What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-19 compared with 2025-08-14 · 104 added, 94 removed, 189 unchanged (51% of the section changed)

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● the LB70 by Lloyd Boston brand, which is a new co-branded collaboration between Xcel and Lloyd Boston that launched in August 2024;

● the Trust, Respect, Love by Cesar Millan brand, which is a new co-branded collaboration between Xcel and Cesar Millan that is planned to launch in Fall 2025;

● the Trust, Respect, Love by Cesar Millan brand, which is a new co-branded collaboration between Xcel and Cesar Millan that is planned to launch in the fourth quarter of 2025;

● the Longaberger brand, which Xcel manages through its 50% ownership interest in Longaberger Licensing, LLC;

● the Isaac Mizrahi brand, in which Xcel holds a noncontrolling interest through IM Topco, LLC;

● a new brand which will be a co-branded collaboration between Xcel and Coco Rocha, that is planned to launch in Fall 2026;

● GemmaMade, which is a co-branded collaboration between Xcel and baking influencer Gemma Stafford which is planned to launch in Fall 2025;

● Mesa Mia, which is a brand owned by Mexican home influencer Jenny Martinez, and for which Xcel holds the television rights through a long-term license agreement and expects to launch in Fall 2025.

We also hold a 19% noncontrolling interest in ORME Live, Inc.

● GemmaMade, which is a co-branded collaboration between Xcel and baking influencer Gemma Stafford which is planned to launch in the fourth quarter of 2025;

Additionally, through October 1, 2025, we held a noncontrolling interest in the Isaac Mizrahi brand.

The Company also holds a 19% noncontrolling interest in ORME Live, Inc.

(“ORME”), a short-form video and social commerce marketplace that launched in April 2024.

Xcel is pioneering a true omni-channel and social commerce sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels.

Our brands have generated over $5 billion in retail sales via live streaming in interactive television and digital channels alone, and our brands collectively reach over 5.0 million social media followers

through Facebook, Instagram, and TikTok.

All of the followers may not be unique followers, as many followers may follow multiple brands and follow our brands on multiple platforms.

Xcel currently operates in a working-capital light model, with our licensees and/or retail partners responsible for the procurement and sale of inventory.

As such, our revenues primarily consist of royalty revenues, and we do not have risk of carrying aged inventory.

As a result, fluctuations in product costs and tariffs do not have a direct impact on us, but do impact us indirectly as our royalty revenues are typically based on the net sales and success of our licensees.

As a result, fluctuations in product costs and tariffs do not

have a direct impact on us, but do impact us indirectly as our royalty revenues are typically based on the net sales and success of our licensees.

Our objective is to build a diversified portfolio of lifestyle consumer products brands through organic growth and the strategic acquisition of new brands.

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Summary of Operating Results

Three months ended June 30, 2025 (the “current quarter”) compared with the three months ended June 30, 2024 (the “prior year quarter”)

Current quarter net revenue decreased $1.63 million to $1.32 million from $2.95 million for the prior year quarter.

This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand.

Three months ended September 30, 2025 (the “current quarter”) compared with the three months ended September 30, 2024 (the “prior year quarter”)

Current quarter net revenue decreased by $0.79 million to $1.12 million from $1.91 million for the prior year quarter.

This decrease was driven by the combination of (i) the fact that in the prior year quarter, we recognized $0.41 million of net product sales from the sale of all remaining inventory of the Longaberger Brand to a third party at cost, and (ii) declines in our licensing revenues.

The declines in licensing revenue were primarily attributable to (i) lower service fees related to IM Topco (see Note 10 to the financial statements for additional details related to the services agreement with IM Topco) and (ii) lower sales of branded products by our licensees mainly due to more cautious consumer spending in the current economic environment.

Direct Operating Costs and Expenses

Direct operating costs and expenses decreased approximately $0.66 million, from $2.83 million in the prior year quarter to $2.17 million in the current quarter.

This decrease was primarily attributable to the combination of (i) the 2023 restructuring and transformation of our business operating model, along with additional cost reduction actions taken by management in 2024, which significantly reduced the Company’s payroll, operating, and overhead costs, and (ii) the impact of the employee retention tax credit recognized in the current quarter.

This decrease was primarily attributable to the 2023 restructuring and transformation of our business operating model, along with additional cost reduction actions taken by management in 2024, which significantly reduced the Company’s payroll, operating, and overhead costs.

Management has continued to implement additional cost cutting measures throughout 2025 to further optimize the Company’s cost structure.

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Other Operating Costs and Expenses (Income)

Depreciation and amortization expense decreased approximately $0.65 million, from $1.55 million in the prior year quarter to $0.90 million in the current quarter.

This decrease is primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand, which included trademarks related to that brand with a net book value of approximately $1.93 million at the time of the divestiture.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.18 million and $0.56 million for the current quarter and prior year quarter, respectively.

The decline in losses is primarily due to the fact that effective January 1, 2025 and April 15, 2025, the Company no longer applies the equity method of accounting to its investments in ORME and IM Topco, respectively.

During the prior year quarter we recognized asset impairment charges of $1.19 million related to our exit from and sublease of our office space at 1333 Broadway;

there were no similar asset impairment charges recognized during the current quarter.

Also during the prior year quarter, we recognized a $3.80 million gain on the divestiture of the Lori Goldstein Brand.

The consideration received from this transaction was non-cash in nature, and consisted of approximately $6.08 million of relief from certain accrued earn-out payments and the release of contingent obligations under contractual agreements with the buyer.

The net book value of the intangible assets sold was approximately $1.93 million, and we also incurred approximately $0.35 million of legal fees in connection with the sale.

Depreciation and amortization expense was reasonably consistent with the prior year, approximating $0.90 million in the current quarter and $0.91 million in the prior year quarter.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of approximately $5.49 million and $6.85 million for the current quarter and prior year quarter, respectively.

The current quarter loss was primarily attributable to a non-cash impairment charge related to the disposition of our remaining equity interest in IM Topco, which closed in October 2025.

The prior year quarter amount was primarily attributable to the combination of (i) $0.60 million of equity method losses and (ii) a $6.25 million non-cash charge to recognize a contractual contingent obligation related to IM Topco, which was subsequently satisfied and discharged in April 2025.

Interest and Finance Expense

Interest and finance expense was approximately $0.52 million for the current quarter, compared with approximately $0.14 million for the prior year quarter.

This increase was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized during the current quarter as a result of the April 2025 refinancing of our term loan debt.

The estimated annual effective income tax rate was approximately 0% for both the current quarter and the prior year quarter, resulting in an income tax provision (benefit) of $0 for both periods.

This increase was primarily attributable to the higher interest rate and higher principal balance on outstanding term loan debt in the current quarter as compared to the prior year quarter.

The estimated annual effective income tax rate for the current quarter and the prior year quarter was approximately -0.3% and 0% respectively, resulting in an income tax provision (benefit) of $0.03 million and $0, respectively.

The federal statutory rate differed from the effective tax rate due to the recording of a valuation allowance against the benefit that would have otherwise been recognized, as it was considered not more likely than not that the net operating losses generated during each period will be utilized in future periods.

Net Loss Attributable to Xcel Brands, Inc.

We had a net loss of $3.99 million for the current quarter, compared with net income of $0.20 million for the prior year quarter, due to the combination of the factors outlined above.

We had a net loss of $7.90 million for the current quarter, compared with a net loss of $9.21 million for the prior year quarter, due to the combination of the factors outlined above.

Non-GAAP Net Income (Loss), Non-GAAP Diluted EPS, and Adjusted EBITDA

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stockholders, exclusive of amortization of trademarks, income (loss) from equity method investments, stock-based compensation and cost of licensee warrants, loss on early extinguishment of debt (if any), gains on sales of assets and investments (if any), asset impairment charges (if any), and income taxes (if any).

Non-GAAP net income (loss) and

non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.

Non-GAAP net income (loss) and non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.

We had Adjusted EBITDA of approximately $(0.65) million for the current quarter, compared with approximately $(1.05) million for the prior year quarter.

Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income (loss) attributable to Xcel Brands, Inc.

stockholders before interest and finance expenses (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity method investments, asset impairment charges, stock-based compensation and cost of licensee warrants, gains on sales of assets and investments, and costs associated with restructuring of operations.

stockholders before interest and finance expense (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity method investments, asset impairment charges (if any), stock-based compensation and cost of licensee warrants, gains on sales of assets and investments (if any), and costs associated with restructuring of operations.

Management uses non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the Company’s results of operations.

Management believes non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus, these non-GAAP measures provide supplemental information to assist investors in evaluating the Company’s financial results.

Management believes non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA are also useful because these measures adjust for certain costs and other events that

management believes are not representative of our core business operating results, and thus, these non-GAAP measures provide supplemental information to assist investors in evaluating the Company’s financial results.

Non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in accordance with GAAP.

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When evaluating our performance, you should consider non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results, and not rely on any single financial measure.

The following table is a reconciliation of net (loss) income attributable to Xcel Brands, Inc.

The following table is a reconciliation of net loss attributable to Xcel Brands, Inc.

stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:

Three Months Ended

September 30,

($ in thousands)

Net (loss) income attributable to Xcel Brands, Inc.

Net loss attributable to Xcel Brands, Inc.

Amortization of trademarks

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Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Gains on sales of assets and investments

Asset impairment charges

Income tax provision (benefit)

Non-GAAP net loss

The following table is a reconciliation of diluted (loss) earnings per share (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP diluted EPS:

The following table is a reconciliation of diluted loss per share (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP diluted EPS:

Three Months Ended

Diluted (loss) earnings per share

September 30,

Diluted loss per share

Amortization of trademarks

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Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Gains on sales of assets and investments

Asset impairment charges

Income tax provision (benefit)

Non-GAAP diluted EPS

Non-GAAP weighted average diluted shares

The following table is a reconciliation of net (loss) income attributable to Xcel Brands, Inc.

The following table is a reconciliation of net loss attributable to Xcel Brands, Inc.

stockholders (our most directly comparable financial measure presented in accordance with GAAP) to Adjusted EBITDA:

Three Months Ended

September 30,

($ in thousands)

Net (loss) income attributable to Xcel Brands, Inc.

Net loss attributable to Xcel Brands, Inc.

Interest and finance expense

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Loss from equity method investments

Asset impairment charges

Stock-based compensation and cost of licensee warrants

Gains on sales of assets and investments

Costs associated with restructuring of operations

Adjusted EBITDA

Six months ended June 30, 2025 (the “current six months”) compared with the six months ended June 30, 2024 (the “prior year six months”)

Current six months net revenue decreased $2.49 million to $2.65 million from $5.14 million for the prior year six months.

This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand, partially offset by increased licensing revenues generated by our other brands, particularly for the C Wonder brand and the TowerHill by Christie Brinkley brand.

Nine months ended September 30, 2025 (the “current nine months”) compared with the nine months ended September 30, 2024 (the “prior year nine months”)

Current nine months net revenue decreased $3.28 million to $3.77 million from $7.05 million for the prior year nine months.

This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand.

This decrease was also partially driven by the fact that in the prior year nine months we recognized $0.54 million of net product sales from the final sale of certain residual jewelry inventories and the sale of all remaining inventory related to the Longaberger brand.

Direct Operating Costs and Expenses

Direct operating costs and expenses decreased approximately $2.90 million, from $7.08 million in the prior year six months to $4.18 million in the current six months.

Direct operating costs and expenses decreased approximately $3.56 million, from $9.91 million in the prior year nine months to $6.35 million in the current nine months.

Management has continued to implement additional cost cutting measures throughout 2025 to further optimize the Company’s cost structure.

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Other Operating Costs and Expenses (Income)

Depreciation and amortization expense decreased approximately $1.33 million, from $3.13 million in the prior year six months to $1.80 million in the current six months.

Depreciation and amortization expense decreased approximately $1.34 million, from $4.04 million in the prior year nine months to $2.70 million in the current nine months.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.52 million and $1.09 million for the current six months and prior year six months, respectively.

During the prior year six months we recognized asset impairment charges of $3.48 million related to our exit from and sublease of our office space at 1333 Broadway, of which approximately $3.1 million related to the operating lease right-of-use asset and approximately $0.4 million related to leasehold improvements at that location.

There were no similar asset impairment charges recognized during the current six months.

Also during the prior year six months, we recognized a $3.80 million gain on the divestiture of the Lori Goldstein Brand.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $6.01 million and $7.94 million for the current nine months and prior year nine months, respectively.

The current nine months loss was primarily attributable to a $5.53 million non-cash impairment charge related to the disposition of our remaining equity interest in IM Topco, which closed in October 2025.

The prior year nine months amount was composed of (i) $1.69 million of equity method losses and (ii) a $6.25 million non-cash charge to recognize a contractual contingent obligation related to IM Topco, which was subsequently satisfied and discharged in April 2025.

During the prior year nine months we recognized asset impairment charges of $3.48 million related to our exit from and sublease of our office space at 1333 Broadway, of which approximately $3.1 million related to the operating lease right-of-use asset and approximately $0.4 million related to leasehold improvements at that location.

There were no similar asset impairment charges recognized during the current nine months.

Also during the prior year nine months, we recognized a $3.80 million gain on the divestiture of the Lori Goldstein Brand.

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Interest and Finance Expense

Interest and finance expense was approximately $2.90 million for the current six months, compared with approximately $0.30 million for the prior year six months.

This increase was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized during the current six months as a result of the April 2025 refinancing of our term loan debt.

The estimated annual effective income tax rate for the current six months and the prior year six months was approximately -0.7% and 0% respectively, resulting in an income tax provision (benefit) of $0.05 million and $0, respectively.

Interest and finance expense was approximately $3.42 million for the current nine months, representing an increase of approximately $2.98 million compared with interest and finance expense of approximately $0.44 million for the prior year nine months.

This increase was primarily attributable to the combination of (i) the $1.85 million loss on early extinguishment of debt recognized during the current nine months as a result of the April 2025 refinancing of our term loan debt, and (ii) the higher interest rates and higher principal balance on outstanding term loan debt in the current nine months as compared to the prior year nine months.

The estimated annual effective income tax rate for the current nine months and the prior year nine months was approximately -0.5% and 0% respectively, resulting in an income tax provision (benefit) of $0.08 million and $0, respectively.

Net Loss Attributable to Xcel Brands, Inc.

We had a net loss of $6.79 million for the current six months, compared with a net loss of $6.10 million for the prior year six months, due to the combination of the factors outlined above.

We had a net loss of $14.68 million for the current nine months, compared with a net loss of $15.31 million for the prior year nine months, due to the combination of the factors outlined above.

Non-GAAP Net Income (Loss), Non-GAAP Diluted EPS, and Adjusted EBITDA

We had a non-GAAP net loss of approximately $2.27 million, or $(0.95) per diluted share (“non-GAAP diluted EPS”), for the current six months and a non-GAAP net loss of approximately $2.10 million, or $(0.96) per diluted share, for the prior year six months.

We had Adjusted EBITDA of approximately $(1.00) million for the current six months, compared with approximately $(1.61) million for the prior year six months.

We had a non-GAAP net loss of approximately $3.61 million, or $(1.24) per diluted share (“non-GAAP diluted EPS”), for the current nine months and a non-GAAP net loss of approximately $3.44 million, or $(1.53) per diluted share, for the prior year nine months.

We had Adjusted EBITDA of approximately $(1.65) million for the current nine months, compared with approximately $(2.66) million for the prior year nine months.

The following table is a reconciliation of net loss attributable to Xcel Brands, Inc.

stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:

Six Months Ended

Nine Months Ended

September 30,

($ in thousands)

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Asset impairment charges

Income tax provision

Income tax provision (benefit)

Non-GAAP net loss

The following table is a reconciliation of diluted loss per share (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP diluted EPS:

Six Months Ended

Nine Months Ended

September 30,

Diluted loss per share

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stockholders (our most directly comparable financial measure presented in accordance with GAAP) to Adjusted EBITDA:

Six Months Ended

Nine Months Ended

September 30,

($ in thousands)

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Accretion of lease liability for exited lease

Income tax provision

Income tax provision (benefit)

State and local franchise taxes

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Liquidity and Capital Resources

As of June 30, 2025 and December 31, 2024, our unrestricted cash and cash equivalents were approximately $1.0 million and $1.3 million, respectively.

Restricted cash at June 30, 2025 consisted of $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $1.0 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement.

As of September 30, 2025 and December 31, 2024, our unrestricted cash and cash equivalents were approximately $1.5 million and $1.3 million, respectively.

Restricted cash at September 30, 2025 consisted of $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $1.0 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement.

Restricted cash at December 31, 2024 consisted of $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease.

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Our current “licensing plus” operating model is a working capital light business model, and generally does not require material capital expenditures.

As of June 30, 2025, we have no significant commitments for future capital expenditures.

On August 4, 2025, the Company completed a best-efforts public offering of 2,181,818 shares of its common stock at a price to the public of $1.10 per share.

Simultaneously with completing such offering, the Company sold to Robert W.

D’Loren, Chairman and Chief Executive Officer of the Company, and Mark DiSanto, a Director of the Company, 82,159 and 60,883 shares of common stock, respectively, at a price of $1.38 per share pursuant to subscription agreements entered into on August 1, 2025.

The aggregate net proceeds to the Company from the sale of the shares sold in the best-efforts public offering and the private placement (after deducting the placement agent fees and other estimated offering expenses) were approximately $2.0 million.

As of September 30, 2025, we have no significant commitments for future capital expenditures.

Working Capital

We had working capital (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) of approximately $0.70 million as of June 30, 2025.

We had a working capital deficit (which we calculate in a non-GAAP manner as current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) of approximately $0.89 million as of September 30, 2025.

This working capital deficit includes and is primarily reflective of the November 2025 amendment to our term loan debt, which resulted in the accelerated maturity of a significant portion of our Term Loan A debt and the associated reclassification of $1.0 million of restricted cash from non-current assets to current assets;

absent these impacts of this amendment, our working capital at September 30, 2025 would have been approximately $0.61 million.

We had working capital of approximately $0.76 million as of December 31, 2024.

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The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As of June 30, 2025, we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

As of September 30, 2025, we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

While we have undertaken significant restructuring efforts during 2023 and 2024, and have implemented additional measures during 2025 to further optimize its cost structure, management has determined that, absent additional funding, there is substantial doubt about the Company’s ability to meet its financial obligations as they become due within twelve months from the date these accompanying unaudited condensed consolidated financial statements are issued.

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The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Commentary on the components of our cash flows for the current six months as compared with the prior year six months is set forth below.

Commentary on the components of our cash flows for the current nine months as compared with the prior year nine months is set forth below.

Operating Activities

Net cash used in operating activities was approximately $3.80 million in the current six months, compared with approximately $2.88 million in the prior year six months.

The current six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.79) million plus non-cash items of approximately $4.77 million and the net change in operating assets and liabilities of approximately $(1.78) million.

Non-cash items were primarily comprised of $0.52 million of losses related to our equity method investments, $1.85 million from the loss on early extinguishment of debt, $1.80 million of depreciation and amortization expense, and $0.37 million of various non-cash interest expenses.

The net change in operating assets and liabilities was primarily comprised of (i) approximately $(1.56) million of payments of accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities, plus (ii) a decrease in deferred revenue of $(0.50) million.

The prior year six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.18) million plus non-cash items of approximately $4.10 million and the net change in operating assets and liabilities of approximately $(0.80) million.

Non-cash items were primarily comprised of approximately $3.48 million of asset impairment charges, $3.13 million of depreciation and amortization, and our $1.09 million undistributed proportional share of net losses from equity method investees, partially offset by a $(3.80) million gain on the divestiture of the Lori Goldstein Brand.

The net change in operating assets and liabilities was primarily comprised of (i) a decrease in various operating liabilities of $(0.56) million, (ii) a decrease in lease-related assets and liabilities of $(0.63) million, and (iii) an increase in other long-term liabilities of $0.39 million.

Net cash used in operating activities was approximately $5.20 million in the current nine months, compared with approximately $3.31 million in the prior year nine months.

The current nine months net cash used in operating activities was primarily attributable to the combination of the net loss of $(14.78) million plus non-cash items of approximately $11.62 million and the net change in operating assets and liabilities of approximately $(2.04) million.

Non-cash items were primarily comprised of $6.01 million of losses and impairment charges related to our equity method investments, $1.85 million from the loss on early extinguishment of debt, $2.70 million of depreciation and amortization expense, and $0.69 million of aggregate non-cash interest expenses.

The net change in operating assets and liabilities was primarily driven by approximately $(2.05) million of payments of accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities.

The prior year nine months net cash used in operating activities was primarily attributable to the combination of the net loss of $(15.40) million plus non-cash items of approximately $11.99 million and the net change in operating assets and liabilities of approximately $0.11 million.

Non-cash items were primarily comprised of approximately $6.25 million for the change in value of contingent obligations related to our equity method investments, our $1.68 million undistributed proportional share of net losses from equity method investees, $4.04 million of depreciation and amortization expense, and $3.48 million of asset impairment charges, partially offset by a $(3.80) million gain on the divestiture of the Lori Goldstein Brand.

The net change in operating assets and liabilities was primarily comprised of decreases in accounts receivable and inventory of approximately $0.59 million and $0.45 million, respectively, partially offset by a decrease in lease-related assets and liabilities of $(0.71) million.

Investing Activities

Net cash used in investing activities in the current six months was comprised of purchases of equipment totaling approximately $0.01 million.

Net cash used in investing activities in the prior year six months was comprised of purchases of furniture and fixtures totaling approximately $0.10 million

Net cash used in investing activities in the current nine months was comprised of purchases of equipment totaling approximately $0.01 million.

Net cash used in investing activities in the prior year nine months was comprised of purchases of furniture and fixtures totaling approximately $0.11 million

Financing Activities

Net cash provided by financing activities in the current quarter was primarily attributable to $2.05 million of proceeds received from the delayed draw portion of the Company’s December 2024 term loan agreement, and $3.62 million of proceeds received from the Company’s April 2025 refinancing of its term loan debt (as described in more detail below).

This was partially offset by $0.53 million of deferred finance costs paid in connection with the April 2025 refinancing, and $0.50 million of principal payments made on the Company’s term loan debt.

Net cash provided by financing activities in the prior year six months was $1.90 million, attributable to the net proceeds received from the March 2024 public offering and private placement transactions in which the Company issued an aggregate of 357,889 shares of common stock along with warrants exercisable for an additional 18,293 shares of common stock.

This was partially offset by $0.25 million of scheduled principal payments made on our term loan debt.

Net cash provided by financing activities in the current nine months was primarily attributable to $2.05 million of proceeds received from the delayed draw portion of the Company’s December 2024 term loan agreement, $3.62 million of proceeds received from the April 2025 refinancing of our term loan debt, and $1.97 million of proceeds generated by equity offerings undertaken in August 2025.

These items were partially offset by $0.57 million of deferred finance costs paid in connection with debt refinancing, and $0.50 million of principal payments made on the Company’s term loan debt.

Net cash provided by financing activities in the prior year nine months was primarily attributable to $1.90 million of net proceeds generated by equity offerings undertaken during the first quarter of 2024, partially offset by $0.50 million of scheduled principal payments made on our term loan debt.

April 2025 Debt Refinancing

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In connection with the April 21, 2025 amendment and refinancing transaction, UTG Capital, Inc., a Delaware corporation (“UTG”), purchased a 100% undivided, participation interest in Term Loan B for a purchase price of $9.12 million.

Also in connection with this refinancing transaction, IPX’s participation in Term Loan B was repaid and IPX purchased a $0.50 million undivided, last-out, subordinated participation interest in Term Loan A.

in connection with this refinancing transaction, IPX’s participation in Term Loan B was repaid and IPX purchased a $0.50 million undivided, last-out, subordinated participation interest in Term Loan A.

On May 15, 2025, the Company repaid $0.50 million of the outstanding principal amount of Term Loan A.

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the Company is currently in compliance with all applicable covenants.

On October 7, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into a further amendment of the December 12, 2024 loan and security agreement, pursuant to which the (i) the agents and lenders (as defined in the loan and security agreement) consented to the transfer and the release of the termination of the pledge agreement and the release of the agents’ liens on the equity interests of IM Topco, LLC;

(ii) the liquid asset covenant requirement was reduced to $1,000,000;

and (iii) Xcel made a prepayment of $250,000 against the outstanding principal amount of Term Loan A, of which $140,000 was paid from the blocked account.

On November 18, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into the fourth amendment of the December 12, 2024 loan and security agreement, pursuant to which (i) the agents and lenders (as defined in the loan and security agreement) provided the Company with a limited waiver with respect to certain specified events of default, and also amended certain financial covenants related to the term loan agreement;

(ii) the Company committed to make a prepayment of $3,250,000 on Term Loan A by February 20, 2026, along with the payment of an amendment fee of $450,000 (of which $125,000 is payable on December 5, 2025 and the remaining $325,000 will be due if the $3,250,000 principal amount of Term Loan A is not repaid on or prior to February 20, 2026);

and (iii) the payment of the remaining principal balance on Term Loan A of $500,000 was changed to be due on December 31, 2026 which shall be held by a related party.

In addition, upon the repayment of the $3.25 million of Term Loan A, the Company will have revised financial covenants.

The minimum revenue requirement for the rolling 12 months ending December 31, 2025 will be $3.9 million and $1.7 million for the Included Subsidiaries and Halston, respectively, each as defined in the loan agreements.

And after the Term Loan A payment is made, the minimum revenue requirement covenants shall remain at these levels for the duration of the loans and the minimum liquidity requirement shall be zero, which includes the lenders’ release of $1.0 million of restricted cash within the blocked account back to the Company.

August 2025 Public Offering and Private Placement Transactions

On August 1, 2025, the Company entered into a placement agency agreement with Maxim Group LLC (the “Placement Agent”), as lead placement agent, relating to a best efforts public offering (the “2025 Offering”) of 2,181,818 shares of the Company’s common stock at a price to the public of $1.10 per share.

The closing of the 2025 Offering occurred on August 4, 2025.

The net proceeds to the Company from the sale of the shares, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately $1.8 million.

In connection with the 2025 Offering, on August 1, 2025, the Company entered into subscription agreements with each of Robert W.

D’Loren, Chairman and Chief Executive Officer of the Company, and Mark DiSanto, a director of the Company, to purchase 82,159 and 60,883 shares, respectively, at a price of $1.38 per share.

The total number of shares purchased was 143,042.

Net proceeds after payment of agent fees were approximately $0.2 million.

The purchase of such shares closed concurrently with the 2025 Offering.

The aggregate number of shares of common stock issued from the 2025 Public Offering and Private Placement Transactions was 2,324,860 shares and the total net proceeds received was approximately $2.0 million.

Other Factors

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We continue to seek new opportunities, including expansion through interactive television, live streaming, and additional domestic and international licensing arrangements, and acquiring and collaborating with additional brands, including the TowerHill by Christie Brinkley brand and LB70 by Lloyd Boston brand, both of which launched in 2024.

We plan to launch four new brands over the next 12 to 15 months, including Trust, Respect, Love by Cesar Millan, GemmaMade, and Mesa Mia in Fall 2025, and a new co-branded collaboration with Coco Rocha in Fall 2026.

We plan to launch three new brands in the fourth quarter of 2025, including Trust, Respect, Love by Cesar Millan, GemmaMade, and Mesa Mia.

During 2023 and throughout 2024, we have restructured our business operations into a leaner, more focused “licensing plus” business model.

We have entered into structured contractual arrangements with best-in-class business partners in order to more efficiently operate our former wholesale and e-commerce businesses while reducing and better managing our exposure to operating risks, and taken additional actions to generate cost savings.

Based on all of these actions taken to date, plus additional measures implemented during the current year to further optimize the Company’s cost structure, the Company’s direct operating costs on an annualized basis have been reduced from approximately $8 million per quarter

under our previous operating model to less than $2.5 million per quarter on a going-forward basis.

This represents more than $22 million of cost savings on an annualized basis compared to our cost structure in 2022.

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Please refer to our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on May 28, 2025, for a discussion of our critical accounting policies and estimates.

During the three months ended June 30, 2025, there were no material changes to our critical accounting policies or estimates.

During the three months ended September 30, 2025, there were no material changes to our critical accounting policies or estimates.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis