What changed in this filing

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Item 1A. Risk Factors

2022-04-15 compared with 2021-04-23 · 203 added, 187 removed, 277 unchanged (58% of the section changed)

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Please also see “Forward-Looking Statements” on page 3 for additional information regarding Forward-Looking Statements.

Summary of Risk Factors

Our business is subject to a number of risks, which include, but are not limited to, risks related to:

● our limited amount of cash and our significant debt obligations;

● our concentration of revenue with a limited number of licensees;

● restrictions related to certain key licensing agreements;

● our dependency on our Chief Executive Officer and on the promotional services of certain key spokespersons;

● the operational performance and/or strategic initiatives of our licensees and retail partners;

● continued market acceptance of our brands and products;

● execution of our growth strategy, including the acquisition of new brands;

● intense competition in the apparel, fashion, and jewelry industries, and within our licensees’ markets;

● product sourcing, including our arrangements with foreign suppliers, supply and logistics considerations, and our dependency on independent manufacturers;

● protection of our trademarks and other intellectual property rights;

An investment in our securities is subject to a number of risks, which include, but are not limited to, risks related to:

● management’s significant control over matters requiring shareholder approval;

● the fact that our common stock has historically been thinly traded;

● declines of and volatility in the market price of our common stock;

● the potential issuance of a substantial number of shares of common stock upon exercise of warrants and options and to satisfy and earn-out obligation if certain conditions are met;

● our intent to not pay any cash dividends for the foreseeable future;

● provisions of our corporate charter documents which could delay or prevent change of control;

We are also subject to general risks, which include, but are not limited to, risks related to:

● a pandemic or outbreak of disease or similar public health threat, or fear of such an event;

● the Ukrainian-Russian conflict;

● a decline in general economic conditions or consumer spending levels;

● potential impairment of our trademarks and other intangible assets under accounting guidelines;

● changes in our effective tax rates or adverse outcomes resulting from examination of our tax returns;

● maintenance and security of our information technology systems;

● changes in laws and regulations;

● maintaining an effective system of internal control;

● limitations on liabilities of our directors and executive officers;

● the potential impact of SEC “penny stock” rules on trading of our shares of our common stock;

● the potential impact of Rule 144 restrictions on our shares of common stock as a former shell company.

Risks Related to Our Business

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Although we believe that our existing cash and our anticipated cash flow from operations will be sufficient to sustain our operations at our current expense levels for at least 12 months subsequent to the date of the filing of this Annual Report on Form 10-K, we may require significant additional cash to satisfy our working capital requirements, expand our operations or acquire additional brands, although historically we have funded acquisitions with debt and equity financing.

Our inability to finance our growth, either internally through our operations or externally, may limit our growth potential and our ability to execute

our business strategy successfully.

Our inability to finance our growth, either internally through our operations or externally, may limit our growth potential and our ability to execute our business strategy successfully.

If we issue securities to raise capital to finance operations and/or pay down or restructure our debt, our existing stockholders may experience dilution.

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Our significant debt obligations could impair our liquidity and financial condition, and in the event we are unable to meet our debt obligations, we could lose ownership of our trademarks and/or other assets.

On April 14, 2021, we entered into a loan and security agreement with Bank Hapoalim B.M.

and FEAC Agent LLC and the financial institutions party thereto.

We have an outstanding balance of $25.0 million as of April 15, 2021 under this credit facility.

On December 30, 2021, we entered into a loan and security agreement with FEAC Agent LLC and the financial institutions party thereto.

We currently have an outstanding balance of $29.0 million under this credit facility.

We may also assume or incur additional debt, including secured debt, in the future in connection with, or to fund, future acquisitions or for other operating needs.

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In the event that we fail in the future to make any required payment under the agreements governing our indebtedness or if we fail to comply with the financial and operating covenants contained in those agreements, we would be in default with respect to that indebtedness and the lenders could declare such indebtedness to be immediately due and payable.

Our prior credit facility with Bank Hapoalim B.M.

had been amended in the past (including for the years ended December 31, 2020 and 2019) to eliminate or change the minimum EBITDA (as defined in the agreement) requirement for specified periods.

