Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this report are forward-looking statements that involve a number of known and unknown risks, uncertainties and other factors, all of which are difficult or impossible to predict and many of which are beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks are detailed in the Risk Factors section of our Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on May 28, 2025. The words “believe,” “anticipate,” “expect,” “continue,” “estimate,” “appear,” “suggest,” “goal,” “potential,” “predicts,” “seek,” “will,” “confident,” “project,” “provide,” “plan,” “likely,” “future,” “ongoing,” “intend,” “may,” “should,” “would,” “could,” “guidance,” and similar expressions identify forward-looking statements.
Overview
Xcel Brands, Inc. (“Xcel,” the “Company,” “we,” “us,” or “our”) is a media and consumer products company engaged in the design, licensing, marketing, live streaming, and social commerce sales of branded apparel, footwear, accessories, fine jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands. Xcel was founded in 2011 with a vision to reimagine shopping, entertainment, and social media as social commerce.
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; and
● 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
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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:
● 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, live streaming, and traditional brick-and-mortar retail channels; and
● acquiring additional consumer brands and integrating them into our operating platform, and leveraging our operating infrastructure and distribution relationships.
We believe that Xcel offers a unique value proposition to our retail and direct-to-consumer customers and our licensees for the following reasons:
● our management team, including our officers’ and directors’ experience in, and relationships within the industry;
● our deep knowledge, expertise, and proprietary technology in live streaming and social commerce;
● our design, sales, marketing, and technology platform that enables us to design trend-right product; and
● our significant media and internet presence.
Summary of Operating Results
Three months ended June 30, 2025 (the “current quarter”) compared with the three months ended June 30, 2024 (the “prior year quarter”)
Revenues
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.
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 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.
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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 $0.65 million, from $1.55 million in the prior year quarter to $0.90 million in the current quarter. 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 $0.18 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.
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.
Income Taxes
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. Stockholders
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
We had a non-GAAP net loss of approximately $0.90 million, or $(0.37) per diluted share (“non-GAAP diluted EPS”), for the current quarter and a non-GAAP net loss of $0.30 million, or $(0.13) per diluted share, for the prior year quarter. 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, 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
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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, 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. Management believes non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business operating results, and thus, these non-GAAP measures provide supplemental information to assist investors in evaluating the Company’s financial results.
Non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in accordance with GAAP. Given that non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA are financial measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures.
In evaluating non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA, you should be aware that in the future we may or may not incur expenses similar to some of the adjustments in this report. Our presentation of non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any other unusual or non-recurring items. 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) income attributable to Xcel Brands, Inc. stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:
Three Months Ended
June 30,
($ in thousands)
2025
2024
Net (loss) income attributable to Xcel Brands, Inc. stockholders
$
(3,988)
$
195
Amortization of trademarks
876
1,520
Loss from equity method investments
180
557
Stock-based compensation and cost of licensee warrants
186
42
Loss on early extinguishment of debt
1,850
—
Gains on sales of assets and investments
—
(3,801)
Asset impairment charges
—
1,188
Non-GAAP net loss
$
(896)
$
(299)
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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
June 30,
2025
2024
Diluted (loss) earnings per share
$
(1.66)
$
0.08
Amortization of trademarks
0.36
0.65
Loss from equity method investments
0.08
0.24
Stock-based compensation and cost of licensee warrants
0.08
0.02
Loss on early extinguishment of debt
0.77
—
Gains on sales of assets and investments
—
(1.62)
Asset impairment charges
—
0.50
Non-GAAP diluted EPS
$
(0.37)
$
(0.13)
Non-GAAP weighted average diluted shares
2,403,639
2,349,014
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
June 30,
($ in thousands)
2025
2024
Net (loss) income attributable to Xcel Brands, Inc. stockholders
$
(3,988)
$
195
Interest and finance expense
2,337
146
Accretion of lease liability for exited lease
59
76
Income tax provision (benefit)
—
—
State and local franchise taxes
6
12
Depreciation and amortization
899
1,545
Loss from equity method investments
180
557
Asset impairment charges
—
1,188
Stock-based compensation and cost of licensee warrants
186
42
Gains on sales of assets and investments
—
(3,801)
Costs associated with restructuring of operations
22
—
Adjusted EBITDA
$
(299)
$
(40)
Six months ended June 30, 2025 (the “current six months”) compared with the six months ended June 30, 2024 (the “prior year six months”)
Revenues
Current six months net revenue decreased $2.49 million to $2.65 million from $5.14 million for the prior year six months. 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.
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. 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 six months.
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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. 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 $0.52 million and $1.09 million for the current six months and prior year six months, 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 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 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 $2.90 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.
Income Taxes
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. 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. Stockholders
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.
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We had Adjusted EBITDA of approximately $(1.00) million for the current six months, compared with approximately $(1.61) million for the prior year six months.
The following table is a reconciliation of net loss attributable to Xcel Brands, Inc. stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:
Six Months Ended
June 30,
($ in thousands)
2025
2024
Net loss attributable to Xcel Brands, Inc. stockholders
$
(6,785)
$
(6,099)
Amortization of trademarks
1,751
3,039
Loss from equity method investments
516
1,090
Stock-based compensation and cost of licensee warrants
352
186
Loss on early extinguishment of debt
1,850
—
Gains on sales of assets and investments
—
(3,801)
Asset impairment charges
—
3,483
Income tax provision
50
—
Non-GAAP net loss
$
(2,266)
$
(2,102)
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:
Six Months Ended
June 30,
2025
2024
Diluted loss per share
$
(2.84)
$
(2.78)
Amortization of trademarks
0.73
1.38
Loss from equity method investments
0.22
0.50
Stock-based compensation and cost of licensee warrants
0.15
0.08
Loss on early extinguishment of debt
0.77
—
Gains on sales of assets and investments
—
(1.73)
Asset impairment charges
—
1.59
Income tax provision
0.02
—
Non-GAAP diluted EPS
$
(0.95)
$
(0.96)
Non-GAAP weighted average diluted shares
2,388,694
2,193,206
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 Adjusted EBITDA:
Six Months Ended
June 30,
($ in thousands)
2025
2024
Net loss attributable to Xcel Brands, Inc. stockholders
$
(6,785)
$
(6,099)
Interest and finance expense
2,897
296
Accretion of lease liability for exited lease
120
76
Income tax provision
50
—
State and local franchise taxes
14
24
Depreciation and amortization
1,799
3,134
Loss from equity method investments
516
1,090
Asset impairment charges
—
3,483
Stock-based compensation and cost of licensee warrants
352
186
Gains on sales of assets and investments
—
(3,801)
Costs associated with restructuring of operations
39
—
Adjusted EBITDA
$
(998)
$
(1,611)
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Liquidity and Capital Resources
General
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.
Our principal capital requirements have generally been to fund working capital needs and acquire new brands. Our current “licensing plus” operating model is a working capital light business model, and generally does not require material 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 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 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. Management intends to continue exploring strategic financing alternatives and operational efficiencies to improve liquidity. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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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 $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 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 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
On April 21, 2025, the Company and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for $1.5 million repayment of the $3.95 million Term Loan A and an additional Term Loan B in the amount of $5.12 million. 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 $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.
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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 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.
From and after April 21, 2025, interest on each Term Loan A accrues at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0% floor, plus 8.5%. From and after April 21, 2025, interest on each Term Loan B accrues at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0% floor, plus 6.5%. From and after April 21, 2025 through March 31, 2027, interest on the Term Loan B will be paid in-kind by being capitalized and added to the principal amount of the Term Loan B at the end of each calendar month.
The 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 contains various customary financial covenants and reporting requirements, as specified and defined therein; the Company is currently in compliance with all applicable covenants.
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 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 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 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
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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. 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.
Our long-term success, however, will still remain largely dependent on our ability to build and maintain our brands’ awareness and continue to attract wholesale and direct-to-consumer customers, and contract with and retain key licensees and business partners, as well as our and our licensees’ ability to accurately predict upcoming fashion and design trends within their respective customer bases and fulfill the product requirements of the particular retail channels within the global marketplace. Unanticipated changes in consumer fashion preferences and purchasing patterns, slowdowns in the U.S. economy, changes in the prices of supplies, consolidation of retail establishments, and other factors noted in Item 1A of our most recent Annual Report on Form 10-K could adversely affect our licensees’ ability to meet and/or exceed their contractual commitments to us and thereby adversely affect our future operating results.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, or liquidity.
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires management to exercise judgment. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates and judgments on a variety of factors, including our historical experience, knowledge of our business and industry, and current and expected economic conditions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Because the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
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 June 30, 2025, there were no material changes to our critical accounting policies or estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.