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Item 2. Management’s Discussion and Analysis

2026-08-13 compared with 2026-05-14 · 118 added, 58 removed, 175 unchanged (50% 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 development of influencer led brands and the acquisition of dynamic consumer lifestyle brands.

(“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, home goods and other consumer products, and the development of influencer led brands 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.

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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.

Our brand portfolio also previously included the Judith Ripka brand (through April 27, 2026) and a noncontrolling ownership interest in the Isaac Mizrahi brand (through October 1, 2025).

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.

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Summary of Operating Results

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

Three months ended June 30, 2026 (the “current quarter”) compared with the three months ended June 30, 2025 (the “prior year quarter”)

Current quarter net revenue decreased by $0.20 million to $1.12 million from $1.32 million for the prior year quarter.

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.

This decrease was primarily driven by the loss of licensing revenue as a result of the sale of the Judith Ripka brand in April 2026.

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 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.

Our total direct operating costs and expenses declined approximately 2% to $1.86 million in the current quarter compared to $1.90 million in the prior year quarter, as reductions in the Company’s payroll and benefits costs were partially offset by a net increase in other selling, general and administrative expenses.

The decrease in payroll and benefits costs was due to cost reduction actions taken by management in 2025, while the year-over-year increase in other selling, general and administrative expenses was primarily attributable to the one-time impact of the employee retention credit recognized in 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.

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.

Depreciation and amortization expense decreased to $0.81 million in the current quarter from $0.90 million in the prior year quarter;

this decline was primarily attributable to the sale of the Judith Ripka brand trademarks in April 2026.

For the prior year quarter, we recognized a $0.18 million loss related to our equity investment in IM Topco.

However, as the remaining IM Topco equity interest was transferred to WHP on October 1, 2025, there were no earnings or losses from equity investments for the current quarter.

Interest and Finance Expense

Interest and finance expense was approximately $0.87 million for the current quarter, compared with approximately $2.34 million for the prior year quarter.

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.

This decrease was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized in the prior year quarter related to the April 2025 refinancing of our term loan debt, compared with a much smaller comparable loss of $0.15 million recognized in the current quarter related to the April 2026 debt refinancing.

This decrease was partially offset by higher interest expense and other finance charges, primarily driven by higher overall outstanding debt balances in the current quarter.

The estimated annual effective income tax rate for the current quarter and the prior year quarter was approximately -0.8% and 0.0%, respectively, resulting in an income tax provision (benefit) of $0.02 million and $0, respectively.

For both periods, the federal statutory rate differed from the effective tax rate primarily 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.

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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 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), charges related to the sale of the Judith Ripka brand, 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 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, charges related to the sale of the Judith Ripka brand, stock-based compensation and cost of licensee warrants, 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.

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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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Stock-based compensation and cost of licensee warrants

Asset impairment charges

Loss on early extinguishment of debt

Charges related to the sale of the Judith Ripka brand

Income tax provision (benefit)

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Stock-based compensation and cost of licensee warrants

Asset impairment charges

Loss on early extinguishment of debt

Charges related to the sale of the Judith Ripka brand

Income tax provision (benefit)

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Loss from equity investments

Asset impairment charges

Charges related to the sale of the Judith Ripka brand

Stock-based compensation and cost of licensee warrants

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Adjusted EBITDA

Six months ended June 30, 2026 (the “current six months”) compared with the six months ended June 30, 2025 (the “prior year six months”)

Current six months net revenue decreased by approximately $0.39 million to $2.27 million from $2.65 million for the prior year six months.

This decrease was primarily driven by the combination of (i) 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 first quarter of 2026, and (ii) the loss of licensing revenues related to the Judith Ripka brand as a result of the sale of this brand in April 2026.

Direct Operating Costs and Expenses

Overall direct operating costs and expenses declined approximately 5% to $3.93 million in the current six months compared to $4.18 million in the prior year six months, as reductions in the Company’s payroll and benefits costs were partially offset by a net increase in other selling, general and administrative expenses.

Other Operating Costs and Expenses (Income)

Depreciation and amortization expense decreased to $1.71 million in the current six months from $1.80 million in the prior year six months;

this decline was primarily attributable to the sale of the Judith Ripka brand trademarks in April 2026.

During the current year six months, we also recognized approximately $0.10 million of charges related to the sale of the Judith Ripak trademarks.

For the prior year six months, we recognized a $0.52 million loss related to our equity investment in IM Topco.

However, as the remaining IM Topco equity interest was transferred to WHP on October 1, 2025, there were no earnings or losses from equity investments for the current six months.

Interest and Finance Expense

Interest and finance expense was approximately $1.47 million for the current six months, compared with approximately $2.90 million for the prior year quarter.

This $1.43 million decrease was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized in the prior year six months related to the April 2025 refinancing of our term loan debt, compared with a much smaller comparable loss of $0.15 million recognized in the current six months related to the April 2026 debt refinancing.

This decrease was partially offset by higher interest expense and other finance charges, primarily driven by higher average overall outstanding debt balances in the current year period.

The estimated annual effective income tax rate for the current six months and the prior year six months was approximately -0.6% and -0.7%, respectively, resulting in an income tax provision (benefit) of $0.03 million and $0.05 million, respectively.

Net Loss Attributable to Xcel Brands, Inc.

We had a net loss of $4.97 million for the current six months, compared with a net loss of $6.79 million for the prior year six 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 $2.68 million, or $(0.44) per diluted share (“non-GAAP diluted EPS”), for the current six months and a non-GAAP net loss of $2.27 million, or $(0.95) per diluted share, for the prior year six months.

We had Adjusted EBITDA of approximately $(1.18) million for the current six months, compared with approximately $(1.00) million for the prior year six 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

($ in thousands)

Net loss attributable to Xcel Brands, Inc.

Amortization of trademarks

Loss from equity investments

Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Charges related to the sale of the Judith Ripka brand

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

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

Charges related to the sale of the Judith Ripka brand

Income tax provision

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:

Six Months Ended

($ 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 investments

Charges related to the sale of the Judith Ripka brand

Stock-based compensation and cost of licensee warrants

Costs associated with restructuring of operations

Adjusted EBITDA

Liquidity and Capital Resources

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.

As of June 30, 2026 and December 31, 2025, our unrestricted cash and cash equivalents were approximately $0.40 million and $1.15 million, respectively.

Restricted cash at June 30, 2026 consisted of $0.62 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.

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

As of June 30, 2026, we had no significant commitments for future capital expenditures.

Working Capital

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).

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) deficit was approximately $(1.28) million and $(0.80) million as of June 30, 2026 and December 31, 2025, respectively.

Our working capital deficit as of June 30, 2026 notably includes $1.87 million of liabilities for our Senior Secured Notes, which were recently issued in April 2026 and have a maturity date of in April 2027 (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 March 31, 2026 we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

As of June 30, 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.

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Operating Activities

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.

Net cash used in operating activities was approximately $2.73 million in the current six months, compared with approximately $3.80 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 $(4.97) million plus non-cash items of approximately $3.14 million and the net change in operating assets and liabilities of approximately $(0.90) million.

Non-cash items were primarily comprised of $1.71 million of depreciation and amortization expense, and $1.01 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.

The net change in operating assets and liabilities was primarily driven by changes in deferred revenue balances of $(0.80) million.

The prior year 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.

Investing Activities

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.

The current six months cash provided by investing activities of $2.00 million was attributable to net proceeds received from the sale of the Judith Ripka brand trademarks in April 2026.

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

Financing Activities

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.

Net cash used in financing activities in the current six months was predominantly related to the debt financing and refinancing transactions executed in April 2026 (as described further below), including (i) repayment of $(3.25) million of principal under our Term Loan A debt, (ii) $3.01 million of gross proceeds received from the issuance of our new Senior Secured Notes, (iii) total payments made under the Senior Secured Notes (inclusive of original issue discount) of $(0.86) million, and (iv) payment of deferred finance costs of $(0.35) million related to the issuance of the Senior Secured Notes.

In addition, we received proceeds of approximately $0.42 million (net of related fees and expenses) during the current six months from the issuance of shares of common stock under our equity line of credit facility (as described further below).

Net cash provided by financing activities in the prior year six 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, and $3.62 million of proceeds received from the Company’s April 2025 refinancing of its term loan debt.

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.

Equity Line Facility

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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.

Through July 31, 2026, we issued 382,500 shares under the equity line.

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.

accordingly, the Company issued 16,094 shares to White Lion on May 6, 2026.

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.

For the three and six months ended June 30, 2026, the Company issued an aggregate of 348,000 shares under the equity line facility arrangement and received aggregate net proceeds of approximately $0.67 million.

Through July 31, 2026, the Company issued 382,500 shares under the equity line facility arrangement and received aggregate net proceeds of approximately $0.71 million.

Also, during the current six months, the Company incurred approximately $0.26 million of fees and expenses (consisting of legal and accounting fees) associated with the equity line arrangement and related registration statement, which were recorded as a reduction to additional paid-in capital.

Debt Transactions and Refinancings

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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;

(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 $3.25 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);

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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);

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:

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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.

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 in the case of SFT and Quick or $1.435 per share in the case of IPX 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 the case of SFT and Quick or $1.435 per share in the case of IPX.

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.

As such, immediately following the funding and completion of the transactions described above, the Company’s debt obligations were 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 $0.50 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

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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.

While the 2022 sale of a majority interest in the Isaac Mizrahi brand and the 2024 divestiture of the LOGO by Lori Goldstein brand (and, to a lesser extent, the April 2026 sale of the Judith Ripka 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.

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

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.

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, 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.

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

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.

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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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.

During the three months ended June 30, 2026, 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