What changed in this filing

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Item 1A. Risk Factors

2025-05-28 compared with 2024-04-19 · 130 added, 103 removed, 395 unchanged (37% of the section changed)

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

● our limited amount of cash;

● our debt obligations and our limited amount of cash;

● material weaknesses in our internal controls over financial reporting;

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

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● conducting operations through joint ventures and our dependence on the joint ventures;

● our dependency upon our spokespersons;

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

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

● supply chain disruptions;

● the Ukrainian-Russian conflict;

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

● inflation and/or a potential recession;

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

● extreme or unseasonable weather conditions;

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We have a limited amount of cash to grow our operations.

If we cannot obtain additional sources of cash, our growth prospects and future profitability may be materially adversely affected, and we may not be able to implement our business plan.

If we cannot obtain additional sources of cash, our growth prospects and future profitability will likely be materially adversely affected, and we may not be able to implement our business plan.

Such additional financing may not be available on satisfactory terms or it may not be available when needed, or at all.

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On March 19, 2024, we closed on a public offering and private placement of our common stock, which resulted in aggregate net proceeds to us of approximately $2.0 million.

Although we believe that our current levels of cash and our anticipated cash flow from operations will be sufficient to sustain our operations at our current expense levels for at least twelve 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 and develop additional brands.

In December 2024, we refinanced our debt by entering into a new loan agreement for an aggregate amount of $10.0 million of term loans, resulting in the net receipt of $2.8 million of cash after repayment of expenses and repayment

of our prior loan agreement.

In April 2025, we refinanced our debt with a new lender, resulting in the net receipt of approximately $3.0 million of cash after repayment of principal and payment of fees and expenses.

We may require significant additional cash to satisfy our working capital requirements, expand our operations, or acquire and develop additional brands.

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.

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In addition, the new securities may have rights senior to those of our common stock.

Our financial statements have been prepared assuming that we will continue as a going concern.

We incurred net losses of approximately $22.6 million and $22.2 million during the years ended December 31, 2024 and 2023, respectively (which included non-cash expenses of approximately $20.3 million and $9.0 million, respectively), and had an accumulated deficit of approximately $76.2 million and $53.8 million as of December 31, 2024 and 2023, respectively.

Net cash used in operating activities was $4.7 million in 2024 and $6.5 million in 2023.

Our audited financial statements for the fiscal year ended December 31, 2024 were prepared under the assumption that we will continue as a going concern;

however, we have incurred significant losses over the past several years and have used a significant amount of cash in operating activities.

These factors raise significant uncertainties regarding our ability to meet our financial obligations and financing requirements.

As such, there is substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent on executing our business plans and meeting our obligations as they come due within the next twelve months from the filing date of this Annual Report on Form 10-K.

Accordingly, the accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and calculations of liabilities that might be necessary should be Company be unable to continue as a going concern.

Our auditor also included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2024 with respect to this uncertainty.

Our auditor determined our ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding our available capital and the risk of bias in management’s judgments and assumptions in their determination.

Although we intend to continue exploring strategic financing alternatives and operational efficiencies to improve liquidity, there can be no assurance that funding will be available on acceptable terms on a timely basis, or at all, or otherwise improve our liquidity.

The various ways that we could raise capital carry potential risks.

Any additional sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders.

Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business.

As such, we cannot conclude that such plans will be effectively implemented within one year after the date that the financial statements included in this Annual Report are filed with the SEC and there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern.

Our 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 21, 2025, we entered into an amendment our lenders and FEAC Agent, LLC, pursuant to which the December 12, 2024 loan and security agreement was amended to provide for $1.5 million repayment of the $3.95 million Term Loan A made on December 12, 2024 and an additional Term Loan B in the amount of $5.12 million on April 21, 2025.

The loans outstanding after giving effect to this amendment and the application of the proceeds of the additional Term Loan B are as follows:

(1) Term Loan A in the amount of $2.45 million, (2) Term Loan B in the amount of $9.12 million, and (3) Delayed Draw Term Loan in the amount of $2.05 million.

These term loans are guaranteed by certain direct and indirect subsidiaries of the Company, and are secured by all of the assets of the Company and such subsidiaries.

