1009829--3/16/2007--JAKKS_PACIFIC

related topics

{customer, product, revenue}

{product, market, service}

{financial, litigation, operation}

{cost, operation, labor}

{property, intellectual, protect}

{investment, property, distribution}

{operation, international, foreign}

{acquisition, growth, future}

{debt, indebtedness, cash}

{competitive, industry, competition}

{product, liability, claim}

{tax, income, asset}

{personnel, key, retain}

The outcome of litigation in which we have been named as a defendant is unpredictable and a materially adverse decision in any such matter could have a material adverse affect on our financial position and results of operations. Our inability to redesign, restyle and extend our existing core products and product lines as consumer preferences evolve, and to develop, introduce and gain customer acceptance of new products and product lines, may materially and adversely impact our business, financial condition and results of operations. The 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. There are risks associated with our license agreements. 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. 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 termination of THQ s manufacturing licenses and the inability of the joint venture to otherwise obtain these licenses from other manufacturers would materially adversely affect the joint venture s and our business, financial condition and results of operations. The failure of the joint venture or THQ to perform as anticipated could have a material adverse affect on our financial position and results of operations. 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. We may not be able to sustain or manage our rapid growth, which may prevent us from continuing to increase our net revenues. 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. 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. We depend on our key personnel and any loss or interruption of either of their services could adversely affect our business, financial condition and results of operations. We depend on third-party manufacturers, and if our relationship with any of them is harmed or if they independently encounter difficulties in their manufacturing processes, we could experience product defects, production delays, cost overruns or the inability to fulfill orders on a timely basis, any of which could adversely affect our business, financial condition and results of operations. We have substantial sales and manufacturing operations outside of the United States subjecting us to risks common to international operations. 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. We depend on our proprietary rights and our inability to safeguard and maintain the same, or claims of third parties that we have violated their intellectual property rights, could have a material adverse effect on our business, financial condition and results of operations. Market conditions and other third-party conduct could negatively impact our margins and implementation of other business initiatives. We may not have the funds necessary to purchase our outstanding convertible senior notes upon a fundamental change or other purchase date, as required by the indenture governing the notes. We have a material amount of goodwill which, if it becomes impaired, would result in a reduction in our net income.

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1009829--3/16/2007--JAKKS_PACIFIC_INC