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Item 9A. Controls and Procedures

2021-04-23 compared with 2020-04-14 · 227 added, 239 removed, 389 unchanged (55% of the section changed)

Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Such controls and procedures, by their nature, can provide only reasonable assurance regarding management’s control objectives.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a‑15(f) and 15d‑15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2019.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2019, to ensure that all information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time specified in SEC rules and forms and is accumulated and communicated to our management, including our principal executive and principal accounting officers to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Such controls and procedures, by their nature, can provide only reasonable assurance regarding management’s control objectives.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a 15(f) and 15d 15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2020.

Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of December 31, 2020, due to the material weakness described below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed by, or under the supervision of, the chief executive officer and principal financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the design and effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our evaluation under the framework described above, our management has concluded that our internal control over financial reporting was effective as of December 31, 2019.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation requirements by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Based on its evaluation as of December 31, 2020, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2020 due to the material weaknesses set forth below.

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The basis for the conclusion that such internal control was ineffective included the following considerations:

● the Company was unable to file our Annual Report on Form 10-K within the time specified in SEC rules and forms, due to material subsequent events occurring in the first quarter of 2021, including a significant brand acquisition and a significant debt refinancing transaction, and impacts of the ongoing COVID-19 pandemic on our processes;

● the complexities in determining an impairment charge in the carrying value of one of the Company’s trademarks required additional time for a complete analysis.

The Company has hired additional personnel in its finance department to address the material weakness.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) during our most recent completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

There was no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our most recent completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Other Information

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Each director holds office until a successor is elected and qualified or earlier resignation or removal.

D’Loren

Chairman of the Board of Directors and Chief Executive Officer and President

Chief Financial Officer and Assistant Secretary, and Principal Financial and Accounting Officer

Giuseppe “Joe”

Giuseppe “Joe” Falco

President and Chief Operating Officer of the Isaac Mizrahi Brand

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Below are the biographies of each of our officers and directors as of December 31, 2019.

D’Loren has been the Chairman of our Board and our Chief Executive Officer and President since September 2011.

D’Loren has been an entrepreneur, innovator and pioneer of the consumer branded products industry for the past 35 years.

D’Loren has spearheaded the Company’s omni-channel platform, connecting the channels of digital, brick-and-mortar, social media, and direct-response television to create a single customer view and brand experience for Xcel’s brands.

D’Loren has been the Chairman of our Board and our Chief Executive Officer and President since September 2011.

D’Loren has been an entrepreneur, innovator, and pioneer of the consumer branded products industry for the past 35 years.

He served as Chairman and CEO of IPX Capital, LLC and its subsidiaries, a consumer products investment company, from 2009 to 2011.

He continues to serve as IPX Capital LLC’s Chairman.

Prior to founding the Company, from June 2006 to July 2008, Mr.

D’Loren was a director, President and CEO of NexCen Brands, Inc., a global brand acquisition and management company with holdings that included The Athlete’s Foot, Waverly Home, Bill Blass, MaggieMoo’s, Marble Slab Creamery, Pretzel Time, Pretzelmaker, Great American Cookies, and The Shoe Box.

From 2002 to 2006, Mr.

D’Loren’s work among consumer brands continued as President and CEO of UCC Capital Corporation, an intellectual property investment company where he invested in the consumer branded products, media and entertainment sectors.

From 1997 to 2002, Mr.

D’Loren founded and acted as President and Chief Operating Officer of CAK Universal Credit Corporation, an intellectual property finance company.

D’Loren’s total career debt and equity investments in over 30 entertainment and consumer branded products companies have exceeded $1.0 billion.

In 1985, he founded and served as President and CEO of the D’Loren Organization, an investment and restructuring firm responsible for over $2 billion of transactions.

D’Loren has also served as an asset manager for Fosterlane Management, as well as a manager with Deloitte.

D’Loren has served on the Board of Directors for Iconix Brand Group, Longaberger Company, Business Loan Center, and as a board advisor to The Athletes Foot and Bill Blass, Ltd.

D’Loren founded and acted as President and Chief Operating Officer of CAK Universal Credit Corporation, an intellectual property finance company.

D’Loren’s total career debt and equity investments in over 30 entertainment and consumer branded products companies have exceeded $1.0 billion.

In 1985, he founded and served as President and CEO of the D’Loren Organization, an investment and restructuring firm responsible for over $2 billion of transactions.

D’Loren has also served as an asset manager for Fosterlane Management, as well as a manager with Deloitte.

D’Loren has served on the Board of Directors for Iconix Brand Group, Longaberger Company, Business Loan Center, and as a board advisor to The Athletes Foot and Bill Blass, Ltd.

He also serves on the board of directors for the Achilles Track Club International.

D’Loren is a Certified Public Accountant and holds an M.S.

degree from Columbia University and a B.S.

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from 2006 to May 2008 and Chief Financial Officer and Chief Credit Officer for UCC Capital Corporation, and its predecessor company, CAK Universal Credit Corp., from 1998 to 2006.

Prior to joining UCC,

Prior to joining UCC, Mr.

Haran was a partner at Sidney Yoskowitz and Company P.C., a registered diversified certified public accounting firm.

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From 2001 to 2003, Mr.

Burroughs worked as a Senior Financial Analyst at The Pullman Group where he was involved with structuring the first securitizations of music royalties, including the Bowie Bonds, and as a Financial Analyst at Merrill Lynch’s private client group.

Burroughs received a B.S.

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DiSanto has served as the Chief Executive Officer of Triple Crown Corporation, a regional real estate development and investment company with commercial and residential development projects exceeding 1.5 million square feet.

DiSanto received a degree in business administration from Villanova University’s College of Commerce and Finance, a J.D.

degree from the University of Toledo College of Law, and an M.S.

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Prior to that, Mr.

Fielding served as the CEO of Claire’s Stores Inc., where he oversaw strategic growth and international development for the retail chain’s 3,000‑plus stores worldwide.

Fielding served as the CEO of Claire’s Stores Inc., where he oversaw strategic growth and international development for the retail chain’s 3,000-plus stores worldwide.

From May 2008 to 2012 Mr.

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Liebman joined Shorewood in 1994 as Executive Vice President and Chief Financial Officer, and served as its President from 1999 until Shorewood was acquired by International Paper in 2000.

Liebman continued

as Executive Vice President of Shorewood until his retirement in 2005.

Liebman continued as Executive Vice President of Shorewood until his retirement in 2005.

Liebman is a Certified Public Accountant and was an audit partner with Deloitte and Touche, LLP (and its predecessors) from 1974 to 1994.

Deborah Weinswig was appointed as a member of our Board in January 2018.

She is a Managing Director of Funding Global Retail & Technology (“FGRT”), the think tank for the Hong Kong-based Fung Group, since April 2014 where she is responsible for building the team’s research capabilities and providing insights into the disruptive technologies that are reshaping today’s global retail landscape.

Prior to leading FGRT, Weinswig served as Chief Customer Officer for Profitect Inc., a predictive analytics and big data software provider.

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Weinswig was employed by Citigroup, Inc., most recently where she was Managing Director and Head of the Global Staples & Consumer Discretionary team at Citi Research.

Weinswig also serves as an e-commerce expert for the International Council of Shopping Centers’

Research Task Force and was a founding member of the Oracle Retail Industry Strategy Council.

Weinswig also serves as an e-commerce expert for the International Council of Shopping Centers’ Research Task Force and was a founding member of the Oracle Retail Industry Strategy Council.

Lastly, she is a member of the Board of Directors of Kiabi (affiliated with the Auchan Group).

Weinswig is a Certified Public Accountant and holds an MBA from the University of Chicago.

Directors’

Qualifications

Directors’ Qualifications

In furtherance of our corporate governance principles, each of our directors brings unique qualities and qualifications to our Board.

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The following descriptions demonstrate the qualifications of each director:

D’Loren has extensive experience in and knowledge of the licensing and commercial business industries and financial markets.

This knowledge and experience, including his experience as director, president, and chief executive officer of a global brand management company, provide us with valuable insight to formulate and create our acquisition strategy and how to manage and license acquired brands.

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Mizrahi has been a leader in the fashion industry for almost 30 years.

Since his first collection in 1987, Mr.

Mizrahi’s designs have come to stand for timeless, cosmopolitan style.

He has been awarded four Council of Fashion Designers of America (CFDA) awards, including a special award in 1996 for the groundbreaking documentary “Unzipped.”

In the Spring of 2016, Mr.

Mizrahi launched IMNYC Isaac Mizrahi, available exclusively at Hudson’s Bay and Lord & Taylor department stores.

his first collection in 1987, Mr.

Mizrahi’s designs have come to stand for timeless, cosmopolitan style.

He has been awarded four Council of Fashion Designers of America (CFDA) awards, including a special award in 1996 for the groundbreaking documentary “Unzipped.” In the Spring of 2016, Mr.

Mizrahi launched IMNYC Isaac Mizrahi, available exclusively at Hudson’s Bay and Lord & Taylor department stores.

Previously, in 2009, Mr.

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In addition, television audiences have come to value Mr.

Mizrahi’s media presence through his roles on “Project Runway All Stars”

for Lifetime, and his appearances on broadcast television networks where he offers his expertise on fashion and style.

Mizrahi’s media presence through his roles on “Project Runway All Stars” for Lifetime, and his appearances on broadcast television networks where he offers his expertise on fashion and style.

Employment Agreements with Executives

D’Loren

On February 28, 2019, and effective as of January 1, 2019, the Company entered into a three-year employment agreement with Robert W.

D’Loren for him to continue to serve as Chief Executive Officer of the Company, referred to as the D’Loren Employment Agreement.

Following the initial three-year term, the agreement will be automatically renewed for one-year terms unless either party gives written notice of intent to terminate at least 90 days prior to the termination of the then current term.

Pursuant to the D’Loren Employment Agreement, Mr.

D’Loren’s annual base salary is $0.89 million.

The Company’s board of directors or the compensation committee may approve increases (but not decreases) from time to time.

Pursuant to the D’Loren Employment Agreement, Mr.

D’Loren’s annual base salary is $0.89 million.

The Company’s board of directors or the compensation committee may approve increases (but not decreases) from time to time.

Following the initial three-year term, Mr.

D’Loren’s base salary will be reviewed at least annually.

D’Loren receives an allowance for an automobile appropriate for his level of position and the Company pays (in addition to monthly lease or other payments) all of the related expenses for gasoline, insurance, maintenance, repairs or any other costs with Mr.

D’Loren’s automobile.

D’Loren will be eligible to receive an annual cash bonus in an amount equal to (i) 2.5% of all income generated from the sales of the Company’s products and by the trademarks and other intellectual property owned, operated or managed by us (“IP Income”), in excess of $8.0 million earned and received by us in such fiscal year:

provided that any IP income generated through net sales shall be multiplied by (x) 7% in the case of net sales from wholesale sales, and private label sales and (y) 3% in the case of net sales from e-commerce sales through the Company’s web sites and (ii) 5% of the Company’s adjusted EBITDA (as defined in the D’Loren Employment Agreement) for such fiscal year.

D’Loren shall have the right to elect to receive the cash bonus through the issuance of shares of the Company’s common stock.

Pursuant to the D’Loren Agreement, Mr.

D’Loren was granted an option to purchase up to 2,578,947 shares of the Company’s common stock at an exercise price of $1.70 per share.

D’Loren’s base salary will be reviewed at least annually.

D’Loren’s automobile.

D’Loren shall have the right to elect to receive the cash bonus through the issuance of shares of the Company’s common stock.

Pursuant to the D’Loren Agreement, Mr.

D’Loren was granted an option to purchase up to 2,578,947 shares of the Company’s common stock at an exercise price of $1.70 per share.

The option is exercisable until February 28, 2029 and shall vest, subject to Mr.

D’Loren remaining employed by the Company and based upon the Company’s common stock achieving the following target prices:

Target Prices

Number of Option Shares Vesting

D’Loren’s employment is terminated by the Company without cause, or if Mr.

D’Loren resigns with good reason, or if the Company fails to renew the term, then Mr.

D’Loren will be entitled to receive his unpaid base salary and cash bonuses through the termination date and a lump sum payment equal to the base salary in effect on the termination date for the longer of two years from the termination date or the remainder of the then-current term.

D’Loren’s employment is terminated by the Company without cause, or if Mr.

D’Loren resigns with good reason, or if the Company fails to renew the term, then Mr.

Additionally, Mr.

D’Loren would be entitled to two hundred times the average annual cash bonuses paid in the preceding 12 months.

D’Loren would also be entitled to continue to participate in the Company’s group medical plan or receive reimbursement for premiums paid for other medical insurance in an amount not to exceed the cost to participate in the Company’s plan, subject to certain conditions, for a period of 36 months from the termination date.

D’Loren would be entitled to two hundred times the average annual cash bonuses paid in the preceding 12 months.

D’Loren would also be entitled to continue to participate in the Company’s group medical plan or receive reimbursement for

premiums paid for other medical insurance in an amount not to exceed the cost to participate in the Company’s plan, subject to certain conditions, for a period of 36 months from the termination date.

Change of Control

In the event Mr.

D’Loren’s employment is terminated within 12 months following a change of control by the Company without cause or by Mr.

D’Loren with good reason, he would be entitled to a lump sum payment equal to two times (i) his base salary in effect on the termination date for the longer of two years from the termination date or the remainder of the then-current term and (ii) two times the average annual cash bonuses paid in the preceding 12 months, minus $100.

“Change of control,”

as defined in Mr.

D’Loren’s employment agreement, means a merger or consolidation to which we are a party, a sale, lease or other transfer, exclusive license or other disposition of all or substantially all of our assets, a sale or transfer by our stockholders of voting control, in a single transaction or a series of transactions or, if during any twelve consecutive month period, the individuals who at the beginning of such period, constitute the board of directors of the Company (the “Incumbent Directors”) cease (other than due to death) to constitute a majority of the members of the board at the end of such period;

D’Loren’s employment is terminated within 12 months following a change of control by the Company without cause or by Mr.

“Change of control,” as defined in Mr.

provided that directors elected by or on the recommendation of a majority of the directors who so qualify as Incumbent Directors shall be deemed to be Incumbent Directors.

Upon a change of control, notwithstanding the vesting and exercisability schedule in any stock option or other grant agreement between Mr.

D’Loren and the Company, all unvested stock options, shares of restricted stock and other equity awards granted by the Company to Mr.

D’Loren pursuant to any such agreement shall immediately vest, and all such stock options shall become exercisable and remain exercisable for the lesser of 180 days after the date the change of control occurs or the remaining term of the applicable option.

D’Loren and the Company, all unvested stock options, shares of restricted stock and other equity awards granted by the Company to Mr.

Non-Competition and Non-Solicitation

During the term of his employment by the Company and for a one-year period after the termination of such employment (unless Mr.

D’Loren’s employment was terminated without cause or was terminated by him for good reason, in which case only for his term of employment and a six-month period after the termination of such employment), Mr.

D’Loren may not permit his name to be used by or participate in any business or enterprise (other than the mere passive ownership of not more than 5% of the outstanding stock of any class of a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market) that engages or proposes to engage in our business in the United States, its territories and possessions and any foreign country in which we do business as of the date of termination of his employment.

Also, during his employment and for a one-year period after the termination of such employment, Mr.

D’Loren may not, directly or indirectly, solicit, induce or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any of its subsidiaries;

or solicit, induce or attempt to induce any person who is, or was during the then-most recent 12-month period, a corporate officer, general manager or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment with the Company or any of its subsidiaries;

or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries;

or solicit, induce or attempt to induce any person who is, or was during the then-most recent 12-month period, a corporate officer, general manager, or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment with the Company or any of its subsidiaries;

or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries;

or in any way interfere with the relationship between any such customer, supplier, licensee, employee, or business relation and the Company or any of its subsidiaries.

On February 28, 2019, and effective as of January 1, 2019, the Company entered into a two-year employment agreement with James Haran for him to continue to serve as the Company’s Chief Financial Officer, referred to as the Haran Employment Agreement.

Following the initial two-year term, the agreement automatically renewed for a one-year term and will be automatically renewed for one-year terms thereafter unless either party gives written notice of intent to terminate at least 30 days prior to the expiration of the then current term.

Pursuant to the Haran Employment Agreement, Mr.

Haran’s annual base salary is $0.37 million per annum.

The board of directors or the compensation committee may approve increases (but not decreases) from time to time.

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Haran will be eligible to receive a performance cash bonus in an amount equal to (i) 0.23% of all IP Income in excess of $12.0 million earned and received by us in such fiscal year;

provided that any IP income generated through net sales shall be multiplied by (x) 7% in the case of net sales from wholesale sales, and private label sales and (y) 3% in the case of net sales from e-commerce sales through the Company’s web sites plus (ii) 0.375% of the Company’s adjusted EBITDA (as defined in the Haran Employment Agreement) for such fiscal year.

Notwithstanding the foregoing, for (i) 2019, $0.04 million of Mr.

Haran’s bonus is guaranteed, of which $0.01 million was paid to Mr.

Haran upon execution of the Haran Employment Agreement and $0.03 million is payable on or before June 30, 2019, and (ii) for 2020, $0.03 million of Mr.

Haran’s bonus is guaranteed and payable on or before June 30, 2020, in each case, as long as Mr.

Haran remains employed by the Company.

Haran’s bonus was guaranteed, of which $0.01 million was paid to Mr.

Haran upon execution of the Haran Employment Agreement and $0.03 million was paid prior to June 30, 2019, and (ii) for 2020, $0.03 million of Mr.

Haran’s bonus was guaranteed and paid prior to June 30, 2020, in each case.

Pursuant to the Haran Employment Agreement, Mr.

Haran was granted an option to purchase up to 552,632 shares of the Company’s common stock at an exercise price of $1.70 per share.

The option is exercisable until February 28, 2029 and shall vest, subject to Mr.

Haran remaining employed with the Company and based upon the Company’s common stock achieving target prices as follows:

Target Prices

Number of Option Shares Vesting

Haran’s employment is terminated by the Company without cause, or if Mr.

Haran resigns with good reason, or if the Company fails to renew the term, then Mr.

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In the event Mr.

Haran’s employment is terminated within 12 months following a change of control by the Company without cause or by Mr.

Haran with good reason, Mr.

Haran would be entitled to a lump sum payment equal to his base salary in effect on the termination date for 12 months following such termination.

“Change of control,”

as defined in Mr.

Haran’s employment agreement, means a merger or consolidation to which we are a party, a sale, lease or other transfer, exclusive license or other disposition of all or substantially all of our assets, or a sale or transfer by our stockholders of voting control, in a single transaction or a series of transactions.

“Change of control,” as defined in Mr.

Upon a change of control, notwithstanding the vesting and exercisability schedule in any stock option or other grant agreement between Mr.

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Also, during his employment and for a one-year period after the termination of his employment, Mr.

Haran may not, directly or indirectly, solicit, induce or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any of its subsidiaries;

or solicit, induce or attempt to induce any person who is, or was during the then-most recent 12‑month period, a corporate officer, general manager or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment with the Company or any of its subsidiaries;

or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries;

any of its subsidiaries;

or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries;

or in any way interfere with the relationship between any such customer, supplier, licensee, employee or business relation and the Company or any of its subsidiaries.

Giuseppe Falco

On February 27, 2019, and effective January 1, 2019, the Company entered into a two-year employment agreement with Giuseppe Falco for him to serve as President and Chief Merchant of the Company’s Interactive Technology business and

the Company’s Creative Director, referred to as the Falco Employment Agreement.

Following the initial two-year term, the agreement will be automatically renewed for an additional one-year term, unless either party gives written notice of intent to terminate at least 30 days prior to the expiration of the then current term.

Following the initial two-year term, the agreement automatically renewed for an additional one-year term.

Under the Falco Employment Agreement, Mr.

Falco’s base salary is $0.55 million per annum.

Cash Bonus and Stock Bonus .

Falco will be eligible to receive a performance cash bonus in an amount up to $0.4 million per annum and a performance stock bonus with a value of up to $0.09 million per annum based upon the Company receiving Gross DRT Sales as follows:

Falco was eligible to receive a performance cash bonus in an amount up to $0.4 million per annum and a performance stock bonus with a value of up to $0.09 million per annum based upon the Company receiving Gross DRT Sales as follows:

($ in thousands)

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$265,000 or more

The Gross DRT Sale Level targets for 2020 shall be established by the Compensation Committee of the Company’s Board of Directors.

Gross DRT Sales ”

means gross sales generated by the Company’s trademarks through any program transmitted by television, on QVC, HSN (including their e-commerce businesses known as Buy Any Time), or similar interactive television networks globally.

Falco’s employment is terminated by us without cause, or if Mr.

The Gross DRT Sale Level targets for 2020 were established by the Compensation Committee of the Company’s Board of Directors.

“ Gross DRT Sales ” means gross sales generated by the Company’s trademarks through any program transmitted by television, on QVC, HSN (including their e-commerce businesses known as Buy Any Time), or similar interactive television networks globally.

Falco’s employment is terminated by us without cause, or if Mr.

Falco resigns with good reason, or if we fail to renew the term, then Mr.

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In the event Mr.

Falco’s employment is terminated within 12 months following a change of control by the Company without cause or by Mr.

Falco with good reason, Mr.

Falco would be entitled to a lump sum payment equal to his base salary in effect on the termination date for six months following such termination.

“Change of control,”

as defined in Mr.

Falco’s employment agreement, means a merger or consolidation to which we are a party, a sale, lease or other transfer, exclusive license or other disposition of all or substantially all of our assets, or a sale or transfer by our stockholders of voting control, in a single transaction or a series of transactions.

“Change of control,” as defined in Mr.

Upon a change of control, notwithstanding the vesting and exercisability schedule in any stock option or other grant agreement between Mr.

Falco and us, all unvested stock options, shares of restricted stock and other equity awards granted by us to Mr.

Falco and us, all unvested stock

options, shares of restricted stock and other equity awards granted by us to Mr.

Falco pursuant to any such agreement shall immediately vest, and all such stock options shall become exercisable and remain exercisable for the lesser of 180 days after the date the change of control occurs or the remaining term of the applicable option.

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During the term of his employment by the Company and for a one-year period after the termination of such employment, Mr.

Falco may not permit his name to be used by or participate in any business or enterprise (other than the mere passive ownership of not more than 5% of the outstanding stock of any class of a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market) that engages or proposes to engage in the Company’s business in the United States, its territories and possessions and any foreign country in which we do business as of the date of termination of his employment.

Also, during his employment and for a one-year period after the termination of such employment, Mr.

Falco may not, directly or indirectly, solicit, induce or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any of its subsidiaries;

or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries;

or in any way interfere with the relationship between any such customer, supplier, licensee, employee or business relation and the Company or any of its subsidiaries.

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Francis, and Ms.

Deborah Weinswig meet the director independence requirements under the applicable listing rule of the NASDAQ Stock Market LLC (“NASDAQ”).

Each current member of the Audit Committee, Compensation Committee, and Nominating Committee is independent and meets the applicable rules and regulations regarding independence for such committee, including those set forth in the applicable NASDAQ rules, and each member is free of any relationship that would interfere with his individual exercise of independent judgment.

Section 16(a) Beneficial Ownership Reporting Compliance

To our knowledge, based solely on a review of Forms 3 and 4 and any amendments thereto furnished to our Company pursuant to Rule 16a‑3(e) under the Securities Exchange Act of 1934, or representations that no Forms 5 were required, all Section 16(a) filing requirements applicable to our officers, directors, and beneficial owners of more than 10% of our equity securities were timely filed, except that each of Messrs.

DiSanto, Fielding, Francis, Liebman and Malka, Ms.

Weinswig, and Mr.

Mizrahi, a 10% holder of our securities, filed one Form 4 late.

To our knowledge, based solely on a review of Forms 3 and 4 and any amendments thereto furnished to our Company pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934, or representations that no Forms 5 were required, all Section 16(a) filing requirements applicable to our officers, directors, and beneficial owners of more than 10% of our equity securities were timely filed, except that Mr.

DiSanto filed Forms 4 late for six transactions and Mr.

D’Loren filed Forms 4 late for three transactions.

Code of Ethics

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DiSanto, and Ms.

Each of such persons has been determined to be an “independent director”

under the applicable NASDAQ and SEC rules, which is the independence standard that was adopted by our board of directors.

Each of such persons has been determined to be an “independent director” under the applicable NASDAQ and SEC rules, which is the independence standard that was adopted by our board of directors.

The board of directors has determined that Mr.

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The Audit Committee operates under a written charter adopted by our board of directors.

The Audit Committee assists the board of directors by providing oversight of our accounting and financial reporting processes, appoints the independent registered public accounting firm, reviews with the registered independent registered public accounting firm the scope and results of the audit engagement, approves professional services provided by the independent registered

public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees and reviews the adequacy of internal accounting controls.

The Audit Committee

assists the board of directors by providing oversight of our accounting and financial reporting processes, appoints the independent registered public accounting firm, reviews with the registered independent registered public accounting firm the scope and results of the audit engagement, approves professional services provided by the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees and reviews the adequacy of internal accounting controls.

Compensation Committee

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DiSanto and Fielding.

Each of such persons has been determined to be an “independent director”

under the applicable NASDAQ rules.

Our board of directors has adopted a written Compensation Committee Charter that sets forth the committee’s responsibilities.

Each of such persons has been determined to be an “independent director” under the applicable NASDAQ rules.

Our board of directors has adopted a written Compensation Committee Charter that sets forth the committee’s responsibilities.

The committee is responsible for determining all forms of compensation for our executive officers, and establishing and maintaining executive compensation practices designed to enhance long-term stockholder value.

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DiSanto and Liebman.

Each of such persons has been determined to be an “independent director”

under the applicable NASDAQ rules.

Our board of directors has adopted a written Nominating Committee Charter that sets forth the committee’s responsibilities.

Each of such persons has been determined to be an “independent director” under the applicable NASDAQ rules.

Our board of directors has adopted a written Nominating Committee Charter that sets forth the committee’s responsibilities.

Executive Compensation

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Summary Compensation Table

D’Loren

CEO and Chairman

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President and COO

Bonuses were paid in accordance with the executives’

respective employment agreements.

See “Employment Agreements with Executives”

The dollar amounts shown represent the grant date fair value of stock option awards granted during the applicable fiscal year calculated in accordance with ASC Topic 718.

(1) Salary amounts for 2020 reflect temporary voluntary reductions from April 1, 2020 – December 31, 2020 in connection with cost reduction actions taken by management in response to the COVID-19 pandemic.

(2) Bonuses were paid in accordance with the executives’ respective employment agreements.

See “Employment Agreements with Executives” in Item 10.

(3) The amount shown represents the grant date fair value of fully-vested common stock awards issued in 2020 as payment for a performance bonus earned in the prior year.

Outstanding Equity Awards as of December 31, 2020

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Unexercisable

D’Loren

CEO, Chairman

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(2) These options become exercisable as to one-third of the shares on each of March 31, 2017, 2018, and 2019, and expire on March 31, 2021.

These options shall become exercisable based upon the Company’s common stock achieving specified target prices as outlined in the executive’s employment agreement, and expire on February 28, 2029.

See “Employment Agreements with Executives”

Such shares vest (i) as to 36,843 shares of common stock, on March 31, 2020;

(ii) as to 82,500 shares of common stock, on May 31, 2020;

and (iii) as to 19,692 shares of common stock, on June 1, 2020;

provided, however, that Mr.

D’Loren has the right to extend each vesting date by six-month increments, in his sole discretion, prior to the date the restrictions would lapse.

(3) These options shall become exercisable based upon the Company’s common stock achieving specified target prices as outlined in the executive’s employment agreement, and expire on February 28, 2029.

See “Employment Agreements with Executives” in Item 10.

(4) Such shares vest (i) as to 77,500 shares of common stock, on March 31, 2021;

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Falco has the right to extend each vesting date by six-month increments, in his sole discretion, prior to the date the restrictions would lapse.

These options became exercisable as to one-fifth of the shares on each of January 1, 2018 and January 1, 2019, and shall become exercisable as to an additional one-fifth of the shares on each of January 1, 2020, 2021 and 2022, and expire at the five-year anniversary of each vesting date for each individual one-fifth tranche.

(5) These options became exercisable as to one-fifth of the shares on each of January 1, 2018, 2019, and 2020, and shall become exercisable as to an additional one-fifth of the shares on each of January 1, 2021 and 2022, and expire at the five-year anniversary of each vesting date for each individual one-fifth tranche.

Director Compensation

We pay our non-employee directors $3,000 for each board of directors and committee meeting attended, up to a maximum of $12,000 per year for board of directors’

meetings and up to a maximum of $12,000 per year for committee meetings, except that the chairman of each committee receives $4,000 for each such committee meeting attended, up to a maximum of $16,000 per year.

The following table sets forth information with respect to each non-employee director’s compensation for the year ended December 31, 2019.

We pay our non-employee directors $3,000 for each board of directors and committee meeting attended, up to a maximum of $12,000 per year for board of directors’ meetings and up to a maximum of $12,000 per year for committee meetings, except that the chairman of each committee receives $4,000 for each such committee meeting attended, up to a maximum of $16,000 per year.

The following table sets forth information with respect to each non-employee director’s compensation for the year ended December 31, 2020.

The dollar amounts shown for Stock Awards represent the grant date fair value of the restricted stock awards or stock options granted during the fiscal year calculated in accordance with ASC Topic 718.

Mark DiSanto (1)

Francis (1) (2)

Howard Liebman (1)

Benjamin Malka (1) (2) (3)

Deborah Weinswig (1)

James Fielding (1)

On April 1, 2019, each non-employee director was granted 10,000 shares of restricted stock pursuant to the terms and conditions of the Plan.

Such shares of restricted stock will vest evenly over two years, whereby 50% shall vest on April 1, 2020 and 50% shall vest on April 1, 2021.

Notwithstanding the foregoing, each grantee may extend the vesting date of all or a portion of the restricted shares by six months and, thereafter one or more times may further extend such date with respect to all or a portion of the restricted shares until the next following October 1 or April 1, as the case may be.

The grant date fair value of the shares was $1.70 per share.

(1) On April 1, 2020, each non-employee director was granted options to purchase 40,000 shares of stock pursuant to the terms and conditions of the Plan.

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The exercise price of the options is $0.50 per share.

Benjamin Malka did not stand for re-election at the Company’s 2019 Annual Stockholders Meeting, and thus his term as a director ended September 11, 2019.

All unvested equity awards previously granted to Mr.

Malka vested as of September 11, 2019.

There were no restricted stock awards granted to non-employee directors for the year ended December 31, 2020.

2011 Equity Incentive Plan

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Cash awards may be issued under the Plan either alone or in addition to or in tandem with other awards granted under the Plan or other payments made to a participant not under the Plan.

The board or committee, as the case may be, shall determine the eligible persons to whom, and the time or times at which, cash awards will be made, the amount that is subject to the cash award, the circumstances and conditions under which such amount shall be paid, in whole or in part,

the time of payment, and all other terms and conditions of the awards.

The maximum cash award that may be paid to any participant under the Plan during any calendar year shall not exceed $2,500,000.

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The exercise price of a non-qualified stock option may not be less than fair market value of the shares of common stock underlying the option on the date the option is granted.

and “subsidiary”

corporations, as those terms are defined in Section 424 of the Internal Revenue Code) to the extent that the aggregate fair market value of the underlying stock (determined at the time the option is granted) exceeds $100,000.

Certain awards made under the Plan may be granted so that they qualify as “performance-based compensation”

(as this term is used in Internal Revenue Code Section 162(m) and the regulations thereunder) and are exempt from the deduction limitation imposed by Code Section 162(m).

Under the Plan, we may not, in the aggregate, grant incentive stock options that are first exercisable by any individual optionee during any calendar year (under all such plans of the optionee’s employer corporation and its “parent” and “subsidiary” corporations, as those terms are defined in Section 424 of the Internal Revenue Code) to the extent that the aggregate fair market value of the underlying stock (determined at the time the option is granted) exceeds $100,000.

Certain awards made under the Plan may be granted so that they qualify as “performance-based compensation” (as this term is used in Internal Revenue Code Section 162(m) and the regulations thereunder) and are exempt from the deduction limitation imposed by Code Section 162(m).

Under Internal Revenue Code Section 162(m), our tax deduction may be limited to the extent total compensation paid to the chief executive officer, or any of the four most highly compensated executive officers (other than the chief executive officer) exceeds $1 million in any one tax year.

Among other criteria, awards only qualify as performance-based awards if at the time of grant the compensation committee is comprised solely of two or more “outside directors”

(as this term is used in Internal Revenue Code Section 162(m) and the regulations thereunder).

Among other criteria, awards only qualify as performance-based awards if at the time of grant the compensation committee is comprised solely of two or more “outside directors” (as this term is used in Internal Revenue Code Section 162(m) and the regulations thereunder).

In addition, we must obtain stockholder approval of material terms of performance goals for such performance-based compensation.

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(ii) each named executive officer and director of the Company, and (iii) all officers and directors as a group.

Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership”

concepts under the rules of the Securities and Exchange Commission.

Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission.

Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to dispose of or direct the disposition of the security.

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Named executive officers and directors:

D’Loren (1)

Giuseppe Falco (3)

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Isaac Mizrahi (11)

Buckingham Capital Management, Inc.

485 Lexington Avenue, 3rd Floor, New York, NY 10017

Hilco Trading, LLC (12)

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(1) Consists of (i) 1,432,966 shares held by Mr.

D’Loren, (ii) 526,283 shares owned by Irrevocable Trust of Rose Dempsey (or the Irrevocable Trust) of which Mr.

D’Loren and Mr.

D’Loren, (ii) 607,317 shares owned by Irrevocable Trust of Rose Dempsey (or the Irrevocable Trust) of which Mr.

D’Loren and Mr.

DiSanto are the trustees and as to which Mr.

D’Loren has sole voting and dispositive power, (iii) 1,123,470 shares issuable upon exercise of immediately exercisable options and warrants, (iv) 139,035 restricted shares, (v) 2,473,325 shares of common stock (including 800,992 restricted shares) held in the name of Isaac Mizrahi, (vi) 299,139 shares of common stock (including 27,500 restricted shares) held in the name of Marisa Gardini, (vii) 777,778 shares of common stock held in the name of The H Company IP, LLC, (viii) 136,525 other shares of restricted stock and 2,190,477 other shares of common stock as to which holders thereof granted to Mr.

D’Loren irrevocable proxy and attorney-in-fact with respect to the shares, and (viii) 666,667 shares issuable upon exercise of immediately exercisable warrants to which holders thereof granted to Mr.

D’Loren irrevocable proxy and attorney-in-fact with respect to the shares.

Pursuant to a voting agreement Mr.

Mizrahi and Ms.

Gardini agreed to, and pursuant to restricted stock agreements certain grantees agreed to, appoint a person designated by our board of directors as their irrevocable proxy and attorney-in-fact with respect to the shares set forth in clauses (v), (vi) and (vii), respectively.

D’Loren does not have any pecuniary interest in these shares described in clauses (v), (vi) and (vii) and disclaims beneficial ownership thereof.

Does not include 326,671 shares held by the D’Loren Family Trust (or the Family Trust) of which Mark DiSanto is a trustee and has sole voting and dispositive power.

D’Loren has sole voting and dispositive power, (iii) 1,123,470 shares issuable upon exercise of immediately exercisable options and warrants, (iv) 2,473,325 shares of common stock (including 522,500 restricted shares) held in the name of Isaac Mizrahi, and (v) 3,955,287 shares of common stock (including 77,500 restricted shares) as to which holders thereof granted to Mr.

D’Loren irrevocable proxy and attorney-in-fact with respect to the shares.

Certain holders or grantees have entered into certain agreements, pursuant to which appoint a person designated by our board of directors as their irrevocable proxy and attorney-in-fact with respect to the shares set forth in clauses (iv) and (v).

D’Loren does not have any pecuniary interest in these shares described in clauses (iv) and (v) and disclaims beneficial ownership thereof.

Does not include 326,671 shares held by the D’Loren Family Trust (or the Family Trust) of which Mark DiSanto is a trustee and has sole voting and dispositive power.

(2) Consists of (i) 204,418 shares and (ii) immediately exercisable options and warrants to purchase 238,968 shares.

Includes (i) 58,579 shares, (ii) 195,333 restricted shares, and (iii) 600,000 shares issuable upon exercise of immediately exercisable warrants and options.

Giuseppe Falco, the President and Chief Operating Officer of the Mizrahi brands, is an executive officer but not a named executive officer.

Consists of (i) 305,286 shares, (ii) 5,263 restricted shares, and (iii) immediately exercisable options and warrants to purchase 176,312 shares.

(3) Consists of (i) 58,579 shares, (ii) 195,333 restricted shares, and (iii) 600,000 shares issuable upon exercise of immediately exercisable warrants and options.

(4) Consists of (i) 310,549 shares and (ii) immediately exercisable options and warrants to purchase 176,312 shares.

(5) Consists of (i) 36,165 shares, (ii) 30,000 restricted shares, and (iii) immediately exercisable options to purchase 137,500 shares.

Consists of (i) 326,671 shares held by the D’Loren Family Trust, of which Mark DiSanto is trustee and has sole voting and dispositive power over the shares held by the D’Loren Family Trust, (ii) 856,548 shares held by Mark X.

DiSanto Investment Trust, of which Mark DiSanto is trustee and has sole voting and dispositive power over the shares held by the Trust, (iii) 83,537 shares, (iv) 14,000 restricted shares, (v) 125,000 shares issuable upon exercise of warrants and options that have vested, and (vi) 60,000 shares held by other trusts, of which Mark DiSanto is trustee and has sole voting and dispositive power over the shares held by the trusts.

Includes (i) 95,000 shares, (ii) 14,000 restricted shares and (iii) immediately exercisable options to purchase 75,000 shares.

Consists of (i) 18,000 restricted shares and (ii) immediately exercisable options to purchase 25,000 shares.

(6) Consists of (i) 326,671 shares held by the D’Loren Family Trust, of which Mark DiSanto is trustee and has sole voting and dispositive power over the shares held by the D’Loren Family Trust, (ii) 1,022,613 shares held by Mark X.

DiSanto Investment Trust, of which Mark DiSanto is trustee and has sole voting and dispositive power over the

shares held by the Trust, (iii) 5,000 restricted shares, (iv) 137,500 shares issuable upon exercise of warrants and options that have vested, and (v) 82,392 shares held by other trusts, of which Mark DiSanto is trustee and has sole voting and dispositive power over the shares held by the trusts.

(7) Consists of (i) 104,000 shares, (ii) 5,000 restricted shares and (iii) immediately exercisable options to purchase 87,500 shares.

(8) Consists of (i) 18,000 restricted shares and (ii) immediately exercisable options to purchase 37,500 shares.

(9) Consists of (i) 5,000 shares, (ii) 5,000 restricted shares, and (iii) immediately exercisable options to purchase 12,500 shares.

(10) Includes (i) 4,190,270 shares, (ii) 258,333 restricted shares, (iii) 438,750 shares issuable upon exercise of warrants that are currently exercisable, (iv) 2,112,500 shares issuable upon exercise of options that are currently exercisable, and (v) 6,428,612 other shares of common stock as to which holders thereof granted to Mr.

D’Loren irrevocable proxy and attorney-in-fact with respect to the shares.

(11) Consists of (i) 1,950,825 shares, (ii) 522,500 restricted shares, and (iii) immediately exercisable options to purchase 300,000 shares.

Based solely on a Schedule 13G/A filed on Feburary 13, 2019 by Buckingham Capital Management, Inc.

(12) The H Company IP, LLC, or HIP, directly owns 1,000,000 shares of common stock, which we refer to as the H Company Shares.

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therefore, H Investment may be deemed to beneficially own the H Company Shares.

Hilco Brands, LLC, or Hilco Brands, in its capacity as a member of the Board of Managers of H Investment, has the ability to direct the management of H Investment’s business, including the power to direct the decisions of H Investment regarding the voting and disposition of the H Company Shares;

therefore, Hilco Brands may be deemed to have indirect beneficial ownership of the H Company Shares.

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Benjamin Malka

Concurrent with the acquisition of the H Halston Brand on December 22, 2014, the Company and The H Company IP, LLC (“HIP”) entered into a license agreement (the “HIP License Agreement”), which was subsequently amended September 1, 2015.

Benjamin Malka, who was a director of the Company from June 2014 through September 2019, is a 25% equity holder of HIP’s parent company, House of Halston LLC (“HOH”), and Chief Executive Officer of HOH.

The HIP license agreement provides for royalty payments including guaranteed minimum royalties to be paid to the Company during the initial term that expires on December 31, 2019.

On September 1, 2015, the Company entered into a license agreement with Lord and Taylor, LLC (the “L&T License”) and simultaneously amended the HIP License Agreement eliminating HIP’s minimum guaranteed royalty obligations, provided the L&T License is in effect.

In addition, the Company entered into a sublicense agreement with HIP (the “HIP Sublicense Agreement”), obligating the Company to pay HIP a fee on an annual basis the greater of (i) 50% of royalties received under the L&T License from H Halston products or (ii) guaranteed minimum royalties.

Provided that Lord & Taylor, LLC is paying the Company at least $1,000,000 per quarter under the L&T License, the remaining contractually required guaranteed minimum royalties are equal to $0.75 million, $0.75 million, $1.5 million, and $1.75 million for the twelve months ending January 31, 2018, 2019, 2020, and 2021, respectively.

On December 12, 2016, the Company entered into another license agreement for the H Halston Brand with Dillard’s Inc and affiliates (the “Dillard’s License”, and together with the L&T License, the “DRT Licenses”).

Through October 26, 2018, the Company operated under the following terms as an at-will license as set forth below:

The HIP Trademark Usage and Royalty Participation Agreement, has an initial term that expires on December 31, 2020 unless sooner terminated or renewed, and we shall pay to HIP:

(i) 50% of the excess H Halston Royalty paid to us under the DRT Licenses and any other third party licenses that we may enter into;

(ii) 25% of the excess developed brand royalty paid to us for the Highline Collective Brand under the DRT Licenses, and 20% of the excess developed brand royalty paid to us for any subsequent developed brand under the DRT Licenses, and (iii) 10% of the excess private label brand royalty paid to us under the DRT Licenses and during the first term only of the DRT Licenses.

Additionally, we have the right, but not the obligation, at any time after January 31, 2023, to terminate the obligations under points (ii) and (iii) above by paying to HIP an amount equal to four times the sum of the developed brand credits and private label credits for the contract year ending on January 31, 2023 (the “Buy Out Payment’’).

The Buy-Out Payment may be payable by us and at our sole discretion either (a) in cash, or (b) in a number of common shares of Xcel calculated based on the amount of the Buy-Out Payment divided by the average closing price for common shares of Xcel on a national exchange for the preceding five trading days, subject to a minimum price for common shares of Xcel of $7.00 per common share.

Once effective, it will terminate and replace the HIP Sublicense Agreement.

A license and supply agreement with the Halston Operating Company, LLC (“HOC”), a subsidiary of HOH, with an initial term ending on January 31, 2022, subject to renewal.

Under the HOC at-will license and supply agreement, HOC shall provide licensed products for sale to pre-approved retailers, including HBC and Dillard’s, and shall also be responsible for overseeing the visual merchandising and in-store retail environments for such approved retailers, as well as be responsible for training and oversight of any retail staff responsible for selling the licensed products within HBC and Dillard’s, as reasonably agreed upon between HOC and HBC and Dillard’s.

The at-will HOC license and supply agreement provides for, among other things, design fees of $1.2 million for the period from July 1, 2017 through December 31, 2017, subsequent design fees of $2.4 million for the contractual yearly periods ending on January 31, 2019, and on December 31, 2020, 2021, and 2022, respectively, and sales-based royalties on the categories of products licensed under the agreement and the contractual year of payment.

Once effective, it will terminate and replace the HIP License Agreement.

HOH has also entered into an arrangement with another licensee of the Company to supply Halston-branded apparel for the subsequent sale of such product to end customers.

Under the Company’s separate pre-existing licensing agreements in

place with the aforementioned other licensee and with HIP as described above, the Company earns royalties on the sales of such Halston-branded products.

In addition, we entered into an arrangement with HOC whereby HOC pays us a license fee for branded products related to categories not included in the HOC license and supply agreement.

Effective October 26, 2018, the Company and HOH terminated the HIP License Agreement including all amendments and the HIP Sublicense Agreement.

In addition, the at-will license has been terminated and no longer in effect.

For the years ended December 31, 2019 and 2018, the Company recorded approximately $0.0 million and $2.0 million of revenue from HOC, respectively.

As of December 31, 2018, the Company had a receivable balance of approximately $1.5 million due from HOC, which was collected in 2019.

On February 11, 2019 (the “Closing Date”), the Company acquired the Halston Heritage Brands from HIP, a wholly-owned subsidiary of HOH.

Pursuant to the Agreement, at closing, the Company delivered to HIP or its designees (collectively the “Sellers”

an aggregate of $8.4 million in cash.

In addition, Xcel agreed to issue to the HIP 777,778 shares of the Company’s common stock (the “Xcel Shares”), subject to a voting agreement and a lock-up agreement relating to the Xcel Shares and a consent and waiver agreement each in from satisfactory to Xcel within three months from the date of the Agreement.

In the event such agreements are not executed and delivered to Xcel, the Xcel Shares shall be forfeited.

In addition to the closing considerations, HIP will be eligible to earn up to an aggregate of $6.0 million (the “Earn-Out Value”) through December 31, 2022 based on Excess Net Royalties.

“Excess Net Royalties”

during any calendar year for 2019 through 2022 (each, a “Royalty Target Year”) is equal to (a) the positive amount, if any, of the Net Royalties as calculated for such Royalty Target Year, less the greater of (i) One Million Five Hundred Thousand Dollars ($1.5 million), or (ii) the maximum Net Royalties for any previous Royalty Target Year.

“Applicable Percentage”

means (a) 50% of the first $10.0 million of Excess Net Royalties during the Earn-Out Period, (b) 20% of aggregate Excess Net Royalties during the Earn-Out Period greater than $10.0 million and up to $15.0 million and (c) 0% of aggregate Excess Net Royalties during the Earn-Out Period in excess of $15.0 million.

The Earn-Out Consideration shall be payable in cash or of common stock of Xcel Shares (the “Earn-Out Shares”) at the Sellers’

provided, however, that if the number of Earn-Out Shares, when combined with the number of Xcel Shares issued at the closing, will exceed 4.99% of the aggregate number of shares of Xcel common stock outstanding as of the closing date (calculated in accordance with Nasdaq Rule 5635(a)) (the “Xcel Share Limit”), then Xcel may, in its sole and unfettered discretion, elect to (x) pay cash for the Earn-Out Value attributable to the Earn-Out Shares that would exceed the Xcel Share Limit;

(y) solicit stockholder approval for the issuance of Earn-Out Shares in excess of the Xcel Share Limit in accordance with Nasdaq Rule 5635(a)(2) and, if such stockholder approval is obtained, issue such Earn-Out Shares to the Seller;

Benjamin Malka was a director of the Company from June 2014 through September 2019.

Malka is also a 25% equity holder of House of Halston LLC (“HOH”), and is the former Chief Executive Officer of HOH.

HOH is the parent company of the H Company IP, LLC (“HIP”).

On February 11, 2019, the Company and its wholly owned subsidiary, H Heritage Licensing, LLC, entered into an asset purchase agreement (the "Heritage Asset Purchase Agreement") with HIP and HOH, pursuant to which the Company acquired certain assets of HIP, including the "Halston,"

"Halston Heritage,"

and "Roy Frowick"

trademarks (collectively, the "Halston Heritage Trademarks") and other intellectual property rights relating thereto.

Pursuant to the Heritage Asset Purchase Agreement, at closing, the Company delivered in escrow for HIP or its designees (collectively, the “Sellers”) an aggregate of $8.4 million in cash and 777,778 shares of the Company’s common stock valued at $1.1 million (the “Xcel Shares”), subject to a voting agreement and a lock-up agreement relating to the Xcel Shares and a consent and waiver agreement each in form satisfactory to Xcel within three months from the date of the Heritage Asset Purchase Agreement.

Such agreements were executed and delivered to Xcel, and the Xcel Shares were issued and delivered to the Sellers.

In addition to the closing considerations, HIP is eligible to earn up to an aggregate of $6.0 million (the “Earn-Out Value”) through December 31, 2022 based on Excess Net Royalties.

“Excess Net Royalties” during any calendar year for 2019 through 2022 (each, a “Royalty Target Year”) is equal to (a) the positive amount, if any, of the Net Royalties as calculated for such Royalty Target Year, less the greater of (i) One Million Five Hundred Thousand Dollars ($1.5 million), or (ii) the maximum Net Royalties for any previous Royalty Target Year.

“Applicable Percentage” means (a) 50% of the first $10.0 million of Excess Net Royalties during the Earn-Out Period, (b) 20% of aggregate Excess Net Royalties during the Earn-Out Period greater than $10.0 million and up to $15.0 million and (c) 0% of aggregate Excess Net Royalties during the Earn-Out Period in excess of $15.0 million.

The Earn-Out Consideration shall be payable in common stock of Xcel (the “Earn-Out Shares”);

provided, however, that if the number of Earn-Out Shares, when combined with the number of Xcel Shares issued at the Closing Date, will exceed 4.99% of the aggregate number of shares of Xcel common stock outstanding as of the Closing Date (calculated in accordance with Nasdaq Rule 5635(a)) (the “Xcel Share Limit”), then Xcel may, in its sole and unfettered discretion, elect to (x) pay cash for the Earn-Out Value attributable to the Earn-Out Shares that would exceed the Xcel Share Limit;

or (z) solicit stockholder approval for the issuance of Shares in excess of the Xcel Share Limit in accordance with Nasdaq Rule 5635(a)(2) and, if such stockholder approval is obtained, pay the applicable Earn-Out Consideration with a combination of cash and Earn-Out Shares.

D’Loren

Jennifer D’Loren is the wife of Robert W.

D’Loren, the Company’s Chief Executive Officer and Chairman of the Board, and is employed by the Company.

D’Loren brings vast experience in project management and implementation of financial IT solutions.

Hilco Trading, LLC

Hilco Trading, LLC ("Hilco") directly and indirectly owns greater than 5% of the Company's common stock, and its affiliate Hilco Global owns 50% of the equity of Longaberger Licensing, LLC.

During the year ended December 31, 2020, the Company sold certain apparel products to an affiliate of Hilco, and recognized $0.15 million of revenue from this transaction.

Additionally, during the year ended December 31, 2020, the Company sold certain intangible assets of Longaberger Licensing, LLC to a third party;

an affiliate of Hilco earned and was paid a commission of $0.05 million related to the sale of these assets.

Jennifer D’Loren is the wife of Robert W.

D’Loren, the Company’s Chief Executive Officer and Chairman of the Board, and is employed by the Company.

D’Loren brings vast experience in project management and implementation of financial IT solutions.

During the past two years, Mrs.

D’Loren has worked on the implementation of the Company’s ERP system.

D’Loren received compensation of $.17 million and $0.08 million for the years ended December 31, 2019 and 2018, respectively.

D’Loren has worked on the implementation of the Company’s ERP system.

D’Loren received compensation of $0.14 million and $0.17 million for the years ended December 31, 2020 and 2019, respectively.

Isaac Mizrahi

On February 24, 2020, the Company entered into an employment agreement with Isaac Mizrahi, a principal stockholder of the Company, for Mr.

Mizrahi to continue to serve as Chief Design Officer of the Isaac Mizrahi Brand.

The term of the employment agreement expires on December 31, 2022, subject to earlier termination, and may be extended, at the Company’s option, for two successive one-year terms (each, a “Renewal Period”).

Mizrahi’s base salary shall be $1.8 million, $2.0 million, and $2.1 million per annum during the term of the agreement and $2.25 million and $2.4 million during 2023 and 2024 if the term is extended, in each case, subject to adjustment in the event Mr.

Mizrahi does not make a specified number of appearances on QVC.

Mizrahi shall be eligible to receive an annual cash bonus (the “Bonus”) up to an amount equal to $2.5 million less base salary for 2020 and $3.0 million less base salary for 2021, 2022, and any year during the Renewal Period.

The Bonus shall consist of the DRT Revenue, Bonus, the Brick-and-Mortar Bonus, the Endorsement Bonus and the Monday Bonus, if any, as determined in accordance with the below:

● “DRT Bonus” means for any calendar year an amount equal to 10% of the aggregate net revenue related to sales of Isaac Mizrahi Brand products through direct response television.

The DRT Revenue Bonus shall be reduced by the amount of the Monday Bonus.

● “Brick-and-Mortar Bonus” means for any calendar year an amount equal to 10% of the net revenues from sales of products under the Isaac Mizrahi Brand, excluding DRT revenue and endorsement revenues.

● “Endorsement Bonus” means for any calendar year an amount equal to 40% of revenues derived from projects undertaken by the Company with one or more third parties solely for Mr.

Mizrahi to endorse the third party’s products through the use of Mr.

Mizrahi’s name, likeness, and/or image, and neither the Company nor Mr.

Mizrahi provides licensing or design.

● “Monday Bonus” means $10,000 for each appearance by Mr.

Mizrahi on the QVC channel on Mondays (subject to certain expectations) up to a maximum of 40 such appearances in a calendar year.

Mizrahi is required to devote his full business time and attention to the business and affairs of the Company and its subsidiaries;

Mizrahi is the principal of IM Ready-Made, LLC and Laugh Club, Inc.

(“Laugh Club”), and accordingly, he may undertake promotional activities related thereto (including the promotion of his name, image, and likeness) through television, video, and other media (and retain any compensation he receives for such activities) (referred to as “Retained Media Rights”) so long as such activities (i) do not utilize the IM Trademarks, (ii) do not have a mutually negative impact upon or materially conflict with Mr.

Mizrahi’s duties under the employment agreement, or (iii) are consented to by the Company.

The Company believes that it benefits from Mr.

Mizrahi’s independent promotional activities by increased brand awareness of IM Brands and the IM Trademarks.

Mizrahi’s employment is terminated by the Company without “cause,” or if Mr.

Mizrahi resigns with “good reason,” then Mr.

Mizrahi will be entitled to receive his unpaid base salary and cash bonuses through the termination date and an amount equal to his base salary in effect on the termination date for the longer of six months and the remainder of the then-current term, but in no event exceeding 18 months.

Mizrahi’s employment is terminated by the Company without “cause” or if Mr.

Mizrahi resigns with “good reason,” within six months following a change of control (as defined in the employment agreement), Mr.

Mizrahi shall be eligible to receive a lump-sum payment equal to two times the sum of (i) his base salary (at an average rate that would have been in effect for such two year period following termination) plus (ii) the bonus paid or due to Mr.

Mizrahi in the year prior to the change in control.

Non-Competition and Non-Solicitation.

During the term of his employment by the Company and for a one-year period after the termination of such employment (unless Mr.

Mizrahi’s employment was terminated without “cause” or was terminated by him for “good reason”), Mr.

Mizrahi may not permit his name to be used by or to participate in any business or enterprise (other than the mere passive ownership of not more than 3% of the outstanding stock of any class of a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market) that engages or proposes to engage in the Company’s business anywhere in the world other than the Company and its subsidiaries.

Also during his employment and for a one-year period after the termination of such employment, Mr.

Mizrahi may not, directly or indirectly, solicit, induce, or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any or its subsidiaries;

or solicit, induce, or attempt to induce any person who is, or was during the then-most recent 12-month period, a corporate officer, general manager, or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment with the Company or any of its subsidiaries;

or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries;

or in any way interfere with the relationship between any such customer, supplier, licensee, employee, or business relation and the Company or any of its subsidiaries.

On February 24, 2020 the Company entered into a services agreement with Laugh Club, an entity wholly-owned by Mr.

Mizrahi, pursuant to which Laugh Club shall provide services to Mr.

Mizrahi necessary for Mr.

Mizrahi to perform his services pursuant to the employment agreement.

The Company will pay Laugh Club an annual fee of $0.72 million for such services.

Principal Accounting Fees and Services

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Audit-Related Fees

There were approximately $11,000 of fees billed by our Independent Registered Public Accounting Firm for audit-related services for the fiscal year ended December 31, 2018.

There were no such fees billed by our Independent Registered Public Accounting Firm for the year ended December 31, 2019.

There were no fees billed by our Independent Registered Public Accounting Firm for audit-related services for the fiscal years ended December 31, 2020 and 2019.

There were no fees billed for professional services rendered by our Independent Registered Public Accounting Firm for tax compliance, tax advice, and tax planning for the fiscal years ended December 31, 2020 and 2019.

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The Audit Committee is responsible for pre-approving all audit and permitted non-audit services to be performed for us by our Independent Registered Public Accounting Firm as outlined in its Audit Committee charter.

Prior to engagement of the Independent Registered Public Accounting Firm for each year’s audit, management or the Independent Registered Public Accounting Firm submits to the Audit Committee for approval an aggregate request of services expected to be rendered during the year, which the Audit Committee pre-approves.

During the year, circumstances may arise when it may become necessary to engage the Independent Registered Public Accounting Firm for additional services not contemplated in the original pre-approval.

In those circumstances, the Audit Committee requires specific pre-approval before engaging the Independent Registered Public Accounting Firm.

The engagements of our Independent Registered Public Accounting Firm, CohnReznick LLP was approved by the Company’s Audit Committee.

INDEX TO EXHIBITS

4 unchanged sentences

Warrant issued to Joe Falco dated September 29, 2011 (1)

Description of Registrant’s Securities (1 6 )

Description of Registrant’s Securities (19)

Amended and Restated Voting Agreement between Xcel Brands, Inc.

13 unchanged sentences

and Isaac Mizrahi, dated September 28, 2011 (4)

Employment Agreement between the Company and Robert D’Loren dated February 27, 2019 ( 15 )

Employment Agreement between the Company and Robert D’Loren dated February 27, 2019 (15)

Employment Agreement between the Company and James Haran dated February 27, 2019 (15)

8 unchanged sentences

4 and Waiver to Amended and Restated Loan and Security Agreement (17)

Amendment No.

5 and Waiver to Amended and Restated Loan and Security Agreement (18)

Promissory Note, dated April 20, 2020, executed by Xcel Brands, Inc., as Borrower, for the benefit of Bank of America, NA, as lender (16)

Subsidiaries of the Registrant (19)

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(15) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was filed with the SEC on March 1, 2019.

(16) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was filed with the SEC on April 27, 2020.

(17) This Exhibit is incorporated by reference to the appropriate Exhibit to the Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on April 14, 2020.

(18) This Exhibit is incorporated by reference to the appropriate Exhibit to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2020, which was filed with the SEC on November 13, 2020.

(19) Filed herewith.

* Portions of this exhibit have been omitted pursuant to a Request for Confidential Treatment and filed separately with the SEC.

Such portions are designated “***”.

+ Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

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/s/ Robert W.

D’Loren

D’Loren, Chairman, President,

Chief Executive Officer and Director

2 unchanged sentences

/s/ Robert W.

D’Loren

Chief Executive Officer and Chairman

April 22, 2021

D’Loren

(Principal Executive Officer)

17 unchanged sentences

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-K

Item 9A. Controls and Procedures