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

As of the date of this Annual Report on Form 10-K, the Company is in compliance with all applicable covenants.

Within 30 days after April 21, 2025, the outstanding principal amount of the Term Loan A shall be repaid, on a pro rata basis in an aggregate amount equal to $500,000.

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

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

Our debt obligations:

● could impair our liquidity;

● could make it more difficult for us to satisfy our other obligations;

● require us to dedicate a substantial portion of our cash flow to payments on our debt obligations, which reduces the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements;

● could impede us from obtaining additional financing in the future;

● impose restrictions on us with respect to the use of our available cash, including in connection with future transactions;

● could limit our ability to execute on any potential acquisitions in the future;

● make us more vulnerable in the event of a downturn in our business prospects and could limit our flexibility to plan for, or react to, changes in our sales and licensing channels.

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.

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.

Failure to maintain our listing on Nasdaq would result in a default under our term loan debt agreements, as amended.

A debt default could significantly diminish the market value and marketability of our common stock and could result in the acceleration of the payment obligations under all or a portion of our indebtedness, or a renegotiation of our loan agreement with more onerous terms and/or additional equity dilution.

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

We have identified material weaknesses in our internal controls over financial reporting.

We are ultimately responsible for establishing and maintaining adequate internal controls over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.

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

We have identified material weaknesses in our internal controls over financial reporting as of December 31, 2024 (see “Controls and Procedures” in Item 9A for further information).

We are actively developing and plan to implement a remediation plan designed to address these material weaknesses.

However, we cannot guarantee these steps will be sufficient to address the material weaknesses.

If this remediation proves ineffective, if we fail to develop and maintain proper and effective internal controls over financial reporting, or if additional material weaknesses in our disclosure controls and internal control over financial reporting are discovered or occur in the future, our ability to produce timely and accurate financial statements, comply with applicable laws and regulations, or access the capital markets could be impaired and we could be required to restate our financial results.

If we identify any new material weaknesses in the future, or if our remediation measures are not effective, any such newly identified or existing material weakness could limit our ability to prevent or detect a misstatement of our accounts or

disclosures that could result in a material misstatement of our annual or interim financial statements.

In such case, we may be unable to maintain compliance with securities law requirements regarding the timely filing of periodic reports, in addition to applicable stock exchange listing requirements.

Investors may lose confidence in our financial reporting, and our stock price may decline as a result.

We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses

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

During the years ended December 31, 2023 and 2022, Qurate accounted for approximately 34% and 44%, 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.

Our cash flow would also be significantly impacted if there were significant delays in our collection of receivables from Qurate.

A substantial portion of our revenue is generated from Qurate, through the respective agreements with Qurate through QVC and HSN, and from G-III Apparel Group, through our master license agreement relating to the Halston Brand.

During the years ended December 31, 2024 and 2023, Qurate accounted for approximately 44% and 34%, respectively, of our total net revenue, while the Halston Master License represented approximately 31% and 9% of our total net revenue, respectively.

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

Our cash flow would also be significantly impacted if there were significant delays in our collection of receivables from these licensees.

Additionally, we have limited control over the programming that Qurate devotes to our brands or its promotional sales with our brands (such as “Today’s Special Value” sales).

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There could also be disagreements with our joint venture partners that could adversely affect our interest a joint venture.

We hold a 30% interest in each of IM Topco, LLC and ORME.

We currently hold a 17.5% interest in IM Topco, LLC and a 19% interest in ORME.

We may enter into additional joint ventures in the future.

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While we provide certain services to IM Topco, LLC and may provide services to future joint ventures, we do not control the day-to-day operations of IM Topco, LLC or ORME, and may not control the day-to-day operations of future joint ventures.

The anticipated synergies or other benefits of a joint venture may fail to materialize due to changing business conditions or changes in our business priorities or those of our joint venture partners.

The anticipated synergies or other benefits

of a joint venture may fail to materialize due to changing business conditions or changes in our business priorities or those of our joint venture partners.

Our joint venture partners, as well as any future partners, may have interests that are different from our interests that may result in conflicting views as to the conduct of the business or future direction of the joint venture.

