XCel Brands, Inc. [XELB] Filings

10-Q 1 xelb-20240630x10q.htm 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from ___ to ___

Commission File Number: 001-37527

XCEL BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware		76-0307819
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

	550 Seventh Avenue, 11th Floor, New York, NY 10018
	(Address of Principal Executive Offices)

(347) 727-2474

(Issuer’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	XELB	NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 12, 2024, there were 23,507,126 shares of common stock, $.001 par value per share, of the issuer outstanding.

Table of Contents

XCEL BRANDS, INC.

INDEX

	a
		Page

PART I - FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets	3

	Unaudited Condensed Consolidated Statements of Operations	4

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	5

	Unaudited Condensed Consolidated Statements of Cash Flows	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

PART II - OTHER INFORMATION		38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

	Signatures	39

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30, 2024		December 31, 2023
	(Unaudited)		(Note 1)
Assets
Current Assets:
Cash and cash equivalents	$	924	$	2,998
Accounts receivable, net of allowances for credit losses of $30 and $75 at June 30, 2024 and December 31, 2023, respectively		3,055		3,454
Inventory		407		453
Prepaid expenses and other current assets		378		398
Total current assets		4,764		7,303
Non-current Assets:
Property and equipment, net		214		634
Operating lease right-of-use assets		4,099		4,453
Trademarks and other intangibles, net		36,532		41,520
Equity method investments		16,643		17,735
Other assets		920		15
Total non-current assets		58,408		64,357

Total Assets	$	63,172	$	71,660

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	2,353	$	2,236
Deferred revenue		989		889
Accrued income taxes payable		372		372
Current portion of operating lease obligations		1,354		1,258
Current portion of long-term debt		1,000		750
Current portion of contingent obligation		—		964
Total current liabilities		6,068		6,469
Long-Term Liabilities:
Deferred revenue		3,111		3,556
Long-term portion of operating lease obligations		5,964		4,021
Long-term debt, net, less current portion		3,524		3,971
Long-term portion of contingent obligation		—		5,432
Other long-term liabilities		430		40
Total long-term liabilities		13,029		17,020
Total Liabilities		19,097		23,489

Commitments and Contingencies

Stockholders' Equity:
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $.001 par value, 50,000,000 shares authorized, and 23,492,117 and 19,795,053 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		23		20
Paid-in capital		105,946		103,861
Accumulated deficit		(59,948)		(53,849)
Total Xcel Brands, Inc. stockholders' equity		46,021		50,032
Noncontrolling interest		(1,946)		(1,861)
Total Stockholders' Equity		44,075		48,171

Total Liabilities and Stockholders' Equity	$	63,172	$	71,660

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues
Net licensing revenue	$	2,826	$	2,428	$	5,010	$	4,650
Net sales		128		4,353		128		8,181
Net revenue		2,954		6,781		5,138		12,831
Cost of goods sold		38		3,800		38		6,493
Gross profit		2,916		2,981		5,100		6,338

Direct operating costs and expenses
Salaries, benefits and employment taxes		1,630		2,241		3,563		5,706
Other selling, general and administrative expenses		1,490		2,943		3,519		6,436
Total direct operating costs and expenses		3,120		5,184		7,082		12,142

Operating loss before other operating costs and expenses (income)		(204)		(2,203)		(1,982)		(5,804)

Other operating costs and expenses (income)
Depreciation and amortization		1,545		1,786		3,134		3,583
Asset impairment charges		1,188		—		3,483		—
Loss from equity method investments		557		515		1,090		1,030
Gain on divestiture of Lori Goldstein Brand		(3,801)		—		(3,801)		—
Gain on sale of limited partner ownership interest		—		(351)		—		(351)
Gain on settlement of lease liability		—		(445)		—		(445)

Operating income (loss)		307		(3,708)		(5,888)		(9,621)

Interest and finance expense (income), net		146		(7)		296		18

Income (loss) before income taxes		161		(3,701)		(6,184)		(9,639)

Income tax provision (benefit)		—		—		—		—

Net income (loss)		161		(3,701)		(6,184)		(9,639)
Net loss attributable to noncontrolling interest		(34)		(233)		(85)		(528)
Net income (loss) attributable to Xcel Brands, Inc. stockholders	$	195	$	(3,468)	$	(6,099)	$	(9,111)

Earnings (loss) per common share attributable to Xcel Brands, Inc. stockholders:
Basic earnings (loss) per share	$	0.01	$	(0.18)	$	(0.28)	$	(0.46)
Diluted earnings (loss) per share	$	0.01	$	(0.18)	$	(0.28)	$	(0.46)
Weighted average number of common shares outstanding:
Basic weighted average common shares outstanding		23,491,238		19,735,500		21,933,079		19,684,630
Diluted weighted average common shares outstanding		23,539,886		19,735,500		21,933,079		19,684,630

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)


	Xcel Brands, Inc. Stockholders
	Common Stock
	Number of			Paid-In		Accumulated		Noncontrolling
	Shares	Amount		Capital		Deficit		Interest		Total
Balance as of December 31, 2022	19,624,860	$	20	$	103,592	$	(32,797)	$	(676)	$	70,139

Compensation expense related to stock options and restricted stock	—		—		51		—		—		51

Shares issued to consultant in connection with stock grant	8,334		—		6		—		—		6

Net loss	—		—		—		(5,643)		(295)		(5,938)

Balance as of March 31, 2023	19,633,194		20		103,649		(38,440)		(971)		64,258

Compensation expense related to stock options and restricted stock	—		—		27		—		—		27

Shares issued to consultant in connection with stock grant	58,334		—		39		—		—		39

Shares issued on exercise of stock options, net of shares surrendered for cashless exercises	9,128		—		—		—		—		—

Net income (loss)	—		—		—		(3,468)		(233)		(3,701)

Balance as of June 30, 2023	19,700,656	$	20	$	103,715	$	(41,908)	$	(1,204)	$	60,623


Balance as of December 31, 2023	19,795,053	$	20	$	103,861	$	(53,849)	$	(1,861)	$	48,171

Compensation expense related to stock options and restricted stock	—		—		36		—		—		36

Contra-revenue related to warrants held by licensee	—		—		10		—		—		10

Shares issued to consultant in connection with stock grant	78,000		—		98		—		—		98

Shares issued in connection with public offering and private placement transactions, net of transaction costs	3,579,064		3		1,899		—		—		1,902

Net loss	—		—		—		(6,294)		(51)		(6,345)

Balance as of March 31, 2024	23,452,117		23		105,904		(60,143)		(1,912)		43,872

Compensation expense related to stock options and restricted stock	—		—		32		—		—		32

Contra-revenue related to warrants held by licensee	—		—		10		—		—		10

Shares issued to directors in connection with restricted stock grants	40,000		—		—		—		—		—

Net income (loss)	—		—		—		195		(34)		161

Balance as of June 30, 2024	23,492,117	$	23	$	105,946	$	(59,948)	$	(1,946)	$	44,075

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	For the Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(6,184)	$	(9,639)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		3,134		3,583
Asset impairment charges		3,483		100
Amortization of deferred finance costs included in interest expense		54		—
Stock-based compensation and cost of licensee warrants		186		122
Provision for (recovery of) credit losses		(45)		—
Undistributed proportional share of net loss of equity method investees		1,090		1,030
Gain on divestiture of Lori Goldstein brand		(3,801)		—
Gain on sale of limited partner ownership interest		—		(351)
Gain on settlement of lease liability		—		(445)
Changes in operating assets and liabilities:
Accounts receivable		444		(1,768)
Inventory		46		2,047
Prepaid expenses and other current and non-current assets		(146)		863
Deferred revenue		(345)		5,041
Accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities		(555)		(1,637)
Lease-related assets and liabilities		(634)		(417)
Other long-term liabilities		390		—
Net cash used in operating activities		(2,883)		(1,471)

Cash flows from investing activities
Net proceeds from sale of assets		—		451
Purchase of property and equipment		(104)		(81)
Net cash (used in) provided by investing activities		(104)		370

Cash flows from financing activities
Proceeds from public offering and private placement transactions, net of transaction costs		1,902		—
Payment of long-term debt		(250)		—
Net cash provided by financing activities		1,652		—

Net decrease in cash, cash equivalents, and restricted cash		(1,335)		(1,101)

Cash, cash equivalents, and restricted cash at beginning of period		2,998		4,608

Cash, cash equivalents, and restricted cash at end of period	$	1,663	$	3,507

Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents	$	924	$	3,507
Restricted cash (reported in other non-current assets)		739		—
Total cash, cash equivalents, and restricted cash	$	1,663	$	3,507

Supplemental disclosure of non-cash activities:
Recognition of operating lease right-of-use asset	$	2,596	$	—
Recognition of operating lease obligation	$	2,596	$	—

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	234	$	—
Cash paid during the period for income taxes	$	—	$	16

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2024

(Unaudited)

1. Nature of Operations, Background, and Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2023 (which has been derived from audited financial statements) and the unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements were prepared following the same policies and procedures used in the preparation of the audited consolidated financial statements and reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the results of operations, financial position, and cash flows of Xcel Brands, Inc. and its subsidiaries (the “Company” or "Xcel"). The results of operations for the interim periods presented herein are not necessarily indicative of the results for the entire fiscal year or for any future interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 19, 2024.

The Company 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.

Currently, the Company’s brand portfolio consists of the Halston brands (the "Halston Brand"), the Judith Ripka brands (the "Ripka Brand"), the C Wonder brands (the "C Wonder Brand"), the Longaberger brand (the “Longaberger Brand”), the Isaac Mizrahi brands (the "Isaac Mizrahi Brand"), the TowerHill by Christie Brinkley brand (the “CB Brand”), and other proprietary brands.

●

The Halston Brand, Ripka Brand, and C Wonder Brand are wholly owned by the Company.

●

The Company manages the Longaberger Brand through its 50% ownership interest in Longaberger Licensing, LLC; the Company consolidates Longaberger Licensing, LLC and recognizes noncontrolling interest for the remaining ownership interest held by a third party.

●

The Company holds a noncontrolling interest in the Isaac Mizrahi Brand through its 30% ownership interest in IM Topco, LLC; the Company accounts for its interest in IM Topco, LLC using the equity method of accounting.

●

The CB Brand is a new co-branded collaboration between Xcel and Christie Brinkley, announced in 2023 and launched in May 2024.

The Company’s brand portfolio also included the LOGO by Lori Goldstein brand (the “Lori Goldstein Brand”) as a wholly owned brand from April 1, 2021 through June 30, 2024; the Lori Goldstein Brand was divested on June 30, 2024 (see Note 3 for additional details).

The Company also owns a 30% interest in ORME Live, Inc. (“ORME”), a short-form video and social commerce marketplace that launched in April 2024.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2024

(Unaudited)

The Company primarily generates revenue through the licensing of its brands through contractual arrangements with manufacturers and retailers. The Company, through its licensees, distributes through an 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, traditional brick-and-mortar retailers, and e-commerce channels, to be everywhere its customers shop.

Prior to and for a portion of 2023, the Company also engaged in wholesale and direct-to-consumer sales of products under its brands. The Company’s former wholesale and direct-to-consumer operations were presented as "Net sales" and "Cost of goods sold" in the condensed consolidated statements of operations, separately from the Company’s licensing revenues. The only net sales and cost of goods sold recognized for the three and six months ended June 30, 2024 were related to the final sale of certain residual jewelry inventories; as of June 30, 2024, the Company has no remaining jewelry inventory. The Company’s remaining inventory as of June 30, 2024 all relates to the Longaberger Brand, and the Company plans to sell off this remaining inventory by December 31, 2024.

Liquidity and Management’s Plans

The Company incurred a net loss attributable to Company stockholders of approximately $6.1 million during the six months ended June 30, 2024 (which included non-cash expenses of approximately $7.7 million), and had an accumulated deficit of approximately $59.9 million as of June 30, 2024. Net cash used in operating activities was approximately $2.9 million for the six months ended June 30, 2024. The Company had working capital (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in common stock) of approximately $1.1 million as of June 30, 2024. The Company’s unrestricted cash and cash equivalents were approximately $0.9 million as of June 30, 2024. The aforementioned factors raise uncertainties about the Company’s ability to continue as a going concern.

During the year ended December 31, 2023, management implemented a plan to mitigate an expected shortfall of capital and to support future operations by shifting its business from a wholesale/licensing hybrid model into a “licensing plus” model. To affect this transition, the Company entered into various new licensing agreements and joint venture arrangements with best-in-class business partners. These restructuring initiatives were substantially completed as of June 30, 2023. Management believes that this evolution of the Company’s operating model will provide the Company with significant cost savings and allow the Company to reduce and better manage its exposure to operating risks. As of December 31, 2023, the Company had reduced payroll costs by approximately $6 million and operating expenses (excluding non-recurring charges related to the restructuring) by approximately $9 million, on an annualized basis when compared to the corresponding periods in 2022.

In addition, during the first six months of 2024, management took actions which further reduced direct operating expenses to a run rate of approximately $12.5 million per annum, and going forward beginning in the third quarter of 2024, will reduce operating expenses to a run rate of approximately $10 million per annum, due to the elimination of expenses related to the Lori Goldstein Brand and reduction of executive cash compensation.

Also during the year ended December 31, 2023, the Company entered into a new term loan agreement in the amount of $5 million, which provided the Company with additional liquidity.

During the six months ended June 30, 2024, the Company issued new shares of common stock for net proceeds of approximately $1.9 million, which provided the Company with additional liquidity. Additionally, the Company entered into a divestiture transaction which relieved the Company of its contractual obligations to make future cash payments of approximately $1.0 million, and also relieved the Company of a potential future contingent obligation to make future cash payments of up to $11.3 million.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2024

(Unaudited)

Based on the aforementioned events and changes, management expects that existing cash and future operating cash flows will be adequate to meet the Company’s operating needs, term debt service obligations, and capital expenditure needs, for at least the twelve months subsequent to the filing date of this Quarterly Report on Form 10-Q; therefore, such conditions and uncertainties with respect to the Company’s ability to continue as a going concern as of June 30, 2024, have been alleviated.

2. Investments in Unconsolidated Affiliates and Variable Interest Entities

Investment in IM Topco, LLC

On May 27, 2022, Xcel (along with IM Topco, LLC (“IM Topco”) and IM Brands, LLC (“IMB”), both wholly owned subsidiaries of the Company) and IM WHP, LLC (“WHP”), a subsidiary of WHP Global, a private equity-backed brand management and licensing company, entered into a membership purchase agreement. Pursuant to this agreement, on May 31, 2022, (i) the Company contributed assets owned by IMB, including the Isaac Mizrahi Brand trademarks and other intellectual property rights relating thereto into IM Topco, and (ii) the Company sold 70% of the membership interests of IM Topco to WHP.

The Company accounts for its 30% interest in the ongoing operations of IM Topco as other operating costs and expenses under the equity method of accounting. Pursuant to the business venture agreement between the Company and WHP governing the operation of IM Topco, IM Topco’s net cash flow (as defined in the agreement) shall be distributed to the members during each fiscal year no less than once per fiscal quarter, as follows:

(i)

first, 100% to WHP, until WHP has received an aggregate amount during such fiscal year equal to $8,852,000 (subject to adjustment in certain circumstances as set forth in the agreement);

(ii)

second, 100% to Xcel, until Xcel has received an aggregate amount during such fiscal year equal to $1,316,200 (subject to adjustment in certain circumstances as set forth in the agreement); and

(iii)

thereafter, in proportion to the members’ respective percentage interests.

Further, on April 12, 2024, the Company, WHP, and IM Topco entered into an amendment of the business venture agreement, such that on and after January 1, 2026, WHP shall receive 50% of the net cash flow which would otherwise be payable to Xcel, until WHP has received an aggregate amount of additional net cash flow equal to $1,000,000.

Based on these distribution provisions, the Company recognized an equity method loss related to its investment in IM Topco of $0.52 million for each of the three-month periods ended June 30, 2024 and 2023, and $1.03 million for each of the six-month periods ended June 30, 2024 and 2023. For cash flow earnings (i.e., net income before intangible asset amortization expense), management allocated the amounts based on the preferences outlined above. As such, Xcel recognized no cash-based earnings for all of the periods presented. For non-cash amortization expense, management allocated the amounts based on the relative ownership of each member (i.e., 70% WHP and 30% Xcel). The equity method loss for each period presented is equal Xcel’s share of amortization expense.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2024

(Unaudited)

Summarized financial information for IM Topco for the three and six months ended June 30, 2024 and 2023 is as follows:


	For the three months ended				For the six months ended
	June 30,				June 30,
($ in thousands)	2024		2023		2024		2023
Revenues	$	2,711	$	3,573	$	5,463	$	6,919
Gross profit		2,711		3,573		5,463		6,919
(Loss) income from continuing operations		(374)		206		(771)		113
Net (loss) income		(374)		206		(771)		113

Refer to Note 11 and Note 12 for additional information regarding the Company’s ongoing relationship with IM Topco.

Investment in Orme Live, Inc.

In December 2023, the Company contributed $0.15 million of cash to ORME in exchange for a 30% equity ownership interest in ORME. The carrying value of this investment was $0.09 million and $0.15 million as of June 30, 2024 and December 31, 2023, respectively, and is included within other assets in the Company’s condensed consolidated balance sheets.

The Company accounts for its 30% interest in the operations of ORME as a component of other operating costs and expenses under the equity method of accounting. The Company’s proportional share of the operating results of ORME for the three and six months ended June 30, 2024 was a loss of approximately $0.04 million and $0.06 million, respectively.

Longaberger Licensing, LLC Variable Interest Entity

Since 2019, Xcel has been party to a limited liability company agreement with a subsidiary of Hilco Global related to Longaberger Licensing, LLC (“LL”). Hilco Global is the sole Class A Member of LL, and Xcel is the sole Class B Member of LL (each individually a “Member”). Each Member holds a 50% equity ownership interest in LL; however, based on an analysis of the contractual terms and rights contained in the LLC agreement and related agreements, the Company has previously determined that under the applicable accounting standards, LL is a variable interest entity and the Company has effective control over LL. Therefore, as the primary beneficiary, the Company has consolidated LL since 2019, and has recognized the assets, liabilities, revenues, and expenses of LL as part of its consolidated financial statements, along with a noncontrolling interest which represents Hilco Global’s 50% ownership share in LL.

3. Divestiture Transaction

On June 21, 2024, the Company (through its wholly owned subsidiary, Gold Licensing, LLC) entered into an asset purchase agreement with Lori Goldstein and Lori Goldstein, Ltd (together the “LG Parties”), pursuant to which the Company agreed to sell, and the LG Parties agreed to purchase, substantially all of the assets of the Lori Goldstein Brand, including the “LOGO by Lori Goldstein” trademark and other intellectual property rights relating thereto. Also in conjunction with this transaction, key license agreements related to the Lori Goldstein Brand were assigned to and assumed by the LG Parties. This divestiture transaction closed on June 30, 2024.

As consideration for the sale of these assets, the parties agreed to the following:

●

The LG Parties waived their rights with respect to certain contingent consideration amounts that had been previously earned by the LG Parties (under the terms of the April 1, 2021 purchase of the assets by Xcel), and terminated their rights to any future earn-out payments.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2024

(Unaudited)

●

The Company retained the right to all royalties and fee income for net sales from licensees related to the Lori Goldstein Brand through the closing date.

●

The Company’s May 2, 2024 termination of the employment agreement and consulting agreement with the LG Parties was withdrawn and stayed until the closing date. The Company paid Ms. Goldstein and Lori Goldstein, Ltd a combined total of $25,000 as compensation for services rendered under the employment agreement and consulting agreement through June 30, 2024, and also reimbursed Ms. Goldstein for expenses incurred in the course of fulfilling her duties under the employment agreement through June 30, 2024.

●

The Company and the LG Parties entered into a mutual general release and waiver of outstanding legal disputes.

Thus, the total consideration received by the Company for this divestiture transaction was approximately $6.08 million, comprised of (i) the waiver of approximately $1.03 million of accrued earn-out payments earned by the LG Parties through June 30, 2024, plus (ii) the release of the remaining balance of approximately $5.05 million of contingent obligations recorded on the Company’s balance sheet. The remaining unamortized net book value of the Lori Goldstein intangible assets immediately prior to the sale was approximately $1.93 million, and the Company also incurred approximately $0.35 million of legal fees in connection with this transaction. As such, the Company recorded a net non-cash gain on the divestiture of the Lori Goldstein Brand of approximately $3.80 million for the three and six months ended June 30, 2024.

4. Trademarks and Other Intangibles

Trademarks and other intangibles, net consist of the following:


	Weighted
	Average	June 30, 2024
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (finite-lived)	15 years		58,580		22,100		36,480
Copyrights and other intellectual property	8 years		429		377		52
Total		$	59,009	$	22,477	$	36,532


	Weighted
	Average	December 31, 2023
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (finite-lived)	15 years		68,880		27,431		41,449
Copyrights and other intellectual property	8 years		429		358

XCel Brands, Inc. [XELB] Filings
10-Q	[2024-08-14]
10-Q	[2024-05-20]
10-K	[2024-04-19]
10-Q	[2023-11-20]
10-Q	[2023-08-14]
10-Q	[2023-05-18]
10-K	[2023-04-17]
10-Q	[2022-11-14]
10-Q	[2022-08-15]
10-Q	[2022-05-23]
10-K	[2022-04-15]
10-Q	[2021-11-15]
10-Q	[2021-08-13]
10-Q	[2021-05-17]
10-K	[2021-04-23]
10-Q	[2020-11-13]
10-Q	[2020-08-19]
10-Q	[2020-05-19]
10-K	[2020-04-14]
10-Q	[2019-11-14]
10-Q	[2019-08-12]
10-Q	[2019-05-15]
10-K	[2019-04-01]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-Q	[2018-05-15]
10-K	[2018-03-30]
10-Q	[2017-11-13]
10-Q	[2017-08-10]
10-Q	[2017-05-11]
10-K	[2017-03-24]
10-Q	[2016-11-14]
10-Q	[2016-08-10]
10-Q	[2016-05-10]
10-K	[2016-03-17]
10-Q	[2015-11-13]
10-Q	[2015-08-14]
10-Q	[2015-05-15]
10-K	[2015-03-31]
S-1	[2015-02-11]
10-Q	[2014-11-14]
10-Q	[2014-08-14]
10-Q	[2014-05-14]
10-K	[2014-04-11]
10-Q	[2013-11-14]
S-1	[2013-09-20]
10-Q	[2013-08-13]
10-Q	[2013-05-14]
10-K	[2013-03-15]
10-Q	[2012-11-19]
10-Q	[2012-08-14]
10-Q	[2012-05-14]
10-K	[2012-03-30]