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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-19 · 124 added, 184 removed, 109 unchanged (74% of the section changed)

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Xcel Brands, Inc.

(“Xcel,” the “Company,” “we,” “us,” or “our”) is a media and consumer products company engaged in the design, licensing, marketing, live streaming, and social commerce sales of branded apparel, footwear, accessories, fine jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands.

Xcel was founded in 2011 with a vision to reimagine shopping, entertainment, and social media as social commerce.

Currently, our brand portfolio consists of the following:

● the Halston, Judith Ripka, and C Wonder brands, which are wholly owned by Xcel;

● the TowerHill by Christie Brinkley brand, which is a new co-branded collaboration between Xcel and Christie Brinkley that launched in May 2024;

● 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 the fourth quarter of 2025;

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

● 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;

● 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 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.

Xcel owns the Halston and C Wonder brands, as well as the co-branded collaboration brands Tower Hill by Christie Brinkley, Trust.

Love by Cesar Millan, GemmaMade by Gemma Stafford, and Off/Duty by Coco Rocha brand, and holds the television rights through a long-term license agreement with Mesa Mia by Jenny Martinez.

Xcel also owns and manages the Longaberger by Shannon Doherty brand through its controlling interest in Longaberger Licensing, LLC.

Also, as of March 31, 2026, our brand portfolio also included the Judith Ripka brand, which was wholly owned by Xcel;

this brand was sold to a third party as of April 27, 2026.

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

Xcel is pioneering a modern consumer products 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 to be everywhere its customers shop.

The Company’s previously owned and current brands have generated more than $5 billion in retail sales via livestreaming in interactive television and digital channels alone and have over 20,000 hours of content production time in live-stream and social commerce.

The Company’s brand portfolio reaches more than 46 million social media followers with broadcast reaching 200 million households.

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.

To grow our brands, we are focused on the following primary strategies:

● licensing of our brands for sale through interactive television (e.g., QVC, HSN, JTV, etc.);

● licensing of our brands for sale through interactive television (e.g., QVC, HSN, etc.);

● licensing of our brands to retailers that sell to the end consumer;

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Summary of Operating Results

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

Three months ended March 31, 2026 (the “current quarter”) compared with the three months ended March 31, 2025 (the “prior year quarter”)

Current quarter net revenue decreased by $0.19 million to $1.14 million from $1.33 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.

This decrease was primarily driven by Qurate’s transition to a new apparel supplier for the C Wonder brand in December 2025, which negatively impacted Qurate sales for this brand and our associated licensing revenues during the current quarter.

Direct Operating Costs and Expenses

Direct operating costs and expenses decreased approximately $0.21 million, from $2.28 million in the prior year quarter to $2.07 million 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.

Currently, the Company has reduced its direct operating expenses to an expected run rate of less than $10 million per annum.

This decrease was primarily attributable to cost reduction actions taken by management in 2025, which reduced the Company’s payroll and benefits costs.

Other selling, general, and administrative expenses for the current quarter were essentially flat compared to the prior year quarter.

Other Operating Costs and Expenses (Income)

Depreciation and amortization expense was reasonably consistent with the prior year, approximating $0.89 million in the current quarter and $0.90 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.

During the current quarter, we recognized a $0.06 million impairment charge to write down the intangible assets related to the Judith Ripka brand to their estimated fair value less cost to sell.

These assets were subsequently sold in April 2026.

For the three months ended March 31, 2025, we recognized a $0.34 million loss related to our investment in IM Topco, comprised of (i) a $0.18 million equity method loss, (ii) a $0.40 million charge to adjust the carrying value of the investment in IM Topco to its estimated fair value as of March 31, 2025, and (iii) a $(0.24) million adjustment to the carrying value of a contingent contractual obligation related to IM Topco.

As all remaining IM Topco equity interests were transferred to WHP on October 1, 2025, there were no earnings or losses from equity investments for the three months ended March 31, 2026.

Interest and Finance Expense

Interest and finance expense was approximately $0.59 million for the current quarter, compared with approximately $0.56 million for the prior year quarter.

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.

This increase was primarily attributable to the higher principal balance on outstanding

term loan debt in the current quarter as compared to the prior year quarter, partially offset by lower interest rates 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 -0.5% and -1.8% respectively, resulting in an income tax provision (benefit) of $0.01 million and $0.05 million, 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.

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

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).

stockholders, exclusive of amortization of trademarks, income (loss) from equity 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.

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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 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.

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 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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Our presentation of non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any other unusual or non-recurring items.

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.

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 attributable to Xcel Brands, Inc.

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Three Months Ended

September 30,

($ in thousands)

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Amortization of trademarks

Loss from equity method investments

Loss from equity investments

Stock-based compensation and cost of licensee warrants

Asset impairment charges

Income tax provision (benefit)

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Three Months Ended

September 30,

Diluted loss per share

Amortization of trademarks

Loss from equity method investments

Stock-based compensation and cost of licensee warrants

Income tax provision (benefit)

Non-GAAP diluted EPS

Non-GAAP weighted average diluted shares

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 attributable to Xcel Brands, Inc.

Interest and finance expense

Accretion of lease liability for exited lease

Income tax provision (benefit)

State and local franchise taxes

Depreciation and amortization

Loss from equity method investments

Stock-based compensation and cost of licensee warrants

Costs associated with restructuring of operations

Adjusted EBITDA

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 $3.56 million, from $9.91 million in the prior year nine months to $6.35 million in the current nine months.

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 nine months.

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

Currently, the Company has reduced its direct operating expenses to an expected run rate of less than $10 million per annum.

Other Operating Costs and Expenses (Income)

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.

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 $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.

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.

Interest and Finance Expense

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 $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 $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:

Nine Months Ended

September 30,

($ in thousands)

Net loss attributable to Xcel Brands, Inc.

Amortization of trademarks

Loss from equity method investments

Loss from equity investments

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 per share (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP diluted EPS:

Nine Months Ended

September 30,

Diluted loss per share

Amortization of trademarks

Loss from equity method investments

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

Non-GAAP diluted EPS

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

Nine Months Ended

September 30,

Three Months Ended

($ in thousands)

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Depreciation and amortization

Loss from equity method investments

Loss from equity 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

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Liquidity and Capital Resources

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.

As of March 31, 2026 and December 31, 2025, our unrestricted cash and cash equivalents were approximately $0.18 million and $1.15 million, respectively.

Subsequently, in April 2026, we sold the intangible assets of the Judith Ripka brand in exchange for $2.30 million of cash at closing, plus up to an additional $0.75 million of potential future contingent consideration.

Restricted cash at March 31, 2026 consisted of $1.08 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease.

Restricted cash at December 31, 2025 consisted of $0.74 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $1.00 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement.

Our principal capital requirements have generally been to fund working capital needs and acquire new brands.

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

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

As of March 31, 2026, we have no significant commitments for future capital expenditures.

Working Capital

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.

Our working capital (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) surplus/(deficit) was approximately $(0.17) million and $(0.80) million as of March 31, 2026 and December 31, 2025, respectively.

These working capital deficit amounts notably included the current portion of Term Loan A debt ($2.75 million as of March 31, 2026 and $3.25 million as of December 31, 2025), which was subsequently refinanced in April 2026 (see below for additional details related to this refinancing transaction).

Going Concern

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

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.

In April 2025, we restructured our outstanding debt and received net proceeds from financing activities.

In August 2025, we closed on a public offering and private placement of our common stock, which provided us with additional net proceeds.

As of March 31, 2026 we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

While we have undertaken significant restructuring and cost reduction efforts, obtained additional funding through a combination of equity issuances and debt financing, and continue to explore strategic financing alternatives and operational efficiencies to improve liquidity, management has determined that there is nonetheless substantial doubt about the Company’s ability to meet its financial obligations as they become due within twelve months from the date these financial statements are issued.

In April 2026, we refinanced a portion of our term loan debt, and also sold intangible assets related to one of our brands in exchange for cash.

While these transactions have significantly improved our liquidity position, the proceeds received may still be insufficient to fully address our liquidity needs.

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Management intends to continue exploring strategic financing alternatives and operational efficiencies to improve liquidity.

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 nine months as compared with the prior year nine months is set forth below.

The 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 quarter as compared with the prior year quarter is set forth below.

Operating Activities

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.

Net cash used in operating activities was approximately $0.88 million in the current quarter, compared with approximately $1.43 million in the prior year quarter.

The current quarter net cash used in operating activities was primarily attributable to the combination of the net loss of $(2.49) million plus non-cash items of approximately $1.51 million and the net change in operating assets and liabilities of approximately $0.10 million.

Non-cash items were primarily comprised of $0.89 million of depreciation and amortization expense, and $0.45 million of aggregate non-cash interest expenses.

The net change in operating assets and liabilities was primarily driven by approximately $0.85 million of net increases in accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities, and a decrease in accounts receivable of approximately $0.30 million, partially offset by an increase in prepaid expenses and other current and non-current assets of $(0.60) million, a decrease in deferred revenue of $(0.23) million and a decrease in lease-related assets and liabilities of $(0.21) million.

The prior year quarter net cash used in operating activities was primarily attributable to the combination of the net loss of $(2.80) million plus non-cash items of approximately $1.45 million and the net change in operating assets and liabilities of approximately $(0.08) million.

Non-cash items were comprised of approximately $0.90 million of depreciation and amortization expense, $0.34 million of losses related to our equity investments, $0.11 million of stock-based compensation and cost of licensee warrants, and $0.10 million of amortization of deferred finance costs.

The net change in operating assets and liabilities was primarily comprised of a decrease in deferred revenue of $(0.21) million and a decrease in lease-related assets and liabilities of $(0.08) million, partially offset by a decrease in accounts receivable of approximately $0.16 million.

Investing Activities

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

There was no net cash used in investing activities in the current quarter.

Net cash used in investing activities in the prior year quarter was comprised of purchases of equipment totaling approximately $0.01 million.

Financing Activities

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

Net cash used in financing activities in the current quarter was primarily attributable to (i) $0.50 million of cash used to make a prepayment on the Term Loan A in advance of the April 2026 refinancing of our term loan debt (as described further below) and (ii) $0.21 million of fees and expenses (consisting of legal and accounting fees) associated with our equity line facility (as described further below).

Net cash provided by financing activities in the prior year 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.

Equity Line Facility

On January 21, 2026, the Company entered into a common stock purchase agreement with White Lion Capital, LLC (“White Lion”), pursuant to which White Lion has committed to purchase up to $15.0 million of the Company’s common stock.

Under the terms and conditions of this agreement, the Company has the right, but not the obligation, to sell to White Lion, and White Lion is obligated to purchase, up to $15.0 million of the Company’s common stock.

The actual amount and timing of any sales of Common Stock will be determined by the Company at its discretion.

The aggregate number of shares that the Company can sell White Lion under this agreement is limited to and may not exceed 1,178,173 shares (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or other similar transaction), which is equal to 19.99% of the total shares of the Company’s common stock outstanding immediately prior to the execution of the agreement, unless (i.) the Company obtains stockholder approval to issue additional shares in excess of this amount, or (ii.) the average price paid for all shares of Common Stock issued under the agreement equals or exceeds certain levels as specified in the agreement.

In consideration for White Lion’s execution and entry into such arrangement, the Company agreed to issue White Lion $37,500 worth of common stock, with the number of shares issued determined based on the closing price of the Company’s stock on the business day immediately preceding the day on which the related registration statement is declared effective by the SEC;

on May 6, 2026, the Company issued 16,094 shares of common stock to White Lion in full satisfaction of this condition.

Additionally, pursuant to the terms of an advisory agreement between the Company and Maxim Group LLC,

the Company agreed to pay Maxim Group LLC a cash fee equal to 4.0% of the gross proceeds received from any sales of securities to White Lion under this arrangement.

As of March 31, 2026, no shares have been issued under the equity line facility arrangement.

Debt Transactions and Refinancings

On December 12, 2024, the Company and certain of its subsidiaries entered into a loan and security agreement with FEAC Agent, LLC (“FEAC”), as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC (“Restore”), as agent for certain lenders, pursuant to which the lenders made term loans to the Company and agreed to make additional term loans to the Company upon the satisfaction of a condition precedent described in the loan agreement.

The term loans under the loan agreement are as follows:

(1) a term loan in the amount of $3.95 million (“Term Loan A”) was made on the closing date, (2) a term loan in the amount of $4.0 million (“Term Loan B”) was made on the closing date, and (3) a term loan in the amount of $2.05 million (“Delayed Draw Term Loan”;

Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as “Term Loans”) was subsequently made in March 2025.

A portion of the proceeds from the Delayed Draw Term Loan were deposited in a bank account to satisfy a liquidity covenant in the loan agreement.

On April 21, 2025, the Company and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for $1.5 million repayment of the $3.95 million Term Loan A and an additional Term Loan B in the amount of $5.12 million.

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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.

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.

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.

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

Principal on the Term Loan A is payable on a pro rata basis in quarterly installments of $250,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on March 31, 2026, with the unpaid balance due on the maturity date of December 12, 2028.

Principal on the Term Loan B is payable on the maturity date of December 12, 2028.

From and after April 21, 2025, interest on each Term Loan A accrues at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0% floor, plus 8.5%.

From and after April 21, 2025, interest on each Term Loan B accrues at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0% floor, plus 6.5%.

From and after April 21, 2025 through March 31, 2027, interest on the Term Loan B will be paid in-kind by being capitalized and added to the principal amount of the Term Loan B at the end of each calendar month.

The Term Loans are guaranteed by certain direct and indirect subsidiaries of the Company, and are secured by all of the assets of the Company and such subsidiaries.

The April 21, 2025 amendment contains various customary financial covenants and reporting requirements, as specified and defined therein;

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.

(ii) the liquid asset covenant requirement was reduced to $1.00 million;

and (iii) Xcel made a prepayment of $0.25 million against the outstanding principal amount of Term Loan A, of which $0.14 million 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.

(ii) the Company committed to make a prepayment of $3.25 million on Term Loan A by February 20, 2026, along with the payment of an amendment fee of $0.45 million (of which $0.125 million was payable on December 5, 2025 and the remaining $0.325 million would be due only if the $3.25 million principal amount of Term Loan A was not repaid on or prior to February 20, 2026);

and (iii) the payment of the remaining principal balance on Term Loan A of $0.5 million 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 would have revised financial covenants.

On February 20, 2026 and March 20, 2026, the Company entered into the fifth and sixth amendments to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC.

Pursuant to such amendments, (i) the Company prepaid $0.50 million on Term Loan A (paid from the blocked account, as defined in the loan and security agreement) in

connection with the fifth amendment and irrevocably authorized FAEC Agent, LLC, as the administrative agent to transfer up to $0.50 million (the “Sixth Amendment Cash Collateral”) from the blocked account to an account maintained by the Administrative Agent to be held as cash collateral securing the Obligations (as defined in the loan and security agreement);

(ii) the Company irrevocably authorized the administrative agent to:

(a) apply all or any portion of the Sixth Amendment Cash Collateral to repay the Term Loan A, or (b) return all or any portion of the Sixth Amendment Cash Collateral to the Company, in each case at the lenders’ sole discretion;

(iii) the liquid asset covenant requirement was reduced to:

(a) at all times prior to the repayment in full of the First Out Obligations (as defined in the loan and security agreement), $0.50 million minus that amount of Sixth Amendment Cash Collateral used to repay Term Loan A, and (b) at all times after the repayment in full of the First Out Obligations, $0;

and (iv) the transaction closing date was extended to March 24, 2026.

On April 13, 2026, the Company entered into the seventh amendment to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC, which provided for, among other things:

the ability of the Company to consummate the issuance of certain senior secured notes (as described below);

the ability for IPX to convert its $0.50 million Term Loan A to common shares of the Company at the price per share equal to $1.435, subject to adjustment;

modifications to certain payment terms;

modifications to certain financial covenants;

modifications to certain financial reporting requirements;

and the amendment of the FEAC Agent, LLC’s role to include certain limitations.

In connection with the seventh amendment, FEAC Agent LLC’s affiliated lenders entered into agreements whereby a $0.50 million portion of Term Loan A was sold and assigned to IPX, and the entirety of Term Loan B was sold and assigned to UTG.

Additionally, the Company was relieved of its obligation to pay the remaining $325,000 amendment fee as specified in the fourth amendment.

Also on April 13, 2026, the Company entered into certain agreements with Smithline Family Trust II (“SFT”), Quick Capital, LLC (“Quick”), and IPX (collectively, the “Purchasers”), pursuant to which the Company issued and sold to the Purchasers 12.5% Senior Secured Notes due April 13, 2027 in the original principal amount of $3,005,780 (the “Secured Notes”) and 100,579 shares of the Company’s common stock.

The Secured Notes were issued with an original issue discount, such that the cash proceeds received by the Company were $2,600,000.

The Company is required to make $100,000 monthly payments on the Secured Notes commencing October 13, 2026, with the balance due at maturity.

The Company’s obligations under the Secured Notes are guaranteed by certain direct and indirect subsidiaries of the Company pursuant to a subsidiary guarantee, and are secured by the assets of the Company and the subsidiary guarantors pursuant to a security agreement.

At any time after the occurrence of an event of default under the Secured Notes and for so long as such event of default is continuing, the Secured Notes are convertible into shares of common stock of the Company (i) initially at a fixed conversion price equal to $1.165 per share and (ii) after May 17, 2026, at a price equal to the lesser of (a) 85% multiplied by the lowest volume weighted average price of the common stock during the 10-trading day period prior to conversion and (b) $1.165.

In addition, to the extent that Company is listed on the Nasdaq Capital Market, the aggregate number of shares of common stock issuable to the Purchasers and any subsequent holder of the Secured Note shall not exceed 19.9% of the total number of shares of common stock outstanding or of the voting power of the common stock as of April 13, 2026 less the shares issued pursuant to the securities purchase agreement unless the Company has obtained stockholder approval in compliance with Nasdaq Listing Rule 5635(d) to authorize the issuance of shares of common stock in connection with the conversion or exchange of all Secured Notes.

The Company granted the Purchasers certain piggyback registration rights with respect to the shares of common stock issuable upon conversion of the Secured Notes.

As part of the transactions described above, IPX purchased $57,803 original principal amount of the Secured Notes and purchased 1,742 shares of common stock, on the same terms as the other Purchasers, except that the shares of common stock purchased by IPX were priced at current market value.

The net proceeds received from the April 13, 2026 issuance of the Secured Notes and shares as described above were used to repay $2.25 million of the Term Loan A debt, and an additional $0.50 million of the Term Loan A debt was paid with the Company’s restricted cash.

As such, following the funding and completion of the transactions described above, the Company’s debt obligations will be as follows:

(1) Senior Secured Notes in the principal amount of $2.6 million, with payments commencing October 13, 2026 and a maturity date of April 13, 2027, (2) Term Loan A in the principal amount

of $0.5 million, payable on the maturity date of September 20, 2027, and (3) Term Loan B in the amount of $9.9 million, payable on the maturity date of December 12, 2028.

Other Factors

We continue to seek to expand and diversify the types of licensed products being produced under our brands.

We plan to continue to diversify the distribution channels and product categories within which licensed products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands.

The Halston brand, C Wonder brand, TowerHill by Christie Brinkley brand, and the LB70 by Lloyd Boston brand, which together currently represent a majority of our revenues, have a core business in fashion apparel and accessories.

Our other brands – including the Judith Ripka brand, which is a fine jewelry brand;

the Longaberger brand, which focuses on home good products;

GemmaMade and Mesa Mia, which focus on cooking and baking related products;

and Trust, Respect, Love, which focuses on pet-related products – help to diversify our industry focus while at the same time complement our business operations and relationships.

We plan to continue to diversify the distribution channels within which licensed products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands.

The Halston brand, C Wonder brand, and TowerHill by Christie Brinkley brand, which together currently represent a majority of our revenues, have a core business in fashion apparel and accessories, as will the Off/Duty by Coco Rocha brand when it launches later this year.

Our other brands – including the Longaberger by Shannon Doherty brand, which focuses on home good products;

GemmaMade by Gemma Stafford and Mesa Mia by Jenny Martinez, which focus on cooking and baking related products;

and Trust.Respect.Love by Cesar Millan brand, which focuses on pet-related products – help to diversify our industry focus while at the same time complement our business operations and relationships.

While the 2022 sale of a majority interest in the Isaac Mizrahi brand and the 2024 divestiture of the LOGO by Lori Goldstein brand resulted in significant decreases in our licensing revenues, we have taken and continue to take actions to replace those revenues with new strategic business initiatives, as we concentrate our resources on growing our brands, launching new brands, and entering into new business partnerships.

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 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.

In April 2025, we restructured our outstanding term debt and received additional net proceeds, which improved our liquidity position.

The higher outstanding principal balance under our refinanced term loan debt will result in higher interest payments over the term of the debt, although a substantial portion of that interest will be paid in-kind through March 2027 by being capitalized and added to the principal amount of the debt.

The successful launch of the TowerHill by Christie Brinkley brand in 2024 is an example of this.

We recently launched two new cobranded collaborations in April 2026, and plan to launch two more before the end of the year.

Additionally, during 2023 and 2024, we restructured our business by shifting from a wholesale/licensing hybrid model to a “licensing plus” business model, divesting certain brands, and undertaking various cost-cutting measures to more efficiently operate our business and reduce and better manage our exposure to operating risks.

During 2025, we continued to implement additional measures to further optimize our cost structure.

As a result, we have reduced our direct operating expenses to an expected run rate of less than $10 million per annum, which represents approximately $21 million of cost savings on an annualized basis compared to our cost structure in 2022.

Nonetheless, we continue to face a number of headwinds in the current macroeconomic environment.

Poor economic and market conditions, including the impacts of inflation and rising consumer debt levels, may negatively impact market sentiment, decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer products, which would adversely affect our operating income and results of operations.

If we are unable to take effective measures in a timely manner to mitigate the impact of inflation and/or a potential recession, our business, financial condition, and results of operations could be adversely affected.

Our long-term success, however, will still remain largely dependent on our ability to build and maintain our brands’ awareness and continue to attract wholesale and direct-to-consumer customers, and contract with and retain key licensees and business partners, as well as our and our licensees’ ability to accurately predict upcoming fashion and design trends within their respective customer bases and fulfill the product requirements of the particular retail channels within the global marketplace.

Poor economic and market conditions, including the cumulative impacts of inflation and rising consumer debt levels, along with the impact of tariffs on goods imported into the U.S., may negatively impact consumer sentiment, decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer products, which would adversely affect our operating income and results of operations.

If we are unable to take effective measures in a timely manner to mitigate the impact of these conditions and/or a potential recession, our business, financial condition, and results of operations could be adversely affected.

Our long-term success, however, will still remain largely dependent on our ability to build and maintain our brands’ awareness and attract customers, and contract with and retain key licensees and business partners, as well as our and our licensees’ ability to accurately predict upcoming fashion and design trends within their respective customer bases and fulfill the product requirements of the particular retail channels within the global marketplace.

Unanticipated changes in consumer fashion preferences and purchasing patterns, slowdowns in the U.S.

economy, changes in the prices of supplies, consolidation of retail establishments, and other factors noted in Item 1A of our most recent Annual Report on Form 10-K could adversely affect our licensees’ ability to meet and/or exceed their contractual commitments to us and thereby adversely affect our future operating results.

economy, and other factors noted in Item 1A of our most recent Annual Report on Form 10-K could adversely affect our licensees’ ability to meet and/or exceed their contractual commitments to us and thereby adversely affect our future operating results.

Off-Balance Sheet Arrangements

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Because the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

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 September 30, 2025, there were no material changes to our critical accounting policies or estimates.

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 15, 2026, for a discussion of our critical accounting policies and estimates.

During the three months ended March 31, 2026, there were no material changes to our critical accounting policies or estimates.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis