What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-06-04 · 166 added, 73 removed, 117 unchanged (67% of the section changed)

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Xcel was founded in 2011 with a vision to reimagine shopping, entertainment, and social media as social commerce.

Xcel owns the Halston, Judith Ripka, and C Wonder brands, as well as the co-branded collaboration brands TowerHill by Christie Brinkley, LB70 by Lloyd Boston, Trust.

by Cesar Millan, and GemmaMade by Gemma Stafford, and also holds noncontrolling interests or long-term license agreements in the Isaac Mizrahi, Orme Live, and Jenny Martinez Live brands.

Xcel also owns and manages the Longaberger brand through its controlling interest in Longaberger Licensing, LLC.

Xcel is pioneering a true modern consumer products sales strategy sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels to be everywhere its customers shop.

Our brands have generated over $5 billion in retail sales via live streaming in interactive television and digital channels alone and over 20,000 hours of content production time in live-stream and social commerce.

Our portfolio reaches in excess of 40 million social media followers and 200 million households.

Currently, our brand portfolio consists of the following:

● the Halston, Judith Ripka, and C Wonder brands, which are wholly owned by Xcel;

● the TowerHill by Christie Brinkley brand, which is a new co-branded collaboration between Xcel and Christie Brinkley that launched in May 2024;

● the LB70 by Lloyd Boston brand, which is a new co-branded collaboration between Xcel and Lloyd Boston that launched in August 2024;

● the Trust, Respect, Love by Cesar Millan brand, which is a new co-branded collaboration between Xcel and Cesar Millan that is planned to launch in Fall 2025;

● the Longaberger brand, which Xcel manages through its 50% ownership interest in Longaberger Licensing, LLC;

● the Isaac Mizrahi brand, in which Xcel holds a noncontrolling interest through IM Topco, LLC;

● a new brand which will be a co-branded collaboration between Xcel and Coco Rocha, that is planned to launch in Fall 2026;

● GemmaMade, which is a co-branded collaboration between Xcel and baking influencer Gemma Stafford which is planned to launch in Fall 2025;

● Mesa Mia, which is a brand owned by Mexican home influencer Jenny Martinez, and for which Xcel holds the television rights through a long-term license agreement and expects to launch in Fall 2025.

We also hold a 19% noncontrolling interest in ORME Live, Inc.

(“ORME”), a short-form video and social commerce marketplace that launched in April 2024.

Xcel is pioneering a true omni-channel and social commerce sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels.

Our brands have generated over $5 billion in retail sales via live streaming in interactive television and digital channels alone, and our brands collectively reach over 5.0 million social media followers

through Facebook, Instagram, and TikTok.

All of the followers may not be unique followers, as many followers may follow multiple brands and follow our brands on multiple platforms.

Xcel currently operates in a working-capital light model, with our licensees and/or retail partners responsible for the procurement and sale of inventory.

As such, our revenues primarily consist of royalty revenues, and we do not have risk of carrying aged inventory.

As a result, fluctuations in product costs and tariffs do not have a direct impact on us, but do impact us indirectly as our royalty revenues are typically based on the net sales and success of our licensees.

Our objective is to build a diversified portfolio of lifestyle consumer products brands through organic growth and the strategic acquisition of new brands.

To grow our brands, we are focused on the following primary strategies:

● distribution and/or licensing of our brands for sale through interactive television (e.g., QVC, HSN, America’s Collectible Network, Inc.

d/b/a JTV (“JTV”), etc.);

● licensing of our brands for sale through interactive television (e.g., QVC, HSN, JTV, etc.);

● licensing of our brands to retailers that sell to the end consumer;

● licensing our brands to manufacturers and retailers for promotion and distribution through e-commerce, social commerce, and traditional brick-and-mortar retail channels;

● licensing our brands to manufacturers and retailers for promotion and distribution through e-commerce, social commerce, live streaming, and traditional brick-and-mortar retail channels;

● acquiring additional consumer brands and integrating them into our operating platform, and leveraging our operating infrastructure and distribution relationships.

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Summary of Operating Results

Three months ended March 31, 2025 (the “current quarter”) compared with the three months ended March 31, 2024 (the “prior year quarter”)

Three months ended June 30, 2025 (the “current quarter”) compared with the three months ended June 30, 2024 (the “prior year quarter”)

Current quarter net revenue decreased $1.63 million to $1.32 million from $2.95 million for the prior year quarter.

This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand, partially offset by increased licensing revenues generated by our other brands, particularly for the C Wonder brand and the TowerHill by Christie Brinkley brand.

This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand.

Direct Operating Costs and Expenses

Direct operating costs and expenses decreased approximately $1.22 million, from $3.12 million in the prior year quarter to $1.90 million in the current quarter.

This decrease was primarily attributable to the 2023 restructuring and transformation of our business operating model, along with additional cost reduction actions taken by management in 2024, which have significantly reduced the Company’s payroll, operating, and overhead costs.

Management has continued to implement additional cost cutting measures throughout the first quarter of 2025 to further optimize the Company’s cost structure.

As of the end of the first quarter of 2025, the Company has reduced its direct operating expenses to an expected run rate of less than $10 million per annum.

This decrease was primarily attributable to the combination of (i) the 2023 restructuring and transformation of our business operating model, along with additional cost reduction actions taken by management in 2024, which significantly reduced the Company’s payroll, operating, and overhead costs, and (ii) the impact of the employee retention tax credit recognized in the current quarter.

Management has continued to implement additional cost cutting measures throughout 2025 to further optimize the Company’s cost structure.

Currently, the Company has reduced its direct operating expenses to an expected run rate of less than $10 million per annum.

Other Operating Costs and Expenses (Income)

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This decrease is primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand, which included trademarks related to that brand with a net book value of approximately $1.93 million at the time of the divestiture.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.58 million and $0.53 million for the current quarter and prior year quarter, respectively, due to the operations of those businesses, the distribution provisions applicable to each, and (in the current quarter) changes in estimated fair value.

However, effective January 2025, the Company no longer applies the equity method of accounting to its investment in ORME, and effective April 2025, the Company will no longer apply the equity method of accounting to its investment in IM Topco.

Going forward, the Company’s investments in these unconsolidated affiliates will be valued at adjusted cost basis, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer.

We also recognized other income of $(0.24) million related to the change in the estimated value of a contractual contingent obligation (related to our investment in IM Topco, LLC) during the current quarter.

During the prior year quarter we recognized asset impairment charges of $2.30 million related to our exit from and sublease of our offices at 1333 Broadway, of which approximately $1.9 million related to the operating lease right-of-use asset and approximately $0.4 million related to leasehold improvements at that location.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.18 million and $0.56 million for the current quarter and prior year quarter, respectively.

The decline in losses is primarily due to the fact that effective January 1, 2025 and April 15, 2025, the Company no longer applies the equity method of accounting to its investments in ORME and IM Topco, respectively.

During the prior year quarter we recognized asset impairment charges of $1.19 million related to our exit from and sublease of our office space at 1333 Broadway;

there were no similar asset impairment charges recognized during the current quarter.

The estimated annual effective income tax rate for the current quarter and the prior year quarter was approximately -1.8% and 0%, respectively, resulting in an income tax provision (benefit) of $0.05 million and $0, respectively.

For both the current quarter and the prior year quarter, the federal statutory rate differed from the effective tax rate due to the recording of a valuation allowance against the benefit that would have otherwise been recognized, as it was considered not more likely than not that the net operating losses generated during each period will be utilized in future periods.

Also during the prior year quarter, we recognized a $3.80 million gain on the divestiture of the Lori Goldstein Brand.

The consideration received from this transaction was non-cash in nature, and consisted of approximately $6.08 million of relief from certain accrued earn-out payments and the release of contingent obligations under contractual agreements with the buyer.

The net book value of the intangible assets sold was approximately $1.93 million, and we also incurred approximately $0.35 million of legal fees in connection with the sale.

Interest and Finance Expense

Interest and finance expense was approximately $2.34 million for the current quarter, compared with approximately $0.15 million for the prior year quarter.

This increase was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized during the current quarter as a result of the April 2025 refinancing of our term loan debt.

The estimated annual effective income tax rate was approximately 0% for both the current quarter and the prior year quarter, resulting in an income tax provision (benefit) of $0 for both periods.

The federal statutory rate differed from the effective tax rate due to the recording of a valuation allowance against the benefit that would have otherwise been recognized, as it was considered not more likely than not that the net operating losses generated during each period will be utilized in future periods.

Net Loss Attributable to Xcel Brands, Inc.

We had a net loss of $2.80 million for the current quarter, compared with a net loss of $6.29 million for the prior year quarter, due to the combination of the factors outlined above.

We had a net loss of $3.99 million for the current quarter, compared with net income of $0.20 million for the prior year quarter, due to the combination of the factors outlined above.

Non-GAAP Net Income (Loss), Non-GAAP Diluted EPS, and Adjusted EBITDA

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Non-GAAP net income (loss) is a non-GAAP unaudited term, which we define as net income (loss) attributable to Xcel Brands, Inc.

stockholders, exclusive of amortization of trademarks, income (loss) from equity method investments, change in contingent reduction in equity ownership of IM Topco, LLC, stock-based compensation and cost of licensee warrants, asset impairment charges, and income taxes (if any).

Non-GAAP net income (loss) and non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.

stockholders, exclusive of amortization of trademarks, income (loss) from equity method investments, stock-based compensation and cost of licensee warrants, loss on early extinguishment of debt (if any), gains on sales of assets and investments (if any), asset impairment charges (if any), and income taxes (if any).

Non-GAAP net income (loss) and

non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.

We had Adjusted EBITDA of approximately $(0.30) million for the current quarter, compared with approximately $(0.04) million for the prior year quarter.

Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income (loss) attributable to Xcel Brands, Inc.

stockholders before interest and finance expenses (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity method investments, change in contingent reduction in equity ownership of IM Topco, LLC, asset impairment charges, stock-based compensation and cost of licensee warrants, and costs associated with restructuring of operations.

stockholders before interest and finance expenses (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity method investments, asset impairment charges, stock-based compensation and cost of licensee warrants, gains on sales of assets and investments, and costs associated with restructuring of operations.

Management uses non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends relating to the Company’s results of operations.

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When evaluating our performance, you should consider non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results, and not rely on any single financial measure.

The following table is a reconciliation of net loss attributable to Xcel Brands, Inc.

The following table is a reconciliation of net (loss) income attributable to Xcel Brands, Inc.

stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:

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($ in thousands)

Net loss attributable to Xcel Brands, Inc.

Net (loss) income attributable to Xcel Brands, Inc.

Amortization of trademarks

Loss from equity method investments

Change in contingent reduction in equity ownership of IM Topco, LLC

Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Gains on sales of assets and investments

Asset impairment charges

Non-GAAP net loss

The following table is a reconciliation of diluted (loss) earnings per share (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP diluted EPS:

Three Months Ended

Diluted (loss) earnings per share

Amortization of trademarks

Loss from equity method investments

Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Gains on sales of assets and investments

Asset impairment charges

Non-GAAP diluted EPS

Non-GAAP weighted average diluted shares

The following table is a reconciliation of net (loss) income attributable to Xcel Brands, Inc.

stockholders (our most directly comparable financial measure presented in accordance with GAAP) to Adjusted EBITDA:

Three Months Ended

($ in thousands)

Net (loss) income attributable to Xcel Brands, Inc.

Interest and finance expense

Accretion of lease liability for exited lease

Income tax provision (benefit)

State and local franchise taxes

Depreciation and amortization

Loss from equity method investments

Asset impairment charges

Stock-based compensation and cost of licensee warrants

Gains on sales of assets and investments

Costs associated with restructuring of operations

Adjusted EBITDA

Six months ended June 30, 2025 (the “current six months”) compared with the six months ended June 30, 2024 (the “prior year six months”)

Current six months net revenue decreased $2.49 million to $2.65 million from $5.14 million for the prior year six months.

Direct Operating Costs and Expenses

Direct operating costs and expenses decreased approximately $2.90 million, from $7.08 million in the prior year six months to $4.18 million in the current six months.

Management has continued to implement additional cost cutting measures throughout 2025 to further optimize the Company’s cost structure.

Currently, the Company has reduced its direct operating expenses to an expected run rate of less than $10 million per annum.

Other Operating Costs and Expenses (Income)

Depreciation and amortization expense decreased approximately $1.33 million, from $3.13 million in the prior year six months to $1.80 million in the current six months.

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.52 million and $1.09 million for the current six months and prior year six months, respectively.

During the prior year six months we recognized asset impairment charges of $3.48 million related to our exit from and sublease of our office space at 1333 Broadway, of which approximately $3.1 million related to the operating lease right-of-use asset and approximately $0.4 million related to leasehold improvements at that location.

There were no similar asset impairment charges recognized during the current six months.

Also during the prior year six months, we recognized a $3.80 million gain on the divestiture of the Lori Goldstein Brand.

The net book value of the intangible assets sold was approximately $1.93 million, and we also incurred approximately $0.35 million of legal fees in connection with the sale.

Interest and Finance Expense

Interest and finance expense was approximately $2.90 million for the current six months, compared with approximately $0.30 million for the prior year six months.

This increase was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized during the current six months as a result of the April 2025 refinancing of our term loan debt.

The estimated annual effective income tax rate for the current six months and the prior year six months was approximately -0.7% and 0% respectively, resulting in an income tax provision (benefit) of $0.05 million and $0, respectively.

Net Loss Attributable to Xcel Brands, Inc.

We had a net loss of $6.79 million for the current six months, compared with a net loss of $6.10 million for the prior year six months, due to the combination of the factors outlined above.

Non-GAAP Net Income (Loss), Non-GAAP Diluted EPS, and Adjusted EBITDA

We had a non-GAAP net loss of approximately $2.27 million, or $(0.95) per diluted share (“non-GAAP diluted EPS”), for the current six months and a non-GAAP net loss of approximately $2.10 million, or $(0.96) per diluted share, for the prior year six months.

We had Adjusted EBITDA of approximately $(1.00) million for the current six months, compared with approximately $(1.61) million for the prior year six months.

The following table is a reconciliation of net loss attributable to Xcel Brands, Inc.

stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:

Six Months Ended

($ in thousands)

Net loss attributable to Xcel Brands, Inc.

Amortization of trademarks

Loss from equity method investments

Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Gains on sales of assets and investments

Asset impairment charges

Income tax provision

Non-GAAP net loss

The following table is a reconciliation of diluted loss per share (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP diluted EPS:

Three Months Ended

Six Months Ended

Diluted loss per share

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Loss from equity method investments

Change in contingent reduction in equity ownership of IM Topco, LLC

Stock-based compensation and cost of licensee warrants

Loss on early extinguishment of debt

Gains on sales of assets and investments

Asset impairment charges

Income tax provision (benefit)

Income tax provision

Non-GAAP diluted EPS

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stockholders (our most directly comparable financial measure presented in accordance with GAAP) to Adjusted EBITDA:

Three Months Ended

Six Months Ended

($ in thousands)

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Accretion of lease liability for exited lease

Income tax provision (benefit)

Income tax provision

State and local franchise taxes

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Loss from equity method investments

Change in contingent reduction in equity ownership of IM Topco, LLC

Asset impairment charges

Stock-based compensation and cost of licensee warrants

Gains on sales of assets and investments

Costs associated with restructuring of operations

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Liquidity and Capital Resources

As of March 31, 2025 and December 31, 2024, our unrestricted cash and cash equivalents were $0.3 million and $1.3 million, respectively.

Restricted cash at March 31, 2025 consisted of $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $1.5 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement.

As of June 30, 2025 and December 31, 2024, our unrestricted cash and cash equivalents were approximately $1.0 million and $1.3 million, respectively.

Restricted cash at June 30, 2025 consisted of $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $1.0 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement.

Restricted cash at December 31, 2024 consisted of $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease.

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Our current “licensing plus” operating model is a working capital light business model, and generally does not require material capital expenditures.

As of March 31, 2025, we have no significant commitments for future capital expenditures.

As of June 30, 2025, we have no significant commitments for future capital expenditures.

On August 4, 2025, the Company completed a best-efforts public offering of 2,181,818 shares of its common stock at a price to the public of $1.10 per share.

Simultaneously with completing such offering, the Company sold to Robert W.

D’Loren, Chairman and Chief Executive Officer of the Company, and Mark DiSanto, a Director of the Company, 82,159 and 60,883 shares of common stock, respectively, at a price of $1.38 per share pursuant to subscription agreements entered into on August 1, 2025.

The aggregate net proceeds to the Company from the sale of the shares sold in the best-efforts public offering and the private placement (after deducting the placement agent fees and other estimated offering expenses) were approximately $2.0 million.

Working Capital

We had a working capital (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) deficit of approximately $0.6 million as of March 31, 2025.

We had working capital of $0.8 million as of December 31, 2024.

We had working capital (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) of approximately $0.70 million as of June 30, 2025.

We had working capital of approximately $0.76 million as of December 31, 2024.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As of March 31, 2025, we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

While we have undertaken significant restructuring efforts during 2023 and 2024, and have implemented additional measures during the first quarter of 2025 to further optimize its cost structure, management has determined that, absent additional funding, there is substantial doubt about the Company’s ability to meet its financial obligations as they become due within twelve months from the date these accompanying unaudited condensed consolidated financial statements are issued.

Subsequent to March 31, 2025, we restructured our outstanding debt and received net proceeds from financing activities.

However, these proceeds may still be insufficient to fully address our liquidity needs.

We are actively pursuing an equity offering to secure additional capital;

however, there can be no assurance that such efforts will be successful or that sufficient funds will be obtained to meet our obligations.

As of June 30, 2025, we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

While we have undertaken significant restructuring efforts during 2023 and 2024, and have implemented additional measures during 2025 to further optimize its cost structure, management has determined that, absent additional funding, there is substantial doubt about the Company’s ability to meet its financial obligations as they become due within twelve months from the date these accompanying unaudited condensed consolidated financial statements are issued.

In April 2025, we restructured our outstanding debt and received net proceeds from financing activities.

In August 2025, we closed on a public offering and private placement of our common stock, which provided us with additional net proceeds.

While these transactions have significantly improved our liquidity position, the proceeds received may still be insufficient to fully address our liquidity needs.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

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The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Commentary on the components of our cash flows for the current quarter as compared with the prior year quarter is set forth below.

Commentary on the components of our cash flows for the current six months as compared with the prior year six months is set forth below.

Operating Activities

Net cash used in operating activities was approximately $1.43 million in the current quarter, compared with approximately $2.61 million in the prior year quarter.

The current quarter net cash used in operating activities was primarily attributable to the combination of the net loss of $(2.80) million plus non-cash items of approximately $1.45 million and the net change in operating assets and liabilities of approximately $(0.08) million.

Non-cash items were comprised of approximately $0.90 million of depreciation and amortization expense, $0.34 million of non-cash expenses related to our equity method investees, $0.11 million of stock-based compensation and cost of licensee warrants, and $0.10 of amortization of deferred finance costs.

The net change in operating assets and liabilities was primarily comprised of a decrease in deferred revenue of $(0.21) million and a decrease in lease-related assets and liabilities of $(0.08) million, partially offset by a decrease in accounts receivable of approximately $0.16 million.

The prior year quarter cash used in operating activities was primarily attributable to the combination of the net loss of $(6.35) million plus non-cash items of approximately $4.59 million and the net change in operating assets and liabilities of approximately $(0.85) million.

Non-cash items were primarily comprised of asset impairment charges of approximately $2.30 million, $1.59 million of depreciation and amortization, and the $0.53 million undistributed proportional share of net loss of equity method investees.

The net change in operating assets and liabilities was primarily comprised of (i) a decrease in deferred revenue of approximately $(0.22) million, mainly related to the Halston Master License agreement, (ii) a decrease in various operating liabilities of $(0.56) million, and (iii) a decrease in lease-related assets and liabilities of $(0.24) million.

Net cash used in operating activities was approximately $3.80 million in the current six months, compared with approximately $2.88 million in the prior year six months.

The current six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.79) million plus non-cash items of approximately $4.77 million and the net change in operating assets and liabilities of approximately $(1.78) million.

Non-cash items were primarily comprised of $0.52 million of losses related to our equity method investments, $1.85 million from the loss on early extinguishment of debt, $1.80 million of depreciation and amortization expense, and $0.37 million of various non-cash interest expenses.

The net change in operating assets and liabilities was primarily comprised of (i) approximately $(1.56) million of payments of accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities, plus (ii) a decrease in deferred revenue of $(0.50) million.

The prior year six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.18) million plus non-cash items of approximately $4.10 million and the net change in operating assets and liabilities of approximately $(0.80) million.

Non-cash items were primarily comprised of approximately $3.48 million of asset impairment charges, $3.13 million of depreciation and amortization, and our $1.09 million undistributed proportional share of net losses from equity method investees, partially offset by a $(3.80) million gain on the divestiture of the Lori Goldstein Brand.

The net change in operating assets and liabilities was primarily comprised of (i) a decrease in various operating liabilities of $(0.56) million, (ii) a decrease in lease-related assets and liabilities of $(0.63) million, and (iii) an increase in other long-term liabilities of $0.39 million.

Investing Activities

Net cash used in investing activities in the current quarter was comprised of purchases of equipment totaling approximately $0.01 million.

There was no net cash used in or provided by investing activities for the prior year quarter.

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

Net cash used in investing activities in the prior year six months was comprised of purchases of furniture and fixtures totaling approximately $0.10 million

Financing Activities

Net cash provided by financing activities in the prior year quarter was $1.90 million, attributable to the net proceeds received from the March 2024 public offering and private placement transactions in which the Company issued an aggregate of 357,889 shares of common stock along with warrants exercisable for an additional 18,293 shares of common stock.

Net cash provided by financing activities in the current quarter was primarily attributable to $2.05 million of proceeds received from the delayed draw portion of the Company’s December 2024 term loan agreement, and $3.62 million of proceeds received from the Company’s April 2025 refinancing of its term loan debt (as described in more detail below).

This was partially offset by $0.53 million of deferred finance costs paid in connection with the April 2025 refinancing, and $0.50 million of principal payments made on the Company’s term loan debt.

Net cash provided by financing activities in the prior year six months was $1.90 million, attributable to the net proceeds received from the March 2024 public offering and private placement transactions in which the Company issued an aggregate of 357,889 shares of common stock along with warrants exercisable for an additional 18,293 shares of common stock.

This was partially offset by $0.25 million of scheduled principal payments made on our term loan debt.

April 2025 Debt Refinancing

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The term loans outstanding after giving effect to the April 21, 2025 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.

(1) Term Loan A in the amount of $4.50 million, and (2) Term Loan B in the amount of $9.12 million.

The proceeds from the additional Term Loan B were used to repay a portion of Term Loan A, as well as to pay fees, costs, and expenses incurred in connection with entering into the April 21, 2025 amendment, and the balance will be used for working capital purposes.

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

Also in connection with this refinancing transaction, IPX’s participation in Term Loan B was repaid and IPX purchased a $500,000 undivided, last-out, subordinated participation interest in Term Loan A.

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.

In connection with the April 21, 2025 amendment and refinancing transaction, UTG Capital, Inc., a Delaware corporation (“UTG”), purchased a 100% undivided, participation interest in Term Loan B for a purchase price of $9.12 million.

Also in connection with this refinancing transaction, IPX’s participation in Term Loan B was repaid and IPX purchased a $0.50 million undivided, last-out, subordinated participation interest in Term Loan A.

On May 15, 2025, the Company repaid $0.50 million of the outstanding principal amount of Term Loan A.

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

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the Company is currently in compliance with all applicable covenants.

Also in connection with this refinancing transaction, UTG Capital, Inc., a Delaware corporation (“UTG”), purchased a 100% undivided, participation interest in Term Loan B for a purchase price of $9.12 million and received warrants entitling it to purchase 1,107,457 warrants shares of the Company.

Such warrants are exercisable for a period of seven years from the date of issuance, at specified exercise prices ranging from $6.60 per share to $17.50 per share.

Further, the Company also issued warrants to purchase 30,000 shares of common stock to Restore Capital (EQ-W), LLC (“Restore”), another of the lenders, and amended warrants to purchase an aggregate of 107,333 shares of common stock held by Restore and warrants previously issued to warrants of FEAC Agent, LLC.

Other Factors

We continue to seek to expand and diversify the types of licensed products being produced under our brands.

We plan to continue to diversify the distribution channels within which licensed products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands.

The Halston brand, C Wonder brand, TowerHill by Christie Brinkley brand, and the LB70 by Lloyd Boston brand have a core business in fashion apparel and accessories.

The Ripka brand is a fine jewelry business, and the Longaberger brand focuses on home good products, which we believe helps diversify our industry focus while at the same time complements our business operations and relationships.

We plan to continue to diversify the distribution channels and product categories within which licensed products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands.

The Halston brand, C Wonder brand, TowerHill by Christie Brinkley brand, and the LB70 by Lloyd Boston brand, which together currently represent a majority of our revenues, have a core business in fashion apparel and accessories.

Our other brands – including the Judith Ripka brand, which is a fine jewelry brand;

the Longaberger brand, which focuses on home good products;

GemmaMade and Mesa Mia, which focus on cooking and baking related products;

and Trust, Respect, Love, which focuses on pet-related products – help to diversify our industry focus while at the same time complement our business operations and relationships.

While the 2022 sale of a majority interest in the Isaac Mizrahi brand and the 2024 divestiture of the LOGO by Lori Goldstein brand resulted in significant decreases in our licensing revenues, we have taken and continue to take actions to replace those revenues with new strategic business initiatives, as we concentrate our resources on growing our brands, launching new brands, and entering into new business partnerships.

We continue to seek new opportunities, including expansion through interactive television, live streaming, and additional domestic and international licensing arrangements, and acquiring and collaborating with additional brands, including the TowerHill by Christie Brinkley brand and LB70 by Lloyd Boston brand, both of which launched in 2024.

We recently announced two new co-branded collaborations, which are planned to launch in Spring 2026.

We plan to launch four new brands over the next 12 to 15 months, including Trust, Respect, Love by Cesar Millan, GemmaMade, and Mesa Mia in Fall 2025, and a new co-branded collaboration with Coco Rocha in Fall 2026.

During 2023 and throughout 2024, we have restructured our business operations into a leaner, more focused “licensing plus” business model.

We have entered into structured contractual arrangements with best-in-class business partners in order to more efficiently operate our former wholesale and e-commerce businesses while reducing and better managing our exposure to operating risks, and taken additional actions to generate cost savings.

Based on all of these actions taken to date, plus additional measures implemented during the first quarter of 2025 to further optimize the Company’s cost structure, the Company’s direct operating costs on an annualized basis have been reduced from approximately $8 million per quarter under our previous operating model to less than $2.5 million per quarter on a going-forward basis.

Based on all of these actions taken to date, plus additional measures implemented during the current year to further optimize the Company’s cost structure, the Company’s direct operating costs on an annualized basis have been reduced from approximately $8 million per quarter

under our previous operating model to less than $2.5 million per quarter on a going-forward basis.

This represents more than $22 million of cost savings on an annualized basis compared to our cost structure in 2022.

In April 2025, we restructured our outstanding term debt and received additional net proceeds, which improved our liquidity position.

The higher outstanding principal balance under our refinanced term loan debt will result in higher interest payments over the term of the debt, although a substantial portion of that interest will be paid in-kind through March 2027 by being capitalized and added to the principal amount of the debt.

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

Poor economic and market conditions, including the impacts of inflation and rising consumer debt levels, 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.

Poor economic and market conditions, including the impacts of inflation and rising consumer debt levels, 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 inflation and/or a potential recession, our business, financial condition, and results of operations could be adversely affected.

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Please refer to our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on May 28, 2025, for a discussion of our critical accounting policies and estimates.

During the three months ended March 31, 2025, there were no material changes to our critical accounting policies or estimates.

During the three months ended June 30, 2025, there were no material changes to our critical accounting policies or estimates.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis