XCel Brands, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ Xcel Brands, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 December 31, 2020 ​ ​ (Unaudited) ​ (Note 1) Assets ​ ​ Current Assets: ​ ​ Cash and cash equivalents ​ $ 3,981 ​ $ 4,957 Accounts receivable, net of allowances of $ 1,284 and $ 1,151 , respectively ​ 10,949 ​ 8,889 Inventory ​ 3,430 ​ 1,216 Prepaid expenses and other current assets ​ 1,711 ​ 1,085 Total current assets ​ 20,071 ​ 16,147 Non-current Assets: ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 3,481 ​ 3,367 Operating lease right-of-use assets ​ ​ 6,831 ​ ​ 8,668 Trademarks and other intangibles, net ​ 99,859 ​ 93,535 Restricted cash ​ 739 ​ 1,109 Other assets ​ 222 ​ 228 Total non-current assets ​ 111,132 ​ 106,907 ​ ​ ​ ​ ​ ​ ​ Total Assets ​ $ 131,203 ​ $ 123,054 ​ ​ ​ ​ ​ ​ ​ Liabilities and Equity ​ ​ Current Liabilities: ​ ​ Accounts payable, accrued expenses and other current liabilities ​ $ 5,444 ​ $ 4,442 Accrued payroll ​ 683 ​ 973 Current portion of operating lease obligations ​ ​ 1,315 ​ ​ 2,101 Current portion of long-term debt ​ 4,998 ​ 2,800 Total current liabilities ​ 12,440 ​ 10,316 Long-Term Liabilities: ​ ​ Long-term portion of operating lease obligations ​ ​ 7,295 ​ ​ 8,469 Long-term debt, less current portion ​ 20,233 ​ 13,838 Contingent obligations ​ ​ 7,539 ​ ​ 900 Deferred tax liabilities, net ​ 1,038 ​ 3,052 Other long-term liabilities ​ 591 ​ 224 Total long-term liabilities ​ 36,696 ​ 26,483 Total Liabilities ​ 49,136 ​ 36,799 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity: ​ ​ Preferred stock, $ .001 par value, 1,000,000 shares authorized, none issued and outstanding ​ — ​ — Common stock, $ .001 par value, 50,000,000 shares authorized, and 19,541,921 and 19,260,862 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively ​ 20 ​ 19 Paid-in capital ​ 102,936 ​ 102,324 Accumulated deficit ​ ( 21,836 ) ​ ( 16,595 ) Total Xcel Brands, Inc. stockholders' equity ​ 81,120 ​ 85,748 Noncontrolling interest ​ ​ 947 ​ ​ 507 Total Equity ​ 82,067 ​ 86,255 ​ ​ ​ ​ ​ ​ ​ Total Liabilities and Equity ​ $ 131,203 ​ $ 123,054 ​ See Notes to Unaudited Condensed Consolidated Financial Statements. ​ 3 Table of Contents Xcel Brands, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 2021 2020 ​ Revenues ​ ​ ​ ​ ​ ​ Net licensing revenue ​ $ 6,854 ​ $ 5,236 ​ $ 17,385 ​ $ 15,378 ​ Net sales ​ 4,407 ​ 2,155 ​ 12,449 ​ 6,590 ​ Net revenue ​ 11,261 ​ 7,391 ​ 29,834 ​ 21,968 ​ Cost of goods sold (sales) ​ 2,865 ​ 1,270 ​ 7,763 ​ 3,923 ​ Gross profit ​ 8,396 ​ 6,121 ​ 22,071 ​ 18,045 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating costs and expenses ​ ​ ​ ​ ​ Salaries, benefits and employment taxes ​ 4,185 ​ 2,968 ​ 12,286 ​ 9,798 ​ Other selling, general and administrative expenses ​ 3,463 ​ 2,159 ​ 9,591 ​ 7,153 ​ Stock-based compensation ​ 163 ​ 49 ​ 754 ​ 780 ​ Depreciation and amortization ​ 1,891 ​ 1,437 ​ 4,949 ​ 4,069 ​ Government assistance - Paycheck Protection Program and other ​ ​ — ​ ​ ( 176 ) ​ ​ — ​ ​ ( 1,816 ) ​ Asset impairment charges ​ — ​ 31 ​ — ​ 113 ​ Total operating costs and expenses ​ 9,702 ​ 6,468 ​ 27,580 ​ 20,097 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income ​ ​ — ​ ​ 46 ​ ​ — ​ ​ 46 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating loss ​ ( 1,306 ) ​ ( 301 ) ​ ( 5,509 ) ​ ( 2,006 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and finance expense ​ ​ ​ ​ ​ Interest expense - term loan debt ​ 565 ​ 303 ​ 1,363 ​ 926 ​ Other interest and finance charges (income), net ​ 23 ​ 1 ​ 127 ​ ( 29 ) ​ Loss on extinguishment of debt ​ ​ — ​ ​ — ​ ​ 821 ​ ​ — ​ Total interest and finance expense ​ 588 ​ 304 ​ 2,311 ​ 897 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss before income taxes ​ ( 1,894 ) ​ ( 605 ) ​ ( 7,820 ) ​ ( 2,903 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax benefit ​ ( 535 ) ​ ( 145 ) ​ ( 2,019 ) ​ ( 269 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ( 1,359 ) ​ ​ ( 460 ) ​ ​ ( 5,801 ) ​ ​ ( 2,634 ) ​ Less: Net loss attributable to noncontrolling interest ​ ​ ( 223 ) ​ ​ ( 26 ) ​ ​ ( 560 ) ​ ​ ( 95 ) ​ Net loss attributable to Xcel Brands, Inc. stockholders ​ $ ( 1,136 ) ​ $ ( 434 ) ​ $ ( 5,241 ) ​ $ ( 2,539 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss per share attributable to Xcel Brands, Inc. common stockholders: ​ ​ ​ ​ ​ Basic and diluted net loss per share ​ $ ( 0.06 ) ​ $ ( 0.02 ) ​ $ ( 0.27 ) ​ $ ( 0.13 ) ​ Weighted average number of common shares outstanding: ​ ​ ​ ​ ​ Basic and diluted weighted average common shares outstanding ​ 19,541,774 ​ 19,231,040 ​ 19,418,469 ​ 19,078,453 ​ ​ See Notes to Unaudited Condensed Consolidated Financial Statements. ​ 4 Table of Contents ​ Xcel Brands, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Equity (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Xcel Brands, Inc. Stockholders ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ Paid-In ​ Accumulated ​ Noncontrolling ​ ​ Total ​ Shares Amount Capital Deficit Interest ​ ​ Equity Balance as of December 31, 2019 18,866,417 ​ $ 19 ​ $ 101,736 ​ $ ( 3,659 ) ​ $ 356 ​ ​ $ 98,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to employees related to stock grants for bonus payments ​ 336,700 ​ ​ — ​ ​ 220 ​ ​ — ​ ​ — ​ ​ ​ 220 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares repurchased from employees in exchange for withholding taxes ​ ( 155,556 ) ​ ​ — ​ ​ ( 102 ) ​ ​ — ​ ​ — ​ ​ ​ ( 102 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock ​ — ​ ​ — ​ ​ 91 ​ ​ — ​ ​ — ​ ​ ​ 91 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 805 ) ​ ( 33 ) ​ ​ ( 838 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of March 31, 2020 19,047,561 ​ ​ 19 ​ ​ 101,945 ​ ​ ( 4,464 ) ​ ​ 323 ​ ​ ​ 97,823 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock ​ — ​ ​ — ​ ​ 55 ​ ​ — ​ ​ — ​ ​ ​ 55 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to employees related to restricted stock grants 270,728 ​ — ​ 265 ​ — ​ — ​ ​ 265 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares repurchased from employees in exchange for withholding taxes ​ ( 87,249 ) ​ ​ — ​ ​ ( 85 ) ​ ​ — ​ — ​ ​ ​ ( 85 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional investment in Longaberger Licensing, LLC by non-controlling interest holder ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 300 ​ ​ ​ 300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 1,300 ) ​ ( 36 ) ​ ​ ( 1,336 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of June 30, 2020 19,231,040 ​ ​ 19 ​ ​ 102,180 ​ ​ ( 5,764 ) ​ ​ 587 ​ ​ ​ 97,022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock ​ — ​ ​ — ​ ​ 56 ​ ​ — ​ ​ — ​ ​ ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 434 ) ​ ​ ( 26 ) ​ ​ ​ ( 460 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2020 ​ 19,231,040 ​ $ 19 ​ $ 102,236 ​ $ ( 6,198 ) ​ $ 561 ​ ​ $ 96,618 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2020 19,260,862 ​ $ 19 ​ $ 102,324 ​ $ ( 16,595 ) ​ $ 507 ​ ​ $ 86,255 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock ​ — ​ ​ — ​ ​ 169 ​ ​ — ​ ​ — ​ ​ ​ 169 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued on exercise of stock options, net ​ 1,667 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 2,547 ) ​ ​ ( 81 ) ​ ​ ( 2,628 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of March 31, 2021 19,262,529 ​ ​ 19 ​ ​ 102,493 ​ ​ ( 19,142 ) ​ ​ 426 ​ ​ ​ 83,796 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock ​ — ​ ​ — ​ ​ 52 ​ ​ — ​ ​ — ​ ​ ​ 52 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to executive related to stock grants for bonus payments ​ 181,179 ​ 1 ​ 282 ​ — ​ — ​ ​ 283 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to consultants related to restricted stock grants 14,045 ​ — ​ 25 ​ — ​ — ​ ​ 25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to directors related to restricted stock grants 50,000 ​ — ​ — ​ — ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued on exercise of stock options ​ 23,102 ​ — ​ — ​ — ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 1,558 ) ​ ( 256 ) ​ ​ ( 1,814 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of June 30, 2021 19,530,855 ​ ​ 20 ​ ​ 102,852 ​ ​ ( 20,700 ) ​ ​ 170 ​ ​ ​ 82,342 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock ​ — ​ ​ — ​ ​ 59 ​ ​ — ​ ​ — ​ ​ ​ 59 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to consultants related to restricted stock grants 9,399 ​ — ​ 25 ​ — ​ — ​ ​ 25 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued on exercise of stock options ​ 1,667 ​ — ​ — ​ — ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional investment in Longaberger Licensing, LLC by non-controlling interest holder ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,000 ​ ​ ​ 1,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 1,136 ) ​ ​ ( 223 ) ​ ​ ​ ( 1,359 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of September 30, 2021 ​ 19,541,921 ​ $ 20 ​ $ 102,936 ​ $ ( 21,836 ) ​ $ 947 ​ ​ $ 82,067 ​ See Notes to Unaudited Condensed Consolidated Financial Statements. 5 Table of Contents ​ Xcel Brands, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ 2021 2020 Cash flows from operating activities ​ ​ Net loss ​ $ ( 5,801 ) ​ $ ( 2,634 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: ​ ​ ​ Depreciation and amortization expense ​ 4,949 ​ 4,069 Asset impairment charges ​ — ​ 113 Amortization of deferred finance costs included in interest expense ​ 211 ​ 72 Stock-based compensation ​ 754 ​ 780 Provision for doubtful accounts ​ ​ 132 ​ ​ 1,054 Loss on extinguishment of debt (non-cash portion) ​ ​ 454 ​ ​ — Deferred income tax benefit ​ ( 2,019 ) ​ ( 269 ) Net gain on sale of assets ​ ​ — ​ ​ ( 46 ) Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 2,192 ) ​ 1,380 Inventory ​ ( 2,214 ) ​ 176 Prepaid expenses and other assets ​ ( 620 ) ​ 187 Accounts payable, accrued expenses and other current liabilities ​ 572 ​ ( 2,403 ) Cash paid in excess of rent expense ​ ​ ( 122 ) ​ ​ ( 276 ) Other liabilities ​ 367 ​ — Net cash (used in) provided by operating activities ​ ( 5,529 ) ​ 2,203 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ Cash consideration for acquisition of Lori Goldstein assets ​ ​ ( 3,661 ) ​ ​ — Net proceeds from sale of assets ​ ​ — ​ ​ 46 Purchase of other intangible assets ​ ​ ( 39 ) ​ ​ — Purchase of property and equipment ​ ( 1,049 ) ​ ( 700 ) Net cash used in investing activities ​ ( 4,749 ) ​ ( 654 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ Proceeds from exercise of stock options ​ ​ 5 ​ ​ — Shares repurchased including vested restricted stock in exchange for withholding taxes ​ — ​ ( 187 ) Cash contribution from non-controlling interest ​ ​ 1,000 ​ ​ 300 Proceeds from revolving loan debt ​ ​ 2,498 ​ ​ — Proceeds from long-term debt ​ ​ 25,000 ​ ​ — Payment of deferred finance costs ​ ( 1,204 ) ​ ( 20 ) Payment of long-term debt ​ ( 18,000 ) ​ ( 1,500 ) Payment of breakage fees associated with extinguishment of long-term debt ​ ​ ( 367 ) ​ ​ — Net cash provided by (used in) financing activities ​ 8,932 ​ ( 1,407 ) ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash, cash equivalents, and restricted cash ​ ( 1,346 ) ​ 142 ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash at beginning of period ​ ​ 6,066 ​ ​ 5,750 ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash at end of period ​ $ 4,720 ​ $ 5,892 ​ ​ ​ ​ ​ ​ ​ Reconciliation to amounts on consolidated balance sheets: ​ ​ Cash and cash equivalents ​ $ 3,981 ​ $ 4,783 Restricted cash ​ 739 ​ 1,109 Total cash, cash equivalents, and restricted cash ​ $ 4,720 ​ $ 5,892 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash activities: ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ $ ( 722 ) ​ $ 797 Operating lease obligations ​ $ ( 722 ) ​ $ 797 Contingent obligation related to acquisition of Lori Goldstein assets at fair value ​ $ 6,639 ​ $ — Liability for equity-based bonuses and other equity-based payments ​ $ 140 ​ $ 93 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ Cash paid during the period for interest ​ $ 1,346 ​ $ 1,092 Cash paid during the period for income taxes ​ $ 18 ​ $ 58 ​ See Notes to Unaudited Condensed Consolidated Financial Statements. ​ ​ 6 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) 1. Nature of Operations, Background, and Basis of Presentation The accompanying condensed consolidated balance sheet as of December 31, 2020 (which has been derived from audited financial statements) and the unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements were prepared following the same policies and procedures used in the preparation of the audited consolidated financial statements and reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the results of operations, financial position, and cash flows of Xcel Brands, Inc. and its subsidiaries (the “Company” or "Xcel"). The results of operations for the interim periods presented herein are not necessarily indicative of the results for the entire fiscal year or for any future interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on April 23, 2021. Certain reclassifications have been made to prior year comparable period financial statements to conform to classifications used in the current year – specifically, the classification and aggregation / disaggregation of certain types of operating costs and expenses, and the disaggregation of the components of interest and finance expense. These reclassifications had no impact on total operating costs and expenses, total interest and finance expense, net loss, stockholders’ equity, or cash flows as previously reported. The Company is a media and consumer products company engaged in the design, production, marketing, live streaming, wholesale distribution, and direct-to-consumer sales of branded apparel, footwear, accessories, fine jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands. Currently, the Company’s brand portfolio consists of the Isaac Mizrahi brands (the "Isaac Mizrahi Brand"), the LOGO by Lori Goldstein brand, the Judith Ripka brands (the "Ripka Brand"), the Halston brands (the "Halston Brands"), the C Wonder brands (the "C Wonder Brand"), and other proprietary brands. The Company also manages the Longaberger brand (the “Longaberger Brand”) through its 50 % ownership interest in Longaberger Licensing, LLC; the Company consolidates Longaberger Licensing, LLC and recognizes noncontrolling interest for the remaining ownership interest held by a third party. The Company acquired the LOGO by Lori Goldstein brand, and the various labels under the brand, on April 1, 2021 (see Note 2). The Company designs, produces, markets, and distributes products, licenses its brands to third parties, and generates licensing revenues. The Company and its licensees distribute through an omni-channel retail sales strategy, which includes distribution through interactive television, digital live-stream shopping, brick-and-mortar retail, wholesale, and e-commerce channels to be everywhere its customers shop. Recently Adopted Accounting Pronouncements On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") No. 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions to the general principles in Topic 740, including, but not limited to, intraperiod tax allocations and interim period tax calculations. The ASU also provides additional clarification and guidance related to recognition of franchise taxes and changes in tax laws. The adoption of this new guidance did not have any impact on the Company’s results of operations, cash flows, and financial condition. 7 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) ​ ​ ​ ​ 2. Acquisitions Acquisition of LOGO by Lori Goldstein Brand On March 30, 2021, the Company and its wholly owned subsidiary, Gold Licensing, LLC, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Lori Goldstein, Ltd. (the “Seller”) and Lori Goldstein (“Shareholder”), pursuant to which the Company agreed to acquire, and the Seller and Shareholder agreed to sell, certain assets of the Seller, including the “LOGO by Lori Goldstein” trademark and other intellectual property rights relating thereto. On April 1, 2021 (the “Closing Date”), the Company completed the acquisition of the assets specified in the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, on the Closing Date, the Company delivered $ 1.6 million in cash consideration to the Seller. In addition, the Company was required to deliver $ 2.0 million in cash consideration to the Seller on the earlier of (i) the Company’s receipt of the first royalty payment from QVC, Inc. in respect of the acquired assets, or (ii) July 29, 2021. This payment was made in July 2021. In addition to the consideration described above, the Seller is eligible to earn additional consideration of up to $ 12.5 million (the “Lori Goldstein Earn-Out”), which would be payable, in cash, within 45 days after the end of each applicable calendar year during the six calendar year period commencing 2021 in an amount equal to 75 % percent of the Royalty Contribution (as defined in the Asset Purchase Agreement) for such calendar year. The Company recorded a contingent obligation of $ 6.6 million related to the Lori Goldstein Earn-Out, based on the difference between the fair value of the acquired assets of the LOGO by Lori Goldstein brand and the total consideration paid, in accordance with the guidance in Accounting Standards Codification (“ASC”) Subtopic 805-50. The LOGO by Lori Goldstein brand acquisition was accounted for as an asset purchase. The following represents the aggregate purchase price of $ 10.3 million: ​ ​ ​ ​ ​ ($ in thousands) ​ ​ Cash paid at closing ​ $ 1,600 Cash paid subsequent to closing ​ 2,045 Total direct initial consideration ​ 3,645 Direct transaction expenses ​ 16 Contingent obligation (Lori Goldstein Earn-Out) ​ 6,639 Total consideration $ 10,300 ​ The aggregate purchase price has been allocated entirely to the trademarks of the brand. Such trademarks have been determined by management to have a finite useful life, and accordingly, amortization is recorded in the Company’s condensed consolidated statements of operations. The Lori Goldstein trademarks are being amortized on a straight-line basis over their expected useful life of four years . Upon the consummation of the acquisition of the LOGO by Lori Goldstein brand as described above, the Company incurred cash bonuses totaling $ 175,000 to certain members of the Company’s senior management (including $ 100,000 to the Chief Executive Officer, and $ 25,000 each to the Chief Financial Officer, President and Chief Operating Officer, and 8 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) Executive Vice President of Business Development and Treasury), such success-related bonuses having been approved by the Board of Directors on March 18, 2021. These bonuses were subsequently paid in May 2021. Additionally, concurrent with the acquisition, the Company also entered into a 10-year employment agreement with the Shareholder to serve as the LOGO by Lori Goldstein brand’s Chief Creative Officer and Spokesperson, with a base salary of $ 0.9 million per annum through December 31, 2021 and $ 1.2 million per annum thereafter, and the opportunity to earn additional incentives based on the future net royalties related to the brand. Further, the Company concurrently entered into a consulting agreement with the Seller to provide creative advice and consultation, for a fee of $ 0.6 million per annum through December 31, 2021 and $ 0.8 million per annum thereafter. 3. Trademarks and Other Intangibles Trademarks and other intangibles, net consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average September 30, 2021 ​ Amortization ​ Gross Carrying ​ Accumulated ​ Net Carrying ($ in thousands) ​ Period ​ Amount ​ Amortization ​ Amount Trademarks (indefinite-lived) n/a ​ $ 44,500 ​ $ — ​ $ 44,500 Trademarks (finite-lived) 15 years ​ 20,386 ​ 6,674 ​ 13,712 Trademarks (finite-lived) ​ 18 years ​ ​ 38,194 ​ ​ 5,786 ​ ​ 32,408 Trademarks (finite-lived) ​ 4 years ​ ​ 10,300 ​ ​ 1,287 ​ ​ 9,013 Other intellectual property 7 years ​ 762 ​ 619 ​ 143 Copyrights and other intellectual property 9 years ​ 229 ​ 146 ​ 83 Total ​ ​ ​ $ 114,371 ​ $ 14,512 ​ $ 99,859 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average December 31, 2020 ​ Amortization Gross Carrying ​ Accumulated ​ Net Carrying ($ in thousands) ​ Period ​ Amount ​ Amortization ​ Amount Trademarks (indefinite-lived) n/a ​ $ 44,500 ​ $ — ​ $ 44,500 Trademarks (finite-lived) 15 years ​ 20,386 ​ 5,640 ​ 14,746 Trademarks (finite-lived) ​ 18 years ​ ​ 38,194 ​ ​ 4,192 ​ ​ 34,002 Other intellectual property 7 years ​ 762 ​ 537 ​ 225 Copyrights and other intellectual property 10 years ​ 190 ​ 128 ​ 62 Total ​ $ 104,032 ​ $ 10,497 ​ $ 93,535 ​ Amortization expense for intangible assets was approximately $ 1.56 million for the three-month period ended September 30, 2021 (the "current quarter") and was approximately $ 1.14 million for the three-month period ended September 30, 2020 (the "prior year quarter"). Amortization expense for intangible assets was approximately $ 4.02 million for the nine-month period ended September 30, 2021 (the “current nine months”) and was approximately $ 3.42 million for the nine-month period ended September 30, 2020 (the “prior year nine months”). The trademarks related to the Isaac Mizrahi Brand have been determined to have indefinite useful lives and, accordingly, no amortization has been recorded for these assets. ​ 9 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows: ​ ​ ​ ​ ($ in thousands) ​ Amortization Year Ending December 31, Expense 2021 (October 1 through December 31) ​ $ 1,555 2022 ​ 6,220 2023 ​ 6,220 2024 ​ 6,199 2025 ​ 4,257 Thereafter ​ 30,908 Total ​ $ 55,359 ​ ​ 4. Significant Contracts and Concentrations QVC Agreements Under the Company’s agreements with Qurate Retail Group (“Qurate”), collectively referred to as the QVC Agreements, Qurate is required to pay the Company fees based primarily on a percentage of its net sales of Isaac Mizrahi, Judith Ripka, Lori Goldstein, and Longaberger branded merchandise. Qurate royalty revenue represents a significant portion of the Company’s total revenues. ● Revenues from the QVC Agreements totaled $ 6.05 million and $ 4.70 million for the current and prior year quarter, respectively, representing approximately 54 % and 64 % of the Company’s total net revenues for the current and prior year quarter, respectively. ● Revenues from the QVC Agreements totaled $ 15.24 million and $ 13.44 million for the current and prior year nine months, respectively, representing approximately 51 % and 61 % of the Company’s total net revenues for the current and prior year nine months, respectively. ● As of September 30, 2021 and December 31, 2020, the Company had receivables from Qurate of $ 6.19 million and $ 4.46 million, respectively, representing approximately 57 % and 50 % of the Company’s total accounts receivable, respectively. ​ 5. Allowance for Doubtful Accounts Accounts receivable are presented on the Company’s condensed consolidated balance sheets net of allowances of $ 1,284,000 and $ 1,151,000 as of September 30, 2021 and December 31, 2020, respectively. The Company recognized bad debt expense of $ 0 and $ 371,000 for the current quarter and prior year quarter, respectively, and recognized bad debt expense of $ 132,000 and $ 1,054,000 for the current nine months and prior year nine months, respectively. The bad debt expense amounts for the current nine months, prior year quarter, and prior year nine months include $ 132,000 , $ 385,000 , and $ 971,000 , respectively, of bad debt expense related to the bankruptcy of and economic impact on certain retail customers due to the COVID-19 pandemic. The total allowance of $ 1.1 million against such customers’ outstanding receivable balances of $ 1.5 million at September 30, 2021 represents management’s best estimate of collectibility, based on information currently available. ​ 10 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) 6. Leases The Company has operating leases for its current office, former office, and a retail store location, as well as certain equipment with a term of 12 months or less. The Company’s real estate leases have remaining lease terms of between 5 months and 7.25 years. Under GAAP, a lessee is generally required to recognize a liability for its obligation to make future lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying leased asset for the lease term. The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease ROU assets, current portion of operating lease liabilities, and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets. The Company does not recognize lease liabilities and ROU assets for lease terms of 12 months or less, but recognizes such lease payments in operations on a straight-line basis over the lease terms. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is generally recognized on a straight-line basis over the lease term. For both the current and prior year quarter, lease expense included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $ 0.4 million. For the current and prior year nine months, lease expense included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $ 1.2 million. As of September 30, 2021, the weighted average remaining operating lease term was approximately 5.9 years and the weighted average discount rate for operating leases was 8.64 %. Cash paid for amounts included in the measurement of operating lease liabilities was $ 0.4 million in the current quarter, $ 1.7 million in the current nine months, $ 0.6 million in the prior year quarter, and $ 1.2 million in the prior year nine months. As of September 30, 2021, the maturities of lease liabilities were as follows: ​ ​ ​ ​ ​ ($ in thousands) ​ ​ 2021 (October 1 through December 31) ​ $ 539 2022 ​ ​ 1,891 2023 ​ 1,711 2024 ​ 1,711 2025 ​ 1,710 After 2025 ​ 3,579 Total lease payments ​ ​ 11,141 Less: Discount ​ ​ 2,531 Present value of lease liabilities ​ ​ 8,610 Current portion of lease liabilities ​ ​ 1,315 Non-current portion of lease liabilities ​ $ 7,295 ​ ​ ​ ​ ​ ​ 11 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) 7. Debt The Company’s net carrying amount of debt was comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ($ in thousands) 2021 2020 ​ Term loan debt ​ $ 23,750 ​ $ 16,750 ​ Unamortized deferred finance costs related to term loan debt ​ ( 1,017 ) ​ ( 112 ) ​ Revolving loan debt ​ ​ 2,498 ​ ​ — ​ Total ​ 25,231 ​ 16,638 ​ Current portion of debt (i) ​ 4,998 ​ 2,800 ​ Long-term debt ​ $ 20,233 ​ $ 13,838 ​ ​ (i) The current portion of debt as of September 30, 2021 consists of $ 2.5 million of term loan debt and $ 2.5 million of revolving loan debt; the current portion of debt as of December 31, 2020 is related solely to term loan debt. Previous Term Loan Debt On February 11, 2019, the Company entered into an amended loan agreement with Bank Hapoalim B.M. (“BHI”), which amended and restated a prior term loan with BHI, such that, as of February 11, 2019, the aggregate outstanding balance of all the term loans extended by BHI to Xcel was $ 22.0 million, which amount was divided into two term loans: (1) a term loan in the amount of $ 7.3 million and (2) a term loan in the amount of $ 14.7 million. Such loan agreement was subsequently amended on April 13, 2020 and again on August 18, 2020; such amendments changed the timing and amount of quarterly installment payments, but did not change the total principal balance, interest rate, or maturity date. These amendments during 2020 were accounted for as debt modifications and, accordingly, no gain or loss was recorded. Current Term Loan Debt On April 14, 2021 (the “Loan Closing Date”), Xcel, as Borrower, and its wholly-owned subsidiaries (each a “Guarantor” and collectively, the “Guarantors”), entered into a Loan and Security Agreement (the “Loan Agreement”) with BHI as administrative agent and collateral agent, FEAC Agent, LLC (“FEAC”) as co-collateral agent, and the financial institutions party thereto as lenders (the “Lenders”). Pursuant to the Loan Agreement, the Lenders made two term loans: (1) a term loan in the amount of $ 10.0 million (“Term Loan A”) and (2) a term loan in the amount of $ 15.0 million (“Term Loan B” and, together with Term Loan A, the “Term Loans”). The Loan Agreement also provided that the Lenders make available to Xcel a revolving loan facility in an amount up to $ 4.0 million on a discretionary basis, but not to exceed 85 % of the amount of eligible accounts receivable, as defined. Xcel shall have the right to request the Lenders to make incremental term loans (the “Incremental Term Loans”) of up to $ 25.0 million. Management assessed and determined that this new agreement resulted in an extinguishment of the previous term loan debt, and accordingly recognized a loss of approximately $ 0.8 million (consisting of $ 0.1 million of unamortized deferred finance costs and $ 0.7 million of breakage fees owed to the old lender under the terms of the previous debt agreement) during the current quarter. Approximately $ 367,000 of such aforementioned breakage fees were paid at time of extinguishment, with the remaining $ 367,000 of such fees payable in three equal payments on each of May 1, 2022, 2023, and 2024. Upon entering into the Loan Agreement, Xcel paid a 2.5 % closing fee in the amount of $ 0.625 million to the administrative agent for the benefit of each Lender having a term loan commitment; the Company also paid approximately $ 0.6 million 12 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) of various legal and other fees in connection with the execution of the Loan Agreement. These fees and costs totaling approximately $ 1.2 million have been deferred on the condensed consolidated balance sheet as of September 30, 2021 as a reduction of the carrying value of the Term Loans, and are being amortized to interest expense over the term of the Term Loans using the effective interest method. The Term Loans mature on April 14, 2025, Incremental Term Loans shall mature on the date set forth in the applicable term note, and Revolving Loans mature on April 14, 2022 or such later date as agreed upon by Xcel and the Lenders. Principal on the Term Loans is payable in 16 quarterly installments of $ 625,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on June 30, 2021 and ending on March 31, 2025, with a final payment of $ 15.0 million on the maturity date of April 14, 2025. An amount equal to eighty percent ( 80 %) of each quarterly principal installment payment shall be applied to the Term Loan A and the remaining twenty percent ( 20 %) of each such quarterly principal installment shall be applied to the Term Loan B until the outstanding principal balance of Term Loan A is paid in full. Thereafter, one hundred percent ( 100 %) of each such quarterly principal installment shall be applied to the Term Loan B. The aggregate remaining annual scheduled principal payments under the Term Loans at September 30, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ Amount of ($ in thousands) Principal Year Ending December 31, Payment 2021 (October 1 to December 31) ​ $ 625 2022 ​ 2,500 2023 ​ ​ 2,500 2024 ​ ​ 2,500 2025 ​ 15,625 Total ​ $ 23,750 ​ Xcel shall have the right upon 30 days ’ prior written notice to (i) terminate the Revolving Loan facility and repay all Revolving Loans and accrued and unpaid interest thereon and (ii) prepay all or any portion of the Term Loans or Incremental Term Loans and accrued and unpaid interest thereon, provided that any prepayment of the Term Loans shall be applied first to prepay the Term Loan A in full, second to prepay the Term Loan B, and third to the Incremental Term Loans in accordance with the terms agreed to by Xcel, the Lenders, and the administrative agent. If any Term Loan is prepaid in whole or in part on or prior to the third anniversary of the Loan Closing Date (including as a result of an event of default), Xcel shall pay a prepayment premium as follows: an amount equal to the principal amount of the Term Loan prepaid multiplied by: (i) the greater of three percent ( 3.00 %) and the Lost Yield Revenue (as defined below) if such prepayment occurs on or before the first anniversary of the Loan Closing Date; (ii) two percent ( 2.00 %) if such prepayment occurs at any time after the first anniversary of the Loan Closing Date and on or prior to the second anniversary of the Loan Closing Date; and (iii) one percent ( 1.00 %) if such prepayment occurs at any time after the second anniversary of the Loan Closing Date on or prior to the third anniversary of the Loan Closing Date. Xcel is not obligated to pay a prepayment premium if the Term Loans are prepaid after the third anniversary of the Loan Closing Date. “Lost Yield Revenue” means, with respect to any payment of Term Loans at any time on or prior to the first anniversary of the Loan Closing Date (excluding regularly scheduled amortization payments), the amount of interest (including interest at the Default Rate to the extent the Default Rate is being charged under the Loan Agreement) that would have accrued on the repaid Term Loans during the first 12 months of the term of the Loan Agreement minus the portion of such interest on such Term Loans that actually has been paid. 13 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) Xcel’s obligations under the Loan Agreement are guaranteed by the Guarantors and secured by all of the assets of Xcel and the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement) and, subject to certain limitations contained in the Loan Agreement, equity interests of the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement). Xcel also granted the Lenders a right of first offer to finance any acquisition for which the consideration therefor will be paid other than by cash of Xcel or the Guarantors, the issuance of equity interest of Xcel, or the issuance of notes to the applicable seller. The Loan Agreement contains customary covenants, including reporting requirements, trademark preservation, and financial covenants (on a consolidated basis with Xcel and the Guarantors under the Loan Agreement). On August 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, the EBITDA financial covenant for the three months ended June 30, 2021 was eliminated, and the financial covenants related to EBITDA, fixed charge coverage ratio, and leverage ratio were lowered for the remainder of 2021 and for the 12 months ending March 31, 2022. Additionally, the maximum amount available under the revolving loan facility was reduced from $ 4.0 million to $ 1.5 million until the Company meets or exceeds certain financial targets as set forth in the amendment. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement. On September 29, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, the maximum amount available under the revolving loan facility was changed to $ 2.5 million for the period from September 29, 2021 to November 15, 2021, and $ 1.5 million thereafter until the Company meets or exceeds certain financial targets as set forth in the amendment. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement. On November 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, certain financial covenants were modified or eliminated for certain time periods. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement The Company’s financial covenants under the Loan Agreement, as amended, are as follows: ● minimum EBITDA at the end of specified fiscal periods as set forth below; ​ ​ ​ ​ ​ Fiscal Period Minimum EBITDA April 1, 2021 to September 30, 2021 ​ $ 2,200,000 April 1, 2021 to December 31, 2021 ​ $ 3,426,000 April 1, 2021 to March 31, 2022 ​ $ 4,515,000 July 1, 2021 to June 30, 2022 ​ $ 5,146,000 October 1, 2021 to September 30, 2022 ​ $ 6,500,000 For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023, and September 30, 2023 ​ $ 7,000,000 For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025 ​ $ 7,500,000 ​ ● liquid assets of at least 4.0 million at all times; 14 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) ● a fixed charge coverage ratio of not less than (a) 1.00 to 1.00 for the nine month period ending on December 31, 2021, (b) 1.00 to 1.00 for the twelve fiscal month period ending March 31, 2022, and (c) 1.25 to 1.00 for the twelve fiscal month period ending at the end of each fiscal quarter commencing with the fiscal quarter ending June 30, 2022; ● a leverage ratio for the twelve fiscal month period ending at the end of each fiscal quarter not exceeding (a) 6.75 to 1.00 for the fiscal quarter ending December 31, 2021, (b) 5.30 to 1.00 for the fiscal quarter ending March 31, 2022, and (c) 4.00 to 1.00 for each fiscal quarter ending on and after June 30, 2022; and ● a loan to value ratio not exceeding 50 % . The Company was in compliance with all applicable covenants as of September 30, 2021, inclusive of the aforementioned amendment executed on November 12, 2021. Interest on the Term Loan A will accrue at LIBOR plus 4.0 % per annum, interest on the Term Loan B will accrue at LIBOR plus 8.0 % per annum, and interest on the Revolving Loans will accrue at either the Base Rate plus 1.5 % per annum or LIBOR plus 3.75 %, as elected by Xcel. Interest on the Loans is payable on the last business day of each calendar month. Base Rate is defined in the Loan Agreement as the greater of (a) BHI’s stated prime rate or (b) 2.00 % per annum plus the overnight federal funds rate published by the Federal Reserve Bank of New York. LIBOR is defined in the Loan Agreement as the greater of (a) the rate of interest per annum for deposits in dollars for an interest period equal to one month as published by ICE Benchmark Administration Limited or a comparable or successor quoting service at approximately 11:00 a.m. (London time) on such date of determination or (b) 1.0 % per annum. Interest on the Incremental Term Loans will accrue at rates and will be paid on dates to be agreed to by Xcel and the Lenders. For the current and prior year quarter, the Company incurred interest expense related to term loan debt of approximately $ 565,000 and $ 303,000 , respectively. For the current nine months and prior year nine months, the Company incurred interest expense related to term loan debt of approximately $ 1,363,000 and $ 926,000 , respectively. The effective interest rate related to term loan debt was approximately 9.6 % and 8.4 % for the current quarter and current nine months, respectively, and was approximately 6.6 % for both the prior year quarter and prior year nine months. On June 24, 2021, Xcel borrowed $ 1.5 million under the aforementioned revolving loan facility, and on September 30, 2021, Xcel borrowed $ 998,000 under the aforementioned revolving loan facility. The Company incurred related interest expense for the current quarter and current nine months of approximately $ 18,000 and $ 19,000 , respectively. 8. Government Assistance Paycheck Protection Program (“PPP”) On April 20, 2020, the Company executed a promissory note (the “Promissory Note”) with Bank of America, N.A., which provided for an unsecured loan in the amount of $ 1.806 million, pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The loan had a two-year term and bore interest at a fixed rate of 1.0 % per annum, and monthly principal and interest payments were deferred for six months after the date of disbursement. The Promissory Note contained events of default and other provisions customary for a loan of this type. The loan was funded on April 23, 2020. The PPP also provides that such a loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act, and later amended by the Paycheck Protection Program Flexibility Act (the "Flexibility Act") signed into law on June 5, 2020. Such forgiveness is determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. 15 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) Management evaluated the legal and contractual terms associated with the loan, and concluded that, although the legal form of the loan was debt, it represented in substance a government grant that was expected to be forgiven. Given the lack of definitive authoritative guidance under GAAP for accounting for government grants, the Company analogized to accounting guidance under International Accounting Standard No. 20, “Accounting for Government Grants and Disclosure of Government Assistance.” Under such guidance, once it is probable that the conditions attached to the assistance will be met, the earnings impact of government grants is recorded on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. Accordingly, the Company recognized approximately $ 166,000 and $ 1,806,000 as a reduction to operating expenses in the prior year quarter and prior year nine months, respectively. No interest expense related to the loan was recorded in the Company’s condensed consolidated financial statements. On September 29, 2021, the U.S. Small Business Administration, as authorized by the CARES Act, remitted payment of $ 1,806,000 to Bank of America, N.A. for full forgiveness of the Company’s Promissory Note under the PPP. Economic Incentive Disaster Loan (EIDL) Concurrently with the PPP loan, in May 2020 the Company also received a $ 10,000 Economic Incentive Disaster Loan (“EIDL”) Advance through the U.S. Small Business Administration. The EIDL Advance represents a grant that does not have to be repaid, and as such, the Company recognized $ 10,000 as a reduction to operating expenses in the prior quarter and prior year nine months. In total for both the PPP and EIDL, the Company recognized approximately $ 176,000 and $ 1,816,000 as a reduction to operating expenses in the prior year quarter and prior year nine months, respectively. 9. Stockholders’ Equity 2011 Equity Incentive Plan The Company’s 2011 Equity Incentive Plan, as amended and restated (the “Plan”), is designed and utilized to enable the Company to provide its employees, officers, directors, consultants, and others whose past, present, and/or potential contributions to the Company have been, are, or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. A total of 13,000,000 shares of common stock are eligible for issuance under the Plan. The Plan provides for the grant of any or all of the following types of awards: stock options, restricted stock, deferred stock, stock appreciation rights, and other stock-based awards. The Plan is administered by the Company’s Board of Directors, or, at the Board’s discretion, a committee of the Board. The Company accounts for stock-based compensation in accordance with Accounting Standards Codification Topic 718, “Compensation - Stock Compensation,” by recognizing the fair value of stock-based compensation as an operating expense over the service period of the award or term of the corresponding contract, as applicable. The fair value of options and warrants is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the long-term implied volatilities of the Company’s stock, and expected life is based on the estimated average of the life of options and warrants using the simplified method. The Company utilizes the simplified method to determine the expected life of the options and warrants due to insufficient exercise activity during recent years as a basis from which to 16 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. Restricted stock awards are valued using the fair value of the Company’s stock at the date of grant. For stock option awards for which vesting is contingent upon the achievement of certain performance targets, the timing and amount of compensation expense recognized is based upon the Company’s projections and estimates of the relevant performance metric(s) until the time the performance obligation is satisfied. Forfeitures are accounted for as a reduction of compensation cost in the period when such forfeitures occur. Stock Options Options granted under the Plan expire at various times – either five , seven , or ten years from the date of grant, depending on the particular grant. A summary of the Company’s stock options activity for the current nine months is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Weighted ​ Remaining ​ ​ ​ ​ ​ ​ ​ Average ​ Contractual ​ Aggregate ​ ​ Number of ​ Exercise ​ Life ​ Intrinsic ​ Options Price (in Years) Value Outstanding at January 1, 2021 7,179,375 ​ $ 3.14 4.93 ​ $ — Granted 510,390 ​ 1.91 ​ Canceled ( 8,050 ) ​ 1.86 ​ Exercised ( 99,700 ) ​ 1.77 ​ Expired/Forfeited ( 1,771,070 ) ​ 5.63 ​ Outstanding at September 30, 2021, and expected to vest 5,810,945 ​ $ 2.32 5.56 ​ $ — Exercisable at September 30, 2021 1,931,778 ​ $ 3.40 2.10 ​ $ — ​ On March 15, 2021, the Company granted options to purchase an aggregate of 365,390 shares of common stock to various employees. The exercise price of the options is $ 1.86 per share, and all options vested immediately on the date of grant. On April 1, 2021, the Company granted options to purchase an aggregate of 125,000 shares of common stock to non-management directors. The exercise price of the options is $ 1.93 per share, and 50 % of the options vest on each of April 1, 2022 and April 1, 2023. On July 1, 2021, the Company granted options to purchase an aggregate of 20,000 shares of common stock to a member of management. The exercise price of the options is $ 2.76 per share, and 50 % of the options vest on each of June 1, 2022 and June 1, 2023. Compensation expense related to stock options for the current quarter and the prior year quarter was approximately $ 48,000 and $ 45,000 , respectively. Compensation expense related to stock options for the current nine months and prior year nine months was approximately $ 246,000 and $ 158,000 , respectively. Total unrecognized compensation expense related to unvested stock options at September 30, 2021 amounts to approximately $ 125,000 and is expected to be recognized over a weighted average period of approximately 1.16 years. 17 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) A summary of the Company’s non-vested stock options activity for the current nine months is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ Options Fair Value Balance at January 1, 2021 4,116,167 ​ $ 0.08 Granted 510,390 ​ 0.44 Vested ( 647,390 ) ​ ​ 0.43 Forfeited or Canceled ( 100,000 ) ​ 0.08 Balance at September 30, 2021 3,879,167 ​ $ 0.06 ​ Warrants Warrants expire at various times – either five or ten years from the date of grant, depending on the particular grant. A summary of the Company’s warrants activity for the current nine months is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Weighted ​ Remaining ​ ​ ​ ​ ​ ​ Average Contractual ​ Aggregate ​ ​ Number of ​ Exercise Life ​ Intrinsic ​ Warrants Price (in Years) Value Outstanding and exercisable at January 1, 2021 579,815 ​ $ 4.63 1.32 ​ $ — Granted — ​ — ​ ​ Canceled — ​ — ​ ​ Exercised — ​ — ​ ​ Expired/Forfeited ( 463,750 ) ​ 5.00 ​ ​ Outstanding and exercisable at September 30, 2021 116,065 ​ $ 3.15 2.83 ​ $ — ​ No compensation expense related to warrants was recognized in the current quarter, prior year quarter, current nine months, or prior year nine months. Stock Awards A summary of the Company’s restricted stock activity for the current nine months is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Number of ​ Average ​ ​ Restricted ​ Grant Date ​ Shares Fair Value Outstanding at January 1, 2021 780,833 ​ $ 4.09 Granted 254,623 ​ 1.69 Canceled — ​ — Vested ( 204,623 ) ​ 1.63 Expired/Forfeited — ​ — Outstanding at September 30, 2021 830,833 ​ $ 3.96 ​ On April 1, 2021, the Company issued an aggregate of 50,000 shares of stock to non-management directors, which vest evenly over two years , whereby 50 % shall vest on April 1, 2022, and 50 % shall vest on April 1, 2023. 18 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) On April 26, 2021, the Company issued 14,045 shares of stock to a consultant, which vested immediately. On July 1, 2021, the Company issued 9,399 shares of stock to a consultant, which vested immediately. Compensation expense related to restricted stock grants for the current and prior year quarter was approximately $ 37,000 and $ 11,000 , respectively. Compensation expense related to restricted stock grants for the current nine months and prior year nine months was approximately $ 84,000 and $ 44,000 , respectively. Total unrecognized compensation expense related to unvested restricted stock grants at September 30, 2021 amounts to approximately $ 72,000 and is expected to be recognized over a weighted average period of approximately 1.50 years. Additionally, on May 7, 2021, the Company issued 181,179 shares of stock to a member of senior management as payment for a performance bonus earned in 2020. These shares vested immediately. The Company had previously recognized compensation expense of approximately $ 291,000 in 2020 to accrue for this performance bonus, and recognized a reduction to compensation expense of approximately $( 8,000 ) during the current nine months related to this bonus. The Company also recognized approximately $ 46,000 and $ 400,000 of compensation expense in the current quarter and current nine months, respectively, related to similar senior management bonuses payable in common stock in 2022. The Company also recognized approximately $ 32,000 of compensation expense in the current quarter and current nine months to accrue for a contractual payment to an employee that will be paid in shares in the fourth quarter of 2021. Shares Available Under the Company’s 2011 Equity Incentive Plan As of September 30, 2021, there were 2,636,969 shares of common stock available for issuance under the Plan. Shares Reserved for Issuance As of September 30, 2021, there were 8,563,979 shares of common stock reserved for issuance pursuant to unexercised warrants and stock options, or available for issuance under the Plan. Dividends The Company has not paid any dividends to date. 10. Earnings Per Share Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period, including stock options and warrants, using the treasury stock method. Diluted EPS excludes all potentially dilutive shares of common stock if their effect is anti-dilutive. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 2021 2020 ​ Basic 19,541,774 19,231,040 ​ 19,418,469 19,078,453 Effect of exercise of warrants — — ​ — — Effect of exercise of stock options ​ — ​ — ​ — ​ — ​ Diluted 19,541,774 19,231,040 ​ 19,418,469 19,078,453 ​ 19 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) As a result of the net loss for all periods presented, the Company calculated diluted earnings per share using basic weighted average shares outstanding for such period, as utilizing diluted shares would be anti-dilutive to loss per share. ​ The computation of diluted EPS excludes the following potentially dilutive securities because their inclusion would be anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 2021 2020 ​ Stock options and warrants ​ 5,927,010 8,083,690 ​ 5,927,010 8,083,690 ​ ​ 11. Income Tax The effective income tax benefit rate for the current quarter and the prior year quarter was approximately 28 % and 25 %, respectively, resulting in an income tax benefit of $ 0.54 million and $ 0.15 million, respectively. The effective income tax benefit rate for the current nine months and prior year nine months was approximately 26 % and 10 %, respectively, resulting in an income tax benefit of $ 2.02 million and $ 0.27 million, respectively. For the current quarter, the federal statutory rate differed from the effective tax rate primarily due to state taxes, which increased the effective tax rate by approximately 7 %. For the prior year quarter, the federal statutory rate differed from the effective tax rate primarily due to state taxes and recurring permanent differences, which increased the effective tax rate by approximately 12 % and 18 %, respectively, partially offset by the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effective rate by approximately 26 %. The effective tax rate was also affected by the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 3 %. For the current nine months, the federal statutory rate differed from the effective tax rate primarily due to state taxes, which increased the effective tax rate by approximately 7 %, partially offset by the impact of recurring permanent differences, which decreased the effective tax rate by approximately 2 %. For the prior year nine months, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effective rate by approximately 5 %. The effective rate was also attributable to state taxes and recurring permanent differences, which increased the effective tax rate by approximately 6 % and decreased the effective tax rate by approximately 3 %, respectively. 12. Related Party Transactions Robert W. 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. Mrs. 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. Mrs. D’Loren received compensation of $ 11,000 and $ 29,000 for the current quarter and prior year quarter, respectively. Mrs. D’Loren received compensation of $ 32,000 and $ 99,000 for the current nine months and prior year nine months, respectively. 20 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) 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”). Mr. 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 the QVC channel. Mr. 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 following: ● “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. Mr. Mizrahi is required to devote his full business time and attention to the business and affairs of the Company and its subsidiaries; however, Mr. 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. Severance . If Mr. 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. If Mr. 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 Mr. Mizrahi’s employment by the Company and for a one-year period after the termination of such employment (unless his 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 21 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) 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. 13. Commitments and Contingencies Contingent Obligation – Halston Heritage Earn-Out In connection with the February 11, 2019 purchase of the Halston Heritage trademarks from H Company IP, LLC (“HIP”), the Company agreed to pay HIP additional consideration (the “Halston Heritage Earn-Out”) of up to an aggregate of $ 6.0 million, based on royalties earned through December 31, 2022. The Halston Heritage Earn-Out of $ 0.9 million is recorded as a long-term liability at September 30, 2021 and December 31, 2020 in the accompanying condensed consolidated balance sheets, based on the difference between the fair value of the acquired assets of the Halston Heritage trademarks and the total consideration paid. In accordance with ASC Topic 480, “Distinguishing Liabilities from Equity,” the Halston Heritage Earn-Out obligation is treated as a liability in the accompanying condensed consolidated balance sheets because of the variable number of shares payable under the agreement. Contingent Obligation – Lori Goldstein Earn-Out In connection with the April 1, 2021 acquisition of the Lori Goldstein trademarks (see Note 2 for additional information), the Company agreed to pay the Seller additional cash consideration of up to $ 12.5 million, based on royalties earned during the six calendar year period commencing in 2021. The Lori Goldstein Earn-Out of $ 6.6 million is recorded as a long-term liability at September 30, 2021 in the accompanying condensed consolidated balance sheet, based on the difference between the fair value of the acquired assets of the Lori Goldstein brand and the total consideration paid, in accordance with the guidance in ASC Subtopic 805-50. Coronavirus Pandemic In March 2020, the World Health Organization declared the outbreak of a novel coronavirus disease (“COVID-19”) as a pandemic, which continues to circulate throughout the U.S. and the world. COVID-19 has had an unprecedented impact on the U.S. and global economy as national, state, and local governments continue to react to and attempt to manage this ongoing public health crisis. The impacts of the ongoing COVID-19 pandemic are broad reaching and are having an impact on the Company’s licensing and wholesale businesses. The COVID-19 pandemic is impacting the Company’s supply chain as most of the Company’s products are manufactured in China, Thailand, and other places around the world affected by this event. Temporary factory 22 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Unaudited Condensed Consolidated Financial Statements September 30, 2021 (Unaudited) closures and the pace of workers returning to work have impacted contract manufacturers’ ability to source certain raw materials and to produce finished goods in a timely manner. The pandemic is also impacting distribution and logistics providers' ability to operate in the normal course of business. Further, the pandemic has resulted in a sudden and continuing decrease in sales for many of the Company’s products, resulting in order cancellations, and a decrease in accounts receivable collections, as the Company recorded approximately $ 1 million of additional allowance for doubtful accounts for the year ended December 31, 2020, and approximately $ 0.1 million for the current nine months, for retailers that have filed for bankruptcy. Due to the ongoing COVID-19 pandemic, there is significant uncertainty surrounding the impact on the Company’s future results of operations and cash flows. Continued impacts of the pandemic could materially adversely affect the Company’s near-term and long-term revenues, earnings, liquidity, and cash flows as the Company’s customers and/or licensees may request temporary relief, delay, or not make scheduled payments. ​ 14. Subsequent Events Amendment to Term Loans On November 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement that was entered into on April 14, 2021 and had been amended on August 12, 2021 and September 29, 2021. Under the November 2021 amendment, certain financial covenants were modified or eliminated for certain time periods. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement. Refer to Note 7 for further details. ​ 23 Table of Contents