{"url_path":"/sec/jakk/10-k/2026/item-7a","section_key":"item-7a","section_title":"Item 7A Quantitative and Qualitative Disclosures About Market","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-03-02","source_url":"https://www.sec.gov/Archives/edgar/data/1009829/0001185185-26-000723-index.html","accession_number":"0001185185-26-000723","cik":"0001009829","ticker":"JAKK","issuer_name":"JAKKS PACIFIC INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1009829/0001185185-26-000723-index.html","primary_entity_key":"0001009829","primary_entity_name":"JAKKS PACIFIC INC"},"word_count":548,"has_tables":true,"body_markdown":"**Item 7A. Quantitative and Qualitative Disclosures About Market\nRisk**\n\n \n\nMarket risk represents the risk of loss that may impact\nour financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and rates.\nWe are exposed to market risk in the areas of changes in United States and international borrowing rates and changes in foreign currency\nexchange rates. In addition, we are exposed to market risk in certain geographic areas that have experienced or remain vulnerable to an\neconomic downturn, such as China. We purchase substantially all of our inventory from companies in China, and, therefore, we are subject\nto the risk that such suppliers will be unable to provide inventory at competitive prices and quality. While we believe that, should such\nevents occur, we would be able to find alternative sources of inventory at competitive prices and quality, we cannot assure you that we\nwould be able to do so. These exposures are directly related to our normal operating and funding activities. To date, we have not used\nderivative instruments or engaged in hedging activities to minimize our market risk.\n\n \n\n**Interest Rate Risk**\n\n \n\nOur exposure to market risk includes interest rate\nfluctuations in connection with our Revolving Facility (see Note 9 – Credit Facilities). As detailed in the BMO Credit Agreement,\nborrowings under the Revolving Facility bear interest, at the Company’s election, at either (i) the Adjusted Term SOFR plus an applicable\nmargin or (ii) the Base Rate plus an applicable margin. The applicable margin varies based on the Company’s Total Net Leverage Ratio\nand ranges from 1.50% to 2.00% for SOFR loans and from 0.50% to 1.00% for Base Rate loans. Borrowings under the Revolving Facility are\ntherefore subject to risk based upon prevailing market interest rates. Interest rate risk may result from many factors, including governmental\nmonetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.\n\n \n\nDuring the twelve-month period ended December 31,\n2025, the maximum amount borrowed under the revolving credit facility was $8 million and the average amount of borrowings outstanding\nwas $0.9 million. As of December 31, 2025, the amount of total borrowings outstanding under the revolving credit facility was nil.\n\n \n\n**Foreign Currency Risk**\n\n \n\nWe have wholly-owned subsidiaries in Hong Kong,\nChina, the United Kingdom, Germany, France, the Netherlands, Italy, Canada and Mexico. Sales are generally made by these operations on\nFOB China or Hong Kong terms and are denominated in U.S. dollars. However, purchases of inventory and Hong Kong operating expenses are\ntypically denominated in Hong Kong dollars and local operating expenses in the United Kingdom, Germany, France, the Netherlands, Italy,\nCanada, Mexico and China are denominated in local currency, thereby creating exposure to changes in exchange rates. Changes in the U.S.\ndollar exchange rates may positively or negatively affect our results of operations. We do not believe that near-term changes in these\nexchange rates, if any, will result in a material effect on our future earnings, fair values or cash flows. Therefore, we have chosen\nnot to enter into foreign currency hedging transactions. We cannot assure you that this approach will be successful, especially in the\nevent of a significant and sudden change in the value of these foreign currencies.\n\n \n\n37\n\n[Table of Contents](#TableOfContents)"}