Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read together with our consolidated financial statements and the notes thereto, included in Item 8 of this Annual Report on Form 10-K. This discussion summarizes the significant factors affecting our consolidated operating results, financial condition and liquidity and cash flows for the years ended
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December 31, 2025 and 2024. Except for historical information, the matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve risks and uncertainties and are based upon judgments concerning factors that are beyond our control.
Overview
Xcel Brands 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 Brand, the Ripka Brand, and the C Wonder Brand, which are wholly owned by the Company;
the Longaberger Brand, which we manage through our 50% ownership interest in Longaberger Licensing, LLC;
the TowerHill by Christie Brinkley brand, which is a co-branded collaboration between Xcel and Christie Brinkley that launched in May 2024;
the Trust-Respect-Love by Cesar Millan brand, which is a new co-branded collaboration between Xcel and Cesar Millan, which is planned to launch in Spring 2026;
the GemmaMade by Gemma Stafford brand, which is a new co-branded collaboration between Xcel and Gemma Stafford, which is planned to launch in Spring 2026;
the Off/Duty by Coco Rocha brand, which is a new co-branded collaboration between Xcel and Coco Rocha, which is planned to launch in Fall 2026; and
Mesa Mia by Jenny Martinez, 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 Spring 2026.
Our brand portfolio also formerly included:
the LOGO by Lori Goldstein brand as a wholly owned brand from April 1, 2021 through June 30, 2024; and
the Isaac Mizrahi brand, in which we hold a noncontrolling ownership interest through October 1, 2025.
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.
We currently operate under 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 may 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.);
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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 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 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 digital presence.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that are the most important to the portrayal of our financial condition and results of operations, and that require our most difficult, subjective, and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. While our significant accounting policies and estimates are described in more detail in the notes to our consolidated financial statements, our most critical accounting policies and estimates, discussed below, pertain to revenue recognition, trademarks and other intangible assets, investments in unconsolidated affiliates, and income taxes. These include but are not limited to: the estimation of the useful lives of our trademarks, and the estimation of future cash flows related to our trademarks; the valuation and accounting for our investments in unconsolidated affiliates, and judgment as to whether any in value are temporary; and the estimation of our future income projections and the likelihood that we will be to realize our deferred tax assets. In applying such policies, we must use some amounts that are based upon our informed judgments and estimates. Estimates, by their nature, are based upon judgments and available information. The estimates that we make are based upon historical factors, current circumstances, and the experience and judgment of management. We evaluate our assumptions and estimates on an ongoing basis.
Revenue Recognition
We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606-10-55-65, by which we recognize licensing revenue at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales- or usage-based royalty has been allocated is satisfied (in whole or in part). More specifically, we separately identify:
(i) Contracts for which, based on experience, royalties are expected to exceed any applicable minimum guaranteed payments, and to which an output-based measure of progress based on the “right to invoice” practical expedient is applied because the royalties due for each period correlate directly with the value to the customer of our performance in each period (this approach is identified as “View A” by the FASB Revenue Recognition Transition Resource Group, “TRG”); and
(ii) Contracts for which revenue is recognized based on minimum guaranteed payments using an appropriate measure of progress, in which minimum guaranteed payments are straight-lined over the term of the contract and
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recognized ratably based on the passage of time, and to which the royalty recognition constraint to the sales-based royalties in excess of minimum guaranteed is applied and such sales-based royalties are recognized to the distinct period only when the minimum guaranteed is exceeded on a cumulative basis (this approach is identified as “View C” by the TRG).
Trademarks and Other Intangible Assets
Our finite-lived intangible assets (primarily trademarks, along with other intangible assets) are amortized over their estimated useful lives, which are estimated based principally on our expected use and strategic plans for each asset, our own historical experience with similar assets, and our expectations related to demand, competition, and other economic factors.
Our finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. To test our finite-lived intangible assets for impairment, we group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of undiscounted future cash flows which are based on revenue growth estimates. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flows analysis or appraisals.
There were no impairment charges recorded for our intangible assets for the years ended December 31, 2025 and 2024.
Investments in Unconsolidated Affiliates
We account for our investments in entities over which we have the ability to exercise significant influence, but do not control, under the equity method of accounting, and recognize our proportionate share of income or losses from the entity within other operating costs and expenses (income) in our consolidated statements of operations. The proportionate share of income or losses of an equity method investee is generally determined based on the investor’s proportional ownership interest. However, in cases where contractual agreements specify allocation ratios for profits and losses, specified costs and expenses, and/or distributions of cash from operations, that differ from our ownership interest, we use such specified allocation ratios for purposes of determining our share of income or losses from the investee if the agreement is considered substantive. As of December 31, 2025, we no longer have any investments accounted for under the equity method.
Investments in entities in which we do not have the ability to exercise significant influence nor control, are generally required to be accounted for at fair value, with unrealized holding gains and losses included in earnings. However, we may elect to measure an equity security without a readily determinable fair value at adjusted cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issue.
In addition, we review our investments in unconsolidated affiliates that are not accounted for at fair value whenever there are indicators that their carrying value may not be recoverable; if a decrease in value of the investment has occurred and such decrease is determined to be other than temporary in nature, we record an impairment charge to reduce the carrying amount of the investment to its fair value.
During the year ended December 31, 2025, we recognized a $6.01 million loss related to our investments in unconsolidated affiliates (which was all related to IM Topco, LLC), comprised of a $0.21 million equity method loss, a $5.53 million further other-than-temporary impairment charge, and $0.27 million of other related costs and adjustments. As of and effective April 15, 2025, as a result of a transaction with other investors during which our equity ownership interest in IM Topco, LLC was reduced from 30% to 17.5%, we concluded that we no longer held significant influence over IM Topco, LLC, and discontinued the application of the equity method of accounting. Subsequently, on October 1, 2025, we disposed of all of our remaining equity interests in IM Topco, LLC.
During the year ended December 31, 2024, we recognized a $11.84 million loss related to our investments in unconsolidated affiliates, comprised of a $1.88 million equity method loss, a $5.75 million other-than-temporary impairment charge, and a $4.21 million non-cash charge to recognize a contingent obligation related to certain contractual
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provisions related to IM Topco, LLC.
The remaining carrying value of our investments in unconsolidated affiliates as of December 31, 2025 was zero.
Income Taxes
Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Deferred income taxes are determined based on the temporary difference between the financial reporting and tax bases of assets and liabilities using enacted rates in effect during the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We consider forecasted earnings, future taxable income, and prudent and feasible tax planning strategies in determined the need for these valuation allowances.
With respect to any uncertainties in income taxes recognized in our financial statements, tax positions are initially recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that has a probability of fifty percent or greater of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.
Summary of Operating Results
The consolidated financial statements and related notes included elsewhere in this Form 10-K are as of or for the years ended December 31, 2025 (the “Current Year”), and December 31, 2024 (the “Prior Year”).
Revenues
Net revenue decreased approximately $3.32 million to $4.94 million for the Current Year, from $8.26 million for the Prior Year.
This decrease was primarily attributable to declines in licensing revenue of $2.97 million, which was predominantly driven by the June 30, 2024 divestiture of the Lori Goldstein brand and the subsequent loss of the licensing revenues associated with that brand; the remainder of the year-over-year decline in licensing revenue was largely driven by lower sales of branded products by our licensees mainly due to more cautious consumer spending in the current economic environment.
Also contributing to the decrease in revenue from the Prior Year was the fact that in the Prior Year, we recognized $0.35 million of net product sales from the final sale of certain residual jewelry inventories and the sale of all remaining inventory related to the Longaberger brand, with no net product sales recognized in the Current Year.
Cost of Goods Sold
Prior Year cost of goods sold was $0.45 million, stemming from the aforementioned final sale of certain residual jewelry inventories and the sale of all remaining inventory related to the Longaberger brand in the Prior Year. There were no comparable amounts recognized in the Current Year as we no longer directly sell any physical products under our current business operating model.
Direct Operating Costs and Expenses
Direct operating costs and expenses decreased approximately $4.19 million, from $12.76 million in the Prior Year to $8.57 million in the Current Year. This decrease was primarily attributable to (i) the 2023 restructuring and transformation of our business operating model, which included reductions in staffing levels as well as related reductions in other overhead costs, (ii) additional actions taken in 2024 to further optimize our cost structure (including the divestiture of the Lori
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Goldstein Brand, which eliminated certain operating and compensation expenses), and (iii) the impact of the employee retention tax credit recognized in the Current Year.
Other Operating Costs and Expenses (Income)
Depreciation and amortization expense decreased approximately $1.36 million, from $4.95 million in the Prior Year to $3.59 million in the Current Year. This decrease was 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 of $6.01 million and $11.69 million for the Current Year and Prior Year, respectively. The Current Year loss was composed of (i) $0.21 million of equity method losses, (ii) a $5.53 million non-cash impairment charge related to the disposition of our remaining equity interest in IM Topco, which closed in October 2025, and (iii) $0.27 million of other related costs and expenses. The Prior Year amount was composed of (i) $1.73 million of equity method losses, (ii) a $4.21 million non-cash charge to recognize a contractual contingent obligation related to IM Topco, which was subsequently satisfied and discharged in April 2025, and (iii) a $5.75 million other-than-temporary impairment of our investment in IM Topco, stemming from a decline in the fair value of the investment as a result of decreases in IM Topco’s revenues and cash flows.
During the Prior Year, 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 comparable asset impairment charges recognized during the Current Year.
Also during the Prior Year, 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. There were no comparable amounts recognized in the Current Year.
Interest and Finance Expense
Interest and finance expense for the Current Year was $4.27 million, compared with $0.93 million for the Prior Year.
This $3.34 million increase was primarily attributable to the combination of (i) the $1.85 million loss on early extinguishment of debt recognized during the Current Year as a result of the April 2025 refinancing of our term loan debt, which was significantly higher than the $0.29 million loss on early extinguishment of debt recognized during the Prior Year, and (ii) the higher interest rates and higher principal balance on outstanding term loan debt in the Current Year as compared to the Prior Year.
Income Tax Provision
The estimated annual effective income tax rate for the Current Year was less than -1%, resulting in an income tax provision of $0.08 million. During the Current Year, the effective tax rate differed from the federal statutory rate primarily due to the recording of a valuation allowance against the benefit that would have otherwise been recognized for the year, as it was considered not more likely than not that the net operating losses generated during the year will be utilized in future periods.
The estimated annual effective income tax rate for the Prior Year was approximately -1%, resulting in an income tax provision of $0.22 million. During the Prior Year, the effective tax rate differed from the federal statutory rate primarily due to the recording of a valuation allowance against the benefit that would have otherwise been recognized for the year, as it was considered not more likely than not that the net operating losses generated during the year will be utilized in future periods.
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Net Loss Attributable to Xcel Brands, Inc. Stockholders
We had a net loss of approximately $17.5 million for the Current Year, compared with a net loss of approximately $22.4 million for the Prior Year, as a result of the factors discussed above.
Non-GAAP Net Income, Non-GAAP Diluted EPS, and Adjusted EBITDA
We had a non-GAAP net loss of $5.2 million or $(1.52) per share (“non-GAAP diluted EPS”) based on 3,435,816 weighted average shares outstanding for the Current Year, compared with a non-GAAP net loss of $5.1 million or $(2.23) per share based on 2,275,332 weighted average shares outstanding for the Prior Year. 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 asset impairment charges (if any), amortization of trademarks, income (loss) from equity 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), and income taxes. 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 $(2.3) million for the Current Year, compared with Adjusted EBITDA of approximately $(3.5) million for the Prior Year. 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 investments, asset impairment charges (if any), stock-based compensation and cost of licensee warrants, gains on sales of assets and investments (if any), and costs associated with restructuring of operations (including operating losses generated by certain of our businesses that have been restructured or discontinued, as well as non-cash charges associated with the restructuring of certain contractual arrangements, and severance payments).
Management uses non-GAAP net income, 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, 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, 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, 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, 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 these measures in a different manner than we do.
In evaluating non-GAAP net income, 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, non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider non-GAAP net income, 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.
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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:
Year Ended December 31,
($ in thousands)
Net loss attributable to Xcel Brands, Inc. stockholders
Asset impairment charges
Amortization of trademarks
Loss from equity investments
Stock-based compensation and cost of licensee warrants
Loss on extinguishment of debt
Gains on sales of assets and investments
Income tax provision
Non-GAAP net loss
The following table is a reconciliation of diluted loss per share to non-GAAP diluted EPS:
Year Ended December 31,
Diluted loss per share attributable to Xcel Brands, Inc. stockholders
Asset impairment charges
Amortization of trademarks
Loss from equity investments
Stock-based compensation and cost of licensee warrants
Loss on extinguishment of debt
Gains on sales of assets and investments
Income tax provision
Non-GAAP diluted EPS
Diluted weighted average shares outstanding
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:
Year Ended December 31,
($ in thousands)
Net loss attributable to Xcel Brands, Inc. stockholders
Interest and finance expense
Accretion of lease liability for exited lease
Income tax provision
State and local franchise taxes
Depreciation and amortization
Loss from equity 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
Liquidity and Capital Resources
General
As of December 31, 2025 and 2024, our unrestricted cash and cash equivalents were approximately $1.2 million and $1.3 million, respectively.
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Restricted cash at December 31, 2025 was approximately $1.7 million, and consisted of (i) $0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and (ii) $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 December 31, 2025, we have no significant commitments for future capital expenditures. Material cash requirements from known contractual and other obligations are discussed under “Obligations and Commitments” below.
Working Capital
Our working capital (which we calculate in a non-GAAP manner as current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares) surplus/(deficit) was $(0.8) million and $0.8 million as of December 31, 2025 and 2024, respectively. Commentary on components of our cash flows for the Current Year compared with the Prior Year is set forth below.
Operating Activities
Net cash used in operating activities was approximately $7.0 million and $4.7 million in the Current Year and Prior Year, respectively.
The Current Year’s cash used in operating activities was primarily attributable to the combination of the net loss of $(17.6) million and a net change in operating assets and liabilities of approximately $(2.7) million, partially offset by non-cash items of approximately $13.3 million. Non-cash items were primarily comprised of, but not limited to, undistributed losses and other charges related to equity investments totaling $6.0 million, $3.6 million of depreciation and amortization, a $1.9 million loss on the early extinguishment of debt, and $1.2 million of non-cash interest and finance expenses (including paid in-kind interest, amortization of deferred finance costs, and other non-cash interest expense). The net change in operating assets and liabilities was mainly driven by paydown of accounts payable, accrued expenses, and other current operating liabilities, as well as the recognition of previously-deferred revenue amounts.
The Prior Year’s cash used in operating activities was primarily attributable to the combination of the net loss of $(22.6) million, partially offset by non-cash items of approximately $17.3 million and a net change in operating assets and liabilities of approximately $0.6 million. Non-cash items were primarily comprised of, but not limited to, undistributed losses and other charges related to equity investments totaling $11.8 million, $4.9 million of depreciation and amortization, $3.5 million of asset impairment charges, and $0.4 million of stock-based compensation and cost of licensee warrants, partially offset by a $(3.8) million gain on the divestiture of the Lori Goldstein brand. The net change in operating assets and liabilities was less significant, as the positive cash flow impacts from decreases in accounts receivable ($1.2 million) and inventory ($0.5 million) were largely offset by changes in deferred revenue and other current liabilities, along with changes in lease-related assets and liabilities.
Investing Activities
Net cash used in investing activities for the Current Year and Prior Year was $0.01 million and $0.11 million, respectively, and was comprised of purchases of property and equipment.
Financing Activities
Net cash provided by financing activities for the Current Year was approximately $7.9 million. This was primarily attributable to the combination of $5.1 million of net proceeds generated from debt financing transactions (including approximately $2.1 million of proceeds received from the delayed draw portion of the Company’s December 2024 term loan agreement, and approximately $3.0 million of proceeds received from the April 2025 refinancing of our term loan debt) and $3.8 million of net proceeds generated from equity financing transactions (including approximately $2.0 million
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from public offering and private placement transactions in August 2025 and approximately $1.8 million from a private investment in public equity transaction in December 2025). Also during the Current Year, we made $0.75 million of principal payments on our term loan debt.
Net cash provided by financing activities for the Prior Year was approximately $3.8 million. This was primarily attributable to approximately $2.8 million of net cash proceeds generated from the December 2024 refinancing of our term loan debt ($8.0 million of gross cash proceeds, less $4.25 million repayment of our previous term loan debt and the payment of $0.9 million of debt issuance costs) and $1.9 million of net proceeds generated by equity offering transactions undertaken during the first quarter of 2024. Also during the Prior Year, we made $0.75 million of scheduled principal payments on term loan debt.
March 2024 Public Offering and Private Placement Transactions
On March 19, 2024, the Company closed on a public offering of 328,427 shares of common stock at an offering price of $6.50 per share and a private placement of 29,462 shares of common stock at an offering price of $9.80 per share. The aggregate number of shares of common stock issued from the public offering and the private placement was 357,889 shares and the total net proceeds received were approximately $1.9 million.
August 2025 Public Offering and Private Placement Transactions
On August 4, 2025, the Company closed on a public offering of 2,181,818 shares of common stock at an offering price of $1.10 per share and a private placement of 143,042 shares of common stock at an offering price of $1.38 per share. The aggregate number of shares of common stock issued from the public offering and the private placement was 2,324,860 shares and the total net proceeds received were approximately $2.0 million.
December 2025 Private Investment in Public Equity Transaction
On December 18, 2025, the Company closed on a transaction with several institutional and accredited investors for the issuance and sale in a private placement of securities, resulting in the issuance and sale of (i) 896,126 shares of the Company’s common stock, (ii) pre-funded warrants to purchase from the Company a total of 773,929 shares of common stock, at an exercise price per share equal to $0.001, and (iii) warrants to purchase from the Company a total of 835,023 shares of common stock, at an exercise price per share equal to $3.00. The aggregate net proceeds to the Company from the sale of the shares of common stock and pre-funded warrants, after deducting the placement agent fees and other estimated offering expenses payable by the Company, were approximately $1.8 million.
Debt Transactions
On December 12, 2024, the Company and certain of its subsidiaries entered into a new loan and security agreement with FEAC Agent, LLC, as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC (“Restore”), as agent for certain lenders, pursuant to which the lenders made term loans to the Company and agreed to make additional term loans to the Company upon the satisfaction of a condition precedent described in the loan agreement. The term loans under the loan agreement are as follows: (1) a term loan in the amount of $3.95 million (“Term Loan A”) was made on the closing date, (2) a term loan in the amount of $4.0 million (“Term Loan B”) was made on the closing date, and (3) a term loan in the amount of $2.05 million (“Delayed Draw Term Loan”; Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as “Term Loans”) was subsequently made in March 2025. The proceeds from Term Loan A and Term Loan B were used to repay the remaining balance of the Company’s October 2023 term loan with IDB, as well as to pay fees, costs, and expenses incurred in connection with entering into the new loan agreement, and the balance may be used for working capital purposes. A portion of the proceeds from the Draw Term Loan were deposited in a bank account to a liquidity covenant in the loan agreement.
As part of the December 12, 2024 financing transaction, IPX Capital, LLC (“IPX”), a company controlled by Robert W. D’Loren, Chairman and Chief Executive Officer of the Company, purchased a 12.5 % undivided, last-out, subordinated participation interest in a portion of Term Loan B debt for a purchase price of $ 0.5 million , and received a pro rata share of warrants received by the Term Loan B Lenders to purchase shares of the Company’s common stock.
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On April 21, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for a $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 were 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, with the balance to be used for working capital purposes.
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 the refinancing, the Company issued certain warrants to UTG and Restore, and amended certain warrants that had been previously issued on December 12, 2024.
Also on April 21, 2025 and in connection with the refinancing of the Company’s term loan debt, IPX’s participation in Term Loan B was repaid and IPX purchased a $0.5 million undivided, last-out, subordinated participation interest in Term Loan A.
On May 15, 2025, the Company repaid $0.5 million of the outstanding principal amount of Term Loan A.
On October 7, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into a further amendment of the December 12, 2024 loan and security agreement, pursuant to which the (i) the agents and lenders (as defined in the loan and security agreement) consented to the transfer and the release of the agents’ liens on the equity interests of IM Topco, LLC; (ii) the liquid asset covenant requirement was reduced to $1.0 million; and (iii) Xcel made a prepayment of $0.25 million against the outstanding principal amount of Term Loan A, of which $0.14 million was paid from the blocked account.
On November 18, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into the fourth amendment of the December 12, 2024 loan and security agreement, pursuant to which (i) the agents and lenders (as defined in the loan and security agreement) provided the Company with a limited waiver with respect to certain specified events of default, and also amended certain financial covenants related to the term loan agreement; (ii) the Company committed to make a prepayment of $3.25 million on Term Loan A by February 20, 2026, along with the payment of an amendment fee of $0.45 million (of which $0.125 million is payable on December 5, 2025 and the remaining $0.325 million would be due only if the $3.25 million principal amount of Term Loan A was not repaid on or prior to February 20, 2026); and (iii) the payment of the remaining principal balance on Term Loan A of $0.5 million was changed to be due on December 31, 2026 which shall be held by IPX. In addition, upon the repayment of the $3.25 million of Term Loan A, the Company will have revised financial covenants. The minimum revenue requirement for the rolling 12 months ending December 31, 2025 will be $3.9 million and $1.7 million for the Included Subsidiaries and Halston, respectively, each as defined in the loan agreements. Further, after the Term Loan A payment is made, the minimum revenue requirement covenants shall remain at these levels for the duration of the loans and the minimum liquidity requirement shall be zero, which includes the lenders’ release of $1.0 million of restricted cash within the blocked account back to the Company.
As of December 31, 2025, $3.25 million of the principal amount on Term Loan A was due on February 20, 2026 (subsequently extended through the amendments discussed below), with the remaining $0.50 million of the principal amount on Term Loan A due on December 31, 2026 (subsequently extended to September 20, 2027 through the amendments discussed below). The principal amount on Term Loan B is due at the maturity date of December 12, 2028 along with all accumulated paid in-kind (“PIK”) interest; the total principal amount of Term Loan B plus accumulated PIK interest as of December 31, 2025 was approximately $9.8 million.
On February 20, 2026 and March 20, 2026, we entered into the fifth and sixth amendments to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC. Pursuant to such amendments, (i) the Company prepaid $500,000 on Term Loan A (paid from the Blocked Account, as defined in the loan and security agreement) in connection with the fifth amendment and irrevocably authorized FAEC Agent, LLC, as the administrative agent to transfer up to
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$500,000 (the “Sixth Amendment Cash Collateral”) from the Blocked Account to an account maintained by the Administrative Agent to be held as cash collateral securing the Obligations (as defined in the loan and security agreement); (ii) the Company irrevocably authorized the administrative agent to: (a) apply all or any portion of the Sixth Amendment Cash Collateral to repay the Term Loan A, or (b) return all or any portion of the Sixth Amendment Cash Collateral to the Company, in each case at the lenders’ sole discretion; (iii) the liquid asset covenant requirement was reduced to: (a) at all times prior to the repayment in full of the First Out Obligations (as defined in the loan and security agreement), $500,000 minus that amount of Sixth Amendment Cash Collateral used to repay Term Loan A, and (b) at all times after the repayment in full of the First Out Obligations, $0; and (iv) the transaction closing date was extended to March 24, 2026.
On April 13, 2026, we entered into the seventh amendment to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC, which provided for, among other things: the ability of the Company to consummate the issuance of certain senior secured notes (as described below); the ability for IPX to convert its $500,000 Term Loan A to common shares of the Company at the price per share equal to $1.435, subject to adjustment; modifications to certain payment terms; modifications to certain financial covenants; modifications to certain financial reporting requirements; and the amendment of the FEAC Agent, LLC’s role to include certain limitations. In connection with the seventh amendment, FEAC Agent LLC’s affiliated lenders entered into agreements whereby a $500,000 portion of Term Loan A was sold and assigned to IPX, and the entirety of Term Loan B was sold and assigned to UTG. Additionally, the Company was relieved of its obligation to pay the remaining $325,000 amendment fee as specified in the fourth amendment.
Also on April 13, 2026, the Company entered into certain agreements with Smithline Family Trust II (“SFT”), Quick Capital, LLC (“Quick”), and IPX (collectively, the “Purchasers”), pursuant to which the Company issued and sold to the Purchasers 12.5% Senior Secured Notes due April 13, 2027 in the original principal amount of $3,005,780 (the “Secured Notes”) and 100,579 shares of the Company’s common stock. The Secured Notes were issued with an original issue discount, such that the cash proceeds received by the Company were $2,600,000. The Company is required to make $100,000 monthly payments on the Secured Notes commencing October 13, 2026, with the balance due at maturity. The Company’s obligations under the Secured Notes are guaranteed by certain direct and indirect subsidiaries of the Company pursuant to a subsidiary guarantee, and are secured by the assets of the Company and the subsidiary guarantors pursuant to a security agreement.
In the event that we fail in the future to satisfy other obligations under the agreements governing our indebtedness, including satisfying financial covenants, we would be in default with respect to that indebtedness and the lenders could declare such indebtedness to be immediately due and payable. Further, at any time after the occurrence of an event of default under the Secured Notes and for so long as such event of default is continuing, the Secured Notes (other than the Secured Note issued to IPX) are convertible into shares of common stock of the Company (i) initially at a fixed conversion price equal to $1.165 per share and (ii) after May 17, 2026, at a price equal to the lesser of (a) 85% multiplied by the lowest volume weighted average price of the common stock during the 10-trading day period prior to conversion and (b) $1.165. The Secured Note issued to IPX is convertible into shares of common stock of the Company initially at a fixed conversion price equal to $1.35 per share, subject to adjustment as set forth therein. In addition, to the extent that Company is listed on the Nasdaq Capital Market, the aggregate number of shares of common stock issuable to the Purchasers and any subsequent holder of the Secured Note shall not exceed 19.9% of the total number of shares of common stock outstanding or of the voting power of the common stock as of April 13, 2026 less the shares issued pursuant to the securities purchase agreement unless the Company has obtained stockholder approval in compliance with Nasdaq Listing Rule 5635(d) to authorize the issuance of shares of common stock in connection with the conversion or exchange of all Secured Notes. We also granted the Purchasers certain piggyback registration rights with respect to the shares of common stock issuable upon conversion of the Secured Notes.
Fees incurred in connection with the transactions described above were approximately $0.1 million.
As part of the transactions described above, IPX purchased $57,803 original principal amount of the Secured Notes and purchased 1,742 shares of common stock, on the same terms as the other Purchasers, except that the shares of common stock purchased by IPX were priced at current market value.
The net proceeds received from the April 13, 2026 issuance of the Secured Notes and shares as described above were used to repay $2.25 million of the Term Loan A debt, and an additional $1 million of the Term Loan A debt was paid with the
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Company’s restricted cash. As such, following the funding and completion of the transactions described above, the Company’s debt obligations will be as follows: (1) Senior Secured Notes in the principal amount of $2.6 million, with payments commencing October 13, 2026 and a maturity date of April 13, 2027, (2) Term Loan A in the principal amount of $0.5 million, payable on the maturity date of September 20, 2027, and (3) Term Loan B in the amount of $9.9 million, payable on the maturity date of December 12, 2028.
Obligations and Commitments
Term Loan Debt
Refer to information outlined above.
Senior Secured Notes
Refer to information outlined above.
Contingent Obligation – Lori Goldstein Earn-Out
In connection with the April 1, 2021 purchase of the Lori Goldstein trademarks, we had agreed to pay the seller additional cash consideration (the “Lori Goldstein Earn-Out”) of up to $12.5 million, based on royalties earned during the six calendar year period commencing in 2021. The Lori Goldstein Earn-Out was initially recorded as a liability of $6.6 million, based on the difference between the fair value of the acquired assets of the Lori Goldstein Brand and the total consideration paid. Through January 1, 2024, we paid $0.2 million to the seller, and as of January 1, 2024, the remaining balance of the contingent obligation was $6.4 million, of which approximately $1.03 million had been earned and was payable to the seller.
During the year ended December 31, 2024, we paid approximately $0.3 million to the seller. However, as a result of the June 30, 2024 divestiture of the Lori Goldstein Brand, the seller waived its rights with respect to the Lori Goldstein Earn-Out amounts that had been previously earned and had not yet been paid, and terminated its rights to any future payments under the Lori Goldstein Earn-Out. As a result, we de-recognized approximately $1.03 million of accrued Lori Goldstein Earn-Out payments and the remaining balance of approximately $5.05 million of contingent obligations recorded on the Company’s balance sheet. As of December 31, 2024, there were no liability amounts remaining on the Company’s balance sheet related to the Lori Goldstein Earn-Out.
Contingent Obligation – Isaac Mizrahi Transaction
Under the terms of the May 31, 2022 transaction related to the sale of a majority interest in the Isaac Mizrahi brand (as subsequently amended in 2023 and 2024), the Company had agreed with WHP (the buyer) that, in the event that the aggregate royalties received by IM Topco were less than $13.5 million for the twelve-month period ending March 31, 2025 or less than $18.0 million for the year ending December 31, 2025, Xcel was obligated to transfer equity interests in IM Topco to WHP equal to 12.5% of the total outstanding equity interests of IM Topco, such that Xcel’s ownership interest in IM Topco would decrease from 30% to 17.5%, and WHP’s ownership interest in IM Topco would increase from 70% to 82.5%.
During 2024, management concluded that, based on current trends in and projections of IM Topco’s royalty revenues as well as the Company’s decision to not make the certain additional royalty payments to IM Topco, it was virtually certain that the Company would be required to make such transfer of equity interests to WHP in 2025. As such, the Company estimated and recorded a contingent obligation of $4.21 million in the accompanying consolidated balance sheets, and recognized a corresponding non-cash charge in the consolidated statements of operations for the Prior Year.
During 2025, the Company adjusted the carrying value of the contingent obligation to its estimated fair value of $3.97 million, and recognized a $(0.24) million credit in the consolidated statements of operations. On and effective April 15, 2025, such equity interests were transferred to WHP in full satisfaction and settlement of this contractual obligation, and the previously recorded liability was de-recognized by reducing the value of the asset for the investment in IM Topco.
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Real Estate Leases
We are currently party to a lease (as lessee) for approximately 29,600 square feet of office space at 1333 Broadway, 10th floor, New York, New York. This location represented our former corporate offices and operations facility, and our lease for this location expires on October 30, 2027. Future payments under this lease are expected to be approximately $1.55 million for the year ending December 31, 2026 and $1.29 million for the year ending December 31, 2027. We have subleased this office space to a third-party subtenant through October 30, 2027, for which we expect to receive cash from the subtenant of $0.86 million for the year ending December 31, 2026 and $0.51 million for the year ending December 31, 2027.
We are also currently party to a lease (as lessee) for approximately 12,000 square feet of office space at 550 Seventh Avenue, 11th floor, New York, New York. This location represents our current corporate offices and operations facility, and our lease for this location expires in 2032. Future payments under this lease are expected to be approximately $0.51 million for the year ending December 31, 2026, $0.55 million for the year ending December 31, 2027, $0.57 million for the year ending December 31, 2028, $0.58 million for the year ending December 31, 2029, $0.60 million for the year ending December 31, 2030, $0.61 million for the year ending December 31, 2031, and $0.21 million for the year ending December 31, 2032.
Employment Contracts
We have entered into contracts with certain executives and key employees. The future minimum compensation payments under these contracts are approximately $2.2 million, of which $2.0 million and $0.2 million is expected to be paid in 2026 and 2027, respectively.
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.
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, and TowerHill by Christie Brinkley 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.
While the 2022 sale of a majority interest in the Isaac Mizrahi brand resulted in a substantial decrease in our licensing revenues, as that brand represented a significant portion of our historical licensing revenues, and the 2024 divestiture of the LOGO by Lori Goldstein brand also resulted in a notable decrease 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. The successful launch of the TowerHill by Christie Brinkley brand in 2024 is an example of this. In Spring 2026, we plan to launch the Trust-Respect-Love by Cesar Millan brand, which will expand and diversify our licensed products into the pet products sector, and the GemmaMade by Gemma Stafford and Mesa Mia by Jenny Martinez brands, which will expand and diversify our licensed products into baking, cooking, and food-related products sector.
During 2023 and 2024, we restructured our business by shifting from a wholesale/licensing hybrid model to a “licensing plus” business model, divesting certain brands, and undertaking various cost-cutting measures to more efficiently operate our business and reduce and better manage our exposure to operating risks. During 2025, we continued to implement additional measures to further optimize our cost structure. As a result, we have reduced our direct operating expenses to
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an expected run rate of less than $10 million per annum, which represents approximately $21 million of cost savings on an annualized basis compared to our cost structure in 2022.
Nonetheless, we continue to face a number of headwinds in the current macroeconomic environment. Poor economic and market conditions, including the cumulative impacts of inflation and rising consumer debt levels, along with the impact of tariffs on goods imported into the U.S., may negatively impact consumer 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 these conditions 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 attract 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, and other factors noted in the section captioned “Risk Factors” could adversely affect our licensees’ ability to meet and/or exceed their contractual commitments to us and thereby adversely affect our future operating results.
