
strain our cash resources.
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A
limited number of licensors account for a large portion of our net
sales
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We
derive
a significant portion of our net sales from a limited number of licensors.
If
one or more of these licensors were to terminate or fail to renew our license
or
not grant us new licenses, our business, financial condition and results of
operations could be adversely affected.
The
toy industry is highly competitive and our inability to compete effectively
may
materially and adversely impact our business, financial condition and results
of
operations.
The
toy
industry is highly competitive. Globally, certain of our competitors have
financial and strategic advantages over us, including:
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greater
financial resources;
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larger
sales, marketing and product development
departments;
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stronger
name recognition;
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longer
operating histories; and
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greater
economies of scale.
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In
addition, the toy industry has no significant barriers to entry. Competition
is
based primarily on the ability to design and develop new toys, to procure
licenses for popular characters and trademarks and to successfully market
products. Many of our competitors offer similar products or alternatives to
our
products. Our competitors have obtained and are likely to continue to obtain
licenses that overlap our licenses with respect to products, geographic areas
and markets. We cannot assure you that we will be able to obtain adequate shelf
space in retail stores to support our existing products or to expand our
products and product lines or that we will be able to continue to compete
effectively against current and future competitors.
An
adverse outcome in the litigation commenced against us and against our video
game joint venture with THQ by WWE, or a decline in the popularity of WWE,
could
adversely impact our interest in that joint
venture.
The
joint
venture with THQ depends entirely on a single license, which gives the venture
exclusive worldwide rights to produce and market video games based on World
Wrestling Entertainment characters and themes. An adverse outcome against us,
THQ or the joint venture in the lawsuit commenced by WWE, or an adverse outcome
against THQ or the joint venture in the lawsuit commenced by WWE against THQ
and
the joint venture (see the first Risk Factor, above, and “Legal Proceedings”),
would adversely impact our rights under the joint venture’s single license,
which would adversely affect the joint venture’s and our business, financial
condition and results of operation.
Furthermore,
the popularity of professional wrestling, in general, and World Wrestling
Entertainment, in particular, is subject to changing consumer tastes and
demands. The relative popularity of professional wrestling has fluctuated
significantly in recent years. A decline in the popularity of World Wrestling
Entertainment could adversely affect the joint venture’s and our business,
financial condition and results of operations.
The
termination of THQ’s manufacturing licenses and the inability of the joint
venture to otherwise obtain these licenses from other manufacturers would
materially adversely affect the joint venture’s and our business, financial
condition and results of operations.
The
joint
venture relies on hardware manufacturers and THQ’s non-exclusive licenses with
them for the right to publish titles for their platforms and for the manufacture
of the joint venture’s titles. If THQ’s manufacturing licenses were to terminate
and the joint venture could not otherwise obtain these licenses from other
manufacturers, the joint venture would be unable to publish additional titles
for these manufacturers’ platforms, which would materially adversely affect the
joint venture’s and our business, financial condition and results of
operations.
The
failure of the joint venture or THQ to perform as anticipated could have a
material adverse affect on our financial position and results of
operations.
The
joint
venture’s failure to timely develop titles for new platforms that achieve
significant market acceptance, to maintain net sales that are commensurate
with
product development costs or to maintain compatibility between its personal
computer CD-ROM titles and the related hardware and operating systems would
adversely affect the joint venture’s and our business, financial condition and
results of operations.
Furthermore,
THQ controls day-to-day operations of the joint venture and all of its product
development and production operations. Accordingly, the joint venture relies
exclusively on THQ to manage these operations effectively. THQ’s failure to
effectively manage the joint venture would have a material adverse effect on
the
joint venture’s and our business and results of operations. We are also
dependent upon THQ’s ability to manage cash flows of the joint venture. If THQ
is required to retain cash for operations, or because of statutory or
contractual restrictions, we may not receive cash payments for our share of
profits, on a timely basis, or at all.
The
amount of preferred return that we now receive from the joint venture is subject
to change, which could adversely affect our results of
operations.
The
joint
venture agreement provides for us to have received guaranteed preferred returns
through June 30, 2006 at varying rates of the joint venture’s net sales
depending on the cumulative unit sales and platform of each particular game.
The
preferred return was subject to change after June 30, 2006 and was to be
set for the distribution period beginning July 1, 2006 and ending
December 31, 2009 (the “Next Distribution Period”). The agreement provides
that the parties will negotiate in good faith and agree to the preferred return
not less than 180 days prior to the start of the Next Distribution Period.
It further provides that if the parties are unable to agree on a preferred
return, the preferred return will be determined by arbitration. Since the
parties have not reached an agreement with respect to the preferred return
for
the Next Distribution Period, the preferred return for the Next Distribution
Period is to be determined through arbitration. The preferred return
is accrued in the quarter in which the licensed games are sold and the preferred
return is earned. Based on the same rates as set forth under the
original joint venture agreement, an estimated receivable of $35.3 million
has
been accrued for the eighteen months ending December 31, 2007, pending the
resolution of this outstanding issue.
Any
adverse change to the preferred return for the Next Distribution Period as
well
as the ongoing performance of the joint venture may result in our experiencing
reduced net income, which would adversely affect our results of
operations.
We
may not be able to sustain or manage our rapid growth, which may prevent us
from
continuing to increase our net revenues.
We
have
experienced rapid growth in our product lines resulting in higher net sales
over
the last six years, which was achieved through acquisitions of businesses,
products and licenses. For example, revenues associated with companies we
acquired since 2005 were approximately $185.6 million and $11.8 million, in
2006
and 2007, respectively, representing 24.3% and 1.4% of our total revenues for
those periods. As a result, comparing our period-to-period operating results
may
not be meaningful and results of operations from prior periods may not be
indicative of future results. We cannot assure you that we will continue to
experience growth in, or maintain our present level of, net sales.
Our
growth strategy calls for us to continuously develop and diversify our toy
business by acquiring other companies, entering into additional license
agreements, refining our product lines and expanding into international markets,
which will place additional demands on our management, operational capacity
and
financial resources and systems. The increased demand on management may
necessitate our recruitment and retention of qualified management personnel.
We
cannot assure you that we will be able to recruit and retain qualified personnel
or expand and manage our operations effectively and profitably. To effectively
manage future growth, we must continue to expand our operational, financial
and
management information systems and to train, motivate and manage our work force.
There can be no assurance that our operational, financial and management
information systems will be adequate to support our future operations. Failure
to expand our operational, financial and management information systems or
to
train, motivate or manage employees could have a material adverse effect on
our
business, financial condition and results of operations.
In
addition, implementation of our growth strategy is subject to risks beyond
our
control, including competition, market acceptance of new products, changes
in
economic conditions, our ability to obtain or renew licenses on commercially
reasonable terms and our ability to finance increased levels of accounts
receivable and inventory necessary to support our sales growth, if any.
Accordingly, we cannot assure you that our growth strategy will continue to
be
implemented successfully.
If
we are unable to acquire and integrate companies and new product lines
successfully, we will be unable to implement a significant component of our
growth strategy.
Our
growth strategy depends in part upon our ability to acquire companies and new
product lines. Revenues associated with our acquisitions since 2005 represented
approximately 24.3% and 1.4% of our total revenues in 2006 and 2007,
respectively. Future acquisitions will succeed only if we can effectively assess
characteristics of potential target companies and product lines, such
as:
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attractiveness
of products;
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suitability
of distribution channels;
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financial
condition and results of operations;
and
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the
degree to which acquired operations can be integrated with our
operations.
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We
cannot
assure you that we can identify attractive acquisition candidates or negotiate
acceptable acquisition terms, and our failure to do so may adversely affect
our
results of operations and our ability to sustain growth. Our acquisition
strategy involves a number of risks, each of which could adversely affect our
operating results, including:
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difficulties
in integrating acquired businesses or product lines, assimilating
new
facilities and
personnel
and harmonizing diverse business strategies and methods of
operation;
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diversion
of management attention from operation of our existing
business;
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loss
of key personnel from acquired companies;
and
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failure
of an acquired business to achieve targeted financial
results.
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A
limited number of customers account for a large portion of our net sales, so
that if one or more of our major customers were to experience difficulties
in
fulfilling their obligations to us, cease doing business with us, significantly
reduce the amount of their purchases from us or return substantial amounts
of
our products, it could have a material adverse effect on our business, financial
condition and results of operations.
Our
three
largest customers accounted for 47.9% of our net sales in 2007. Except for
outstanding purchase orders for specific products, we do not have written
contracts with or commitments from any of our customers. A substantial reduction
in or termination of orders from any of our largest customers could adversely
affect our business, financial condition and results of operations. In addition,
pressure by large customers seeking price reductions, financial incentives,
changes in other terms of sale or for us to bear the risks and the cost of
carrying inventory also could adversely affect our business, financial condition
and results of operations. If one or more of our major customers were to
experience difficulties in fulfilling their obligations to us, cease doing
business with us, significantly reduce the amount of their purchases from us
or
return substantial amounts of our products, it could have a material adverse
effect on our business, financial condition and results of operations. In
addition, the bankruptcy or other lack of success of one or more of our
significant retailers could negatively impact our revenues and bad debt
expense.
We
depend on our key personnel and any loss or interruption of either of their
services could adversely affect our business, financial condition and results
of
operations.
Our
success is largely dependent upon the experience and continued services of
Jack
Friedman, our Chairman and Chief Executive Officer, and Stephen G. Berman,
our
President and Chief Operating Officer. We cannot assure you that we would be
able to find an appropriate replacement for Mr. Friedman or Mr. Berman if the
need should arise, and any loss or interruption of Mr. Friedman’s or Mr.
Berman’s services could adversely affect our business, financial condition and
results of operations.
We
depend on third-party manufacturers, and if our relationship with any of them
is
harmed or if they independently encounter difficulties in their manufacturing
processes, we could experience product defects, production delays, cost overruns
or the inability to fulfill orders on a timely basis, any of which could
adversely affect our business, financial condition and results of
operations.
We
depend
on many third-party manufacturers who develop, provide and use the tools, dies
and molds that we own to manufacture our products. However, we have limited
control over the manufacturing processes themselves. As a result, any
difficulties encountered by the third-party manufacturers that result in product
defects, production delays, cost overruns or the inability to fulfill orders
on
a timely basis could adversely affect our business, financial condition and
results of operations.
We
do not
have long-term contracts with our third-party manufacturers. Although we believe
we could secure other third-party manufacturers to produce our products, our
operations would be adversely affected if we lost our relationship with any
of
our current suppliers or if our current suppliers’ operations or sea or air
transportation with our overseas manufacturers were disrupted or terminated
even
for a relatively short period of time. Our tools, dies and molds are located
at
the facilities of our third-party manufacturers.
Although
we do not purchase the raw materials used to manufacture our products, we are
potentially subject to variations in the prices we pay our third-party
manufacturers for products, depending on what they pay for their raw
materials.
We
have substantial sales and manufacturing operations outside of the United States
subjecting us to risks common to international
operations.
We
sell
products and operate facilities in numerous countries outside the United States.
For the year ended December 31, 2007 sales to our international customers
comprised approximately 14.7% of our net sales. We expect our sales to
international customers to account for a greater portion of our revenues in
future fiscal periods. Additionally, we utilize third-party manufacturers
located principally in China which are subject to the risks normally associated
with international operations, including:
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•
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currency
conversion risks and currency
fluctuations;
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•
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limitations,
including taxes, on the repatriation of
earnings;
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•
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political
instability, civil unrest and economic
instability;
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•
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greater
difficulty enforcing intellectual property rights and weaker laws
protecting such rights;
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•
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complications
in complying with laws in varying jurisdictions and changes in
governmental policies;
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•
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greater
difficulty and expenses associated with recovering from natural
disasters;
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•
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transportation
delays and interruptions;
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•
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the
potential imposition of tariffs;
and
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•
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the
pricing of intercompany transactions may be challenged by taxing
authorities in both
Hong
Kong and the United States, with potential increases in income
taxes.
|
Our
reliance on external sources of manufacturing can be shifted, over a period
of
time, to alternative sources of supply, should such changes be necessary.
However, if we were prevented from obtaining products or components for a
material portion of our product line due to medical, political, labor or other
factors beyond our control, our operations would be disrupted while alternative
sources of products were secured. Also, the imposition of trade sanctions by
the
United States against a class of products imported by us from, or the loss
of
“normal trade relations” status by China, could significantly increase our cost
of products imported from that nation. Because of the importance of our
international sales and international sourcing of manufacturing to our business,
our financial condition and results of operations could be significantly and
adversely affected if any of the risks described above were to
occur.
Our
business is subject to extensive government regulation and any violation by
us
of such regulations could result in product liability claims, loss of sales,
diversion of resources, damage to our reputation, increased warranty costs
or
removal of our products from the market, and we cannot assure you that our
product liability insurance for the foregoing will be
sufficient.
Our
business is subject to various laws, including the Federal Hazardous Substances
Act, the Consumer Product Safety Act, the Flammable Fabrics Act and the rules
and regulations promulgated under these acts. These statutes are administered
by
the CPSC, which has the authority to remove from the market products that are
found to be defective and present a substantial hazard or risk of serious injury
or death. The CPSC can require a manufacturer to recall, repair or replace
these
products under certain circumstances. We cannot assure you that defects in
our
products will not be alleged or found. Any such allegations or findings could
result in:
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•
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product
liability claims;
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•
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diversion
of resources;
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•
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damage
to our reputation;
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•
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increased
warranty costs; and
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•
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removal
of our products from the
market.
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Any
of
these results may adversely affect our business, financial condition and results
of operations. There can be no assurance that our product liability insurance
will be sufficient to avoid or limit our loss in the event of an adverse outcome
of any product liability claim.
We
depend on our proprietary rights and our inability to safeguard and maintain
the
same, or claims of third parties that we have violated their intellectual
property rights, could have a material adverse effect on our business, financial
condition and results of operations.
We
rely
on trademark, copyright and trade secret protection, nondisclosure agreements
and licensing arrangements to establish, protect and enforce our proprietary
rights in our products. The laws of certain foreign countries may not protect
intellectual property rights to the same extent or in the same manner as the
laws of the United States. We cannot assure you that we or our licensors will
be
able to successfully safeguard and maintain our proprietary rights. Further,
certain parties have commenced legal proceedings or made claims against us
based
on our alleged patent infringement, misappropriation of trade secrets or other
violations of their intellectual property rights. We cannot assure you that
other parties will not assert intellectual property claims against us in the
future. These claims could divert our attention from operating our business
or
result in unanticipated legal and other costs, which could adversely affect
our
business, financial condition and results of operations.
Market
conditions and other third-party conduct could negatively impact our margins
and
implementation of other business initiatives.
Economic
conditions, such as rising fuel prices and decreased consumer confidence, may
adversely impact our margins. In addition, general economic conditions were
significantly and negatively affected by the September 11th terrorist attacks
and could be similarly affected by any future attacks. Such a weakened economic
and business climate, as well as consumer uncertainty created by such a climate,
could adversely affect our sales and profitability. Other conditions, such
as
the unavailability of electronics components, may impede our ability to
manufacture, source and ship new and continuing products on a timely basis.
Significant and sustained increases in the price of oil could adversely impact
the cost of the raw materials used in the manufacture of our products, such
as
plastic.
We
may not have the funds necessary to purchase our outstanding convertible senior
notes upon a fundamental change or other purchase date, as required by the
indenture governing the notes.
On
June
15, 2010, June 15, 2013 and June 15, 2018, holders of our convertible senior
notes may require us to purchase their notes, which repurchase may be made
for
cash. In addition, holders may also require us to purchase their notes for
cash
upon the occurrence of certain fundamental changes in our board composition
or
ownership structure, if we liquidate or dissolve under certain circumstances
or
if our common stock ceases being quoted on an established over-the-counter
trading market in the United States. If we do not have, or have access to,
sufficient funds to repurchase the notes, then we could be forced into
bankruptcy. In fact, we expect that we would require third-party financing,
but
we cannot assure you that we would be able to obtain that financing on favorable
terms or at all.
We
have a material amount of goodwill which, if it becomes impaired, would result
in a reduction in our net income.
Goodwill
is the amount by which the cost of an acquisition accounted for using the
purchase method exceeds the fair value of the net assets we acquire. Current
accounting standards require that goodwill no longer be amortized but instead
be
periodically evaluated for impairment based on the fair value of the reporting
unit. As of December 31, 2007, we have not had any impairment of Goodwill,
which
is reviewed on a quarterly basis and formally evaluated on an annual
basis.
At
December 31, 2007, approximately $353.3 million, or 36.0%, of our total assets
represented goodwill. Declines in our profitability may impact the fair value
of
our reporting units, which could result in a write-down of our goodwill.
Reductions in our net income caused by the write-down of goodwill would
adversely affect our results of operations.
USE
OF PROCEEDS
We
will
not receive any of the proceeds from the sale by the selling security holders
of
any of the shares of common stock offered for resale through this prospectus,
although we will receive the proceeds from any cash exercise of a stock option
that precedes a sale of the underlying stock. All proceeds from the resale
of
the shares of our common stock offered for resale through this prospectus will
be for the account of the selling security holders.
SELLING
SECURITY HOLDERS
The
following table sets forth certain information regarding the beneficial
ownership of shares of our common stock by the named selling security holders
as
of March 3, 2008, and the number of common shares covered by this prospectus.
The following table assumes that the selling security holders will sell all
of
the shares offered by them in this offering. However, we are unable to determine
the exact number of shares that will actually be sold or when or if these sales
will occur. Except as noted below, the shares offered for sale constitute all
of
the common shares known to us to be beneficially owned by the respective selling
security holders. Except as set forth in the table below, to our knowledge,
following the offering and sale of the shares, none of the selling security
holders will beneficially own more than one percent of the issued and
outstanding shares of our common stock. This prospectus may be amended or
supplemented from time to time to amend or supplement the information set forth
in the table below.
We
may
require the selling security holders to suspend the sales of the securities
offered by this prospectus upon the occurrence of any event that makes any
statement in this prospectus or the related registration statement untrue in
any
material respect or that requires the changing of statements in these documents
in order to make statements in those documents not misleading.
Other
than the relationships described below, none of the selling security holders
has, nor have they within the past three years had, any material relationship
with us. To our knowledge, none of the selling security holders is a
broker-dealer or an affiliate of a broker-dealer.
The
applicable percentages of ownership of shares of common stock shown in the
table
below are based on an aggregate of 28,627,855 common shares issued and
outstanding on February 29, 2008. The number of shares shown in the table as
beneficially owned is determined under rules promulgated by the SEC. Unless
otherwise noted, the address of the selling security holders is c/o JAKKS
Pacific, 22619 Pacific Coast Highway, Malibu, CA 90265.
| |
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Number
of
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|
Number
of
|
| |
|
Shares
Beneficially Owned
|
|
Number
of Shares
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|
Shares
Beneficially Owned
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|
Selling
Security Holders
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|
Prior
to the Offering(1)
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Offered
Hereby(2)
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After
Offering(1)(3)
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Jack
Friedman
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614,101
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(4)
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610,915
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3,186
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Stephen
G. Berman
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290,567
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(5)
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290,567
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0
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Joel
M. Bennett
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51,366
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(6)
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51,366
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0
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Dan
Almagor
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47,222
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(7)
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47,222
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0
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David
C. Blatte
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95,768
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(8)
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95,768
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0
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Robert
E. Glick
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117,289
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(9)
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117,289
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0
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Michael
G. Miller
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107,914
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(10)
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107,914
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0
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Murray
L. Skala
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116,042
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(11)
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116,042
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0
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|
| (1) |
Includes
all shares beneficially owned, whether directly or indirectly,
individually or together with associates, jointly or as community
property
with a spouse and shares to which each individual has the right to
acquire
beneficial ownership within 60 days of February 29, 2008.
The
inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such
shares.
|
| (2) |
Represents
the maximum number of shares issued under the Plan that could be
sold
under this prospectus if the holder exercised all of his options
when
vested and sold the underlying shares. This number does not constitute
a
commitment to sell any or all of the
shares.
|
| (3) |
The
Number of Shares Beneficially Owned After the Offering is based on
the
assumption that all stock options for shares being offered have been
exercised for cash and the shares have been sold. The Percentage
of Shares
Beneficially Owned After the Offering is based upon 28,627,855 shares
of
our common stock outstanding as of February 29, 2008, plus shares
of
common stock as to which that particular holder has the right to
acquire
beneficial ownership within 60 days of February 29,
2008.
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| (4) |
Mr.
Friedman is our Chairman and Chief Executive Officer. Includes 120,000
shares of common stock issued on January 1, 2008 pursuant to the
terms of
Mr. Friedman’s January 1, 2003 Employment Agreement, which shares are
further subject to the terms of our January 1, 2008 Restricted Stock
Award
Agreement with Mr. Friedman (the “Friedman Agreement”). The Friedman
Agreement provides that Mr. Friedman will forfeit his rights to all
120,000 shares unless certain conditions precedent are met prior
to
January 1, 2009, including the condition that our Pre-Tax Income
(as
defined in the Friedman Agreement) for 2008 exceeds $2,000,000, whereupon
the forfeited shares will become authorized but unissued shares of
our
common stock. The Friedman Agreement, as modified by a subsequent
agreement with our Board of Directors as a condition to receiving
the
20,567 restricted share grant described below, further prohibits
Mr.
Friedman from selling, assigning, transferring, pledging or otherwise
encumbering (a) 50,000 of the 120,000 shares prior to January 1,
2009 and
10,000 until January 1, 2011, (b) of the remaining 60,000 shares,
50,000
shares prior to January 1, 2010; provided, however, that if our Pre-Tax
Income for 2008 exceeds $2,000,000 and our Adjusted EPS Growth (as
defined
in the Friedman Agreement) for 2008 increases by certain percentages
as
set forth in the Friedman Agreement, the vesting of some or all of
the
50,000 shares that would otherwise vest on January 1, 2010 will be
accelerated to the date the Adjusted EPS Growth is determined and
(c) the
remaining 10,000 shares until two years after the vesting date of
all of
the 50,000 shares described in (b). Mr. Friedman is prohibited
from selling, assigning, transferring, pledging or otherwise encumbering
15,000 shares issued him on January 1, 2007 until January 1, 2009.
Also
includes 20,567 shares granted on February 14, 2008, which are subject
to
a three-year restriction on sale, and 175,000 shares subject to
restriction on sale until June 11, 2009 of which shares not more
than
87,500 shares may be sold prior to June 11,
2010.
|
| (5) |
Mr.
Berman is our President, Chief Operating Officer, Secretary and a
Director. Includes 120,000 shares of common stock issued on January
1,
2008 pursuant to the terms of Mr. Berman’s January 1, 2003 Employment
Agreement, which shares are further subject to the terms of our January
1,
2008 Restricted Stock Award Agreement with Mr. Berman (the “Berman
Agreement”). The Berman Agreement provides that Mr. Berman will forfeit
his rights to all 120,000 shares unless certain conditions precedent
are
met prior to January 1, 2009, including the condition that our Pre-Tax
Income (as defined in the Berman Agreement) for 2008 exceeds $2,000,000,
whereupon the forfeited shares will become authorized but unissued
shares
of our common stock. The Berman Agreement, as modified by a subsequent
agreement with our Board of Directors as a condition to receiving
the
20,567 restricted share grant described below, further prohibits
Mr.
Berman from selling, assigning, transferring, pledging or otherwise
encumbering (a) 50,000 of the 120,000 shares prior to January 1,
2009 and
10,000 until January 1, 2011, (b) of the remaining 60,000 shares,
50,000
shares prior to January 1, 2010; provided, however, that if our Pre-Tax
Income for 2008 exceeds $2,000,000 and our Adjusted EPS Growth (as
defined
in the Berman Agreement) for 2008 increases by certain percentages
as set
forth in the Berman Agreement, the vesting of some or all of the
50,000
shares that would otherwise vest on January 1, 2010 will be accelerated
to
the date the Adjusted EPS Growth is determined and (c) the remaining
10,000 shares until two years after the vesting date of all of the
50,000
shares described in (b). Mr. Berman is prohibited from
selling, assigning, transferring, pledging or otherwise encumbering
15,000
shares issued him on January 1, 2007 until January 1, 2009. Also
includes
20,567 shares granted on February 14, 2008, which are subject to
a
three-year restriction on sale, and 175,000 shares subject to restriction
on sale until June 11, 2009 of which shares not more than 87,500
shares
may be sold prior to June 11, 2010.
|
| (6) |
Mr.
Bennett is our Executive Vice President and Chief Financial Officer.
Includes 10,000 shares of restricted common stock granted by our
Board of
Directors to Mr. Bennett upon the execution of his new employment
agreement (see “Executive Compensation- Employment Agreements”), which
restricted shares vest in equal annual installments of 5,000 shares
each
on December 31, 2008 and 2009. Also includes 3,593 restricted shares
on
February 29, 2008 and which vest 50% on March 1, 2009 and the balance
on
March 1, 2010.
|
| (7) |
Mr.
Almagor is one of our Directors. Includes 29,644 shares, which Mr.
Almagor
may purchase upon the exercise of certain stock options, and 17,578
shares
of common stock issued pursuant to our 2002 Stock Award and Incentive
Plan, pursuant to which 5,068 shares may not be sold, mortgaged,
transferred or otherwise encumbered prior to January 1,
2009.
|
| (8) |
Mr.
Blatte is one of our Directors. Includes 82,500 shares, which Mr.
Blatte
may purchase upon the exercise of certain stock options, and 13,268
shares
of common stock issued pursuant to our 2002 Stock Award and Incentive
Plan, pursuant to which 5,068 of such shares may not be sold, mortgaged,
transferred or otherwise encumbered prior to January 1,
2009.
|
| (9) |
Mr.
Glick is one of our Directors. Includes 99,021 shares, which Mr.
Glick may
purchase upon the exercise of certain stock options, and 18,268 shares
of
Common Stock issued pursuant to our 2002 Stock Award and Incentive
Plan,
pursuant to which 5,068 of such shares may not be sold, mortgaged,
transferred or otherwise encumbered prior to January 1,
2009.
|
| (10) |
Mr.
Miller is one of our Directors. Includes 89,646 shares, which Mr.
Miller
may purchase upon the exercise of certain stock options, and 18,268
shares
of Common Stock issued pursuant to our 2002 Stock Award and Incentive
Plan, pursuant to which 5,068 of such shares may not be sold, mortgaged,
transferred or otherwise encumbered prior to January 1,
2009.
|
| (11) |
Mr.
Skala is one of our Directors. Includes 97,771 shares, which Mr.
Skala may
purchase upon the exercise of certain stock options, and 18,268 shares
of
common stock issued pursuant to our 2002 Stock Award and Incentive
Plan,
pursuant to which 5,068 of such shares may not be sold, mortgaged,
transferred or otherwise encumbered prior to January 1,
2009.
|
PLAN
OF DISTRIBUTION
The
selling security holders, and any of their transferees, pledgees, donees,
assignees or other successors-in-interest (including successors by gift,
partnership distribution or other non-sale-related transfer effected after
the
date of this prospectus), may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility
(including over-the-counter markets or inter-dealer quotation systems) or
otherwise on (or through) which the shares are traded or in private
transactions. These sales may be at fixed prices, at market prices at the time
of sale, at varying prices determined at the time of sale or at negotiated
prices or in transactions involving crosses or block transactions. The selling
security holders may use any one or more of the following methods when selling
shares:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
through
the writing of options, whether the options are listed on an options
exchange or otherwise;
|
| · |
broker-dealers
may agree with the selling security holder to sell a specified number
of
such shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
selling security holders may also sell shares under Rule 144 or Rule 144A
under the Securities Act, if available, rather than under this prospectus.
The
selling security holders are not obligated to, and there is no assurance that
the selling security holders will, sell all or any of the shares we are
registering. The selling security holders may transfer, devise or gift such
shares by other means not described in this prospectus.
The
selling security holders may also engage in short sales against the box, puts
and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.
The
selling security holders may also loan or pledge the shares to broker-dealers
or
others who may in turn sell the shares.
Broker-dealers
engaged by the selling security holders may arrange for other brokers-dealers
to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling security holders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling security holders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might
be
deemed to be underwriting discounts or commissions under the Securities Act.
Discounts, concessions, commissions and similar selling expenses, if any,
attributable to the sale of shares will be borne by the selling security
holders. The selling security holders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act.
The
selling security holders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by it and, if it
defaults in the performance of any of its secured obligations, the pledgees
or
secured parties may offer and sell the shares of common stock from time to
time
under this prospectus as it may be supplemented from time to time, or under
an
amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling security holders
to
include the pledgee, transferee or other successors in interest as selling
security holders under this prospectus.
The
selling security holders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
Other
than as described below, to our knowledge, the selling security holders have
not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of its shares of common stock,
nor is there an underwriter or coordinating broker acting in connection with
a
proposed sale of shares of common stock by them. If we are notified by any
of
the selling security holders that any material arrangement has been entered
into
with a broker-dealer for the sale of shares of common stock, if required, we
will file a supplement to this prospectus. If the selling security holders
use
this prospectus for any sale of the shares of common stock, it will be subject
to the prospectus delivery requirements of the Securities Act, unless an
exemption therefrom is available. Messrs. Glick, Berman and Skala have each
entered into a “Rule 10b5-1 Selling Plan” pursuant to which they plan to sell
shares and/or exercise stock options and sell the underlying shares. Mr. Glick’s
plan is with Citigroup Global Markets Inc. acting through its Smith Barney
division and covers the sale of 66,000 shares between March 6, 2008 and
September 16, 2008. Mr. Skala’s plan is with Charles Schwab & Co., Inc. and
covers 60,271 shares to be sold between March 6, 2008 and August 23, 2008.
Mr.
Berman’s plan is with Wells Fargo Investments, LLC and covers 90,000 shares to
be sold during the second quarter of 2008.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
The
selling security holders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock may be “underwriters” within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be deemed to
be
underwriting discounts and commissions under the Securities Act.
Selling
security holders who are “underwriters” within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements
of
the Securities Act and may be subject to statutory liabilities, including,
but
not limited to, liability under Sections 11, 12 and 17 of the Securities
Act and Rule 10b-5 under the Securities Exchange Act of 1934. The selling
security holders have acknowledged that they understand their obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M.
We
may
suspend the use of this prospectus if we learn of any event that causes this
prospectus to include an untrue statement of a material fact required to be
stated in the prospectus or necessary to make the statements in the prospectus
not misleading in light of the circumstances then existing. If this type of
event occurs, a prospectus supplement or post-effective amendment, if required,
will be distributed to each selling security holder. Each selling security
holder has agreed not to trade securities from the time the selling security
holder receives notice from us of this type of event until the selling security
holder receives a prospectus supplement or amendment.
LEGAL
MATTERS
The
legality of the common stock being offered hereby will be passed upon for us
by
Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP, New York,
New York. Murray L. Skala, a partner of that firm, is one of our directors,
an
owner of 18,268 shares of our common stock and a holder of options to
purchase 97,771 shares of our common stock.
EXPERTS
The
financial statements and schedule as of December 31, 2007 and 2006 and
for the
years then ended and management's assessment of the effectiveness of internal
control over financial reporting as of December 31, 2007 incorporated by
reference in this Registration Statement have been so incorporated in reliance
on the reports of BDO Seidman, LLP, an independent registered public accounting
firm, incorporated herein by reference, given on the authority of said
firm as
experts in auditing and accounting.
Our
consolidated financial statements as of December 31, 2005 and for the year
then ended, incorporated by reference in this prospectus, have been audited
by
PKF, Certified Public Accountants, A Professional Corporation, Los Angeles,
California, independent auditors, as stated in their report incorporated by
reference herein.
INCORPORATION
OF DOCUMENTS BY REFERENCE
This
prospectus “incorporates by reference” certain of the reports and other
information that we have filed with the SEC under the Exchange Act. This means
that we are disclosing important information to you by referring you to those
documents. Information filed with the SEC after the date of this prospectus
will
update and supersede this information. The following documents filed with the
SEC are incorporated by reference:
We
incorporate by reference the following documents:
| |
•
|
our
Annual Report on Form 10-K for the year ended December 31, 2007, as
filed on February 29, 2008;
|
| |
•
|
the
description of our common stock contained in our Registration
Statement on
Form 8-A (File No. 0-28104), filed March 29, 1996, and as
incorporated therein by reference to our Registration Statement
on
Form SB-2 (Reg. No. 333-2048-LA);
|
| |
•
|
all
documents filed by us with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this prospectus
and
prior to the termination of the offering of shares hereunder;
and
|
| |
•
|
all
documents filed by us with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, other than any information furnished
pursuant to Item 2.02 or Item 7.01 of Form 8-K, after the date
of the initial registration statement and prior to the effectiveness
of
the registration statement of which this prospectus forms a part
shall be
deemed to be incorporated by reference in this prospectus and
to be part
of this prospectus from the date they are
filed.
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Any
statement contained in this prospectus or in a document incorporated by
reference shall be deemed to be modified or superseded for all purposes to
the
extent that a statement contained in those documents modifies or supersedes
that
statement. Any statements so modified or superseded will not be deemed to
constitute a part of this prospectus except as so modified or superseded. In
addition, any supplement prepared in relation to this prospectus shall be deemed
to supersede for all purposes any earlier supplement prepared in relation to
this prospectus.
We
will
provide each person to whom a copy of this prospectus has been delivered,
without charge, a copy of any of the documents referred to above as being
incorporated by reference. You may request a copy by writing or telephoning
Joel
M. Bennett, c/o JAKKS Pacific, Inc., 22619 Pacific Coast Highway,
Malibu, California, 90265 (telephone: 310-456-7799).
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed a Registration Statement on Form S-8 under the Securities Act, relating
to
the shares of common stock being offered by this prospectus, and reference
is
made to such registration statement. This prospectus constitutes the prospectus
of JAKKS Pacific, Inc., filed as part of the registration statement, and it
does
not contain all information in the registration statement, as certain portions
have been omitted in accordance with the rules and regulations of the
SEC.
We
are
subject to the informational requirements of the Exchange Act, which requires
us
to file reports, proxy statements and other information with the SEC. You may
inspect any document we file with the SEC at the SEC’s Public Reference Room at
100 F Street, N.E., Washington D.C. 20549. Copies of such material can be
obtained from the facility at prescribed rates. Please call the SEC toll free
at
1-800-SEC-0330 for information about its public reference room. Because we
file
documents electronically with the SEC, you may also obtain this information
by
visiting the SEC’s website at http://www.sec.gov or our website at
http://www.jakks.net. Information contained in our web site is not part of
this
prospectus.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES
ACT LIABILITY
Our
certificate of incorporation provides that the personal liability of our
directors shall be limited to the fullest extent permitted by the provisions
of
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(“DGCL”). Section 102(b)(7) of the DGCL generally provides that no director
shall be liable personally to a company or its security holders for monetary
damages for breach of fiduciary duty as a director, provided that the
certificate of incorporation does not eliminate the liability of a director
for
(1) any breach of the director’s duty of loyalty to it or its security
holders; (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) acts or omissions
in respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (4) any transaction from which such director derives an
improper personal benefit. The effect of this provision is to eliminate the
rights of a company and its security holders to recover monetary damages against
a director for breach of her or his fiduciary duty of care as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (1) through (4) above.
The limitations summarized above, however, do not affect the ability of a
company or its security holders to seek non-monetary remedies, such as an
injunction or rescission, against a director for breach of her or his fiduciary
duty.
In
addition, our certificate of incorporation provides that we shall, to the
fullest extent permitted by Section 145 of the DGCL, indemnify all persons
whom it may indemnify pursuant to Section 145 of the DGCL. In general,
Section 145 of the DGCL permits us to indemnify our directors, officers,
employees or agents or, when so serving at our request, another company who
was
or is a party or is threatened to be made a party to any proceeding because
of
his or her position, if he or she acted in good faith and in a manner reasonably
believed to be in or not opposed to our best interests and, with respect to
any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
We
maintain a directors’ and officers’ liability insurance policy covering certain
liabilities that may be incurred by any director or officer in connection with
the performance of his or her duties and certain liabilities that we may incur,
including the indemnification payable to any director or officer. This policy
provides for $50 million in maximum aggregate coverage, including defense
costs. We pay the entire premium for such insurance.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to our directors, officers, or persons controlling us pursuant
to
the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
PART
II
INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
ITEM
3.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The
following documents filed with the Securities and Exchange Commission (the
“Commission”) by JAKKS Pacific, Inc., a Delaware corporation (the “Company” or
the “Registrant”), pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), are incorporated by reference in this Registration
Statement:
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(a)
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The
Company’s Annual Report on Form 10-K for the year ended
December 31, 2007.
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(b)
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The
description of the Common Stock set forth in the Company’s Registration
Statement on Form 8-A, filed March 29, 1996 and any amendment or
report filed for the purpose of updating such
description.
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All
documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, other
than any information furnished pursuant to Item 2.02 or Item 7.01 of
Form 8-K, prior
to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all such securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to
be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM
5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The
legality of the common stock being offered hereby will be passed upon for us
by
Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP, New York,
New York. Murray L. Skala, a partner of that firm, is one of our directors,
an
owner of 18,268 shares of our common stock and a holder of options to
purchase 97,771 shares of our common stock.
ITEM
6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our
certificate of incorporation provides that the personal liability of our
directors shall be limited to the fullest extent permitted by the provisions
of
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(“DGCL”). Section 102(b)(7) of the DGCL generally provides that no director
shall be liable personally to a company or its security holders for monetary
damages for breach of fiduciary duty as a director, provided that the
certificate of incorporation does not eliminate the liability of a director
for
(1) any breach of the director’s duty of loyalty to it or its security
holders; (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) acts or omissions
in respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (4) any transaction from which such director derives an
improper personal benefit. The effect of this provision is to eliminate the
rights of a company and its security holders to recover monetary damages against
a director for breach of her or his fiduciary duty of care as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (1) through (4) above.
The limitations summarized above, however, do not affect the ability of a
company or its security holders to seek non-monetary remedies, such as an
injunction or rescission, against a director for breach of her or his fiduciary
duty.
In
addition, our certificate of incorporation provides that we shall, to the
fullest extent permitted by Section 145 of the DGCL, indemnify all persons
whom it may indemnify pursuant to Section 145 of the DGCL. In general,
Section 145 of the DGCL permits us to indemnify our directors, officers,
employees or agents or, when so serving at our request, another company who
was
or is a party or is threatened to be made a party to any proceeding because
of
his or her position, if he or she acted in good faith and in a manner reasonably
believed to be in or not opposed to our best interests and, with respect to
any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
We
maintain a directors’ and officers’ liability insurance policy covering certain
liabilities that may be incurred by any director or officer in connection with
the performance of his or her duties and certain liabilities that we may incur,
including the indemnification payable to any director or officer. This policy
provides for $30 million in maximum aggregate coverage, including defense
costs. We pay the entire premium for such insurance.
ITEM
8. EXHIBITS.
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EXHIBIT
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NUMBER
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DESCRIPTION
OF EXHIBIT
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4.1
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2002
Stock Award and Incentive Plan (1)
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5.1
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Opinion
of Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP
(1)
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23.1
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Consent
of PKF, Certified Public Accountants, A Professional Corporation
(2)
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23.2
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Consent
of Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP
(contained in Exhibit 5.1)(1)
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23.3
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Consent
of BDO Seidman, LLP, Certified Public Accountants
(2)
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1
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Filed
previously as an exhibit to the initial filing of this Registration
Statement on December 5, 2002, and is incorporated herein by
reference.
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2
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Filed
herewith.
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ITEM
9. UNDERTAKINGS.
(a) The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made pursuant
to
this registration statement, a post-effective amendment to this registration
statement to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2)
That, for the purpose of determining any liability under the Securities Act
of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona
fide offering thereof; and
(3)
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(b)
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the
undersigned registrant’s annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in this Registration Statement shall be deemed
to
be a new registration statement relating to the securities offered therein,
and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c)
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and
is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of
such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-8 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City
of Malibu, State of California on the 5th day of March, 2008.
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JAKKS
PACIFIC, INC.
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By:
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/s/
JACK FRIEDMAN
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Jack
Friedman
Chief
Executive Officer and Chairman
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Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
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SIGNATURE
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Title
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Date
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/s/
JACK FRIEDMAN
Jack
Friedman
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Chief
Executive Officer and Chairman (Principal Executive Officer)
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March
5, 2008
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/s/
JOEL M. BENNETT
Joel
M. Bennett
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Chief
Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
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March
5, 2008
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/s/
STEPHEN G. BERMAN
Stephen
G. Berman
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Director
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March
5, 2008
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/s/
DAN ALMAGOR
Dan
Almagor
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Director
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March
5, 2008
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/s/
DAVID C. BLATTE
David
C. Blatte
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Director
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March
5, 2008
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/s/
ROBERT E. GLICK
Robert
E. Glick
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Director
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March
5, 2008
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/s/
MICHAEL G. MILLER
Michael
G. Miller
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Director
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March
5, 2008
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/s/
MURRAY L. SKALA
Murray
L. Skala
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Director
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March
5, 2008
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EXHIBIT
INDEX
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EXHIBIT
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NUMBER
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DESCRIPTION
OF EXHIBIT
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4.1
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2002
Stock Award and Incentive Plan (1)
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5.1
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Opinion
of Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP
(1)
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| |
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23.1
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|
Consent
of PKF, Certified Public Accountants, A Professional Corporation
(2)
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23.2
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Consent
of Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP
(contained in Exhibit 5.1)
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23.3
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Consent
of BDO Seidman, LLP, Certified Public Accountants
(2)
|
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1
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Filed
previously as an exhibit to the initial filing of this Registration
Statement on December 5, 2002, and is incorporated herein by
reference.
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2
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Filed
herewith.
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