The impact the COVID-19 pandemic will have on our operating results could result in our inability to comply with certain debt covenants and require the lenders under the loan agreement to waive compliance with or agree to amend any such covenant to avoid a default.

In the past, we have received waivers and/or amendments from prior lenders under the various loan agreements for compliance

with certain financial covenants.

The impact the COVID-19 pandemic could continue to have on our operating results could result in our inability to comply with certain debt covenants and require the lenders under the loan agreement to waive compliance with or agree to amend any such covenant to avoid a default.

There can be no assurance that the lenders will amend or grant waivers to the loan agreement to adjust or eliminate covenants or waive our non-compliance or breach of a financial or other covenant in the future.

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Since substantially all of our debt obligations are secured by our assets, upon a default, our lenders may be able to foreclose on our assets.

A substantial portion of our licensing revenue is concentrated with a limited number of licensees such that the loss of any of such licensees could decrease our revenue and impair our cash flows.

A substantial portion of our revenues has been paid by Qurate, through the respective agreements with Qurate through QVC and HSN.

During the years ended December 31, 2020 and 2019, Qurate accounted for approximately 60% and 53%, respectively, of our total revenue.

A substantial portion of our net licensing revenue is concentrated with a limited number of licensees such that the loss of any of such licensees could decrease our revenue and impair our cash flows.

A substantial portion of our net licensing revenue has been paid by Qurate, through the respective agreements with Qurate through QVC and HSN.

During the years ended December 31, 2021 and 2020, Qurate accounted for approximately 50% and 60%, respectively, of our total net revenue.

Because we are dependent on these agreements with Qurate for a significant portion of our revenues, if Qurate were to have financial difficulties, or if Qurate decides not to renew or extend its existing agreements with us, our revenue and cash flows could be reduced substantially.

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Qurate is not required to devote any minimum amount of programming time for any of our brands.

While our business with Qurate has grown since the IsaacMizrahiLIVE brand was launched through December 31, 2017, our 2018 Qurate revenues were flat to 2017, and Qurate revenues declined from 2018 to 2019 and again from 2019 to 2020.

There is no guarantee that our Qurate revenues will grow in the future or that they will not decline.

While our business with Qurate has grown since the IsaacMizrahiLIVE brand was launched through December 31, 2017, our 2018 Qurate revenues were flat compared to 2017, and Qurate revenues declined from 2018 to 2020.

Although Qurate revenues increased from 2020 to 2021, there can be no guarantee that our Qurate revenues will continue to grow in the future or that they will not decline.

Additionally, there can be no assurance that our other licensees will be able to generate sales of products under our brands or grow their existing sales of products under our brands, and if they do generate sales, there is no guarantee that they will not cause a decline in sales of products being sold through Qurate.

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A breach of any of these agreements could also result in Qurate seeking monetary damages, seeking an injunction against us and our other licensees, reducing the programming time allocated to our brands, and/or terminating the respective agreement, which could have a material adverse effect on our net income and cash flows.

Termination of any one of our agreements with Qurate would result in a default under our credit facility with Bank Hapoalim B.M.

and would also enable Bank Hapoalim B.M.

to foreclose on our assets, including our membership interests in our subsidiaries, which combined currently hold all of our trademarks and other intangible assets.

Termination of any one of our agreements with Qurate would result in a default under our credit facility and would also enable our creditors to foreclose on our assets, including our membership interests in our subsidiaries, which combined currently hold all of our trademarks and other intangible assets.

We are dependent upon the promotional services of Isaac Mizrahi as they relate to the Mizrahi brands.

If we lose the services of Isaac Mizrahi, we may not be able to fully comply with the terms of our agreement with Qurate, and it may result in significant reductions in the value of the Mizrahi brands and our prospects, revenues, and cash flows.

Isaac Mizrahi is a key individual in our continued promotion of the Mizrahi brands and the principal salesperson of the Mizrahi brands on Qurate.

Failure of Isaac Mizrahi to provide services to Qurate could result in a termination of the IM Qurate Agreement, which could trigger an event of default under our credit facility with Bank Hapoalim B.M.

Although we have entered into an employment agreement with Mr.

Isaac Mizrahi is a key individual in our continued promotion of the Mizrahi brands and the principal salesperson of the

Mizrahi brands on Qurate.

Failure of Isaac Mizrahi to provide services to Qurate could result in a termination of the IM Qurate Agreement, which could trigger an event of default under our credit facility.

Although we have entered into the IM employment agreement with Mr.

Mizrahi and he is a significant stockholder of Xcel, there is no guarantee that we will not lose his services.

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Mizrahi’s services are not available to us, that we would be able to promote the Mizrahi brands as well as we are able to with Mr.

This could significantly affect the value of the Mizrahi brands and our ability to market the brands, and could impede our ability to fully implement our business

plan and future growth strategy, which would harm our business and prospects.

This could significantly affect the value of the Mizrahi brands and our ability to market the brands, and could impede our ability to fully implement our business plan and future growth strategy, which would harm our business and prospects.

Additionally, while we acquired all trademarks, image, and likeness of Isaac Mizrahi, pursuant to the acquisition of the Mizrahi business and his employment agreement, Mr.

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Mizrahi will not take an action that consumers view as negative, which may harm the Mizrahi brands as well as our business and prospects.

We are dependent upon the promotional services of Lori Goldstein as they relate to the Logo Lori Goldstein brands.

If we lose the services of Lori Goldstein, we may not be able to fully comply with the terms of our agreement with Qurate, and it may result in significant reductions in the value of the Logo Lori Goldstein brands and our prospects, revenues, and cash flows.

Lori Goldstein is a key individual in our continued promotion of the Logo Lori Goldstein brands and the principal salesperson of the Logo Lori Goldstein brands on Qurate.

Failure of Lori Goldstein to provide services to Qurate could result in a termination of related agreements with Qurate, which could trigger an event of default under our credit facility with Bank Hapoalim B.M.

We are dependent upon the promotional services of Lori Goldstein as they relate to the Lori Goldstein brands.

If we lose the services of Lori Goldstein, we may not be able to fully comply with the terms of our agreement with Qurate, and it may result in significant reductions in the value of the LOGO by Lori Goldstein brand and our prospects, revenues, and cash flows.

Lori Goldstein is a key individual in our continued promotion of the LOGO by Lori Goldstein brand and the principal salesperson of the LOGO by Lori Goldstein brand on Qurate.

Failure of Lori Goldstein to provide services to Qurate could result in a termination of related agreements with Qurate, which could trigger an event of default under our credit facility.

Although we have entered into an employment agreement with Ms.

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Goldstein’s services become unavailable to us, we will likely need to find a replacement for Ms.

Goldstein to promote the Logo Lori Goldstein brands.

Goldstein to promote the LOGO by Lori Goldstein brand.

Competition for skilled designers and high-profile brand promoters is intense, and compensation levels may be high, and there is no guarantee that we would be able to identify and attract a qualified replacement, or if Ms.

Goldstein’s services are not available to us, that we would be able to promote the Logo Lori Goldstein brands as well as we are able to with Ms.

This could significantly affect the value of the Logo Lori Goldstein brands and our ability to market the brands, and could impede our ability to fully implement our business plan and future growth strategy, which would harm our business and prospects.

Additionally, while we acquired all trademarks, image, and likeness of Lori Goldstein, pursuant to the acquisition of the Logo Lori Goldstein assets and her employment agreement, Ms.

Goldstein’s services are not available to us, that we would be able to promote the LOGO by Lori Goldstein brand as well as we are able to with Ms.

This could significantly affect the value of the LOGO by Lori Goldstein brand and our ability to market the brand, and could impede our ability to fully implement our business plan and future growth strategy, which would harm our business and prospects.

Additionally, while we acquired all trademarks, image, and likeness of Lori Goldstein, pursuant to the acquisition of the LOGO by Lori Goldstein assets and her employment agreement, Ms.

Goldstein has retained certain rights to participate in outside business activities, including hosting and appearing in television shows, movies and theater productions, and writing and publishing books and other publications.

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Finally, there is no guarantee that Ms.

Goldstein will not take an action that consumers view as negative, which may harm the Logo Lori Goldstein brands as well as our business and prospects.

Goldstein will not take an action that consumers view as negative, which may harm the LOGO by Lori Goldstein brand as well as our business and prospects.

We are dependent upon our Chief Executive Officer and other key executives.

If we lose the services of these individuals we may not be able to fully implement our business plan and future growth strategy, which would harm our business and prospects.

Our success is largely dependent upon the efforts of Robert W.

D’Loren, our Chief Executive Officer and Chairman of our board of directors.

Our continued success is largely dependent upon his continued efforts and those of our other key executives.

Although we entered into an employment agreement with Mr.

D’Loren, as well as employment agreements with other executives and key employees, including Isaac Mizrahi and Lori Goldstein, such persons can terminate their employment with us at their option, and there is no guarantee that we will not lose the services of our executive officers or key employees.

To the extent that any of their services become unavailable to us, we will be required to hire other qualified executives, and we may not be successful in finding or hiring adequate replacements.

This could impede our ability to fully implement our business plan and future growth strategy, which would harm our business and prospects.

The failure of our licensees to adequately produce, market, source, and sell quality products bearing our brand names in their license categories or to pay their obligations under their license agreements could result in a decline in our results of operations and impact our ability to service our debt obligations.

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The failure to satisfy our financial covenant requirements or to make such required payments would give our lenders the right to accelerate all obligations under our debt facility or facilities and foreclose on our trademarks, license agreements, and other related assets securing such notes.

If our customers change their buying patterns, request additional allowances, develop their own private label brands or enter into agreements with national brand manufacturers to sell their products on an exclusive basis, our sales to these customers could be materially adversely affected.

Our customers’ buying patterns, as well as the need to provide additional allowances to customers, could have a material adverse effect on our business, results of operations and financial condition.

Customers’ strategic initiatives, including developing their own private labels brands, selling national brands on an exclusive basis, reducing the number of vendors they purchase from, or reducing the floor space dedicated to our brands could also impact our sales to these customers.

There is a trend among major retailers to concentrate purchasing among a narrowing group of vendors.

To the extent that any key customer reduces the number of its vendors or allocates less floor space for our products and, as a result, reduces or eliminates purchases from us, there could be a material adverse effect on us.

Our business is dependent on continued market acceptance of our brands and any future brands we acquire and the products of our licensees.

Although many of our licensees guarantee minimum net sales and minimum royalties to us, some of our licensees are not yet selling licensed products or currently have limited distribution of licensed products, and a failure of our brands or of products bearing our brands to achieve or maintain broad market acceptance could cause a reduction of our licensing revenues and could further cause existing licensees not to renew their agreements.

Although certain of our licensees guarantee minimum net sales and minimum royalties to us, some of our licensees are not yet selling licensed products or currently have limited distribution of licensed products, and a failure of our brands or of products bearing our brands to achieve or maintain broad market acceptance could cause a reduction of our licensing revenues and could further cause existing licensees not to renew their agreements.

Such failure could also cause the devaluation of our trademarks, which are our primary assets, making it more difficult for us to renew our current licenses upon their expiration or enter into new or additional licenses for our trademarks.

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Additional marketing efforts and expenditures may not, however, result in either increased market acceptance of, or additional licenses for, our trademarks or increased market acceptance, or sales, of our licensees’ products.

Furthermore, we do not actually design or manufacture all of the products bearing our marks, and therefore, have less control over such products’ quality and design than a traditional product manufacturer might have.

Furthermore, we do not actually design or manufacture all of the products

bearing our marks, and therefore, have less control over such products’ quality and design than a traditional product manufacturer might have.

The failure of our licensees to maintain the quality of their products could harm the reputation and marketability of our brands, which would adversely impact our business.

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The success of our company, however, will still remain largely dependent on our ability to build and maintain broad market acceptance of our brands, to contract with and retain key licensees and on our licensees’ ability to accurately predict upcoming fashion and design trends within customer bases and fulfill the product requirements of retail channels within the global marketplace.

Our recent growth has placed, and our anticipated future growth will continue to place, considerable demands on our management and other resources.

Our ability to compete effectively and to manage future growth, if any, will depend on the sufficiency and adequacy of our current resources and infrastructure and our ability to continue to identify, attract and retain personnel to manage our brands and integrate any brands we may acquire into our operations.

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We are subject to the risks associated with our Judith Ripka brand’s wholesale and direct-to-consumer model.

We commenced e-commerce sales and wholesales of our Judith Ripka brand in 2017 and 2018, respectively.

In 2019, we completed the transition of our non-interactive television operations of our Judith Ripka brand to a wholesale and direct-to-consumer model, thus changing these operations from a licensed model to a wholesale and direct-to-consumer business model.

We commenced e-commerce sales and wholesale distribution of our Judith Ripka brand in 2017 and 2018, respectively.

In 2019, we completed the transition of our non-interactive television operations of our Judith Ripka brand from a licensing model to a wholesale and direct-to-consumer model.

We opened a brick-and-mortar retail store for the Judith Ripka brand in 2021, which we subsequently closed in 2022.

As a result, we do not have a well-established history of conducting these operations.

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If we are not successful in managing our inventory balances, our cash flows and operating results may be adversely affected.

There is a trend among major retailers to concentrate purchasing among a narrowing group of vendors.

If we are unable to identify and successfully acquire additional trademarks, our growth may be limited and, even if additional trademarks are acquired, we may not realize anticipated benefits due to integration or licensing difficulties.

While we are focused on growing our existing brands, we intend to selectively seek to acquire additional intellectual property.

However, as our competitors continue to pursue a brand management model, acquisitions may become more

expensive and suitable acquisition candidates could become more difficult to find.

In addition, even if we successfully acquire additional intellectual property or the rights to use additional intellectual property, we may not be able to achieve or maintain profitability levels that justify our investment in, or realize planned benefits with respect to, those additional brands.

Although we will seek to temper our acquisition risks by following acquisition guidelines relating to purchase price and valuation, projected returns, existing strength of the brand, its diversification benefits to us, its potential licensing scale and creditworthiness of licensee base, acquisitions, whether they be of additional intellectual property assets or of the companies that own them, entail numerous risks, any of which could detrimentally affect our reputation, our results of operations, and/or the value of our common stock.

These risks include, among others:

● unanticipated costs associated with the target acquisition or its integration with our company;

● our ability to identify or consummate additional quality business opportunities, including potential licenses and new product lines and markets;

● negative effects on reported results of operations from acquisition related charges and costs, and amortization of acquired intangibles;

● diversion of management’s attention from other business concerns;

● the challenges of maintaining focus on, and continuing to execute, core strategies and business plans as our brand and license portfolio grows and becomes more diversified;

● adverse effects on existing licensing and other relationships;

● potential difficulties associated with the retention of key employees, and difficulties, delays and unanticipated costs associated with the assimilation of personnel, operations, systems and cultures, which may be retained by us in connection with or as a result of our acquisitions;

● risks of entering new domestic and international markets (whether it be with respect to new licensed product categories or new licensed product distribution channels) or markets in which we have limited prior experience;

● increased concentration in our revenues with one or more customers in the event that the brand has distribution channels in which we currently distribute products under one or more of our brands.

When we acquire intellectual property assets or the companies that own them, our due diligence reviews are subject to inherent uncertainties and may not reveal all potential risks.

We may therefore fail to discover or inaccurately assess undisclosed or contingent liabilities, including liabilities for which we may have responsibility as a successor to the seller or the target company.

As a successor, we may be responsible for any past or continuing violations of law by the seller or the target company.

Although we will generally attempt to seek contractual protections through representations, warranties and indemnities, we cannot be sure that we will obtain such provisions in our acquisitions or that such provisions will fully protect us from all unknown, contingent or other liabilities or costs.

Finally, claims against us relating to any acquisition may necessitate our seeking claims against the seller for which the seller may not, or may not be able to, indemnify us or that may exceed the scope, duration or amount of the seller’s indemnification obligations.

Acquiring additional intellectual property could also have a significant effect on our financial position and could cause substantial fluctuations in our quarterly and yearly operating results.

Acquisitions could result in the recording of significant goodwill and intangible assets on our financial statements, the amortization or impairment of which would reduce our reported earnings in subsequent years.

No assurance can be given with respect to the timing, likelihood or financial or business effect of any possible transaction.

Moreover, our ability to grow through the acquisition of additional intellectual property will also depend on the availability of capital to complete the necessary acquisition arrangements.

the event that we are unable to obtain debt financing on acceptable terms for a particular acquisition, we may elect to pursue the acquisition through the issuance by us of shares of our common stock (and, in certain cases, convertible securities) as equity consideration, which could dilute our common stock and reduce our earnings per share, and any such dilution could reduce the market price of our common stock unless and until we were able to achieve revenue growth or cost savings and other business economies sufficient to offset the effect of such an issuance.

Acquisitions of additional brands may also involve challenges related to integration into our existing operations, merging diverse cultures, and retaining key employees.

Any failure to integrate additional brands successfully in the future may adversely impact our reputation and business.

As a result, there is no guarantee that our stockholders will achieve greater returns as a result of any future acquisitions we complete.

Intense competition in the apparel, fashion, and jewelry industries could reduce our sales and profitability.

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If these risks limit or prevent us from manufacturing products in any significant international market, prevent us from acquiring products from foreign suppliers, or significantly increase the cost of our products, our operations could be seriously disrupted until alternative suppliers are found or alternative markets are developed, which could negatively impact our business.

A pandemic outbreak of disease or similar public health threat, or fear of such an event, could have a material adverse impact on the Company's business, operating results and financial condition .

A pandemic or outbreak of disease or similar public health threat, such as the COVID-19 pandemic, or fear of such an event, could have a material adverse impact on our business, operating results, and financial condition.

The current COVID-19 pandemic has caused a disruption to our business, beginning in March 2020.

The impacts of the current COVID-19 pandemic are broad reaching and are having an impact on our licensing and wholesale businesses.

The COVID-19 pandemic is impacting our supply chain as most of our products are manufactured in China, Thailand, and other places around the world affected by this event.

Temporary factory closures and the pace of workers returning to work have impacted our 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.

In addition, COVID-19 has resulted in a sudden and continuing decrease in sales for many of our products, resulting in order cancellations.

Further, the pandemic has affected the financial health of certain of our customers, and the bankruptcy of certain other customers, including Lord & Taylor and Le Tote, Stein Mart, and Century 21, from which we had an aggregate of $1.21 million of accounts receivable due at December 31, 2020.

As a result, we have recognized an allowance for doubtful accounts of $0.97 million for the year ended December 31, 2020, and may be required to make additional adjustments for doubtful accounts which would increase our operating expenses in future periods and negatively impact our operating results, and could result in our failure to meet financial covenants under our credit facility.

Financial impacts associated with the COVID-19 pandemic include, but are not limited to, lower net sales, adjustments to allowances

for doubtful accounts due to customer bankruptcy or other inability to pay their amounts due to vendors, the delay of inventory production and fulfillment, potentially further impacting net sales, and potential incremental costs associated with mitigating the effects of the pandemic, including increased freight and logistics costs and other expenses.

We expect that the impact the COVID-19 pandemic may have on our operating results could result in our inability to comply with certain debt covenants and require BHI to waive compliance with, or agree to amend, any such covenant to avoid a default.

The COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the pandemic, and actions that would be taken by governmental authorities to contain the pandemic or to treat its impact, makes it difficult to forecast any effects on our 2021 results.

However, as of the date of this filing, we expect our results for 2021 to be negatively affected.

We may not be entitled to forgiveness of our recently received Paycheck Protection Program loan, and our application for the Paycheck Protection Program loan could in the future be determined to have been impermissible or could result in damage to our reputation.

We received an unsecured loan in the amount of $1,805,856 (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The PPP Loan has a two-year term and bears interest at a rate of 1.0% per annum.

Monthly principal and interest payments are deferred for six months after the date of disbursement.

The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.

The Promissory Note contains events of default and other provisions customary for a loan of this type.

The Paycheck Protection Program provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act.

Such forgiveness will be 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.

However, no assurance is provided that forgiveness for any portion of the PPP Loan will be obtained.

In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations.

We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the PPP of the CARES Act.

The certification described above did not contain any objective criteria and is subject to interpretation.

However, on April 23, 2020, the U.S.

Small Business Administration (“SBA”) issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.

The lack of clarity regarding loan eligibility under the PPP has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans.

If, despite our good-faith belief that we satisfied all eligible requirements for the PPP Loan, we or any company that we may acquire in the future which received a loan under the PPP, are later determined to have violated any of the laws or governmental regulations that apply to us or such acquiree in connection with the PPP Loan or another loan under the PPP, respectively, such as the False Claims Act, or it is otherwise determined that we or such acquiree were ineligible to receive the PPP Loan or such other loan under the PPP, respectively, we or such acquiree may be subject to penalties, including significant civil, criminal and administrative penalties, and could be required to repay the PPP Loan or such other loan under the PPP, respectively, in its entirety.

In addition, our receipt of the PPP Loan or any company that we may acquire in the future which received a loan under the PPP may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources.

Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs and cause our operating results and financial condition to suffer.

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The price and availability of the raw materials and, in turn, the fabrics, precious and semi-precious metals and gem stones used in our apparel and jewelry may fluctuate significantly, depending on many factors, including crop yields, weather patterns, labor costs and changes in oil prices.

We may not be able to create suitable design

solutions that utilize raw materials with attractive prices or, alternatively, to pass higher raw materials prices and related transportation costs on to our customers.

We may not be able to create suitable design solutions that utilize raw materials with attractive prices or, alternatively, to pass higher raw materials prices and related transportation costs on to our customers.

We are not always successful in our efforts to protect our business from the volatility of the market price of raw materials, and our business can be materially affected by dramatic movements in prices of raw materials.

The ultimate effect of this change on our earnings cannot be quantified, as the effect of movements in raw materials prices on industry selling prices are uncertain, but any significant increase in these prices could have a material adverse effect on our business, financial condition and operating results.

In addition, the global shipping industry is currently experiencing challenges related to port delays and tight availability for carriers and containers.

This situation has negatively impacted our supply chain partners, including third party manufacturers, logistics providers, and other vendors, as well as the supply chains of our licensees, and has resulted in increased cost of supply and freight costs.

Such higher costs for us and our licensees are currently expected to continue for at least some portion of 2022.

Our reliance on independent manufacturers could cause delays or quality issues which could damage customer relationships.

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As a result, any single manufacturing contractor could unilaterally terminate its relationship with us at any time.

Supply disruptions from these manufacturers (or any of our other manufacturers) could have a material adverse effect on our ability to meet customer demands, if we are unable to source suitable replacement materials at acceptable prices or at all.

Supply disruptions from these manufacturers

(or any of our other manufacturers) could have a material adverse effect on our ability to meet customer demands, if we are unable to source suitable replacement materials at acceptable prices or at all.

Moreover, alternative manufacturers, if available, may not be able to provide us with products or services of a comparable quality, at an acceptable price or on a timely basis.

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Accordingly, we cannot predict how such expectations might develop in the future and cannot be certain that our guidelines would satisfy all parties who are active in monitoring and publicizing perceived shortcomings in labor and other business practices worldwide.

While we are focused on growing our existing brands, we intend to selectively seek to acquire additional intellectual property.

However, as our competitors continue to pursue a brand management model, acquisitions may become more expensive and suitable acquisition candidates could become more difficult to find.