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We rely on this information to prepare our consolidated financial statements.

Any delay in reporting reduces our visibility into the results of operations for IM Topco, LLC and any future joint ventures, and our inability to collect timely and accurate information may affect our ability to timely complete our financial statements and timely file reports and other information with the SEC and may adversely affect our business and results of operations.

We are dependent upon the promotional services of Lori Goldstein and our other spokespersons as they relate to our respective 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.

Goldstein, there is no guarantee that we will not lose her services.

To the extent that any of Ms.

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

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 by Lori Goldstein brand as well as we are able to with Ms.

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.

Goldstein’s participation in these personal business ventures could limit her availability to us and affect her ability to perform under this employment agreement.

Finally, there is no guarantee that Ms.

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 will also be dependent upon the services of our other spokespersons and our joint venture partner’s spokesperson to promote our other brands and the brands of our joint venture.

The loss of a spokesperson or a joint ventures’ spokesperson could significantly affect the value of the related brand or our related joint venture interest and our or our related joint venture’s ability to market the brand which would harm our business and prospects.

The company has withheld and rescheduled payment of the $963,642 earnout payment for 2023 due to a spokesperson due to alleged uncured breaches of the spokesperson’s obligations under an employment agreement.

On February 16, 2024, counsel to Lori Goldstein, a brand spokesperson for the company, advised the company that the Company was in material breach of the March 31, 2021 asset purchase agreement for failure to pay the earn-out achieved for 2023 in the amount of $963,642 (the “2023 Earn-out”) under the terms of the agreement, and is instead intending on paying such amount quarterly in 2024.

The Company does not dispute the amount of the 2023 Earn-out and advised Ms.

Goldstein that due to Ms.

Goldstein’s failure to make all of the QVC appearances as required by her employment agreement, the Company was not willing to pay the 2023 Earn-out in a lump sum but would make the payment in four quarterly installments.

Failure to amicably resolve this dispute could adversely affect the Company’s cash flow and the availability of Ms.

Goldstein’s services.

To the extent that any of Ms.

Goldstein’s services become unavailable to us, we will likely need to utilize our existing back-up guest hosts in lieu of Ms.

Goldstein and/or find a replacement for Ms.

Goldstein to promote the LOGO by Lori Goldstein brand.

Goldstein’s services are not available to us, that we would be able to promote

the LOGO by Lori Goldstein brand on QVC and otherwise.

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 for the Lori Goldstein brands, which would harm our business and prospects and adversely impact our results of operations, financial conditions, and cash flows.

Any delay in reporting reduces our visibility into the results of operations for our current and any future joint ventures, and our inability to collect timely and accurate information may affect our ability to timely complete our financial statements and timely file reports and other information with the SEC and may adversely affect our business and results of operations.

In connection with our fiscal year ended December 31, 2023, we were not able to complete the audit of IM Topco in a timely manner, which resulted in our late filing of our Annual Report on Form 10-K for the year ended December 31, 2023 and our late filing of such year’s audit of IM Topco.

IM Topco information was not timely received for the fiscal year ended December 31, 2024, which contributed to our late filing of our Annual Report on Form 10-K for the year ended December 31, 2024.

Effective the second quarter of 2025, our equity interest in IM Topco has decreased to the extent that our investment in IM Topco will no longer be accounted for under the equity method of accounting.

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.

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Our retail 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.

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Continued market acceptance of our brands, our joint ventures’ brands, and our licensees’ products, as well as market acceptance of any future products bearing any future brands we may acquire, is subject to a high degree of uncertainty and constantly changing consumer tastes, preferences, and purchasing patterns.

funds to keep pace with changing consumer demands, which funds may or may not be available on a timely basis, on acceptable terms or at all.

Creating and maintaining market acceptance of our licensees’ products and creating market acceptance of new products and categories of products bearing our marks may require substantial marketing efforts, which may, from time to time, also include our expenditure of significant additional funds to keep pace with changing consumer demands, which funds may or may not be available on a timely basis, on acceptable terms or at all.

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.

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

Negative claims or publicity regarding Xcel, IM Topco, LLC, any future joint ventures, our or their brands, or products could adversely affect our reputation and sales regardless of whether such claims are accurate.

Negative claims or publicity regarding Xcel, IM Topco, LLC, our brand co-developers, any future joint ventures, our or their brands, or products could adversely affect our reputation and sales regardless of whether such claims are accurate.

Social media, which accelerates the dissemination of information, can increase the challenges of responding to negative claims.

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We expect to achieve growth in our existing brands and brands we may develop independently or through collaborations or acquire through expansion of our licensing activities and social media e-commerce platforms, including ORME.

We continue to seek new opportunities and international expansion through interactive television and licensing arrangements, as well as joint ventures and collaborations.

The success of our company, however, will 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.

We continue to seek new opportunities and international expansion through interactive television and licensing arrangements,

as well as joint ventures and collaborations.

The success of our company, however, will remain largely dependent on our ability to build and maintain broad market acceptance of our brands, co-developed brands, and joint venture brands to contract with and retain key licensees and on our licensees’ and join venture partners’ 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 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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● currency exchange rates;

● imposition of increased duties, taxes and other charges on imports;

● imposition of increased duties, tariffs, taxes, and other charges on imports;

● pandemics and disease outbreaks such as COVID-19;

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We rely primarily upon a combination of trademarks, copyrights, and contractual restrictions to protect and enforce our intellectual property rights domestically and internationally.

infringement of our intellectual property rights by others, or prevent the loss of licensing revenue or other damages caused therefrom.

We believe that such measures afford only limited protection and, accordingly, there can be no assurance that the actions taken by us to establish, protect, and enforce our trademarks and other proprietary rights will prevent infringement of our intellectual property rights by others, or prevent the loss of licensing revenue or other damages caused therefrom.

For instance, despite our efforts to protect and enforce our intellectual property rights, unauthorized parties may attempt to copy aspects of our intellectual property, which could harm the reputation of our brands, decrease their value, and/or cause a decline in our licensees’ sales and thus our revenues.

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The proxy holder shall vote in favor of matters recommended or approved by the board of directors.

The combined voting power of the common stock ownership of our directors and executive officers is approximately 45% of our voting securities as of March 31, 2024.

The combined voting power of the common stock ownership of our directors and executive officers was approximately 40% of our voting securities as of April 5, 2025.

As a result, our management through such stock ownership will exercise significant influence over all matters requiring shareholder approval, including the election of our directors and approval of significant corporate transactions.

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Therefore, the Company did not meet the minimum bid price requirement set forth in the Nasdaq listing rules.

The letter also states that pursuant to Nasdaq Listing Rules 5810(c)(3)(A), we will be provided 180 calendar days to regain compliance with the minimum bid price requirement, or until October 14, 2024.

We can regain compliance if, at any time during the Tolling Period or such 180-day period, the closing bid price of our common stock is at least $1.00 for a minimum period of 10 consecutive business days.

If by October 14, 2024, we do not regain compliance with the Nasdaq Listing Rules, we may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii).

We would also need to provide written notice to Nasdaq of our intention to cure the minimum bid price deficiency during the second compliance period by effecting a reverse stock split, if necessary.

As part of its review process, the Nasdaq staff will make a determination of whether it believes we will be able to cure this deficiency.

Should the Nasdaq staff conclude that we will not be able to cure the deficiency, or should we determine not to submit a transfer application or make the required representation, Nasdaq will provide notice that our shares of common stock will be subject to delisting.

If we do not regain compliance within the allotted compliance period, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our shares of common stock will be subject to delisting from the Nasdaq Capital Market.

At such time, we may appeal the delisting determination to a hearings panel.

We intend to monitor our common stock closing bid price between now and October 14, 2024 and will consider available options to resolve the Company’s noncompliance with the minimum bid price requirement, as may be necessary.

There can be no assurance that the Company will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.

On October 15, 2024, Nasdaq notified us that we would be provided an additional 180 days, or until April 14, 2025, to regain compliance with the minimum bid price requirement.

In order to assist in bringing us in compliance with the minimum bid price requirement, we effected a one-for-ten (1:10) reverse stock split of our outstanding shares of common stock effective March 24, 2025.

On April 8, 2025, we received a letter from the Listing Qualifications Department of Nasdaq confirming that we had regained compliance with the applicable listing rules, and this matter was closed.

As of May 2, 2025, the closing price of our common stock was $2.79.

However, there can be no assurance that the minimum bid price for our common stock will continue to stay above $1.00 per share in the future.

If our shares of common stock were to lose their status on Nasdaq, we believe that they would likely be eligible to be quoted on the inter-dealer electronic quotation and trading system operated by OTC Markets Group Inc., commonly referred to as the Pink Open Market and we may also qualify to be traded on their OTCQB market (The Venture Market).

These markets are generally not considered to be as efficient as, and not as broad as, Nasdaq.

Selling our shares on these markets could be more difficult because smaller quantities of shares would likely be bought and sold, and transactions could be delayed.

In addition, in the event our shares are delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our common stock or even holding our common stock, further limiting the liquidity of our common stock.

These factors could result in lower prices and larger spreads in the bid and ask prices for our common stock.

Our common stock may be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks.

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Although our common stock is quoted on the NASDAQ Capital Market, this does not assure that a meaningful, consistent trading market will develop or that the volatility will decline.

This market volatility could reduce the market price of the common stock, regardless of our operating performance.

This market volatility could reduce the market price of the common stock, regardless of our

operating performance.

In addition, the trading price of the common stock has been volatile over the past several years and could change significantly over short periods of time in response to actual or anticipated variations in our quarterly operating results, announcements by us, our licensees or our respective competitors, factors affecting our licensees’ markets generally and/or changes in national or regional economic conditions, making it more difficult for shares of the common stock to be sold at a favorable price or at all.

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General Risks

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

The impacts of the ongoing COVID-19 pandemic (including actions taken by national, state, and local governments in response to COVID-19) negatively impacted the U.S.

The impacts of the COVID-19 pandemic (including actions taken by national, state, and local governments in response to COVID-19) negatively impacted the U.S.

and global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets.

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The global pandemic affected the financial health of certain of our customers, and the bankruptcy of certain other customers;

as a result, we 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.

Supply chain disruptions have adversely affected, and could continue to adversely affect, our licensees’ ability to import our products in a timely manner.

The effects of the COVID-19 pandemic on the shipping industry negatively impacted our and our licensees’ ability to import our branded products in a manner that allows for timely delivery to customers.

as a result, we may be required to make additional adjustments to our allowances for credit losses in future periods, which would increase our operating expenses and negatively impact our operating results.

In addition, the effects of the COVID-19 pandemic on the shipping industry negatively impacted our licensees’ ability to import products in a manner that allowed for timely delivery to customers.

Congestion at ports of loading and ports of entry caused significant delays in deliveries and changes to the itineraries of steamship carriers.

Use of alternate routes or delivery methods would require additional trucking for our licensees and their customers.

Truck driver shortages, shortages of truck equipment and the inability of ports to provide reliable pick up times, also negatively impacted our and our licensees’ ability to timely receive goods in the past.

If our licensees are unable to mitigate supply chain disruptions, their ability to meet customer expectations, manage inventory and complete sales could be materially adversely affected.

Contractual shipping rates have increased as a result of increased demand for container space and the logistical delays experienced by the shipping industry.

Costs have increased as a result of higher contractual shipping rates and the need to purchase additional container space on the secondary market at higher spot rates.

Terminals are also now imposing additional fees on importers not picking up containers on time, even when equipment and labor shortages negatively affect the ability of importers to pick up in a timely manner.

If our licensees are unable to secure container space on a vessel for our branded product due to limited availability, they may experience delays in shipping product from overseas suppliers and ultimately to their customers.

Furthermore, even if they are able to secure space, ports around the world are experiencing congestion from time to time, slowing transit times of product through ports of entry which negatively affects their ability to timely receive and deliver product to their retail partners and customers.

If our licensees are unable to mitigate these supply chain disruptions, their ability to meet customer expectations, manage inventory and complete sales could be materially adversely affected, which could adversely affect our results of operations.

The Ukrainian-Russian conflict could have a material adverse impact on our business.

The Ukrainian-Russian conflict, the responses thereto, such as sanctions imposed by the United States and other western democracies, and any expansion thereof is likely to have unpredictable and wide-ranging effects on the domestic and global economy and financial markets, which could have an adverse effect on our business and results of operations.

Already the conflict has caused market volatility, a sharp increase in certain commodity prices, such as wheat and oil, and an increasing number and frequency of cybersecurity threats.

So far, we have not experienced any direct impact from the conflict and, as our business is conducted exclusively in the United States, we are probably less vulnerable than companies with international operations.

Nevertheless, we will continue to monitor the situation carefully and, if necessary, take action to protect our business, operations, and financial condition.

If our licensees are unable to mitigate any potential future supply chain disruptions, their ability to meet customer expectations, manage inventory and complete sales could be materially adversely affected, which could adversely affect our results of operations.

A decline in general economic conditions resulting in a decrease in consumer spending levels and an inability to access capital may adversely affect our business.

The success of our operations depends on consumer spending.

Consumer spending is impacted by a number of factors which are beyond our control, including actual and perceived economic conditions affecting disposable consumer income (such as unemployment, wages, energy costs and consumer debt levels), customer traffic within shopping and selling environments, business conditions, interest rates and availability of credit and tax rates in the general economy and in the international, regional and local markets in which our products are sold and the impact of natural disasters and pandemics and disease outbreaks such as the COVID-19 pandemic.

Global economic conditions historically included significant recessionary pressures and declines in employment levels, disposable income and actual and/or perceived wealth and further declines in consumer confidence and economic growth.

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or the global economy is likely to have a material adverse effect on our results of operations, financial condition, and business prospects.

Inflation and/or a potential recession could adversely impact our business and results of operations.

Many of the components of our cost of goods sold are subject to price increases that are attributable to factors beyond our control, including but not limited to, global economic conditions, trade barriers or restrictions, supply chain disruptions, changes in crop size, product scarcity, demand dynamics, currency rates, water supply, weather conditions, import and export requirements, and other factors.

The cost of raw materials, labor, manufacturing, energy, fuel, shipping and logistics, and other inputs related to the production and distribution of our products have increased and may continue to increase unexpectedly.

In addition, poor economic and market conditions, including a potential recession, may negatively impact market sentiment, decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer products, which would adversely affect our operating income and results of operations.

Macroeconomic conditions and international trade conditions could adversely impact our business and results of operations.

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

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

Our business is also subject to risks associated with U.S.

and foreign legislation, regulations and trade agreements (including those resulting from the transition to new political administrations) relating to the products and materials our licensees import, including quotas, duties, tariffs or taxes, and other charges or restrictions on imports on our branded and co-branded products.

For example, the United States has recently enacted and proposed to enact significant new tariffs, including a 25% tariff on imports from Mexico and Canada into the United States.

While these tariffs are currently suspended while negotiations take place for a long-term agreement, there continues to exist significant uncertainty about the future relationship between the U.S.

and other countries (including China) with respect to trade policies, treaties and tariffs.

These developments, or the perception that they could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted countries.

We cannot predict whether additional U.S.

and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs and any retaliatory counter measures, taxes or other charges or restrictions, requirements as to where raw materials and component parts must be purchased, additional workplace regulations or other restrictions on our imports will be imposed in the future or adversely modified, or what effect such actions would have on our revenues and costs of operations.

Recently imposed or future quotas, duties or tariffs and any retaliatory counter measures may have a material adverse effect on the cost of our products and the related components and raw materials and our ability to sell products and services outside the United States.

Future trade agreements or modifications to existing trade agreements could also provide our competitors with an advantage over us, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The ultimate impact of any tariffs and any retaliatory counter measures will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, and the amount, scope and nature of the tariffs.

Changes in U.S.

and foreign government administrative policy, including the imposition of or increases in tariffs and changes to existing trade agreements could have a material adverse effect on us.

As a result of changes to U.S.

and foreign government administrative policy, there may be changes to existing trade agreements, greater restrictions on free trade generally, the imposition of or significant increases in tariffs on goods imported into the U.S., including tariffs on products manufactured in China, Canada, or Mexico, and adverse responses by foreign governments to U.S.

trade policies, among other possible changes.

administration has announced it intends to implement or increase tariffs, and it remains unclear what the U.S.

administration or foreign governments will or will not do with respect to tariffs or trade agreements and policies.

A trade war, other governmental action related to tariffs or trade agreements, changes in U.S.

social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where the products of our licensees are manufactured may have a negative impact on the wholesale sales of our licensees and retail sales of our retail partners, and any resulting negative sentiments towards the U.S.

as a result of such changes, could have a material adverse effect on license revenues, our business, financial condition, results of operations, and cash flows.

Extreme or unseasonable weather conditions could adversely affect our business.

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Moreover, we could incur significant expenses or disruptions of our operations in connection with system failures or breaches.

In addition, sophisticated hardware and operating system software and applications that we procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of our systems.

sophisticated hardware and operating system software and applications that we procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of our systems.

The costs to us to eliminate or alleviate security problems, viruses, and bugs, or any problems associated with our newly transitioned systems or outsourced services could be significant, and the efforts to address these problems could result in interruptions, delays or cessation of service that may impede our sales, distribution or other critical functions.

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We could also incur significant costs in complying with the multitude of state, federal, and foreign laws regarding the use and unauthorized disclosure of personal information, to the extent they are applicable.

In the case of a disaster affecting our information technology systems, we may experience

delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support our operations, and other breakdowns in normal communication and operating procedures that could materially and adversely affect our financial condition and results of operations.

In the case of a disaster affecting our information technology systems, we may experience delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support our operations, and other breakdowns in normal communication and operating procedures that could materially and adversely affect our financial condition and results of operations.

We rely significantly on information technology systems and any failure, inadequacy, interruption, or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively and have a material adverse effect on our business, reputation, financial condition, and results of operations.

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If such a significant event were to occur, it could result in a material disruption of our business and commercial operations, including due to a loss, corruption, or unauthorized disclosure of our trade secrets, personal data, or other proprietary or sensitive information.

Further, these cybersecurity incidents can lead to the public disclosure of personal information (including sensitive personal information) of our employees, customers, and others and result in demands for ransom or other forms of blackmail.

other forms of blackmail.

Such attacks, including phishing attacks and attempts to misappropriate or compromise confidential or proprietary information or sabotage enterprise information technology systems, are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including industrial espionage) and expertise, including by organized criminal groups, “hacktivists,” nation states, and others.

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Such a security compromise could harm our reputation, erode confidence in our information security measures, and lead to regulatory scrutiny.

loss, enforcement measures, penalties, fines, indemnification claims, litigation and potential civil or criminal liability, which could materially adversely affect our business, financial condition and results of operations.

To the extent that any disruption or security breach resulted in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential, proprietary, or personal information, we could be exposed to a risk of loss, enforcement measures, penalties, fines, indemnification claims, litigation and potential civil or criminal liability, which could materially adversely affect our business, financial condition and results of operations.

Not all our contracts contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

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We have dedicated a significant amount of time and resources to comply with this legislation for the years ended December 31, 2024 and 2023, and will continue to do so for future fiscal periods.

However, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2023 due to the material weakness.

We cannot be certain that our internal controls will become effective or that future material changes to our internal control over financial reporting will be effective.

However, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2024 and 2023 due to material weaknesses.

We cannot be certain that our internal

controls will become effective or that future material changes to our internal control over financial reporting will be effective.

If we cannot adequately obtain and maintain the effectiveness of our internal control over financial reporting, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC.

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Moreover, if we discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price.

our independent registered public accounting firm may issue a report that is adverse or qualified in the event that they are not satisfied with the level at which our controls are documented, designed or operating.

Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until we are no longer a “smaller reporting company.” At such time that an attestation is required, our independent registered public accounting firm may issue a report that is adverse or qualified in the event that they are not satisfied with the level at which our controls are documented, designed or operating.

Our remediation efforts may not enable us to avoid a material weakness or significant deficiency in the future.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors