10-Q

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, 2021

or

☐    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.)

1333 Broadway, 10th 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 Global 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 9, 2021, there were 19,540,254 shares of common stock, $.001 par value per share, of the issuer outstanding.

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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II - OTHER INFORMATION		35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
	Signatures	36

2

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, 2021		December 31, 2020
	(Unaudited)		(Note 1)
Assets
Current Assets:
Cash and cash equivalents	$	4,815	$	4,957
Accounts receivable, net of allowances of $1,284 and $1,151, respectively		10,662		8,889
Inventory		3,146		1,216
Prepaid expenses and other current assets		1,751		1,085
Total current assets		20,374		16,147
Property and equipment, net		3,515		3,367
Operating lease right-of-use assets		7,914		8,668
Trademarks and other intangibles, net		101,412		93,535
Restricted cash		739		1,109
Other assets		222		228
Total non-current assets		113,802		106,907
Total Assets	$	134,176	$	123,054
Liabilities and Equity
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	5,010	$	4,442
Accrued payroll		660		973
Acquisition consideration payable		2,045		—
Current portion of operating lease obligation		1,720		2,101
Current portion of long-term debt		4,000		2,800
Total current liabilities		13,435		10,316
Long-Term Liabilities:
Long-term portion of operating lease obligation		7,869		8,469
Long-term debt, less current portion		20,829		13,838
Contingent obligations		7,539		900
Deferred tax liabilities, net		1,571		3,052
Other long-term liabilities		591		224
Total long-term liabilities		38,399		26,483
Total Liabilities		51,834		36,799
Commitments and Contingencies
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 19,530,855 and 19,260,862 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		20		19
Paid-in capital		102,852		102,324
Accumulated deficit		(20,700)		(16,595)
Total Xcel Brands, Inc. stockholders' equity		82,172		85,748
Noncontrolling interest		170		507
Total Equity		82,342		86,255
Total Liabilities and Equity	$	134,176	$	123,054

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

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,
	2021		2020		2021		2020
Revenues
Net licensing revenue	$	6,224	$	4,501	$	10,531	$	10,142
Net sales		4,540		549		8,042		4,435
Net revenue		10,764		5,050		18,573		14,577
Cost of goods sold (sales)		3,063		253		4,898		2,653
Gross profit		7,701		4,797		13,675		11,924
Operating costs and expenses
Salaries, benefits and employment taxes		4,049		2,882		8,101		6,830
Other selling, general and administrative expenses		3,090		2,366		6,128		5,015
Recovery of costs in connection with potential acquisitions		—		(101)		—		(21)
Stock-based compensation		431		488		591		731
Depreciation and amortization		1,848		1,329		3,058		2,632
Government assistance - Paycheck Protection Program		—		(1,640)		—		(1,640)
Asset impairment charges		—		82		—		82
Total operating costs and expenses		9,418		5,406		17,878		13,629
Operating loss		(1,717)		(609)		(4,203)		(1,705)
Interest and finance expense
Interest expense - term loan debt		522		310		798		623
Other interest and finance charges (income), net		100		(11)		104		(30)
Loss on extinguishment of debt		821		—		821		—
Total interest and finance expense		1,443		299		1,723		593
Loss before income taxes		(3,160)		(908)		(5,926)		(2,298)
Income tax (benefit) provision		(1,346)		428		(1,484)		(124)
Net loss		(1,814)		(1,336)		(4,442)		(2,174)
Less: Net loss attributable to noncontrolling interest		(256)		(36)		(337)		(69)
Net loss attributable to Xcel Brands, Inc. stockholders	$	(1,558)	$	(1,300)	$	(4,105)	$	(2,105)
Loss per share attributable to Xcel Brands, Inc. common stockholders:
Basic net loss per share	$	(0.08)	$	(0.07)	$	(0.21)	$	(0.11)
Diluted net loss per share	$	(0.08)	$	(0.07)	$	(0.21)	$	(0.11)
Weighted average number of common shares outstanding:
Basic weighted average common shares outstanding		19,449,116		19,132,244		19,355,795		19,001,321
Diluted weighted average common shares outstanding		19,449,116		19,132,244		19,355,795		19,001,321

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

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		Total
	Shares	Amount		Capital		Deficit		Interest		Equity
Balance as of December 31, 2019	18,866,417	$	19	$	101,736	$	(3,659)	$	356	$	98,452
Shares issued to employees in connection with stock grants for bonus payments	336,700		—		220		—		—		220
Shares repurchased from employees in exchange for withholding taxes	(155,556)		—		(102)		—		—		(102)
Compensation expense in connection with stock options and restricted stock	—		—		91		—		—		91
Net loss	—		—		—		(805)		(33)		(838)
Balance as of March 31, 2020	19,047,561		19		101,945		(4,464)		323		97,823
Compensation expense in connection with stock options and restricted stock	—		—		55		—		—		55
Shares issued to employees in connection with restricted stock grants	270,728		—		265		—		—		265
Shares repurchased from employees in exchange for withholding taxes	(87,249)		—		(85)		—		—		(85)
Additional investment in Longaberger Licensing, LLC by non-controlling interest holder	—		—		—		—		300		300
Net loss	—		—		—		(1,300)		(36)		(1,336)
Balance as of June 30, 2020	19,231,040	$	19	$	102,180	$	(5,764)	$	587	$	97,022
Balance as of December 31, 2020	19,260,862	$	19	$	102,324	$	(16,595)	$	507	$	86,255
Compensation expense in connection with stock options and restricted stock	—		—		169		—		—		169
Shares issued on exercise of stock options, net	1,667		—		—		—		—		—
Net loss	—		—		—		(2,547)		(81)		(2,628)
Balance as of March 31, 2021	19,262,529		19		102,493		(19,142)		426		83,796
Compensation expense in connection with stock options and restricted stock	—		—		52		—		—		52
Shares issued to executive in connection with stock grants for bonus payments	181,179		1		282		—		—		283
Shares issued to consultants in connection with restricted stock grants	14,045		—		25		—		—		25
Shares issued to directors in connection with restricted stock grants	50,000		—		—		—		—		—
Shares issued on exercise of stock options, net	23,102		—		—		—		—		—
Net loss	—		—		—		(1,558)		(256)		(1,814)
Balance as of June 30, 2021	19,530,855	$	20	$	102,852	$	(20,700)	$	170	$	82,342

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	For the Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(4,442)	$	(2,174)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense		3,058		2,632
Asset impairment charges		—		82
Amortization of deferred finance costs		109		50
Stock-based compensation		591		731
Allowance for doubtful accounts		132		683
Loss on extinguishment of debt (non-cash portion)		454		—
Deferred income tax benefit		(1,484)		(124)
Changes in operating assets and liabilities:
Accounts receivable		(2,392)		3,396
Inventory		(1,930)		33
Prepaid expenses and other assets		(174)		(59)
Accounts payable, accrued expenses and other current liabilities		192		(2,688)
Cash paid in excess of rent expense		(225)		(181)
Other liabilities		367		—
Net cash (used in) provided by operating activities		(5,744)		2,381
Cash flows from investing activities
Cash consideration for acquisition of Lori Goldstein assets		(1,616)		—
Purchase of other intangible assets		(37)		—
Purchase of property and equipment		(747)		(634)
Net cash used in investing activities		(2,400)		(634)
Cash flows from financing activities
Proceeds from exercise of stock options		5		—
Shares repurchased including vested restricted stock in exchange for withholding taxes		—		(187)
Proceeds from revolving loan debt		1,500		—
Proceeds from long-term debt		25,000		10
Payment of deferred finance costs		(1,131)		—
Payment of long-term debt		(17,375)		(750)
Payment of breakage fees associated with extinguishment of long-term debt		(367)		—
Net cash provided by (used in) financing activities		7,632		(927)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(512)		820
Cash, cash equivalents, and restricted cash at beginning of period		6,066		5,750
Cash, cash equivalents, and restricted cash at end of period	$	5,554	$	6,570
Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents	$	4,815	$	5,461
Restricted cash		739		1,109
Total cash, cash equivalents, and restricted cash	$	5,554	$	6,570
Supplemental disclosure of non-cash activities:
Consideration payable to seller of Lori Goldstein assets	$	2,045	$	—
Contingent obligation related to acquisition of Lori Goldstein assets at fair value	$	6,639	$	—
Liability for equity-based bonuses	$	62	$	100
Amount due from noncontrolling interest for capital contribution	$	—	$	300
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes	$	15	$	47
Cash paid during the period for interest	$	852	$	811

See Notes to Unaudited Condensed Consolidated Financial Statements.

6

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

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

The accompanying condensed consolidated balance sheet as of December 31, 2020 (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, 2020, as filed with the SEC on April 23, 2021.

Certain reclassifications have been made to prior year comparable period financial statements to conform to classifications used in the current year – specifically, the classification and aggregation / disaggregation of certain types of operating costs and expenses, and the disaggregation of the components of interest and finance expense. These reclassifications had no impact on total operating costs and expenses, total interest and finance expense, net loss, stockholders’ equity, or cash flows as previously reported.

The Company is a media and consumer products company engaged in the design, production, marketing, live streaming, wholesale distribution, and direct-to-consumer 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 Isaac Mizrahi brands (the "Isaac Mizrahi Brand"), the LOGO by Lori Goldstein brand, the Judith Ripka brands (the "Ripka Brand"), the Halston brands (the "Halston Brands"), the C Wonder brands (the "C Wonder Brand"), and other proprietary brands. The Company also manages the Longaberger brand (the “Longaberger Brand”) through its 50% ownership interest in Longaberger Licensing, LLC. The Company acquired the LOGO by Lori Goldstein brand, and the various labels under the brand, on April 1, 2021 (see Note 2).

The Company designs, produces, markets, and distributes products, licenses its brands to third parties, and generates licensing revenues. The Company and its licensees distribute through an omni-channel retail sales strategy, which includes distribution through interactive television, digital live-stream shopping, brick-and-mortar retail, wholesale, and e-commerce channels to be everywhere its customers shop.

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") No. 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions to the general principles in Topic 740, including, but not limited to, intraperiod tax allocations and interim period tax calculations. The ASU also provides additional clarification and guidance related to recognition of franchise taxes and changes in tax laws. The adoption of this new guidance did not have any impact on the Company’s results of operations, cash flows, and financial condition.

7

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

2.      Acquisitions

Acquisition of LOGO by Lori Goldstein Brand

On March 30, 2021, the Company and its wholly owned subsidiary, Gold Licensing, LLC, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Lori Goldstein, Ltd. (the “Seller”) and Lori Goldstein (“Shareholder”), pursuant to which the Company agreed to acquire, and the Seller and Shareholder agreed to sell, certain assets of the Seller, including the “LOGO by Lori Goldstein” trademark and other intellectual property rights relating thereto. On April 1, 2021 (the “Closing Date”), the Company completed the acquisition of the assets specified in the Asset Purchase Agreement.

Pursuant to the Asset Purchase Agreement, on the Closing Date, the Company delivered $1.6 million in cash consideration to the Seller. In addition, the Company was required to deliver $2.0 million in cash consideration to the Seller on the earlier of (i) the Company’s receipt of the first royalty payment from QVC, Inc. in respect of the acquired assets, or (ii) July 29, 2021. This payment was made in July 2021.

In addition to the consideration described above, the Seller is eligible to earn additional consideration of up to $12.5 million (the “Lori Goldstein Earn-Out”), which would be payable, in cash, within 45 days after the end of each applicable calendar year during the six calendar year period commencing 2021 in an amount equal to 75% percent of the Royalty Contribution (as defined in the Asset Purchase Agreement) for such calendar year. The Company recorded a contingent obligation of $6.6 million related to the Lori Goldstein Earn-Out, based on the difference between the fair value of the acquired assets of the LOGO by Lori Goldstein brand and the total consideration paid, in accordance with the guidance in Accounting Standards Codification (“ASC”) Subtopic 805-50.

The LOGO by Lori Goldstein brand acquisition was accounted for as an asset purchase. The following represents the aggregate purchase price of $10.3 million:

($ in thousands)
Cash paid at closing	$	1,600
Cash consideration payable		2,045
Total direct initial consideration		3,645
Direct transaction expenses		16
Contingent obligation (Lori Goldstein Earn-Out)		6,639
Total consideration	$	10,300

The aggregate purchase price has been allocated entirely to the trademarks of the brand. Such trademarks have been determined by management to have a finite useful life, and accordingly, amortization is recorded in the Company’s condensed consolidated statements of operations. The Lori Goldstein trademarks are being amortized on a straight-line basis over their expected useful life of four years.

Upon the consummation of the acquisition of the LOGO by Lori Goldstein brand as described above, the Company incurred cash bonuses totaling $175,000 to certain members of the Company’s senior management (including $100,000 to the Chief Executive Officer, and $25,000 each to the Chief Financial Officer, President and Chief Operating Officer, and Executive Vice President of Business Development and Treasury), such success-related bonuses having been approved by the Board of Directors on March 18, 2021. These bonuses were subsequently paid in May 2021.

8

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

Additionally, concurrent with the acquisition, the Company also entered into a 10-year employment agreement with the Shareholder to serve as the LOGO by Lori Goldstein brand’s Chief Creative Officer and Spokesperson, with a base salary of $0.9 million per annum through December 31, 2021 and $1.2 million per annum thereafter, and the opportunity to earn additional incentives based on the future net royalties related to the brand. Further, the Company concurrently entered into a consulting agreement with the Seller to provide creative advice and consultation, for a fee of $0.6 million per annum through December 31, 2021 and $0.8 million per annum thereafter.

3.      Trademarks and Other Intangibles

Trademarks and other intangibles, net consist of the following:

	Weighted
	Average	June 30, 2021
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (indefinite-lived)	n/a	$	44,500	$	—	$	44,500
Trademarks (finite-lived)	15 years		20,386		6,330		14,056
Trademarks (finite-lived)	18 years		38,194		5,254		32,940
Trademarks (finite-lived)	4 years		10,300		644		9,656
Other intellectual property	7 years		762		591		171
Copyrights and other intellectual property	9 years		227		138		89
Total		$	114,369	$	12,957	$	101,412

	Weighted
	Average	December 31, 2020
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (indefinite-lived)	n/a	$	44,500	$	—	$	44,500
Trademarks (finite-lived)	15 years		20,386		5,640		14,746
Trademarks (finite-lived)	18 years		38,194		4,192		34,002
Other intellectual property	7 years		762		537		225
Copyrights and other intellectual property	10 years		190		128		62
Total		$	104,032	$	10,497	$	93,535

Amortization expense for intangible assets was approximately $1.55 million for the three-month period ended March 31, 2021 (the "current quarter") and was approximately $1.14 million for the three-month period ended March 31, 2020 (the "prior year quarter"). Amortization expense for intangible assets was approximately $2.46 million for the six-month period ended June 30, 2021 (the “current six months”) and was approximately $2.28 million for the six-month period ended June 30, 2020 (the “prior year six months”).

The trademarks related to the Isaac Mizrahi Brand have been determined to have indefinite useful lives and, accordingly, no amortization has been recorded for these assets.

9

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows:

($ in thousands)	Amortization
Year Ending December 31,	Expense
2021 (July 1 through December 31)	$	3,110
2022		6,219
2023		6,219
2024		6,199
2025		4,257
Thereafter		30,908
Total	$	56,912

4.      Significant Contracts

QVC Agreements

Under the Company’s agreements with Qurate Retail Group (“Qurate”), collectively referred to as the QVC Agreements, Qurate is required to pay the Company fees based primarily on a percentage of its net sales of Isaac Mizrahi, Judith Ripka, Lori Goldstein, and Longaberger branded merchandise. Qurate royalty revenue represents a significant portion of the Company’s total revenues.

● Revenues from the QVC Agreements totaled $5.45 million and $4.04 million for the current and prior year quarter, respectively, representing approximately 51% and 81% of the Company’s total net revenues for the current and prior year quarter, respectively.

● Revenues from the QVC Agreements totaled $9.19 million and $8.74 million for the current and prior year six months, respectively, representing approximately 50% and 60% of the Company’s total net revenues for the current and prior year six months, respectively.

● As of June 30, 2021 and December 31, 2020, the Company had receivables from Qurate of $5.61 million and $4.46 million, respectively, representing approximately 53% and 50% of the Company’s total accounts receivable, respectively.

5. Allowance for Doubtful Accounts

Accounts receivable are presented on the Company’s condensed consolidated balance sheets net of allowances of $1,284,000 and $1,151,000 as of June 30, 2021 and December 31, 2020, respectively. The Company recognized bad debt expense of $0 and $472,000 for the current quarter and prior year quarter, respectively, and recognized bad debt expense of $132,000 and $683,000 for the current six months and prior year six months, respectively.

The bad debt expense amounts for the current six months, prior year quarter, and prior year six months include $132,000, $472,000, and $586,000, respectively, of bad debt expense related to the bankruptcy of and economic impact on certain retail customers due to the COVID-19 pandemic. The total allowance of $1.1 million against such customers’ outstanding receivable balances of $1.5 million at June 30, 2021 represents management’s best estimate of collectibility, based on information currently available.

10

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

6. Leases

The Company has operating leases for its current office, former office, and a retail store location, as well as certain equipment with a term of 12 months or less. The Company’s real estate leases have remaining lease terms of between approximately 8 months and 8 years.

Under GAAP, a lessee is generally required to recognize a liability for its obligation to make future lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying leased asset for the lease term. The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease ROU assets, current portion of operating lease liabilities, and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets. The Company does not recognize lease liabilities and ROU assets for lease terms of 12 months or less, but recognizes such lease payments in net income on a straight-line basis over the lease terms.

Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is generally recognized on a straight-line basis over the lease term.

For both the current and prior year quarter, lease expense included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $0.4 million. For the current and prior year six months, lease expense included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $0.8 million.

As of June 30, 2021, the weighted average remaining operating lease term was approximately 6.0 years and the weighted average discount rate for operating leases was 6.25%.

Cash paid for amounts included in the measurement of operating lease liabilities was $0.7 million in the current quarter, $1.3 million in the current six months, $0.1 million in the prior year quarter, and $0.7 million in the prior year six months.

As of June 30, 2021, the maturities of lease liabilities were as follows:

($ in thousands)
2021 (July 1 through December 31)	$	1,228
2022		1,891
2023		1,711
2024		1,711
2025		1,710
After 2025		3,321
Total lease payments		11,572
Less: Discount		1,983
Present value of lease liabilities		9,589
Current portion of lease liabilities		1,720
Non-current portion of lease liabilities	$	7,869

11

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

7. Debt

The Company’s net carrying amount of debt was comprised of the following:

	June 30,		December 31,
($ in thousands)	2021		2020
Term loan debt	$	24,375	$	16,750
Unamortized deferred finance costs related to term loan debt		(1,046)		(112)
Revolving loan debt		1,500		—
Total		24,829		16,638
Current portion of debt (i)		4,000		2,800
Long-term debt	$	20,829	$	13,838

(i) The current portion of debt as of June 30, 2021 consists of $2.5 million of term loan debt and $1.5 million of revolving loan debt; the current portion of debt as of December 31, 2020 is related solely to term loan debt.

Previous Term Loan Debt

On February 11, 2019, the Company entered into an amended loan agreement with Bank Hapoalim B.M. (“BHI”), which amended and restated a prior term loan with BHI, such that, as of February 11, 2019, the aggregate outstanding balance of all the term loans extended by BHI to Xcel was $22.0 million, which amount was divided  into two term loans: (1) a term loan in the amount of $7.3 million and (2) a term loan in the amount of $14.7 million. Such loan agreement was subsequently amended on April 13, 2020 and again on August 18, 2020; such amendments changed the timing and amount of quarterly installment payments, but did not change the total principal balance, interest rate, or maturity date. These amendments during 2020 were accounted for as debt modifications and, accordingly, no gain or loss was recorded.

Current Term Loan Debt

On April 14, 2021 (the “Loan Closing Date”), Xcel, as Borrower, and its wholly-owned subsidiaries (each a “Guarantor” and collectively, the “Guarantors”), entered into a Loan and Security Agreement (the “Loan Agreement”) with BHI as administrative agent and collateral agent, FEAC Agent, LLC (“FEAC”) as co-collateral agent, and the financial institutions party thereto as lenders (the “Lenders”). Pursuant to the Loan Agreement, the Lenders made two term loans: (1) a term loan in the amount of $10.0 million (“Term Loan A”) and (2) a term loan in the amount of $15.0 million (“Term Loan B” and, together with Term Loan A, the “Term Loans”).

The Loan Agreement also contemplates that the Lenders will provide to Xcel a revolving loan facility in an amount up to $4.0 million on a discretionary basis, but not to exceed 85% of the amount of eligible accounts receivable. Xcel shall have the right to request the Lenders to make incremental term loans (the “Incremental Term Loans”) of up to $25.0 million.

Management assessed and determined that this new agreement resulted in an extinguishment of the previous term loan debt, and accordingly recognized a loss of approximately $0.8 million (consisting of $0.1 million of unamortized deferred finance costs and $0.7 million of breakage fees owed to the old lender under the terms of the previous debt agreement) during the current quarter. Approximately $367,000 of such aforementioned breakage fees were paid at time of extinguishment, with the remaining $367,000 of such fees payable in three equal payments on each of May 1, 2022, 2023, and 2024.

Upon entering into the Loan Agreement, Xcel paid a 2.5% closing fee in the amount of $0.625 million to the administrative agent for the benefit of each Lender having a term loan commitment; the Company also paid approximately $0.5 million of various legal and other fees in connection with the execution of the Loan Agreement. These fees and costs totaling

12

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

approximately $1.1 million have been deferred on the condensed consolidated balance sheet as a reduction of the carrying value of the Term Loans, and are being amortized to interest expense over the term of the Term Loans using the effective interest method.

The Term Loans mature on April 14, 2025, Incremental Term Loans shall mature on the date set forth in the applicable term note, and Revolving Loans mature on April 14, 2022 or such later date as agreed upon by Xcel and the Lenders. Principal on the Term Loans is payable in 16 quarterly installments of $625,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on June 30, 2021 and ending on March 31, 2025, with a final payment of $15.0 million on the maturity date of April 14, 2025. An amount equal to eighty percent (80%) of each quarterly principal installment payment shall be applied to the Term Loan A and the remaining twenty percent (20%) of each such quarterly principal installment shall be applied to the Term Loan B until the outstanding principal balance of Term Loan A is paid in full. Thereafter, one hundred percent (100%) of each such quarterly principal installment shall be applied to the Term Loan B.

The aggregate remaining annual scheduled principal payments under the Term Loans at June 30, 2021 were as follows:

	Amount of
($ in thousands)	Principal
Year Ending December 31,	Payment
2021 (July 1 to December 31)	$	1,250
2022		2,500
2023		2,500
2024		2,500
2025		15,625
Total	$	24,375

Xcel shall have the right upon 30 days’ prior written notice to (i) terminate the Revolving Loan facility and repay all Revolving Loans and accrued and unpaid interest thereon and (ii) prepay all or any portion of the Term Loans or Incremental Term Loans and accrued and unpaid interest thereon, provided that any prepayment of the Term Loans shall be applied first to prepay the Term Loan A in full, second to prepay the Term Loan B, and third to the Incremental Term Loans in accordance with the terms agreed to by Xcel, the Lenders, and the administrative agent.

If any Term Loan is prepaid in whole or in part on or prior to the third anniversary of the Loan Closing Date (including as a result of an event of default), Xcel shall pay a prepayment premium as follows: an amount equal to the principal amount of the Term Loan prepaid multiplied by: (i) the greater of three percent (3.00%) and the Lost Yield Revenue (as defined below) if such prepayment occurs on or before the first anniversary of the Loan Closing Date; (ii) two percent (2.00%) if such prepayment occurs at any time after the first anniversary of the Loan Closing Date and on or prior to the second anniversary of the Loan Closing Date; and (iii) one percent (1.00%) if such prepayment occurs at any time after the second anniversary of the Loan Closing Date on or prior to the third anniversary of the Loan Closing Date. Xcel is not obligated to pay a prepayment premium if the Term Loans prepaid after the third anniversary of the Loan Closing Date. “Lost Yield Revenue” means, with respect to any payment of Term Loans at any time on or prior to the first anniversary of the Loan Closing Date (excluding regularly scheduled amortization payments), the amount of interest (including interest at the Default Rate to the extent the Default Rate is being charged under the Loan Agreement) that would have accrued on the repaid Term Loans during the first 12 months of the term of the Loan Agreement minus the portion of such interest on such Term Loans that actually has been paid.

Xcel’s obligations under the Loan Agreement are guaranteed by the Guarantors and secured by all of the assets of Xcel and the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement) and,

13

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

subject to certain limitations contained in the Loan Agreement, equity interests of the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement).

Xcel also granted the Lenders a right of first offer to finance any acquisition for which the consideration therefor will be paid other than by cash of Xcel or the Guarantors, the issuance of equity interest of Xcel, or the issuance of notes to the applicable seller.

The Loan Agreement contains customary covenants, including reporting requirements, trademark preservation, and financial covenants (on a consolidated basis with Xcel and the Guarantors under the Loan Agreement).

On August 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, the EBITDA financial covenant for the three months ended June 30, 2021 was eliminated, and the financial covenants related to EBITDA, fixed charge coverage ratio, and leverage ratio were lowered for the remainder of 2021 and for the 12 months ending March 31, 2022. Additionally, the maximum amount available under the revolving loan facility was reduced from $4.0 million to $1.5 million until the Company demonstrates compliance with the amended financial covenants for the applicable periods ending December 31, 2021. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement.

The Company’s financial covenants under the Loan Agreement, as amended, are as follows:

● minimum EBITDA at the end of specified fiscal periods as set forth below;

Fiscal Period	Minimum EBITDA
April 1, 2021 to September 30, 2021	$	3,000,000
April 1, 2021 to December 31, 2021	$	4,400,000
April 1, 2021 to March 31, 2022	$	6,000,000
For the trailing twelve month periods ending June 30, 2022 and September 30, 2022	$	6,500,000
For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023, and September 30, 2023	$	7,000,000
For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025	$	7,500,000

● liquid assets of at least 4.0 million at all times;

● a fixed charge coverage ratio of not less than (a) 1.05 to 1.00 for the nine month period ending on December 31, 2021, (b) 1.20 to 1.00 for the twelve fiscal month period ending March 31, 2022, and (c) 1.25 to 1.00 for the twelve fiscal month period ending at the end of each fiscal quarter commencing with the fiscal quarter ending June 30, 2022;

● a leverage ratio for the twelve fiscal month period ending at the end of each fiscal quarter not exceeding (a) 6.75 to 1.00 for the fiscal quarter ending December 31, 2021 and (b) 4.00 to 1.00 for each fiscal quarter ending on and after March 31, 2022; and

● a loan to value ratio not exceeding 50%.

The Company was in compliance with all applicable covenants as of June 30, 2021.

14

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

Interest on the Term Loan A will accrue at LIBOR plus 4.0% per annum, interest on the Term Loan B will accrue at LIBOR plus 8.0% per annum, and interest on the Revolving Loans will accrue at either the Base Rate plus 1.5% per annum or LIBOR plus 3.75%, as elected by Xcel. Interest on the Loans is payable on the last business day of each calendar month. Base Rate is defined in the Loan Agreement as the greater of (a) BHI’s stated prime rate or (b) 2.00% per annum plus the overnight federal funds rate published by the Federal Reserve Bank of New York. LIBOR is defined in the Loan Agreement as the greater of (a) the rate of interest per annum for deposits in dollars for an interest period equal to one month as published by ICE Benchmark Administration Limited or a comparable or successor quoting service at approximately 11:00 a.m. (London time) on such date of determination or (b) 1.0% per annum. Interest on the Incremental Term Loans will accrue at rates and will be paid on dates to be agreed to by Xcel and the Lenders.

For the current and prior year quarter, the Company incurred interest expense related to term loan debt of approximately $522,000 and $310,000, respectively. For the current six months and prior year six months, the Company incurred interest expense related to term loan debt of approximately $798,000 and $623,000, respectively. The effective interest rate related to term loan debt was approximately 9.0% and 7.8% for the current quarter and current six months, respectively, and was approximately 6.6% for both the prior year quarter and prior year six months.

On June 24, 2021, Xcel borrowed $1.5 million under the aforementioned revolving loan facility, and incurred related interest expense for the current quarter of approximately $1,000.

8.      Government Assistance

Paycheck Protection Program (“PPP”)

On April 20, 2020, the Company executed a promissory note (the “Promissory Note”) with Bank of America, N.A., which provided for an unsecured loan in the amount of $1.806 million, pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The loan has a two-year term and bears interest at a fixed rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type. The loan was funded on April 23, 2020.

The PPP also provides that this loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act, and later amended by the Paycheck Protection Program Flexibility Act (the "Flexibility Act") signed into law on June 5, 2020. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. While management believes that it is probable that the loan will be forgiven in full, no definite assurance can be provided that forgiveness for any portion of the loan will be obtained. Management's determination that full forgiveness is probable is based on qualification under the Flexibility Act.

Management evaluated the legal and contractual terms associated with the loan, and concluded that, although the legal form of the loan is debt, it represents in substance a government grant that is expected to be forgiven. Given the lack of definitive authoritative guidance under GAAP for accounting for government grants, the Company analogized to accounting guidance under International Accounting Standard No. 20, “Accounting for Government Grants and Disclosure of Government Assistance.” Under such guidance, once it is probable that the conditions attached to the assistance will be met, the earnings impact of government grants is recorded on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. Accordingly, the Company recognized $1.640 million as a reduction to operating expenses in the prior year quarter and prior year six months. No interest expense related to the loan has been recorded in the Company’s condensed consolidated financial statements.

15

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

9. Stockholders’ Equity

2011 Equity Incentive Plan

The Company’s 2011 Equity Incentive Plan, as amended and restated (the “Plan”), is designed and utilized to enable the Company to provide its employees, officers, directors, consultants, and others whose past, present, and/or potential contributions to the Company have been, are, or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. A total of 13,000,000 shares of common stock are eligible for issuance under the Plan. The Plan provides for the grant of any or all of the following types of awards: stock options, restricted stock, deferred stock, stock appreciation rights, and other stock-based awards. The Plan is administered by the Company’s Board of Directors, or, at the Board’s discretion, a committee of the Board.

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification Topic 718, “Compensation - Stock Compensation,” by recognizing the fair value of stock-based compensation as an operating expense over the service period of the award or term of the corresponding contract, as applicable.

The fair value of options and warrants is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the long-term implied volatilities of the Company’s stock, and expected life is based on the estimated average of the life of options and warrants using the simplified method. The Company utilizes the simplified method to determine the expected life of the options and warrants due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Restricted stock awards are valued using the fair value of the Company’s stock at the date of grant.

For stock option awards for which vesting is contingent upon the achievement of certain performance targets, the timing and amount of compensation expense recognized is based upon the Company’s projections and estimates of the relevant performance metric(s) until the time the performance obligation is satisfied.

Forfeitures are accounted for as a reduction of compensation cost in the period when such forfeitures occur.

Stock Options

Options granted under the Plan expire at various times – either five, seven, or ten years from the date of grant, depending on the particular grant.

16

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

A summary of the Company’s stock options activity for the current six months is as follows:

				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Life	Intrinsic
	Options	Price		(in Years)	Value
Outstanding at January 1, 2021	7,179,375	$	3.14	4.93	$	—
Granted	490,390		1.88
Canceled	(8,050)		1.86
Exercised	(92,820)		1.76
Expired/Forfeited	(1,721,070)		5.63
Outstanding at June 30, 2021, and expected to vest	5,847,825	$	2.33	5.78	$	2,792,000
Exercisable at June 30, 2021	1,963,658	$	3.42	2.33	$	—

On March 15, 2021, the Company granted options to purchase an aggregate of 365,390 shares of common stock to various employees. The exercise price of the options is $1.86 per share, and all options vested immediately on the date of grant.

On April 1, 2021, the Company granted options to purchase an aggregate of 125,000 shares of common stock to non-management directors. The exercise price of the options is $1.93 per share, and 50% of the options vest on each of April 1, 2022 and April 1, 2023.

Compensation expense related to stock options for the current quarter and the prior year quarter was approximately $40,000 and $45,000, respectively. Compensation expense related to stock options for the current six months and prior year six months was approximately $198,000 and $113,000, respectively.

Total unrecognized compensation expense related to unvested stock options at June 30, 2021 amounts to approximately $151,000 and is expected to be recognized over a weighted average period of approximately 1.15 years.

A summary of the Company’s non-vested stock options activity for the current six months is as follows:

		Weighted
		Average
	Number of	Grant Date
	Options	Fair Value
Balance at January 1, 2021	4,116,167	$	0.08
Granted	490,390		0.40
Vested	(647,390)		0.43
Forfeited or Canceled	(75,000)		0.08
Balance at June 30, 2021	3,884,167	$	0.06

Warrants

Warrants expire at various times – either five or ten years from the date of grant, depending on the particular grant.

17

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

A summary of the Company’s warrants activity for the current six months is as follows:

				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Life	Intrinsic
	Warrants	Price		(in Years)	Value
Outstanding and exercisable at January 1, 2021	579,815	$	4.63	1.32	$	—
Granted	—		—
Canceled	—		—
Exercised	—		—
Expired/Forfeited	—		—
Outstanding and exercisable at June 30, 2021	579,815	$	4.63	0.82	$	—

No compensation expense related to warrants was recognized in the current quarter, prior year quarter, current six months, or prior year six months.

Stock Awards

A summary of the Company’s restricted stock activity for the current six months is as follows:

		Weighted
	Number of	Average
	Restricted	Grant Date
	Shares	Fair Value
Outstanding at January 1, 2021	780,833	$	4.09
Granted	245,224		1.65
Canceled	—		—
Vested	(195,224)		1.58
Expired/Forfeited	—		—
Outstanding at June 30, 2021	830,833	$	3.96

On April 1, 2021, the Company issued an aggregate of 50,000 shares of stock to non-management directors, which vest evenly over two years, whereby 50% shall vest on April 1, 2022, and 50% shall vest on April 1, 2023.

On April 26, 2021, the Company issued 14,045 shares of stock to a consultant, which vested immediately.

Compensation expense related to restricted stock grants for the current and prior year quarter was approximately $37,000 and $10,000, respectively. Compensation expense related to restricted stock grants for the current six months and prior year six months was approximately $47,000 and $33,000, respectively.

Total unrecognized compensation expense related to unvested restricted stock grants at June 30, 2021 amounts to approximately $84,000 and is expected to be recognized over a weighted average period of approximately 1.75 years.

Additionally, on May 7, 2021, the Company issued 181,179 shares of stock to a member of senior management as payment for a performance bonus earned in 2020. These shares vested immediately. The Company had previously recognized compensation expense of approximately $291,000 in 2020 to accrue for this performance bonus, and recognized a reduction to compensation expense of approximately $(8,000) during the current six months related to this bonus.

18

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

The Company also recognized approximately $354,000 of compensation expense in the current quarter and current six months related to similar senior management bonuses payable in common stock in 2022.

Shares Available Under the Company’s 2011 Equity Incentive Plan

As of June 30, 2021, there were 2,611,155 shares of common stock available for issuance under the Plan.

Shares Reserved for Issuance

As of June 30, 2021, there were 9,038,795 shares of common stock reserved for issuance pursuant to unexercised warrants and stock options, or available for issuance under the Plan.

Dividends

The Company has not paid any dividends to date.

10.    Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period, including stock options and warrants, using the treasury stock method. Diluted EPS excludes all potentially dilutive shares of common stock if their effect is anti-dilutive.

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Basic	19,449,116	19,132,244	19,355,795	19,001,321
Effect of exercise of warrants	—	—	—	—
Effect of exercise of stock options	—	—	—	—
Diluted	19,449,116	19,132,244	19,355,795	19,001,321

As a result of the net loss for all periods presented, the Company calculated diluted earnings per share using basic weighted average shares outstanding for such period, as utilizing diluted shares would be anti-dilutive to loss per share.

The computation of diluted EPS excludes the following potentially dilutive securities because their inclusion would be anti-dilutive:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Stock options and warrants	6,427,640	8,119,940	6,427,640	8,119,940

11.    Income Tax

The effective income tax rate for the current quarter and the prior year quarter was approximately 43% and -49%, respectively, resulting in an income tax (benefit) provision of $(1.35) million and $0.43 million, respectively.

The effective income tax rate for the current six months and prior year six months was approximately 25% and 5%, respectively, resulting in an income tax (benefit) of $(1.48) million and $(0.12) million, respectively.

19

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

For the current quarter, the federal statutory rate differed from the effective tax rate primarily due to recurring permanent differences and state taxes, which increased the effective tax rate by approximately 15% and 7%, respectively.

For the prior year quarter, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effective rate by approximately 41%. The effective tax rate was also attributable to state taxes and recurring permanent differences, which decreased the effective tax rate by approximately 2% and 27%, respectively. The effective tax rate was also attributable to the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 3%.

For the current six months, the federal statutory rate differed from the effective tax rate primarily due to state taxes, which increased the effective tax rate by approximately 7%, partially offset by the impact of recurring permanent differences, which decreased the effective tax rate by approximately 3%.

For the prior year six months, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effect rate by approximately 16%. The effective rate was also attributable to state taxes and recurring permanent differences, which increased the effective tax rate by approximately 5% and decreased the effective tax rate by approximately 8%, respectively. The effective tax rate was also affected by the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 4%.

12.    Related Party Transactions

Robert W. D’Loren

Jennifer D’Loren is the wife of Robert W. D’Loren, the Company’s Chief Executive Officer and Chairman of the Board, and is employed by the Company. Mrs. D’Loren brings vast experience in project management and implementation of financial IT solutions. During the past two years, Mrs. D’Loren has worked on the implementation of the Company’s ERP system. Mrs. D’Loren received compensation of $11,000 and $33,000 for the current quarter and prior year quarter, respectively. Mrs. D’Loren received compensation of $21,000 and $70,000 for the current six months and prior year six months, respectively.

Isaac Mizrahi

On February 24, 2020, the Company entered into an employment agreement with Isaac Mizrahi, a principal stockholder of the Company, for Mr. Mizrahi to continue to serve as Chief Design Officer of the Isaac Mizrahi Brand. The term of the employment agreement expires on December 31, 2022, subject to earlier termination, and may be extended, at the Company’s option, for two successive one-year terms (each, a “Renewal Period”). Mr. Mizrahi’s base salary shall be $1.8 million, $2.0 million, and $2.1 million per annum during the term of the agreement and $2.25 million and $2.4 million during 2023 and 2024 if the term is extended, in each case, subject to adjustment in the event Mr. Mizrahi does not make a specified number of appearances on the QVC channel. Mr. Mizrahi shall be eligible to receive an annual cash bonus (the “Bonus”) up to an amount equal to $2.5 million less base salary for 2020 and $3.0 million less base salary for 2021, 2022, and any year during the Renewal Period. The Bonus shall consist of the DRT Revenue, Bonus, the Brick-and-Mortar Bonus, the Endorsement Bonus and the Monday Bonus, if any, as determined in accordance with the following:

● “DRT Bonus” means for any calendar year an amount equal to 10% of the aggregate net revenue related to sales of Isaac Mizrahi Brand products through direct response television. The DRT Revenue Bonus shall be reduced by the amount of the Monday Bonus.

20

XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

● “Brick-and-Mortar Bonus” means for any calendar year an amount equal to 10% of the net revenues from sales of products under the Isaac Mizrahi Brand, excluding DRT revenue and endorsement revenues.

● “Endorsement Bonus” means for any calendar year an amount equal to 40% of revenues derived from projects undertaken by the Company with one or more third parties solely for Mr. Mizrahi to endorse the third party’s products through the use of Mr. Mizrahi’s name, likeness, and/or image, and neither the Company nor Mr. Mizrahi provides licensing or design.

● “Monday Bonus” means $10,000 for each appearance by Mr. Mizrahi on the QVC channel on Mondays (subject to certain expectations) up to a maximum of 40 such appearances in a calendar year.

Mr. Mizrahi is required to devote his full business time and attention to the business and affairs of the Company and its subsidiaries; however, Mr. Mizrahi is the principal of IM Ready-Made, LLC and Laugh Club, Inc. (“Laugh Club”), and accordingly, he may undertake promotional activities related thereto (including the promotion of his name, image, and likeness) through television, video, and other media (and retain any compensation he receives for such activities) (referred to as “Retained Media Rights”) so long as such activities (i) do not utilize the IM trademarks, (ii) do not have a mutually negative impact upon or materially conflict with Mr. Mizrahi’s duties under the employment agreement, or (iii) are consented to by the Company. The Company believes that it benefits from Mr. Mizrahi’s independent promotional activities by increased brand awareness of IM Brands and the IM trademarks.

Severance. If Mr. Mizrahi’s employment is terminated by the Company without “cause,” or if Mr. Mizrahi resigns with “good reason,” then Mr. Mizrahi will be entitled to receive his unpaid base salary and cash bonuses through the termination date and an amount equal to his base salary in effect on the termination date for the longer of six months and the remainder of the then-current term, but in no event exceeding 18 months. If Mr. Mizrahi’s employment is terminated by the Company without “cause” or if Mr. Mizrahi resigns with “good reason” within six months following a change of control (as defined in the employment agreement), Mr. Mizrahi shall be eligible to receive a lump-sum payment equal to two times the sum of (i) his base salary (at an average rate that would have been in effect for such two-year period following termination) plus (ii) the bonus paid or due to Mr. Mizrahi in the year prior to the change in control.

Non-Competition and Non-Solicitation. During the term of Mr. Mizrahi’s employment by the Company and for a one-year period after the termination of such employment (unless his employment was terminated without “cause” or was terminated by him for “good reason”), Mr. Mizrahi may not permit his name to be used by or to participate in any business or enterprise (other than the mere passive ownership of not more than 3% of the outstanding stock of any class of a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market) that engages or proposes to engage in the Company’s business anywhere in the world other than the Company and its subsidiaries. Also during his employment and for a one-year period after the termination of such employment, Mr. Mizrahi may not, directly or indirectly, solicit, induce, or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any or its subsidiaries; or solicit, induce, or attempt to induce any person who is, or was during the then-most recent 12-month period, a corporate officer, general manager, or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment with the Company or any of its subsidiaries; or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries; or in any way interfere with the relationship between any such customer, supplier, licensee, employee, or business relation and the Company or any of its subsidiaries.

On February 24, 2020, the Company entered into a services agreement with Laugh Club, an entity wholly-owned by Mr. Mizrahi, pursuant to which Laugh Club shall provide services to Mr. Mizrahi necessary for Mr. Mizrahi to perform his services pursuant to the employment agreement. The Company will pay Laugh Club an annual fee of $0.72 million for such services.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

13.    Commitments and Contingencies

Contingent Obligation – Halston Heritage Earn-Out  

In connection with the February 11, 2019 purchase of the Halston Heritage trademarks from H Company IP, LLC (“HIP”), the Company agreed to pay HIP additional consideration (the “Halston Heritage Earn-Out”) of up to an aggregate of $6.0 million, based on royalties earned through December 31, 2022. The Halston Heritage Earn-Out of $0.9 million is recorded as a long-term liability at March 31, 2021 and December 31, 2020 in the accompanying condensed consolidated balance sheets, based on the difference between the fair value of the acquired assets of the Halston Heritage trademarks and the total consideration paid. In accordance with ASC Topic 480, “Distinguishing Liabilities from Equity,” the Halston Heritage Earn-Out obligation is treated as a liability in the accompanying condensed consolidated balance sheets because of the variable number of shares payable under the agreement.

Contingent Obligation – Lori Goldstein Earn-Out

In connection with the April 1, 2021 acquisition of the Lori Goldstein trademarks (see Note 2 for additional information), the Company agreed to pay the Seller additional cash consideration of up to $12.5 million, based on royalties earned during the six calendar year period commencing in 2021. The Lori Goldstein Earn-Out of $6.6 million is recorded as a long-term liability at June 30, 2021 in the accompanying condensed consolidated balance sheet, based on the difference between the fair value of the acquired assets of the Lori Goldstein brand and the total consideration paid, in accordance with the guidance in ASC Subtopic 805-50.

Coronavirus Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus disease (“COVID-19”) as a pandemic, which continues to spread throughout the U.S. COVID-19 is having an unprecedented impact on the U.S. economy as federal, state, and local governments react to this ongoing public health crisis.

The impacts of the current COVID-19 pandemic are broad reaching and are having an impact on the Company’s licensing and wholesale businesses. The COVID-19 pandemic is impacting the Company’s supply chain as most of the Company’s products are manufactured in China, Thailand, and other places around the world affected by this event. Temporary factory closures and the pace of workers returning to work have impacted contract manufacturers’ ability to source certain raw materials and to produce finished goods in a timely manner. The pandemic is also impacting distribution and logistics providers' ability to operate in the normal course of business. Further, the pandemic has resulted in a sudden and continuing decrease in sales for many of the Company’s products, resulting in order cancellations, and a decrease in accounts receivable collections, as the Company recorded approximately $1 million of additional allowance for doubtful accounts for the year ended December 31, 2020, and approximately $0.1 million for the current six months, for retailers that have filed for bankruptcy.

Due to the ongoing COVID-19 pandemic, there is significant uncertainty surrounding the impact on the Company’s future results of operations and cash flows. Continued impacts of the pandemic could materially adversely affect the Company’s near-term and long-term revenues, earnings, liquidity, and cash flows as the Company’s customers and/or licensees may request temporary relief, delay, or not make scheduled payments.

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XCEL BRANDS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

14.    Subsequent Events

Amendment to Term Loans

On August 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, the EBITDA financial covenant for the three months ended June 30, 2021 was eliminated, and the financial covenants related to EBITDA, fixed charge coverage ratio, and leverage ratio were lowered for the remainder of 2021 and for the 12 months ending March 31, 2022. Additionally, the maximum amount available under the revolving loan facility was reduced from $4.0 million to $1.5 million until the Company demonstrates compliance with the amended financial covenants for the applicable periods ending December 31, 2021. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement.

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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 Section of our Form 10-K for the fiscal year ended December 31, 2020. 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, production, marketing, wholesale distribution, and direct-to-consumer 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 one thing. The Company owns and manages the Isaac Mizrahi brand (the "Isaac Mizrahi Brand"), the Halston brand (the "Halston Brand"), the Judith Ripka brand (the "Ripka Brand"), the C Wonder brand (the "C Wonder Brand"), the LOGO by Lori Goldstein brand (the "Lori Goldstein Brand"), and the Longaberger brand (the “Longaberger Brand”), pioneering a true omni-channel sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, brick-and-mortar retail, wholesale and e-commerce channels to be everywhere its customers shop.

Our objective is to build a diversified portfolio of lifestyle consumer brands through organic growth and the strategic acquisition of new brands. To grow our brands, we are focused on following primary strategies:

● expanding and leveraging our live-streaming platform. We recently launched our live-streaming platform through our Longaberger brand technology platform with the goal to build the world’s largest digital marketplace powered by live-streaming and micro-influencers for home and other related products, designed to create a better lifestyle. We plan to leverage this technology across our other brands.

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

● wholesale sales and/or licensing of our brands for sale through interactive television (i.e., QVC, HSN, The Shopping Channel, TVSN, etc.);

● licensing our brands to manufacturers and retailers for promotion and distribution through e-commerce, social commerce, and traditional brick-and-mortar retail channels whereby we provide certain design services;

● distribution of our brands through e-commerce directly to the end consumer; and

● acquiring additional consumer brands and integrating them into our operating platform while 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;

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● our deep knowledge and expertise in live streaming;

● our design, production, sales, marketing, and supply chain and integrated technology platform that enables us to design and distribute trend-right product; and

● our operating strategy, significant media and internet presence, and distribution network.

Our design, production and supply chain platform was developed to shorten the supply chain cycle by utilizing state-of-the-art supply chain management technology, trend analytics, and data science to actively monitor fashion trends and read and react to customer demands.

Summary of Operating Results

Three months ended June 30, 2021 (the “current quarter”) compared with the three months ended June 30, 2020 (the “prior year quarter”)

Revenues

Current quarter net revenue increased approximately $5.7 million to $10.8 million from $5.1 million for the prior year quarter.

Net licensing revenue increased by approximately $1.7 million in the current quarter to $6.2 million, compared with $4.5 million in the prior year quarter. This increase in licensing revenue was primarily attributable to the Lori Goldstein brand, which we acquired on April 1, 2021, as well as continued strong performance by the Isaac Mizrahi brand, partially offset by a decline in licensing revenue related to the transitioning of the H Halston brand to a wholesale supply model.

Net product sales increased by approximately $4.0 million in the current quarter to $4.5 million, compared with $0.5 million in the prior year quarter. The increase in net sales was primarily attributable to higher wholesale apparel sales, as retail sales were severely negatively impacted in the prior year quarter during the initial outbreak of the COVID-19 pandemic. Jewelry wholesale sales also contributed significantly to the increase in sales, and e-commerce sales of Longaberger branded products and Judith Ripka brand jewelry also grew substantially from the prior year quarter.

Cost of Goods Sold

Current quarter cost of goods sold was $3.1 million, compared with $0.3 million for the prior year quarter due to significantly higher volume of wholesale and e-commerce sales in the current quarter. Gross profit (net revenue less cost of goods sold) increased approximately $2.9 million to $7.7 million from $4.8 million in the prior year quarter, primarily driven by the aforementioned increase in net licensing revenue.

Operating Costs and Expenses

Operating costs and expenses increased approximately $4.0 million from $5.4 million in the prior year quarter to $9.4 million in the current quarter. This increase was mainly driven by normalized post-COVID adjusted salary costs and marketing expenses, and expenses related to the Lori Goldstein brand trademarks acquired on April 1, 2021. Additionally, the prior year quarter notably included the benefit of government assistance received through the Paycheck Protection Program under the CARES Act, for which the Company recognized $1.6 million as a reduction to prior year quarter expenses.

Interest and Finance Expense

Interest and finance expense for the current quarter was $1.4 million, compared with $0.3 million for the prior year quarter. This increase of approximately $1.1 million was primarily attributable to a $0.8 million loss on the extinguishment of debt recognized in the current quarter as a result of the new term loan financing agreement entered into on April 14, 2021. The

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increase in interest and finance expense was also partially attributable to the fact that the new term loan agreement entered into during the current quarter resulted in a higher outstanding principal balance at a higher interest rate as compared with the previous term loan agreement.

Income Tax Benefit

The effective income tax rate for the current quarter and the prior year quarter was approximately 43% and -49%, respectively, resulting in an income tax (benefit) provision of $(1.35) million and $0.43 million, respectively.

For the current quarter, the federal statutory rate differed from the effective tax rate primarily due to recurring permanent differences and state taxes, which increased the effective tax rate by approximately 15% and 7%, respectively.

For the prior year quarter, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effective rate by approximately 41%. The effective tax rate was also attributable to state taxes and recurring permanent differences, which decreased the effective tax rate by approximately 2% and 27%, respectively. The effective tax rate was also attributable to the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 3%.

Net Loss Attributable to Xcel Brands, Inc. Stockholders

We had a net loss of $1.6 million for the current quarter, compared with a net loss of $1.3 million for the prior year quarter, due to the combination of the factors outlined above.

Non-GAAP Net Income, Non-GAAP Diluted EPS, and Adjusted EBITDA

We had a non-GAAP net loss of approximately $0.1 million, or $(0.01) per diluted share (“non-GAAP diluted EPS”), for the current quarter and non-GAAP net income of $1.2 million, or $0.06 per diluted share, for the prior year quarter. Non-GAAP net income is a non-GAAP unaudited term, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders, exclusive of amortization of trademarks, stock-based compensation, loss on extinguishment of debt, gain on sales of assets, gain on reduction of contingent obligations, costs (recoveries) in connection with potential acquisitions, certain adjustments to allowances for doubtful accounts related to the bankruptcy of and economic impact on certain retail customers due to the COVID-19 pandemic, asset impairments, and deferred income taxes. Non-GAAP net income 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 $0.9 million for the current quarter, compared with Adjusted EBITDA of $1.7 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 depreciation and amortization, interest and finance expenses (including loss on extinguishment of debt, if any), income taxes, other state and local franchise taxes, stock-based compensation, gain on reduction of contingent obligations, gain on sale of assets, costs (recoveries) in connection with potential acquisitions, asset impairments, and certain adjustments to allowances for doubtful accounts related to the bankruptcy of and economic impact on certain retail customers due to the COVID-19 pandemic.

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. The Company incurred certain costs in the prior year which it could have eliminated but elected not to do so in light of government assistance received through the Paycheck Protection Program under the CARES Act (the “PPP Benefit”), which represents a cash benefit directly related to the Company’s operating expenses incurred. Accordingly, the PPP Benefit is not considered a reconciling item for purposes of the computation of non-GAAP net income and Adjusted EBITDA for the prior year

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periods. Adjusted EBITDA is the measure used to calculate compliance with the EBITDA covenant under the Company’s term loan agreement.

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 non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures.

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.

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) income:

	Three Months Ended
	June 30,
($ in thousands)	2021		2020
Net loss attributable to Xcel Brands, Inc. stockholders	$	(1,558)	$	(1,300)
Amortization of trademarks		1,520		1,108
Stock-based compensation		431		488
Loss on extinguishment of debt		821		—
(Recovery of) costs in connection with potential acquisition		—		(101)
Certain adjustments to allowances for doubtful accounts		—		472
Property and equipment impairment		—		82
Deferred income tax (benefit) provision		(1,346)		428
Non-GAAP net (loss) income	$	(132)	$	1,177

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

	Three Months Ended
	June 30,
	2021		2020
Diluted loss per share	$	(0.08)	$	(0.07)
Amortization of trademarks		0.08		0.06
Stock-based compensation		0.02		0.03
Loss on extinguishment of debt		0.04		—
(Recovery of) costs in connection with potential acquisition		—		(0.01)
Certain adjustments to allowances for doubtful accounts		—		0.02
Property and equipment impairment		—		0.01
Deferred income tax (benefit) provision		(0.07)		0.02
Non-GAAP diluted EPS	$	(0.01)	$	0.06
Non-GAAP weighted average diluted shares		19,449,116		19,192,353

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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 Adjusted EBITDA:

	Three Months Ended
	June 30,
($ in thousands)	2021		2020
Net loss attributable to Xcel Brands, Inc. stockholders	$	(1,558)	$	(1,300)
Depreciation and amortization		1,848		1,329
Interest and finance expense		1,443		299
Income tax (benefit) provision		(1,346)		428
State and local franchise taxes		33		45
Stock-based compensation		431		488
(Recovery of) costs in connection with potential acquisition		—		(101)
Certain adjustments to allowances for doubtful accounts		—		472
Property and equipment impairment		—		82
Adjusted EBITDA	$	851	$	1,742

Six months ended June 30, 2021 (the “current six months”) compared with the six months ended June 30, 2020 (the “prior year six months”)

Revenues

Current six months net revenue increased approximately $4.0 million to $18.6 million from $14.6 million for the prior year six months.

Net licensing revenue increased by approximately $0.4 million in the current six months to $10.5 million, compared with $10.1 million in the prior year six months. This increase in licensing revenue was primarily attributable to the Lori Goldstein brand, which we acquired on April 1, 2021, as well as continued strong performance by the Isaac Mizrahi brand, partially offset by a decline in licensing revenue related to the transitioning of the H Halston brand to a wholesale supply model.

Net product sales increased by approximately $3.6 million in the current six months to $8.0 million, compared with $4.4 million in the prior year six months. The increase in net sales was primarily attributable to the combination of higher jewelry wholesale sales, and higher sales of Longaberger branded products through e-commerce, social commerce, and livestreaming. Wholesale apparel sales also contributed significantly to the year-over-year increase in net product sales, as retail sales were severely negatively impacted in the prior year period during the initial outbreak of the COVID-19 pandemic.

Cost of Goods Sold

Current six months cost of goods sold was $4.9 million, compared with $2.7 million for the prior year six months due to significantly higher volume of wholesale and e-commerce sales in the current six months. Gross profit (net revenue less cost of goods sold) increased approximately $1.8 million to $13.7 million from $11.9 million in the prior year six months, primarily driven by the aforementioned increase in net product sales.  

Gross profit margin from product sales remained constant at 40% for both the current and prior year six months.

Operating Costs and Expenses

Operating costs and expenses increased approximately $4.3 million from $13.6 million in the prior year six months to $17.9 million in the current six months. This increase was mainly driven by a combination of post-COVID normalized salary costs, marketing expenses, shipping and warehousing costs, and consulting fees, partially offset by lower bad debt expense. The increase in operating expenses was also partially attributable to increased non-cash amortization expense related to the Lori Goldstein brand trademarks acquired on April 1, 2021. Additionally, the prior year six months notably

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included the benefit of government assistance received through the Paycheck Protection Program under the CARES Act, for which the Company recognized $1.6 million as a reduction to prior year six months expenses.

Interest and Finance Expense

Interest and finance expense for the current six months was $1.7 million, compared with $0.6 million for the prior year quarter. This increase of approximately $1.1 million was primarily attributable to a $0.8 million loss on the extinguishment of debt recognized in the current six months as a result of the new term loan financing agreement entered into on April 14, 2021. The increase in interest and finance expense was also partially attributable to the fact that the new term loan agreement entered into during the current six months resulted in a higher outstanding principal balance at a higher interest rate as compared with the previous term loan agreement.

Income Tax Benefit

The effective income tax rate for the current six months and prior year six months was approximately 25% and 5%, respectively, resulting in an income tax (benefit) provision of $(1.48) million and $(0.12) million, respectively.

For the current six months, the federal statutory rate differed from the effective tax rate primarily due to state taxes, which increased the effective tax rate by approximately 7%, partially offset by the impact of recurring permanent differences, which decreased the effective tax rate by approximately 3%.

For the prior year six months, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effect rate by approximately 16%. The effective rate was also attributable to state taxes and recurring permanent differences, which increased the effective tax rate by approximately 5% and decreased the effective tax rate by approximately 8%, respectively. The effective tax rate was also affected by the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 4%.

Net Loss Attributable to Xcel Brands, Inc. Stockholders

We had a net loss of $4.1 million for the current six months, compared with a net loss of $2.1 million for the prior year six months, due to the combination of the factors outlined above.

Non-GAAP Net Income, Non-GAAP Diluted EPS, and Adjusted EBITDA

We had a non-GAAP net loss of approximately $1.6 million, or $(0.09) per diluted share, for the current six months and non-GAAP net income of $1.4 million, or $0.07 per diluted share, for the prior year six months. We had Adjusted EBITDA of approximately $(0.0) million for the current six months, compared with Adjusted EBITDA of $2.5 million for the prior year six months.

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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 income:

	Six Months Ended
	June 30,
($ in thousands)	2021		2020
Net loss attributable to Xcel Brands, Inc. stockholders	$	(4,105)	$	(2,105)
Amortization of trademarks		2,396		2,216
Stock-based compensation		591		731
Loss on extinguishment of debt		821		—
(Recovery of) costs in connection with potential acquisition		—		(21)
Certain adjustments to allowances for doubtful accounts		132		586
Property and equipment impairment		—		82
Deferred income tax benefit		(1,484)		(124)
Non-GAAP net (loss) income	$	(1,649)	$	1,365

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,
	2021		2020
Diluted loss per share	$	(0.21)	$	(0.11)
Amortization of trademarks		0.12		0.11
Stock-based compensation		0.03		0.04
Loss on extinguishment of debt		0.04		—
(Recovery of) costs in connection with potential acquisition		—		0.00
Certain adjustments to allowances for doubtful accounts		0.01		0.03
Property and equipment impairment		—		0.01
Deferred income tax benefit		(0.08)		(0.01)
Non-GAAP diluted EPS	$	(0.09)	$	0.07
Non-GAAP weighted average diluted shares		19,355,795		19,001,842

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)	2021		2020
Net loss attributable to Xcel Brands, Inc. stockholders	$	(4,105)	$	(2,105)
Depreciation and amortization		3,058		2,632
Interest and finance expense		1,723		593
Income tax (benefit) provision		(1,484)		(124)
State and local franchise taxes		72		83
Stock-based compensation		591		731
(Recovery of) costs in connection with potential acquisition		—		(21)
Certain adjustments to allowances for doubtful accounts		132		586
Property and equipment impairment		—		82
Adjusted EBITDA	$	(13)	$	2,457

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Liquidity and Capital Resources

Liquidity

Our principal capital requirements have been to fund working capital needs, acquire new brands, and to a lesser extent, capital expenditures. As of June 30, 2021 and December 31, 2020, our cash and cash equivalents were approximately $4.8 million and $5.0 million, respectively.

Restricted cash at June 30, 2021 and at December 31, 2020 consisted of $0.7 million and $1.1 million, respectively, of cash deposited with BHI as collateral for an irrevocable standby letter of credit associated with the lease of our current corporate office and operating facility.

On April 14, 2021, we entered into a new loan and security agreement, which resulted in the extinguishment of the $16.8 million term loan debt which existed as of December 31, 2020, and increased our term loan debt obligations to $25.0 million. Under this agreement, our term loan debt obligation is payable in 16 equal quarterly installments of $625,000, commencing June 30, 2021 and ending on March 31, 2025, with a final payment of $15.0 million payable on the maturity date of April 14, 2025. In addition, the agreement provides for up to $25.0 million of future acquisition financing, subject to lender approval on a deal-by-deal basis, and a revolving loan facility of up to $1.5 million (increasing to a maximum of $4.0 million after we demonstrate compliance with certain financial covenants for the applicable periods ending December 31, 2021) on a discretionary basis. On June 24, 2021, we borrowed $1.5 million under the revolving loan facility.

We expect that existing cash and operating cash flows will be adequate to meet our operating needs, term debt service obligations, and capital expenditure needs, for at least the 12 months subsequent to the filing date of this Quarterly Report on Form 10-Q.

Changes in Working Capital

Our working capital (current assets less current liabilities, excluding the current portion of operating lease obligations and any contingent obligations payable in common stock) was $8.7 million and $7.9 million as of June 30, 2021 and December 31, 2020, respectively. This working capital increase was primarily attributable to cash provided by the new term loan entered into during the current quarter, partially offset by cash used to repay amounts outstanding under the previous term loan and to acquire the Lori Goldstein brand trademarks during the current quarter.

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 $(5.74) million in the current six months, compared with net cash provided by operating activities of approximately $2.38 million in the prior year six months.

The current six months cash used in operating activities was primarily attributable to the combination of the net loss of $(4.44) million plus non-cash expenses of approximately $2.86 million and the net change in operating assets and liabilities of approximately $(4.16) million. Non-cash net expenses were primarily comprised of $3.06 million of depreciation and amortization, $0.59 million of stock-based compensation, $0.13 million of bad debt expense, $0.11 million of amortization of deferred finance costs, a $0.45 non-cash loss on extinguishment of debt, and a deferred income tax benefit of $(1.48) million. The net change in operating assets and liabilities was primarily comprised of an increase in inventory of $(1.93) million, an increase in accounts receivable of $(2.39) million, an increase in other liabilities of $0.37 million, and cash paid in excess of rent expense of $(0.23) million. The change in accounts receivable was primarily related to the timing of sales and collections, while the change in inventory is primarily related to expected increases in wholesales, including our drop-ship programs, and an increase in our direct-to-consumer businesses.

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The prior year six months cash provided by operating activities was primarily attributable to the combination of the net loss of $(2.17) million plus non-cash expenses of approximately $4.05 million and the net change in operating assets and liabilities of approximately $0.50 million. The net loss of $(2.17) million includes $1.64 million of government assistance received through the PPP under the CARES Act, which was recognized as a reduction to prior year six months expenses for which the program was intended to compensate. Non-cash net expenses were primarily comprised of $2.63 million of depreciation and amortization, $0.73 million of stock-based compensation, $0.68 million of bad debt expense, and deferred income tax benefit of $(0.12) million. The net change in operating assets and liabilities included a decrease in accounts receivable of $3.40 million and a decrease in accounts payable, accrued expenses and other current liabilities of $(2.71) million, and cash paid in excess of rent expense of $(0.18) million. The net change in accounts receivable was attributable to a combination of the timing of collections, and lower revenues recognized as a result of the COVID-19 pandemic. The net change in accounts payable, accrued expenses and other current liabilities was due to timing of payments, as well as actions taken by management during the prior year six months in response to the COVID-19 pandemic to conserve cash.

Investing Activities

Net cash used in investing activities for the current six months was approximately $2.40 million, which was primarily attributable to the acquisition of the Lori Goldstein brand on April 1, 2021, and, to a lesser extent, to capital expenditures relating to the fit-out and furnishing of our new Judith Ripka fine jewelry retail store, which opened in June 2021.  

Net cash used in investing activities for the prior year six months was approximately $0.63 million, primarily attributable to capital expenditures, a substantial portion of which related to the implementation of our ERP system.

Financing Activities

Net cash provided by financing activities for the current six months was approximately $7.63 million, and was primarily attributable to $25.0 million of proceeds from our new term loan debt entered into on April 14, 2021, as well as $1.5 million of proceeds drawn from our new revolving loan facility. Partially offsetting these proceeds were $(16.75) million paid on the balance of our previous term loan, $(0.37) million of fees paid to the previous debtholders in connection with the extinguishment of the previous term loan, $(1.13) million of deferred finance costs paid in connection with our new term loan, and $(0.63) million of scheduled principal payments made under our new term loan.

Net cash used in financing activities for the prior year six months was approximately $(0.93) million, and was primarily attributable to payments made on long-term debt obligations of $(0.75) million, and $(0.19) million of shares repurchased related to vested restricted stock in exchange for withholding taxes.

Other Factors

We continue to seek to expand and diversify the types of products being produced and licensed under our brands. We plan to continue to diversify the distribution channels within which products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands. The Mizrahi brand, Halston brand, Lori Goldstein brand, and C Wonder brand have a core business in fashion apparel and accessories. The Ripka brand is a fine jewelry business, and the Longaberger brand focuses on home good products, which we believe helps diversify our industry focus while at the same time complements our business operations and relationships.

We continue to work towards expanding our wholesale and direct-to-consumer e-commerce businesses, and complement these operations with our licensing business.

In addition, we continue to seek new opportunities, including expansion through interactive television, our design, production and supply chain platform, additional domestic and international licensing arrangements, and acquiring additional brands. In April 2021, we acquired the Lori Goldstein brand, which is currently available and sold to consumers through QVC.

However, the impacts of the current COVID-19 pandemic are broad reaching and are having an impact on our licensing and wholesale businesses. This global pandemic is impacting our supply chain, and temporary factory closures and the

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pace of workers returning to work have impacted our contract manufacturers’ ability to source certain raw materials and to produce finished goods in a timely manner. The pandemic is also impacting distribution and logistics providers' ability to operate in the normal course of business. In addition, COVID-19 has resulted in a sudden and continuing decrease in sales for many of our products, resulting in order cancellations. Further, the global pandemic has affected the financial health of certain of our customers, and the bankruptcy of certain other customers, from which we had an aggregate of approximately $1.5 million of accounts receivable due at June 30, 2021. As a result, we have recognized an allowance for doubtful accounts of approximately $1.1 million as of June 30, 2021, and may be required to make additional adjustments for doubtful accounts which would increase our operating expenses in future periods and negatively impact our operating results, and could result in our failure to meet financial covenants under our credit facility. Financial impacts associated with the COVID-19 pandemic include, but are not limited to, lower net sales, adjustments to allowances for doubtful accounts due to customer bankruptcy or other inability to pay their amounts due to vendors, the delay of inventory production and fulfillment, potentially further impacting net sales, and potential incremental costs associated with mitigating the effects of the pandemic, including increased freight and logistics costs and other expenses. The impact of the COVID-19 pandemic is expected to continue to have an adverse effect on our operating results, which could result in our inability to comply with certain debt covenants and require BHI to waive compliance with, or agree to amend, any such covenant to avoid a default. The COVID-19 global pandemic is ongoing, and its dynamic nature, including uncertainties relating to the severity and duration of the pandemic, as well as actions that would be taken by governmental authorities to contain the pandemic or to treat its impact, makes it difficult to forecast any effects on our 2021 results. However, as of the date of this filing, we expect our results for some portion of 2021 to be significantly affected.

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

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, 2020, filed with the SEC on April 23, 2021, for a discussion of our critical accounting policies. During the three and six months ended June 30, 2021, there were no material changes to our accounting policies.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

33

ITEM 4.    CONTROLS AND PROCEDURES

A. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2021, the end of the period covered by this report. Based on, and as of the date of such evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2021, due to the material weakness described below.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on April 23, 2021, our management concluded that our internal controls over financial reporting were not effective due to the material weakness set forth below. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The basis for the conclusion that such internal control was ineffective included the following considerations:

● the Company was unable to file its Annual Report on Form 10-K within the time specified in SEC rules and forms, due to material subsequent events occurring in the first quarter of 2021, including a significant brand acquisition and a significant debt refinancing transaction, and impacts of the ongoing COVID-19 pandemic on the Company’s processes; and

● the complexities in determining an impairment charge in the fourth quarter of 2020 related to the carrying value of one of the Company’s trademarks required additional time for a complete analysis.

The Company has hired additional personnel in its finance department to address the material weakness.

B. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:

There have not been any significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

In the ordinary course of business, from time to time we become involved in legal claims and litigation. In the opinion of management, based on consultations with legal counsel, the disposition of litigation currently pending against us is unlikely to have, individually or in the aggregate, a materially adverse effect on our business, financial position, or results of operations.

ITEM 1A.    RISK FACTORS

In addition to the Risk Factors set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, set forth below are certain factors which could affect our financial condition and operating results. We operate in a highly competitive industry that involves numerous known and unknown risks and uncertainties that could impact our operations. The risks described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our financial condition and/or operating results.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of unregistered or registered securities during the three and six months ended June 30, 2021.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

None.

ITEM 6.    EXHIBITS

The following exhibits are filed herewith:

10.1 Amendment No. 1 and Waiver to Loan and Security Agreement

31.1 Rule 13a-14(a)/15d-14(a) Certification (CEO)

31.2 Rule 13a-14(a)/15d-14(a) Certification (CFO)

32.1 Section 1350 Certification (CEO)

32.2 Section 1350 Certification (CFO)

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 13, 2021	By:	/s/ Robert W. D’Loren
		Name: Robert W. D’Loren
		Title: Chairman and Chief Executive Officer
	By:	/s/ James Haran
		Name: James Haran
		Title: Chief Financial Officer and Vice President

36

EX-10.1

Exhibit 10.1

AMENDMENT NO. 1 and WAIVER
to
LOAN AND SECURITY AGREEMENT

THIS AMENDMENT NO. 1 AND WAIVER TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as of August 12, 2021, by and among XCEL BRANDS, INC., a Delaware corporation (“Borrower”), each other signatory hereto that is a Credit Party under the Loan Agreement (as hereinafter defined), the financial institutions from time to time party to the Loan Agreement (collectively, “Lenders” and individually, each a “Lender”), BANK HAPOALIM B.M., (“BHI”) as administrative agent and collateral agent for Lenders (BHI in such capacity together with its successors and assigns in such capacity, “Administrative Agent”) and FEAC Agent, LLC (“FEAC”), as co-collateral agent (FEAC in such capacity together with its successors and assigns in such capacity, “Co-Collateral Agent”).

BACKGROUND

Borrower, IM Brands, LLC (“IM Brands”), JR Licensing, LLC, H Licensing, LLC, C Wonder Licensing, LLC, Xcel Design Group, LLC, Judith Ripka Fine Jewelry, LLC, H Heritage Licensing, LLC, Xcel-CT MFG, LLC and Gold Licensing, LLC (other than Borrower, collectively, “Guarantors”), Lenders and Agents are parties to a Loan and Security Agreement dated as of April 12, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) pursuant to which Lenders made term loans to Borrower secured by a Lien on substantially all of the assets of Borrower.  Guarantors have guaranteed the payment and performance of Borrower’s obligations to Lenders and Agents under the Loan Agreement which guarantee obligations are secured by a Lien on substantially all of the assets of Guarantors.

Borrower has requested that Lenders waive compliance with certain financial covenants, and make certain amendments to the Loan Agreement.  Lenders and Agents have agreed to provide such waiver and amend the Loan Agreement on the terms and conditions set forth herein.  

NOW, THEREFORE, in consideration of the financial accommodations provided to Borrower by Lenders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions.  All capitalized terms not otherwise defined herein shall have the meanings given to them in the Loan Agreement.

2.Waiver.  Subject to the satisfaction of the conditions precedent set forth in Section 4 below, Lenders hereby waive the Event of Default arising from the failure of Borrower and the Included Subsidiaries on a consolidated basis to achieve EBITDA of at least $1,750,000 for the three month period ending June 30, 2021.  

3.Amendment to Loan Agreement.  Subject to the satisfaction of the conditions set forth in Section 4 below, the Loan Agreement is hereby amended as follows:

(a)The defined term “Maximum Revolving Loan Amount” in Section 1.1 amended to provide as follows:

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135944.00102/126596093v.1

“Maximum Revolving Loan Amount” means (a) until Borrower delivers a Compliance Certificate in accordance with Section 8.1(d) which shows compliance with the financial covenants set forth on Schedule V for the applicable periods ending December 31, 2021, $1,500,000 and (b) at all times thereafter, $4,000,000; provided that, if Borrower fails to comply with the financial covenants set forth on Schedule V as calculated in any Compliance Certificate delivered in accordance with Section 8.1(d), then from and after the date of such Compliance Certificate to the date of the Compliance Certificate next delivered in accordance with Section 8.1(d) showing compliance with the financial covenants set forth on Schedule V, the Maximum Revolving Loan Amount shall be $1,500,000.

(b)Section 8.1(d) is amended to provide as follows:

“(d)together with the Financial Statements delivered pursuant to Sections 8.1(a) and 8.1(c), a Compliance Certificate executed by a Responsible Officer of Borrower which shall include in reasonable detail (i) the calculations used in determining compliance with the financial covenants set forth on Schedule II and Schedule V, (ii) the exclusions with respect to changes in operating assets and liabilities as set forth on the cash flow statement of  Borrower and the Included Subsidiaries as reported in the calculation of the Fixed Charge Coverage Ratio and (iii) detail with respect to the tax benefits of redemptions of Equity Interests in such period;”

(c)Schedule II (Financial Covenants) is replaced with Schedule II attached to this Amendment.

(d)Schedule V to this Amendment is inserted as Schedule V to the Loan Agreement.

(e)Exhibit D (Form of Compliance Certificate) is replaced with Exhibit D attached to this Amendment.

4.Conditions of Effectiveness.  This Amendment shall become effective upon Agents’ receipt of this Amendment duly executed by each Credit Party and each Lender and the payment to Administrative Agent for the benefit of each Lender a fee in the amount of 0.25% of the outstanding principal amount of the Term Loans.

5.Representations and Warranties.  Each Credit Party hereby represents and warrants as follows:

(a)This Amendment constitutes the legal, valid and binding obligation of such Credit Party and is enforceable against such Credit Party in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally or limiting the right of specific performance.

(b)Upon the effectiveness of this Amendment, all representations and warranties of such Credit Party contained in the Loan Documents to which it is a party continue to

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be true and correct in all material respects as of the date hereof, as if repeated as of the date hereof, except for such representations and warranties which, by their terms, are expressly made only as of a previous date.

(c)No Event of Default has occurred and is continuing or would exist after giving effect to this Amendment.

(d)No Credit Party has any defense, counterclaim or offset with respect to any of the Loan Documents.

6.Effect on the Loan Documents.

(a)Except as specifically set forth herein, the Loan Documents shall remain in full force and effect, and are hereby ratified and confirmed by each Credit Party a party thereto.

(b)The limited waivers set forth in Section 2 hereof are effective only for the specific instance and purpose set for the herein and shall not entitle Borrower or Guarantor to any further waiver in any similar or other circumstances.  Except  as specifically set forth herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agents or any Lender nor constitute a waiver of any provision of any Loan Document.

7.Governing Law.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of New York.

8.Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

9.Counterparts; Electronic Transmission.  This Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement.  Any signature delivered by a party by facsimile or other electronic transmission shall be deemed to be an original signature hereto.

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first written above.

XCEL BRANDS, INC.

By:​ ​ /s/ James Haran​ ​
Name: James Haran
Title: CFO

IM BRANDS, LLC
JR LICENSING, LLC
H LICENSING, LLC
C WONDER LICENSING, LLC
XCEL DESIGN GROUP, LLC
JUDITH RIPKA FINE JEWELRY, LLC
H HERITAGE LICENSING, LLC
XCEL-CT MFG, LLC
GOLD LICENSING, LLC

By: XCEL BRANDS, INC.,
Its Manager

By:​ ​ /s/ James Haran​ ​
Name: James Haran
Title: CFO

21070539 SIGNATURE PAGE TO
AMENDMENT NO. 1 AND WAIVER TO LOAN AND SECURITY AGREEMENT

BANK HAPOALIM B.M., as Administrative Agent

By:​ ​ /s/ Barry S. Renow​ ​
Name: Barry S. Renow
Title: First Vice President

By:​ ​ /s/ Michael Gorman III​ ​
Name: Michael Gorman III
Title: First Vice President

[additional signature pages follow]

21070539 SIGNATURE PAGE TO
AMENDMENT NO. 1 AND WAIVER TO LOAN AND SECURITY AGREEMENT

FEAC AGENT, LLC, as Co-Collateral Agent.

By:​ ​ /s/ Michelle Handy​ ​
Name: Michelle Handy
Title: Managing Director

[additional signature pages follow]

21070539 SIGNATURE PAGE TO
AMENDMENT NO. 1 AND WAIVER TO LOAN AND SECURITY AGREEMENT

BANK HAPOALIM B.M., as a Lender

By:​ ​ /s/ Barry S. Renow​ ​
Name: Barry S. Renow
Title: First Vice President

By:​ ​ /s/ Michael Gorman III​ ​
Name: Michael Gorman III
Title: First Vice President

[additional signature pages follow]

21070539 SIGNATURE PAGE TO
AMENDMENT NO. 1 AND WAIVER TO LOAN AND SECURITY AGREEMENT

FIRST EAGLE ALTERNATIVE CAPITAL BDC, INC., as a Lender

By:​ ​ /s/ Michelle Handy​ ​
Name: Michelle Handy
Title: Managing Director

FIRST EAGLE DIRECT LENDING FUND IV, LLC, as a Lender

By: First Eagle Alternative Credit, LLC
Its: Manager

By:​ ​ /s/ Michelle Handy​ ​
Name: Michelle Handy
Title: Managing Director

FIRST EAGLE DIRECT LENDING IV CO-INVEST, LLC, as a Lender

By: First Eagle Alternative Credit, LLC
Its: Manager

By:​ ​ /s/ Michelle Handy​ ​
Name: Michelle Handy
Title: Managing Director

FIRST EAGLE DIRECT LENDING LEVERED FUND IV SPV, LLC, as a Lender

By: First Eagle Direct Lending Levered Fund IV, LLC

Its: Manager

By:​ ​ /s/ Michelle Handy​ ​
Name: Michelle Handy
Title: Managing Director

21070539 SIGNATURE PAGE TO
AMENDMENT NO. 1 AND WAIVER TO LOAN AND SECURITY AGREEMENT

SCHEDULE II

FINANCIAL COVENANTS

1.Minimum EBITDA.  EBITDA of Borrower and the Included Subsidiaries on a consolidated basis shall not be less than the amounts set forth below at the end of the applicable fiscal period set forth below:

Fiscal Period	Minimum EBITDA
April 1, 2021 to September 30, 2021	$3,000,000
April 1, 2021 to December 31, 2021	$4,400,000
For the trailing twelve month period ending March 31, 2022	$6,000,000
For the trailing twelve month periods ending June 30, 2022 and September 30, 2022	$6,500,000
For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023	$7,000,000
For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024 and March 31, 2025	$7,500,000

2.Minimum Liquid Assets.  Liquid Assets of Borrower and the Included Subsidiaries on a consolidated basis shall be at least $4,000,000 at all times.

3.Fixed Charge Coverage Ratio.  The Fixed Charge Coverage Ratio of Borrower and the Included Subsidiaries on a consolidated basis for (a) the nine month period ending on December 31, 2021 shall not be less than 1.05 to 1.00, (b) the twelve Fiscal Month period ending March 31, 2022 shall not be less than 1.20 to 1.00 and (c) the twelve Fiscal Month period ending at the end of each Fiscal Quarter commencing with the Fiscal Quarter ending June 30, 2022 shall not be less than 1.25 to 1.00.

4.Maximum Leverage Ratio.  The Leverage Ratio of Borrower and the Included Subsidiaries on a consolidated basis for the twelve Fiscal Month period ending at the end of each Fiscal Quarter shall not exceed (a) 6.75 to 1.00 for the Fiscal Quarter ending December 31, 2021 and (b) 4.00 to 1.00 for each Fiscal Quarter ending on and after March 31, 2022.

5.Loan To Value Ratio.  At no time shall the Loan to Value Ratio exceed 50%.

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SCHEDULE V

FINANCIAL COVENANTS

1.Minimum EBITDA.  EBITDA of Borrower and the Included Subsidiaries on a consolidated basis shall not be less than the amounts set forth below at the end of the applicable fiscal period set forth below:

Fiscal Period	Minimum EBITDA
April 1, 2021 to December 31, 2021	$6,500,000
For the trailing twelve month periods ending March 31, 2022, June 30, 2022 and September 30, 2022	$6,500,000
For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023	$7,000,000
For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024 and March 31, 2025	$7,500,000

2.Minimum Liquid Assets.  Liquid Assets of Borrower and the Included Subsidiaries on a consolidated basis shall be at least $4,000,000 at all times.

3.Fixed Charge Coverage Ratio.  The Fixed Charge Coverage Ratio of Borrower and the Included Subsidiaries on a consolidated basis for the twelve Fiscal Month period ending at the end of each Fiscal Quarter commencing with the Fiscal Quarter ending December 31, 2021 shall not be less than 1.25 to 1.00.

4.Maximum Leverage Ratio.  The Leverage Ratio of Borrower and the Included Subsidiaries on a consolidated basis for the twelve Fiscal Month period ending at the end of each Fiscal Quarter shall not exceed (a) 4.50 to 1.00 for the Fiscal Quarter ending December 31, 2021 and (b) 4.00 to 1.00 for each Fiscal Quarter ending on and after March 31, 2022.

5.Loan To Value Ratio.  At no time shall the Loan to Value Ratio exceed 50%.

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EXHIBIT D

FORM OF CERTIFICATE OF COMPLIANCE

[Date]

This Compliance Certificate (this “Certificate”) is given by Xcel Brands, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Loan and Security Agreement, dated as of April 12, 2021, among Borrower, the other Credit Parties party thereto from time to time, Lenders party thereto from time to time, Bank Hapoalim B.M., as administrative agent and collateral agent for such Lenders and FEAC Agent, LLC, as co-collateral agent for such Lenders (as such agreement may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”).  Capitalized terms used herein without definition shall have the meanings set forth in the Loan Agreement.

The undersigned is a Responsible Officer of Borrower and is duly authorized to execute and deliver this Certificate on behalf of Credit Parties.  By executing this Certificate, such officer of Borrower hereby certifies to the Agents and Lenders on behalf of Credit Parties that:

1.The Financial Statements attached hereto for the Fiscal [Quarter][Year] ending ____________________ are true and complete in all material respects and fairly present in all material respects the financial condition of Borrower and the Included  Subsidiaries as at the end of such Fiscal [Quarter][Year].

2.The calculations set forth in Annex 1 are computations of the financial covenants set forth on Schedule II and Schedule V of the Loan Agreement calculated from the Financial Statements in accordance with the terms of the Loan Agreement.  

3. Attached as Annex 2 is the calculation of revenue from the Revenue Licenses and no Trigger Event has occurred

4.Based upon a review of the activities of Borrower and the Included Subsidiaries and the Financial Statements during the period covered thereby, as of the date hereof, [no Default or Event of Default has occurred under the Credit Agreement][a Default or Event of Default has occurred, as described on Annex 3 hereto, and the action proposed to be taken with respect thereto is described on Annex 3 hereto].

5.Annex 4 sets forth a list of each new Material Contract entered into by any Credit Party since the date of the last Compliance Certificate delivered pursuant to the Loan Agreement. Except as set forth on Annex 4, there has been no termination of, any amendment to or other modification of or any default under, any QVC Agreement.

6.Except as set forth on Annex 4,  there has been no amendment to or other modification of any Employment Agreement, any termination of any Employment Agreement or any breach of any Employment Agreement which is not cured in any applicable grace period.

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7.Except as set forth on Annex 4, there has been no termination of any other Material Contract which the applicable Credit Party has not replaced within sixty (60) days of such termination, with a similar agreement which generates revenue at least equivalent to the agreement which was terminated.

8.No Credit Party has formed or acquired any Subsidiary except for:  [List new Subsidiaries, including Excluded Subsidiaries, Exempt Subsidiaries and Equity Funded Subsidiaries].

9..The following is a list of Outside Financing obtained by each Excluded Subsidiary:  [List Outside Financing].

10.The following is a list of Seller Financing and Take Back Financing obtained by each Exempt Subsidiary: [List Seller Financing and Take Back Financing].

IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed as of the date first above written.

XCEL BRANDS, INC.,
as Borrower

By:​ ​​ ​
Name:
Title:

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert W. D’Loren, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 of Xcel Brands, Inc. (the “Company”).

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 13, 2021	By:	/s/ Robert W. D’Loren
		Name: Robert W. D’Loren
		Title: Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James Haran, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 of Xcel Brands, Inc. (the “Company”).

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 13, 2021	By:	/s/ James Haran
		Name: James Haran
		Title: Chief Financial Officer and Vice President

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Xcel Brands, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert W. D’Loren, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May
August 13, 2021	By:	/s/ Robert W. D’Loren
		Name: Robert W. D’Loren
		Title: Chairman and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Xcel Brands, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Haran, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 13, 2021	By:	/s/ James Haran
		Name: James Haran
		Title: Chief Financial Officer and Vice President

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 09, 2021
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	001-37527
Entity Registrant Name	XCEL BRANDS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	76-0307819
Entity Address, Address Line One	1333 Broadway, 10th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10018
City Area Code	347
Local Phone Number	727-2474
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	XELB
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		19,540,254
Entity Central Index Key	0001083220
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current Assets:
Cash and cash equivalents	$ 4,815	$ 4,957
Accounts receivable, net of allowances of $1,284 and $1,151, respectively	10,662	8,889
Inventory	3,146	1,216
Prepaid expenses and other current assets	1,751	1,085
Total current assets	20,374	16,147
Property and equipment, net	3,515	3,367
Operating lease right-of-use assets	7,914	8,668
Trademarks and other intangibles, net	101,412	93,535
Restricted cash	739	1,109
Other assets	222	228
Total non-current assets	113,802	106,907
Total Assets	134,176	123,054
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	5,010	4,442
Accrued payroll	660	973
Acquisition consideration payable	2,045
Current portion of operating lease obligation	1,720	2,101
Current portion of long-term debt	4,000	2,800
Total current liabilities	13,435	10,316
Long-Term Liabilities:
Long-term portion of operating lease obligation	7,869	8,469
Long-term debt, less current portion	20,829	13,838
Contingent obligations	7,539	900
Deferred tax liabilities, net	1,571	3,052
Other long-term liabilities	591	224
Total long-term liabilities	38,399	26,483
Total Liabilities	51,834	36,799
Commitments and Contingencies
Equity:
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding	0	0
Common stock, $.001 par value, 50,000,000 shares authorized, and 19,530,855 and 19,260,862 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	20	19
Paid-in capital	102,852	102,324
Accumulated deficit	(20,700)	(16,595)
Total Xcel Brands, Inc. stockholders' equity	82,172	85,748
Noncontrolling interest	170	507
Total Equity	82,342	86,255
Total Liabilities and Equity	$ 134,176	$ 123,054

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Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Accounts Receivable, Allowance for Credit Loss, Current	$ 1,284	$ 1,151
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	19,530,855	19,260,862
Common stock, shares outstanding (in shares)	19,530,855	19,260,862

XML

Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues
Net revenue	$ 10,764	$ 5,050	$ 18,573	$ 14,577
Cost of goods sold (sales)	3,063	253	4,898	2,653
Gross profit	7,701	4,797	13,675	11,924
Operating costs and expenses
Salaries, benefits and employment taxes	4,049	2,882	8,101	6,830
Other selling, general and administrative expenses	3,090	2,366	6,128	5,015
Recovery of costs in connection with potential acquisitions		(101)		(21)
Stock-based compensation	431	488	591	731
Depreciation and amortization	1,848	1,329	3,058	2,632
Government assistance - Paycheck Protection Program		(1,640)		(1,640)
Asset impairment charges		82		82
Total operating costs and expenses	9,418	5,406	17,878	13,629
Operating loss	(1,717)	(609)	(4,203)	(1,705)
Interest and finance expense
Interest expense - term loan debt	522	310	798	623
Other interest and finance charges (income), net	100	(11)	104	(30)
Loss on extinguishment of debt (non-cash portion)	821		821
Total interest and finance expense	1,443	299	1,723	593
Loss before income taxes	(3,160)	(908)	(5,926)	(2,298)
Income tax (benefit) provision	(1,346)	428	(1,484)	(124)
Net loss	(1,814)	(1,336)	(4,442)	(2,174)
Less: Net loss attributable to noncontrolling interest	(256)	(36)	(337)	(69)
Net loss attributable to Xcel Brands, Inc. stockholders	$ (1,558)	$ (1,300)	$ (4,105)	$ (2,105)
Loss per share attributable to Xcel Brands, Inc. common stockholders:
Basic net loss per share	$ (0.08)	$ (0.07)	$ (0.21)	$ (0.11)
Diluted net loss per share	$ (0.08)	$ (0.07)	$ (0.21)	$ (0.11)
Weighted average number of common shares outstanding:
Basic weighted average common shares outstanding	19,449,116	19,132,244	19,355,795	19,001,321
Diluted weighted average common shares outstanding	19,449,116	19,132,244	19,355,795	19,001,321
Net licensing revenue
Revenues
Net revenue	$ 6,224	$ 4,501	$ 10,531	$ 10,142
Net sales revenue
Revenues
Net revenue	$ 4,540	$ 549	$ 8,042	$ 4,435

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Unaudited Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock Employee	Common Stock Executive officer	Common Stock Consultants	Common Stock Director	Common Stock	Paid-In Capital Employee	Paid-In Capital Executive officer	Paid-In Capital Consultants	Paid-In Capital	Accumulated Deficit	Noncontrolling Interest	Employee	Executive officer	Consultants	Total
Balances at Dec. 31, 2019					$ 19				$ 101,736	$ (3,659)	$ 356				$ 98,452
Balances (in shares) at Dec. 31, 2019					18,866,417
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued in connection with stock grants for bonus payments						$ 220						$ 220
Shares issued in connection with stock grants for bonus payments (in shares)	336,700
Shares repurchased from employees in exchange for withholding taxes									(102)						(102)
Shares repurchased from employees in exchange for withholding taxes (in shares)					(155,556)
Compensation expense in connection with stock options and restricted stock									91						91
Net loss										(805)	(33)				(838)
Balances at Mar. 31, 2020					$ 19				101,945	(4,464)	323				97,823
Balances (in shares) at Mar. 31, 2020					19,047,561
Balances at Dec. 31, 2019					$ 19				101,736	(3,659)	356				98,452
Balances (in shares) at Dec. 31, 2019					18,866,417
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Additional investment in Longaberger Licensing, LLC by non-controlling interest holder															300
Net loss															(2,174)
Balances at Jun. 30, 2020					$ 19				102,180	(5,764)	587				97,022
Balances (in shares) at Jun. 30, 2020					19,231,040
Balances at Mar. 31, 2020					$ 19				101,945	(4,464)	323				97,823
Balances (in shares) at Mar. 31, 2020					19,047,561
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued in connection with restricted stock grants						$ 265						$ 265
Shares issued in connection with restricted stock grants (in shares)	270,728
Shares repurchased from employees in exchange for withholding taxes									(85)						(85)
Shares repurchased from employees in exchange for withholding taxes (in shares)					(87,249)
Compensation expense in connection with stock options and restricted stock									55						55
Additional investment in Longaberger Licensing, LLC by non-controlling interest holder											300				300
Net loss										(1,300)	(36)				(1,336)
Balances at Jun. 30, 2020					$ 19				102,180	(5,764)	587				97,022
Balances (in shares) at Jun. 30, 2020					19,231,040
Balances at Dec. 31, 2020					$ 19				102,324	(16,595)	507				86,255
Balances (in shares) at Dec. 31, 2020					19,260,862
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Compensation expense in connection with stock options and restricted stock									169						169
Shares issued on exercise of stock options, net					1,667
Net loss										(2,547)	(81)				(2,628)
Balances at Mar. 31, 2021					$ 19				102,493	(19,142)	426				83,796
Balances (in shares) at Mar. 31, 2021					19,262,529
Balances at Dec. 31, 2020					$ 19				102,324	(16,595)	507				$ 86,255
Balances (in shares) at Dec. 31, 2020					19,260,862
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued on exercise of stock options, net															92,820
Net loss															$ (4,442)
Balances at Jun. 30, 2021					$ 20				102,852	(20,700)	170				82,342
Balances (in shares) at Jun. 30, 2021					19,530,855
Balances at Mar. 31, 2021					$ 19				102,493	(19,142)	426				83,796
Balances (in shares) at Mar. 31, 2021					19,262,529
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued in connection with stock grants for bonus payments		$ 1					$ 282						$ 283
Shares issued in connection with stock grants for bonus payments (in shares)		181,179
Shares issued in connection with restricted stock grants								$ 25						$ 25
Shares issued in connection with restricted stock grants (in shares)			14,045	50,000
Compensation expense in connection with stock options and restricted stock									52						52
Shares issued on exercise of stock options, net					23,102
Net loss										(1,558)	(256)				(1,814)
Balances at Jun. 30, 2021					$ 20				$ 102,852	$ (20,700)	$ 170				$ 82,342
Balances (in shares) at Jun. 30, 2021					19,530,855

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Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities
Net loss	$ (1,814)	$ (1,336)	$ (4,442)	$ (2,174)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense	1,848	1,329	3,058	2,632
Asset impairment charges		82		82
Amortization of deferred finance costs			109	50
Stock-based compensation	431	488	591	731
Allowance for doubtful accounts	0	472	132	683
Loss on extinguishment of debt (non-cash portion)			454
Deferred income tax benefit			(1,484)	(124)
Changes in operating assets and liabilities:
Accounts receivable			(2,392)	3,396
Inventory			(1,930)	33
Prepaid expenses and other assets			(174)	(59)
Accounts payable, accrued expenses and other current liabilities			192	(2,688)
Cash paid in excess of rent expense			(225)	(181)
Other liabilities			367
Net cash (used in) provided by operating activities			(5,744)	2,381
Cash flows from investing activities
Cash consideration for acquisition of Lori Goldstein assets			(1,616)
Purchase of other intangible assets			(37)
Purchase of property and equipment			(747)	(634)
Net cash used in investing activities			(2,400)	(634)
Cash flows from financing activities
Proceeds from exercise of stock options			5
Shares repurchased including vested restricted stock in exchange for withholding taxes				(187)
Proceeds from revolving loan debt			1,500
Proceeds from long-term debt			25,000	10
Payment of deferred finance costs			(1,131)
Payment of long-term debt			(17,375)	(750)
Payment of breakage fees associated with extinguishment of long-term debt			(367)
Net cash provided by (used in) financing activities			7,632	(927)
Net (decrease) increase in cash, cash equivalents, and restricted cash			(512)	820
Cash, cash equivalents, and restricted cash at beginning of period			6,066	5,750
Cash, cash equivalents, and restricted cash at end of period	5,554	6,570	5,554	6,570
Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents	4,815	5,461	4,815	5,461
Restricted cash	739	1,109	739	1,109
Total cash, cash equivalents, and restricted cash	$ 5,554	6,570	5,554	6,570
Supplemental disclosure of non-cash activities:
Consideration payable to seller of Lori Goldstein assets			2,045
Contingent obligation related to acquisition of Lori Goldstein assets at fair value			6,639
Liability for equity-based bonuses			62	100
Amount due from noncontrolling interest for capital contribution		$ 300		300
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes			15	47
Cash paid during the period for interest			$ 852	$ 811

XML

Nature of Operations, Background, and Basis of Presentation

6 Months Ended

Jun. 30, 2021

Nature of Operations, Background, and Basis of Presentation [Abstract]

Nature of Operations, Background, and Basis of Presentation

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

The accompanying condensed consolidated balance sheet as of December 31, 2020 (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, 2020, as filed with the SEC on April 23, 2021.

Certain reclassifications have been made to prior year comparable period financial statements to conform to classifications used in the current year – specifically, the classification and aggregation / disaggregation of certain types of operating costs and expenses, and the disaggregation of the components of interest and finance expense. These reclassifications had no impact on total operating costs and expenses, total interest and finance expense, net loss, stockholders’ equity, or cash flows as previously reported.

The Company is a media and consumer products company engaged in the design, production, marketing, live streaming, wholesale distribution, and direct-to-consumer 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 Isaac Mizrahi brands (the "Isaac Mizrahi Brand"), the LOGO by Lori Goldstein brand, the Judith Ripka brands (the "Ripka Brand"), the Halston brands (the "Halston Brands"), the C Wonder brands (the "C Wonder Brand"), and other proprietary brands. The Company also manages the Longaberger brand (the “Longaberger Brand”) through its 50% ownership interest in Longaberger Licensing, LLC. The Company acquired the LOGO by Lori Goldstein brand, and the various labels under the brand, on April 1, 2021 (see Note 2).

The Company designs, produces, markets, and distributes products, licenses its brands to third parties, and generates licensing revenues. The Company and its licensees distribute through an omni-channel retail sales strategy, which includes distribution through interactive television, digital live-stream shopping, brick-and-mortar retail, wholesale, and e-commerce channels to be everywhere its customers shop.

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") No. 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions to the general principles in Topic 740, including, but not limited to, intraperiod tax allocations and interim period tax calculations. The ASU also provides additional clarification and guidance related to recognition of franchise taxes and changes in tax laws. The adoption of this new guidance did not have any impact on the Company’s results of operations, cash flows, and financial condition.

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Acquisitions

6 Months Ended

Jun. 30, 2021

Asset Acquisitions [Abstract]

Acquisitions

2.      Acquisitions

Acquisition of LOGO by Lori Goldstein Brand

On March 30, 2021, the Company and its wholly owned subsidiary, Gold Licensing, LLC, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Lori Goldstein, Ltd. (the “Seller”) and Lori Goldstein (“Shareholder”), pursuant to which the Company agreed to acquire, and the Seller and Shareholder agreed to sell, certain assets of the Seller, including the “LOGO by Lori Goldstein” trademark and other intellectual property rights relating thereto. On April 1, 2021 (the “Closing Date”), the Company completed the acquisition of the assets specified in the Asset Purchase Agreement.

Pursuant to the Asset Purchase Agreement, on the Closing Date, the Company delivered $1.6 million in cash consideration to the Seller. In addition, the Company was required to deliver $2.0 million in cash consideration to the Seller on the earlier of (i) the Company’s receipt of the first royalty payment from QVC, Inc. in respect of the acquired assets, or (ii) July 29, 2021. This payment was made in July 2021.

In addition to the consideration described above, the Seller is eligible to earn additional consideration of up to $12.5 million (the “Lori Goldstein Earn-Out”), which would be payable, in cash, within 45 days after the end of each applicable calendar year during the six calendar year period commencing 2021 in an amount equal to 75% percent of the Royalty Contribution (as defined in the Asset Purchase Agreement) for such calendar year. The Company recorded a contingent obligation of $6.6 million related to the Lori Goldstein Earn-Out, based on the difference between the fair value of the acquired assets of the LOGO by Lori Goldstein brand and the total consideration paid, in accordance with the guidance in Accounting Standards Codification (“ASC”) Subtopic 805-50.

The LOGO by Lori Goldstein brand acquisition was accounted for as an asset purchase. The following represents the aggregate purchase price of $10.3 million:

($ in thousands)
Cash paid at closing	$	1,600
Cash consideration payable		2,045
Total direct initial consideration		3,645
Direct transaction expenses		16
Contingent obligation (Lori Goldstein Earn-Out)		6,639
Total consideration	$	10,300

The aggregate purchase price has been allocated entirely to the trademarks of the brand. Such trademarks have been determined by management to have a finite useful life, and accordingly, amortization is recorded in the Company’s condensed consolidated statements of operations. The Lori Goldstein trademarks are being amortized on a straight-line basis over their expected useful life of four years.

Upon the consummation of the acquisition of the LOGO by Lori Goldstein brand as described above, the Company incurred cash bonuses totaling $175,000 to certain members of the Company’s senior management (including $100,000 to the Chief Executive Officer, and $25,000 each to the Chief Financial Officer, President and Chief Operating Officer, and Executive Vice President of Business Development and Treasury), such success-related bonuses having been approved by the Board of Directors on March 18, 2021. These bonuses were subsequently paid in May 2021.

Additionally, concurrent with the acquisition, the Company also entered into a 10-year employment agreement with the Shareholder to serve as the LOGO by Lori Goldstein brand’s Chief Creative Officer and Spokesperson, with a base salary of $0.9 million per annum through December 31, 2021 and $1.2 million per annum thereafter, and the opportunity to earn additional incentives based on the future net royalties related to the brand. Further, the Company concurrently entered into a consulting agreement with the Seller to provide creative advice and consultation, for a fee of $0.6 million per annum through December 31, 2021 and $0.8 million per annum thereafter.

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Trademarks and Other Intangibles

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Trademarks and Other Intangibles

3.      Trademarks and Other Intangibles

Trademarks and other intangibles, net consist of the following:

	Weighted
	Average	June 30, 2021
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (indefinite-lived)	n/a	$	44,500	$	—	$	44,500
Trademarks (finite-lived)	15 years		20,386		6,330		14,056
Trademarks (finite-lived)	18 years		38,194		5,254		32,940
Trademarks (finite-lived)	4 years		10,300		644		9,656
Other intellectual property	7 years		762		591		171
Copyrights and other intellectual property	9 years		227		138		89
Total		$	114,369	$	12,957	$	101,412

	Weighted
	Average	December 31, 2020
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (indefinite-lived)	n/a	$	44,500	$	—	$	44,500
Trademarks (finite-lived)	15 years		20,386		5,640		14,746
Trademarks (finite-lived)	18 years		38,194		4,192		34,002
Other intellectual property	7 years		762		537		225
Copyrights and other intellectual property	10 years		190		128		62
Total		$	104,032	$	10,497	$	93,535

Amortization expense for intangible assets was approximately $1.55 million for the three-month period ended March 31, 2021 (the "current quarter") and was approximately $1.14 million for the three-month period ended March 31, 2020 (the "prior year quarter"). Amortization expense for intangible assets was approximately $2.46 million for the six-month period ended June 30, 2021 (the “current six months”) and was approximately $2.28 million for the six-month period ended June 30, 2020 (the “prior year six months”).

The trademarks related to the Isaac Mizrahi Brand have been determined to have indefinite useful lives and, accordingly, no amortization has been recorded for these assets.

Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows:

($ in thousands)	Amortization
Year Ending December 31,	Expense
2021 (July 1 through December 31)	$	3,110
2022		6,219
2023		6,219
2024		6,199
2025		4,257
Thereafter		30,908
Total	$	56,912

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Significant Contracts

6 Months Ended

Jun. 30, 2021

Significant Contracts [Abstract]

Significant Contracts

4.      Significant Contracts

QVC Agreements

Under the Company’s agreements with Qurate Retail Group (“Qurate”), collectively referred to as the QVC Agreements, Qurate is required to pay the Company fees based primarily on a percentage of its net sales of Isaac Mizrahi, Judith Ripka, Lori Goldstein, and Longaberger branded merchandise. Qurate royalty revenue represents a significant portion of the Company’s total revenues.

● Revenues from the QVC Agreements totaled $5.45 million and $4.04 million for the current and prior year quarter, respectively, representing approximately 51% and 81% of the Company’s total net revenues for the current and prior year quarter, respectively.

● Revenues from the QVC Agreements totaled $9.19 million and $8.74 million for the current and prior year six months, respectively, representing approximately 50% and 60% of the Company’s total net revenues for the current and prior year six months, respectively.

● As of June 30, 2021 and December 31, 2020, the Company had receivables from Qurate of $5.61 million and $4.46 million, respectively, representing approximately 53% and 50% of the Company’s total accounts receivable, respectively.

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Allowance for Doubtful Accounts

6 Months Ended

Jun. 30, 2021

Credit Loss [Abstract]

Allowance for Doubtful Accounts

5. Allowance for Doubtful Accounts

Accounts receivable are presented on the Company’s condensed consolidated balance sheets net of allowances of $1,284,000 and $1,151,000 as of June 30, 2021 and December 31, 2020, respectively. The Company recognized bad debt expense of $0 and $472,000 for the current quarter and prior year quarter, respectively, and recognized bad debt expense of $132,000 and $683,000 for the current six months and prior year six months, respectively.

The bad debt expense amounts for the current six months, prior year quarter, and prior year six months include $132,000, $472,000, and $586,000, respectively, of bad debt expense related to the bankruptcy of and economic impact on certain retail customers due to the COVID-19 pandemic. The total allowance of $1.1 million against such customers’ outstanding receivable balances of $1.5 million at June 30, 2021 represents management’s best estimate of collectibility, based on information currently available.

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Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

6. Leases

The Company has operating leases for its current office, former office, and a retail store location, as well as certain equipment with a term of 12 months or less. The Company’s real estate leases have remaining lease terms of between approximately 8 months and 8 years.

Under GAAP, a lessee is generally required to recognize a liability for its obligation to make future lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying leased asset for the lease term. The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease ROU assets, current portion of operating lease liabilities, and long-term operating lease liabilities on the Company’s condensed consolidated balance sheets. The Company does not recognize lease liabilities and ROU assets for lease terms of 12 months or less, but recognizes such lease payments in net income on a straight-line basis over the lease terms.

Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is generally recognized on a straight-line basis over the lease term.

For both the current and prior year quarter, lease expense included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $0.4 million. For the current and prior year six months, lease expense included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $0.8 million.

As of June 30, 2021, the weighted average remaining operating lease term was approximately 6.0 years and the weighted average discount rate for operating leases was 6.25%.

Cash paid for amounts included in the measurement of operating lease liabilities was $0.7 million in the current quarter, $1.3 million in the current six months, $0.1 million in the prior year quarter, and $0.7 million in the prior year six months.

As of June 30, 2021, the maturities of lease liabilities were as follows:

($ in thousands)
2021 (July 1 through December 31)	$	1,228
2022		1,891
2023		1,711
2024		1,711
2025		1,710
After 2025		3,321
Total lease payments		11,572
Less: Discount		1,983
Present value of lease liabilities		9,589
Current portion of lease liabilities		1,720
Non-current portion of lease liabilities	$	7,869

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Debt

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Debt

7. Debt

The Company’s net carrying amount of debt was comprised of the following:

	June 30,		December 31,
($ in thousands)	2021		2020
Term loan debt	$	24,375	$	16,750
Unamortized deferred finance costs related to term loan debt		(1,046)		(112)
Revolving loan debt		1,500		—
Total		24,829		16,638
Current portion of debt (i)		4,000		2,800
Long-term debt	$	20,829	$	13,838

(i) The current portion of debt as of June 30, 2021 consists of $2.5 million of term loan debt and $1.5 million of revolving loan debt; the current portion of debt as of December 31, 2020 is related solely to term loan debt.

Previous Term Loan Debt

On February 11, 2019, the Company entered into an amended loan agreement with Bank Hapoalim B.M. (“BHI”), which amended and restated a prior term loan with BHI, such that, as of February 11, 2019, the aggregate outstanding balance of all the term loans extended by BHI to Xcel was $22.0 million, which amount was divided  into two term loans: (1) a term loan in the amount of $7.3 million and (2) a term loan in the amount of $14.7 million. Such loan agreement was subsequently amended on April 13, 2020 and again on August 18, 2020; such amendments changed the timing and amount of quarterly installment payments, but did not change the total principal balance, interest rate, or maturity date. These amendments during 2020 were accounted for as debt modifications and, accordingly, no gain or loss was recorded.

Current Term Loan Debt

On April 14, 2021 (the “Loan Closing Date”), Xcel, as Borrower, and its wholly-owned subsidiaries (each a “Guarantor” and collectively, the “Guarantors”), entered into a Loan and Security Agreement (the “Loan Agreement”) with BHI as administrative agent and collateral agent, FEAC Agent, LLC (“FEAC”) as co-collateral agent, and the financial institutions party thereto as lenders (the “Lenders”). Pursuant to the Loan Agreement, the Lenders made two term loans: (1) a term loan in the amount of $10.0 million (“Term Loan A”) and (2) a term loan in the amount of $15.0 million (“Term Loan B” and, together with Term Loan A, the “Term Loans”).

The Loan Agreement also contemplates that the Lenders will provide to Xcel a revolving loan facility in an amount up to $4.0 million on a discretionary basis, but not to exceed 85% of the amount of eligible accounts receivable. Xcel shall have the right to request the Lenders to make incremental term loans (the “Incremental Term Loans”) of up to $25.0 million.

Management assessed and determined that this new agreement resulted in an extinguishment of the previous term loan debt, and accordingly recognized a loss of approximately $0.8 million (consisting of $0.1 million of unamortized deferred finance costs and $0.7 million of breakage fees owed to the old lender under the terms of the previous debt agreement) during the current quarter. Approximately $367,000 of such aforementioned breakage fees were paid at time of extinguishment, with the remaining $367,000 of such fees payable in three equal payments on each of May 1, 2022, 2023, and 2024.

Upon entering into the Loan Agreement, Xcel paid a 2.5% closing fee in the amount of $0.625 million to the administrative agent for the benefit of each Lender having a term loan commitment; the Company also paid approximately $0.5 million of various legal and other fees in connection with the execution of the Loan Agreement. These fees and costs totaling

approximately $1.1 million have been deferred on the condensed consolidated balance sheet as a reduction of the carrying value of the Term Loans, and are being amortized to interest expense over the term of the Term Loans using the effective interest method.

The Term Loans mature on April 14, 2025, Incremental Term Loans shall mature on the date set forth in the applicable term note, and Revolving Loans mature on April 14, 2022 or such later date as agreed upon by Xcel and the Lenders. Principal on the Term Loans is payable in 16 quarterly installments of $625,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on June 30, 2021 and ending on March 31, 2025, with a final payment of $15.0 million on the maturity date of April 14, 2025. An amount equal to eighty percent (80%) of each quarterly principal installment payment shall be applied to the Term Loan A and the remaining twenty percent (20%) of each such quarterly principal installment shall be applied to the Term Loan B until the outstanding principal balance of Term Loan A is paid in full. Thereafter, one hundred percent (100%) of each such quarterly principal installment shall be applied to the Term Loan B.

The aggregate remaining annual scheduled principal payments under the Term Loans at June 30, 2021 were as follows:

	Amount of
($ in thousands)	Principal
Year Ending December 31,	Payment
2021 (July 1 to December 31)	$	1,250
2022		2,500
2023		2,500
2024		2,500
2025		15,625
Total	$	24,375

Xcel shall have the right upon 30 days’ prior written notice to (i) terminate the Revolving Loan facility and repay all Revolving Loans and accrued and unpaid interest thereon and (ii) prepay all or any portion of the Term Loans or Incremental Term Loans and accrued and unpaid interest thereon, provided that any prepayment of the Term Loans shall be applied first to prepay the Term Loan A in full, second to prepay the Term Loan B, and third to the Incremental Term Loans in accordance with the terms agreed to by Xcel, the Lenders, and the administrative agent.

If any Term Loan is prepaid in whole or in part on or prior to the third anniversary of the Loan Closing Date (including as a result of an event of default), Xcel shall pay a prepayment premium as follows: an amount equal to the principal amount of the Term Loan prepaid multiplied by: (i) the greater of three percent (3.00%) and the Lost Yield Revenue (as defined below) if such prepayment occurs on or before the first anniversary of the Loan Closing Date; (ii) two percent (2.00%) if such prepayment occurs at any time after the first anniversary of the Loan Closing Date and on or prior to the second anniversary of the Loan Closing Date; and (iii) one percent (1.00%) if such prepayment occurs at any time after the second anniversary of the Loan Closing Date on or prior to the third anniversary of the Loan Closing Date. Xcel is not obligated to pay a prepayment premium if the Term Loans prepaid after the third anniversary of the Loan Closing Date. “Lost Yield Revenue” means, with respect to any payment of Term Loans at any time on or prior to the first anniversary of the Loan Closing Date (excluding regularly scheduled amortization payments), the amount of interest (including interest at the Default Rate to the extent the Default Rate is being charged under the Loan Agreement) that would have accrued on the repaid Term Loans during the first 12 months of the term of the Loan Agreement minus the portion of such interest on such Term Loans that actually has been paid.

Xcel’s obligations under the Loan Agreement are guaranteed by the Guarantors and secured by all of the assets of Xcel and the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement) and,

subject to certain limitations contained in the Loan Agreement, equity interests of the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement).

Xcel also granted the Lenders a right of first offer to finance any acquisition for which the consideration therefor will be paid other than by cash of Xcel or the Guarantors, the issuance of equity interest of Xcel, or the issuance of notes to the applicable seller.

The Loan Agreement contains customary covenants, including reporting requirements, trademark preservation, and financial covenants (on a consolidated basis with Xcel and the Guarantors under the Loan Agreement).

On August 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, the EBITDA financial covenant for the three months ended June 30, 2021 was eliminated, and the financial covenants related to EBITDA, fixed charge coverage ratio, and leverage ratio were lowered for the remainder of 2021 and for the 12 months ending March 31, 2022. Additionally, the maximum amount available under the revolving loan facility was reduced from $4.0 million to $1.5 million until the Company demonstrates compliance with the amended financial covenants for the applicable periods ending December 31, 2021. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement.

The Company’s financial covenants under the Loan Agreement, as amended, are as follows:

● minimum EBITDA at the end of specified fiscal periods as set forth below;

Fiscal Period	Minimum EBITDA
April 1, 2021 to September 30, 2021	$	3,000,000
April 1, 2021 to December 31, 2021	$	4,400,000
April 1, 2021 to March 31, 2022	$	6,000,000
For the trailing twelve month periods ending June 30, 2022 and September 30, 2022	$	6,500,000
For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023, and September 30, 2023	$	7,000,000
For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025	$	7,500,000

● liquid assets of at least 4.0 million at all times;

● a fixed charge coverage ratio of not less than (a) 1.05 to 1.00 for the nine month period ending on December 31, 2021, (b) 1.20 to 1.00 for the twelve fiscal month period ending March 31, 2022, and (c) 1.25 to 1.00 for the twelve fiscal month period ending at the end of each fiscal quarter commencing with the fiscal quarter ending June 30, 2022;

● a leverage ratio for the twelve fiscal month period ending at the end of each fiscal quarter not exceeding (a) 6.75 to 1.00 for the fiscal quarter ending December 31, 2021 and (b) 4.00 to 1.00 for each fiscal quarter ending on and after March 31, 2022; and

● a loan to value ratio not exceeding 50%.

The Company was in compliance with all applicable covenants as of June 30, 2021.

Interest on the Term Loan A will accrue at LIBOR plus 4.0% per annum, interest on the Term Loan B will accrue at LIBOR plus 8.0% per annum, and interest on the Revolving Loans will accrue at either the Base Rate plus 1.5% per annum or LIBOR plus 3.75%, as elected by Xcel. Interest on the Loans is payable on the last business day of each calendar month. Base Rate is defined in the Loan Agreement as the greater of (a) BHI’s stated prime rate or (b) 2.00% per annum plus the overnight federal funds rate published by the Federal Reserve Bank of New York. LIBOR is defined in the Loan Agreement as the greater of (a) the rate of interest per annum for deposits in dollars for an interest period equal to one month as published by ICE Benchmark Administration Limited or a comparable or successor quoting service at approximately 11:00 a.m. (London time) on such date of determination or (b) 1.0% per annum. Interest on the Incremental Term Loans will accrue at rates and will be paid on dates to be agreed to by Xcel and the Lenders.

For the current and prior year quarter, the Company incurred interest expense related to term loan debt of approximately $522,000 and $310,000, respectively. For the current six months and prior year six months, the Company incurred interest expense related to term loan debt of approximately $798,000 and $623,000, respectively. The effective interest rate related to term loan debt was approximately 9.0% and 7.8% for the current quarter and current six months, respectively, and was approximately 6.6% for both the prior year quarter and prior year six months.

On June 24, 2021, Xcel borrowed $1.5 million under the aforementioned revolving loan facility, and incurred related interest expense for the current quarter of approximately $1,000.

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Government assistance

6 Months Ended

Jun. 30, 2021

Unusual or Infrequent Items, or Both [Abstract]

Government assistance

8.      Government Assistance

Paycheck Protection Program (“PPP”)

On April 20, 2020, the Company executed a promissory note (the “Promissory Note”) with Bank of America, N.A., which provided for an unsecured loan in the amount of $1.806 million, pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The loan has a two-year term and bears interest at a fixed rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type. The loan was funded on April 23, 2020.

The PPP also provides that this loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act, and later amended by the Paycheck Protection Program Flexibility Act (the "Flexibility Act") signed into law on June 5, 2020. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. While management believes that it is probable that the loan will be forgiven in full, no definite assurance can be provided that forgiveness for any portion of the loan will be obtained. Management's determination that full forgiveness is probable is based on qualification under the Flexibility Act.

Management evaluated the legal and contractual terms associated with the loan, and concluded that, although the legal form of the loan is debt, it represents in substance a government grant that is expected to be forgiven. Given the lack of definitive authoritative guidance under GAAP for accounting for government grants, the Company analogized to accounting guidance under International Accounting Standard No. 20, “Accounting for Government Grants and Disclosure of Government Assistance.” Under such guidance, once it is probable that the conditions attached to the assistance will be met, the earnings impact of government grants is recorded on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. Accordingly, the Company recognized $1.640 million as a reduction to operating expenses in the prior year quarter and prior year six months. No interest expense related to the loan has been recorded in the Company’s condensed consolidated financial statements.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

Stockholders' Equity

9. Stockholders’ Equity

2011 Equity Incentive Plan

The Company’s 2011 Equity Incentive Plan, as amended and restated (the “Plan”), is designed and utilized to enable the Company to provide its employees, officers, directors, consultants, and others whose past, present, and/or potential contributions to the Company have been, are, or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. A total of 13,000,000 shares of common stock are eligible for issuance under the Plan. The Plan provides for the grant of any or all of the following types of awards: stock options, restricted stock, deferred stock, stock appreciation rights, and other stock-based awards. The Plan is administered by the Company’s Board of Directors, or, at the Board’s discretion, a committee of the Board.

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification Topic 718, “Compensation - Stock Compensation,” by recognizing the fair value of stock-based compensation as an operating expense over the service period of the award or term of the corresponding contract, as applicable.

The fair value of options and warrants is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the long-term implied volatilities of the Company’s stock, and expected life is based on the estimated average of the life of options and warrants using the simplified method. The Company utilizes the simplified method to determine the expected life of the options and warrants due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Restricted stock awards are valued using the fair value of the Company’s stock at the date of grant.

For stock option awards for which vesting is contingent upon the achievement of certain performance targets, the timing and amount of compensation expense recognized is based upon the Company’s projections and estimates of the relevant performance metric(s) until the time the performance obligation is satisfied.

Forfeitures are accounted for as a reduction of compensation cost in the period when such forfeitures occur.

Stock Options

Options granted under the Plan expire at various times – either five, seven, or ten years from the date of grant, depending on the particular grant.

A summary of the Company’s stock options activity for the current six months is as follows:

				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Life	Intrinsic
	Options	Price		(in Years)	Value
Outstanding at January 1, 2021	7,179,375	$	3.14	4.93	$	—
Granted	490,390		1.88
Canceled	(8,050)		1.86
Exercised	(92,820)		1.76
Expired/Forfeited	(1,721,070)		5.63
Outstanding at June 30, 2021, and expected to vest	5,847,825	$	2.33	5.78	$	2,792,000
Exercisable at June 30, 2021	1,963,658	$	3.42	2.33	$	—

On March 15, 2021, the Company granted options to purchase an aggregate of 365,390 shares of common stock to various employees. The exercise price of the options is $1.86 per share, and all options vested immediately on the date of grant.

On April 1, 2021, the Company granted options to purchase an aggregate of 125,000 shares of common stock to non-management directors. The exercise price of the options is $1.93 per share, and 50% of the options vest on each of April 1, 2022 and April 1, 2023.

Compensation expense related to stock options for the current quarter and the prior year quarter was approximately $40,000 and $45,000, respectively. Compensation expense related to stock options for the current six months and prior year six months was approximately $198,000 and $113,000, respectively.

Total unrecognized compensation expense related to unvested stock options at June 30, 2021 amounts to approximately $151,000 and is expected to be recognized over a weighted average period of approximately 1.15 years.

A summary of the Company’s non-vested stock options activity for the current six months is as follows:

		Weighted
		Average
	Number of	Grant Date
	Options	Fair Value
Balance at January 1, 2021	4,116,167	$	0.08
Granted	490,390		0.40
Vested	(647,390)		0.43
Forfeited or Canceled	(75,000)		0.08
Balance at June 30, 2021	3,884,167	$	0.06

Warrants

Warrants expire at various times – either five or ten years from the date of grant, depending on the particular grant.

A summary of the Company’s warrants activity for the current six months is as follows:

				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Life	Intrinsic
	Warrants	Price		(in Years)	Value
Outstanding and exercisable at January 1, 2021	579,815	$	4.63	1.32	$	—
Granted	—		—
Canceled	—		—
Exercised	—		—
Expired/Forfeited	—		—
Outstanding and exercisable at June 30, 2021	579,815	$	4.63	0.82	$	—

No compensation expense related to warrants was recognized in the current quarter, prior year quarter, current six months, or prior year six months.

Stock Awards

A summary of the Company’s restricted stock activity for the current six months is as follows:

		Weighted
	Number of	Average
	Restricted	Grant Date
	Shares	Fair Value
Outstanding at January 1, 2021	780,833	$	4.09
Granted	245,224		1.65
Canceled	—		—
Vested	(195,224)		1.58
Expired/Forfeited	—		—
Outstanding at June 30, 2021	830,833	$	3.96

On April 1, 2021, the Company issued an aggregate of 50,000 shares of stock to non-management directors, which vest evenly over two years, whereby 50% shall vest on April 1, 2022, and 50% shall vest on April 1, 2023.

On April 26, 2021, the Company issued 14,045 shares of stock to a consultant, which vested immediately.

Compensation expense related to restricted stock grants for the current and prior year quarter was approximately $37,000 and $10,000, respectively. Compensation expense related to restricted stock grants for the current six months and prior year six months was approximately $47,000 and $33,000, respectively.

Total unrecognized compensation expense related to unvested restricted stock grants at June 30, 2021 amounts to approximately $84,000 and is expected to be recognized over a weighted average period of approximately 1.75 years.

Additionally, on May 7, 2021, the Company issued 181,179 shares of stock to a member of senior management as payment for a performance bonus earned in 2020. These shares vested immediately. The Company had previously recognized compensation expense of approximately $291,000 in 2020 to accrue for this performance bonus, and recognized a reduction to compensation expense of approximately $(8,000) during the current six months related to this bonus.

The Company also recognized approximately $354,000 of compensation expense in the current quarter and current six months related to similar senior management bonuses payable in common stock in 2022.

Shares Available Under the Company’s 2011 Equity Incentive Plan

As of June 30, 2021, there were 2,611,155 shares of common stock available for issuance under the Plan.

Shares Reserved for Issuance

As of June 30, 2021, there were 9,038,795 shares of common stock reserved for issuance pursuant to unexercised warrants and stock options, or available for issuance under the Plan.

Dividends

The Company has not paid any dividends to date.

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Earnings Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Earnings Per Share

10.    Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period, including stock options and warrants, using the treasury stock method. Diluted EPS excludes all potentially dilutive shares of common stock if their effect is anti-dilutive.

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Basic	19,449,116	19,132,244	19,355,795	19,001,321
Effect of exercise of warrants	—	—	—	—
Effect of exercise of stock options	—	—	—	—
Diluted	19,449,116	19,132,244	19,355,795	19,001,321

As a result of the net loss for all periods presented, the Company calculated diluted earnings per share using basic weighted average shares outstanding for such period, as utilizing diluted shares would be anti-dilutive to loss per share.

The computation of diluted EPS excludes the following potentially dilutive securities because their inclusion would be anti-dilutive:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Stock options and warrants	6,427,640	8,119,940	6,427,640	8,119,940

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Income Tax

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Tax

11.    Income Tax

The effective income tax rate for the current quarter and the prior year quarter was approximately 43% and -49%, respectively, resulting in an income tax (benefit) provision of $(1.35) million and $0.43 million, respectively.

The effective income tax rate for the current six months and prior year six months was approximately 25% and 5%, respectively, resulting in an income tax (benefit) of $(1.48) million and $(0.12) million, respectively.

For the current quarter, the federal statutory rate differed from the effective tax rate primarily due to recurring permanent differences and state taxes, which increased the effective tax rate by approximately 15% and 7%, respectively.

For the prior year quarter, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effective rate by approximately 41%. The effective tax rate was also attributable to state taxes and recurring permanent differences, which decreased the effective tax rate by approximately 2% and 27%, respectively. The effective tax rate was also attributable to the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 3%.

For the current six months, the federal statutory rate differed from the effective tax rate primarily due to state taxes, which increased the effective tax rate by approximately 7%, partially offset by the impact of recurring permanent differences, which decreased the effective tax rate by approximately 3%.

For the prior year six months, the federal statutory rate differed from the effective tax rate primarily due to the tax impact from the vesting of restricted shares of common stock, which was treated as a discrete item for tax purposes and decreased the effect rate by approximately 16%. The effective rate was also attributable to state taxes and recurring permanent differences, which increased the effective tax rate by approximately 5% and decreased the effective tax rate by approximately 8%, respectively. The effective tax rate was also affected by the tax impact of a potential federal net operating loss carryback due to the CARES Act; this item increased the effective rate by approximately 4%.

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Related Party Transactions

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

Related Party Transactions

12.    Related Party Transactions

Robert W. D’Loren

Jennifer D’Loren is the wife of Robert W. D’Loren, the Company’s Chief Executive Officer and Chairman of the Board, and is employed by the Company. Mrs. D’Loren brings vast experience in project management and implementation of financial IT solutions. During the past two years, Mrs. D’Loren has worked on the implementation of the Company’s ERP system. Mrs. D’Loren received compensation of $11,000 and $33,000 for the current quarter and prior year quarter, respectively. Mrs. D’Loren received compensation of $21,000 and $70,000 for the current six months and prior year six months, respectively.

Isaac Mizrahi

On February 24, 2020, the Company entered into an employment agreement with Isaac Mizrahi, a principal stockholder of the Company, for Mr. Mizrahi to continue to serve as Chief Design Officer of the Isaac Mizrahi Brand. The term of the employment agreement expires on December 31, 2022, subject to earlier termination, and may be extended, at the Company’s option, for two successive one-year terms (each, a “Renewal Period”). Mr. Mizrahi’s base salary shall be $1.8 million, $2.0 million, and $2.1 million per annum during the term of the agreement and $2.25 million and $2.4 million during 2023 and 2024 if the term is extended, in each case, subject to adjustment in the event Mr. Mizrahi does not make a specified number of appearances on the QVC channel. Mr. Mizrahi shall be eligible to receive an annual cash bonus (the “Bonus”) up to an amount equal to $2.5 million less base salary for 2020 and $3.0 million less base salary for 2021, 2022, and any year during the Renewal Period. The Bonus shall consist of the DRT Revenue, Bonus, the Brick-and-Mortar Bonus, the Endorsement Bonus and the Monday Bonus, if any, as determined in accordance with the following:

● “DRT Bonus” means for any calendar year an amount equal to 10% of the aggregate net revenue related to sales of Isaac Mizrahi Brand products through direct response television. The DRT Revenue Bonus shall be reduced by the amount of the Monday Bonus.

● “Brick-and-Mortar Bonus” means for any calendar year an amount equal to 10% of the net revenues from sales of products under the Isaac Mizrahi Brand, excluding DRT revenue and endorsement revenues.

● “Endorsement Bonus” means for any calendar year an amount equal to 40% of revenues derived from projects undertaken by the Company with one or more third parties solely for Mr. Mizrahi to endorse the third party’s products through the use of Mr. Mizrahi’s name, likeness, and/or image, and neither the Company nor Mr. Mizrahi provides licensing or design.

● “Monday Bonus” means $10,000 for each appearance by Mr. Mizrahi on the QVC channel on Mondays (subject to certain expectations) up to a maximum of 40 such appearances in a calendar year.

Mr. Mizrahi is required to devote his full business time and attention to the business and affairs of the Company and its subsidiaries; however, Mr. Mizrahi is the principal of IM Ready-Made, LLC and Laugh Club, Inc. (“Laugh Club”), and accordingly, he may undertake promotional activities related thereto (including the promotion of his name, image, and likeness) through television, video, and other media (and retain any compensation he receives for such activities) (referred to as “Retained Media Rights”) so long as such activities (i) do not utilize the IM trademarks, (ii) do not have a mutually negative impact upon or materially conflict with Mr. Mizrahi’s duties under the employment agreement, or (iii) are consented to by the Company. The Company believes that it benefits from Mr. Mizrahi’s independent promotional activities by increased brand awareness of IM Brands and the IM trademarks.

Severance. If Mr. Mizrahi’s employment is terminated by the Company without “cause,” or if Mr. Mizrahi resigns with “good reason,” then Mr. Mizrahi will be entitled to receive his unpaid base salary and cash bonuses through the termination date and an amount equal to his base salary in effect on the termination date for the longer of six months and the remainder of the then-current term, but in no event exceeding 18 months. If Mr. Mizrahi’s employment is terminated by the Company without “cause” or if Mr. Mizrahi resigns with “good reason” within six months following a change of control (as defined in the employment agreement), Mr. Mizrahi shall be eligible to receive a lump-sum payment equal to two times the sum of (i) his base salary (at an average rate that would have been in effect for such two-year period following termination) plus (ii) the bonus paid or due to Mr. Mizrahi in the year prior to the change in control.

Non-Competition and Non-Solicitation. During the term of Mr. Mizrahi’s employment by the Company and for a one-year period after the termination of such employment (unless his employment was terminated without “cause” or was terminated by him for “good reason”), Mr. Mizrahi may not permit his name to be used by or to participate in any business or enterprise (other than the mere passive ownership of not more than 3% of the outstanding stock of any class of a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market) that engages or proposes to engage in the Company’s business anywhere in the world other than the Company and its subsidiaries. Also during his employment and for a one-year period after the termination of such employment, Mr. Mizrahi may not, directly or indirectly, solicit, induce, or attempt to induce any customer, supplier, licensee, or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or any or its subsidiaries; or solicit, induce, or attempt to induce any person who is, or was during the then-most recent 12-month period, a corporate officer, general manager, or other employee of the Company or any of its subsidiaries, to terminate such employee’s employment with the Company or any of its subsidiaries; or hire any such person unless such person’s employment was terminated by the Company or any of its subsidiaries; or in any way interfere with the relationship between any such customer, supplier, licensee, employee, or business relation and the Company or any of its subsidiaries.

On February 24, 2020, the Company entered into a services agreement with Laugh Club, an entity wholly-owned by Mr. Mizrahi, pursuant to which Laugh Club shall provide services to Mr. Mizrahi necessary for Mr. Mizrahi to perform his services pursuant to the employment agreement. The Company will pay Laugh Club an annual fee of $0.72 million for such services.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

13.    Commitments and Contingencies

Contingent Obligation – Halston Heritage Earn-Out  

In connection with the February 11, 2019 purchase of the Halston Heritage trademarks from H Company IP, LLC (“HIP”), the Company agreed to pay HIP additional consideration (the “Halston Heritage Earn-Out”) of up to an aggregate of $6.0 million, based on royalties earned through December 31, 2022. The Halston Heritage Earn-Out of $0.9 million is recorded as a long-term liability at March 31, 2021 and December 31, 2020 in the accompanying condensed consolidated balance sheets, based on the difference between the fair value of the acquired assets of the Halston Heritage trademarks and the total consideration paid. In accordance with ASC Topic 480, “Distinguishing Liabilities from Equity,” the Halston Heritage Earn-Out obligation is treated as a liability in the accompanying condensed consolidated balance sheets because of the variable number of shares payable under the agreement.

Contingent Obligation – Lori Goldstein Earn-Out

In connection with the April 1, 2021 acquisition of the Lori Goldstein trademarks (see Note 2 for additional information), the Company agreed to pay the Seller additional cash consideration of up to $12.5 million, based on royalties earned during the six calendar year period commencing in 2021. The Lori Goldstein Earn-Out of $6.6 million is recorded as a long-term liability at June 30, 2021 in the accompanying condensed consolidated balance sheet, based on the difference between the fair value of the acquired assets of the Lori Goldstein brand and the total consideration paid, in accordance with the guidance in ASC Subtopic 805-50.

Coronavirus Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus disease (“COVID-19”) as a pandemic, which continues to spread throughout the U.S. COVID-19 is having an unprecedented impact on the U.S. economy as federal, state, and local governments react to this ongoing public health crisis.

The impacts of the current COVID-19 pandemic are broad reaching and are having an impact on the Company’s licensing and wholesale businesses. The COVID-19 pandemic is impacting the Company’s supply chain as most of the Company’s products are manufactured in China, Thailand, and other places around the world affected by this event. Temporary factory closures and the pace of workers returning to work have impacted contract manufacturers’ ability to source certain raw materials and to produce finished goods in a timely manner. The pandemic is also impacting distribution and logistics providers' ability to operate in the normal course of business. Further, the pandemic has resulted in a sudden and continuing decrease in sales for many of the Company’s products, resulting in order cancellations, and a decrease in accounts receivable collections, as the Company recorded approximately $1 million of additional allowance for doubtful accounts for the year ended December 31, 2020, and approximately $0.1 million for the current six months, for retailers that have filed for bankruptcy.

Due to the ongoing COVID-19 pandemic, there is significant uncertainty surrounding the impact on the Company’s future results of operations and cash flows. Continued impacts of the pandemic could materially adversely affect the Company’s near-term and long-term revenues, earnings, liquidity, and cash flows as the Company’s customers and/or licensees may request temporary relief, delay, or not make scheduled payments.

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Subsequent Events

6 Months Ended

Jun. 30, 2021

Subsequent Events.

Subsequent Events

14.    Subsequent Events

Amendment to Term Loans

On August 12, 2021, the Company, BHI, FEAC, and the Lenders amended the Loan Agreement entered into on April 14, 2021. Under this amendment, the EBITDA financial covenant for the three months ended June 30, 2021 was eliminated, and the financial covenants related to EBITDA, fixed charge coverage ratio, and leverage ratio were lowered for the remainder of 2021 and for the 12 months ending March 31, 2022. Additionally, the maximum amount available under the revolving loan facility was reduced from $4.0 million to $1.5 million until the Company demonstrates compliance with the amended financial covenants for the applicable periods ending December 31, 2021. There were no changes to the total principal balance, interest rate, maturity date, or any other terms of the Loan Agreement.

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Nature of Operations, Background, and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2021

Nature of Operations, Background, and Basis of Presentation [Abstract]

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") No. 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes certain exceptions to the general principles in Topic 740, including, but not limited to, intraperiod tax allocations and interim period tax calculations. The ASU also provides additional clarification and guidance related to recognition of franchise taxes and changes in tax laws. The adoption of this new guidance did not have any impact on the Company’s results of operations, cash flows, and financial condition.

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2021

Asset Acquisitions [Abstract]

Schedule of Asset Acquisitions

($ in thousands)
Cash paid at closing	$	1,600
Cash consideration payable		2,045
Total direct initial consideration		3,645
Direct transaction expenses		16
Contingent obligation (Lori Goldstein Earn-Out)		6,639
Total consideration	$	10,300

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Trademarks and Other Intangibles (Tables)

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Trademarks and Other Intangibles

	Weighted
	Average	June 30, 2021
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (indefinite-lived)	n/a	$	44,500	$	—	$	44,500
Trademarks (finite-lived)	15 years		20,386		6,330		14,056
Trademarks (finite-lived)	18 years		38,194		5,254		32,940
Trademarks (finite-lived)	4 years		10,300		644		9,656
Other intellectual property	7 years		762		591		171
Copyrights and other intellectual property	9 years		227		138		89
Total		$	114,369	$	12,957	$	101,412

	Weighted
	Average	December 31, 2020
	Amortization	Gross Carrying		Accumulated		Net Carrying
($ in thousands)	Period	Amount		Amortization		Amount
Trademarks (indefinite-lived)	n/a	$	44,500	$	—	$	44,500
Trademarks (finite-lived)	15 years		20,386		5,640		14,746
Trademarks (finite-lived)	18 years		38,194		4,192		34,002
Other intellectual property	7 years		762		537		225
Copyrights and other intellectual property	10 years		190		128		62
Total		$	104,032	$	10,497	$	93,535

Schedule of Future Amortization Expense

Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows:

($ in thousands)	Amortization
Year Ending December 31,	Expense
2021 (July 1 through December 31)	$	3,110
2022		6,219
2023		6,219
2024		6,199
2025		4,257
Thereafter		30,908
Total	$	56,912

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Leases (Tables)

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Maturities of Lease Liabilities

($ in thousands)
2021 (July 1 through December 31)	$	1,228
2022		1,891
2023		1,711
2024		1,711
2025		1,710
After 2025		3,321
Total lease payments		11,572
Less: Discount		1,983
Present value of lease liabilities		9,589
Current portion of lease liabilities		1,720
Non-current portion of lease liabilities	$	7,869

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Debt (Tables)

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Net Carrying Amount of Debt

The Company’s net carrying amount of debt was comprised of the following:

	June 30,		December 31,
($ in thousands)	2021		2020
Term loan debt	$	24,375	$	16,750
Unamortized deferred finance costs related to term loan debt		(1,046)		(112)
Revolving loan debt		1,500		—
Total		24,829		16,638
Current portion of debt (i)		4,000		2,800
Long-term debt	$	20,829	$	13,838

(i) The current portion of debt as of June 30, 2021 consists of $2.5 million of term loan debt and $1.5 million of revolving loan debt; the current portion of debt as of December 31, 2020 is related solely to term loan debt.

Maturities of Long-term Debt

The aggregate remaining annual scheduled principal payments under the Term Loans at June 30, 2021 were as follows:

	Amount of
($ in thousands)	Principal
Year Ending December 31,	Payment
2021 (July 1 to December 31)	$	1,250
2022		2,500
2023		2,500
2024		2,500
2025		15,625
Total	$	24,375

Schedule of minimum EBITDA

Fiscal Period	Minimum EBITDA
April 1, 2021 to September 30, 2021	$	3,000,000
April 1, 2021 to December 31, 2021	$	4,400,000
April 1, 2021 to March 31, 2022	$	6,000,000
For the trailing twelve month periods ending June 30, 2022 and September 30, 2022	$	6,500,000
For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023, and September 30, 2023	$	7,000,000
For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025	$	7,500,000

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

Summary of Stock Option Activity

				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Life	Intrinsic
	Options	Price		(in Years)	Value
Outstanding at January 1, 2021	7,179,375	$	3.14	4.93	$	—
Granted	490,390		1.88
Canceled	(8,050)		1.86
Exercised	(92,820)		1.76
Expired/Forfeited	(1,721,070)		5.63
Outstanding at June 30, 2021, and expected to vest	5,847,825	$	2.33	5.78	$	2,792,000
Exercisable at June 30, 2021	1,963,658	$	3.42	2.33	$	—

Summary of Stock Option Activity for Non-Vested Options

		Weighted
		Average
	Number of	Grant Date
	Options	Fair Value
Balance at January 1, 2021	4,116,167	$	0.08
Granted	490,390		0.40
Vested	(647,390)		0.43
Forfeited or Canceled	(75,000)		0.08
Balance at June 30, 2021	3,884,167	$	0.06

Summary of Warrant Activity

				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Life	Intrinsic
	Warrants	Price		(in Years)	Value
Outstanding and exercisable at January 1, 2021	579,815	$	4.63	1.32	$	—
Granted	—		—
Canceled	—		—
Exercised	—		—
Expired/Forfeited	—		—
Outstanding and exercisable at June 30, 2021	579,815	$	4.63	0.82	$	—

Summary of Restricted Stock Activity

		Weighted
	Number of	Average
	Restricted	Grant Date
	Shares	Fair Value
Outstanding at January 1, 2021	780,833	$	4.09
Granted	245,224		1.65
Canceled	—		—
Vested	(195,224)		1.58
Expired/Forfeited	—		—
Outstanding at June 30, 2021	830,833	$	3.96

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Computation of Diluted Earnings Per Share

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Basic	19,449,116	19,132,244	19,355,795	19,001,321
Effect of exercise of warrants	—	—	—	—
Effect of exercise of stock options	—	—	—	—
Diluted	19,449,116	19,132,244	19,355,795	19,001,321

Anti-dilutive Securities Excluded from Computation of Earnings Per Share

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020
Stock options and warrants	6,427,640	8,119,940	6,427,640	8,119,940

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Nature of Operations, Background, and Basis of Presentation (Details)	6 Months Ended
	Jun. 30, 2021
Longaberger Licensing, LLC | Variable Interest Entity, Primary Beneficiary
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Variable Interest Entity, Qualitative or Quantitative Information, Ownership Percentage	50.00%

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Acquisitions - Total Consideration for Asset Acquisition (Details) - USD ($) $ in Thousands		6 Months Ended
	Apr. 01, 2021	Jun. 30, 2021
Schedule Of Asset Acquisition [Line Items]
Cash consideration payable		$ 2,045
Lori Goldstein Brand
Schedule Of Asset Acquisition [Line Items]
Cash paid at closing	$ 1,600
Cash consideration payable	2,045
Total direct initial consideration	3,645
Direct transaction expenses	16
Contingent obligation (Lori Goldstein Earn-Out)	6,639	$ 6,600
Total consideration	$ 10,300

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Acquisitions - Additional Information (Details) - USD ($)			6 Months Ended
	Apr. 01, 2021	Mar. 18, 2021	Jun. 30, 2021
Schedule Of Asset Acquisition [Line Items]
Acquisition consideration payable			$ 2,045,000
Lori Goldstein Brand
Schedule Of Asset Acquisition [Line Items]
Cash paid at closing	$ 1,600,000
Acquisition consideration payable	$ 2,045,000
Period for payment of additional consideration	45 days
Asset Acquisition, Contingent Obligation	$ 6,639,000		6,600,000
Contingent consideration			$ 12,500,000
Percentage of additional consideration on royalty contribution	75.00%
Purchase price	$ 10,300,000
Term of employment agreement	10 years
Base salary rate during current fiscal year	$ 900,000
Base salary rate after current fiscal year	1,200,000
Advisory and consultation fees during current fiscal year	600,000
Advisory and consultation fees after current fiscal year	$ 800,000
Weighted average useful life of finite-lived intangible assets acquired	4 years
Maximum | Lori Goldstein Brand
Schedule Of Asset Acquisition [Line Items]
Contingent consideration	$ 12,500,000
Senior Management | Lori Goldstein Brand
Schedule Of Asset Acquisition [Line Items]
Bonus Compensation Expense		$ 175,000
Chief Executive Officer | Lori Goldstein Brand
Schedule Of Asset Acquisition [Line Items]
Bonus Compensation Expense		100,000
Chief Financial Officer, President and Chief Operating Officer, and Executive Vice President of Business Development and Treasury [Member] | Lori Goldstein Brand
Schedule Of Asset Acquisition [Line Items]
Bonus Compensation Expense		$ 25,000

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Trademarks and Other Intangibles - Schedule of Trademarks and Other Intangibles (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Trademarks and Other Intangibles
Gross Carrying Amount, Total	$ 114,369	$ 104,032
Accumulated Amortization	12,957	10,497
Net Carrying Amount	56,912
Net Carrying Amount, Total	$ 101,412	$ 93,535
Trademarks
Trademarks and Other Intangibles
Weighted Average Amortization Period	15 years	15 years
Gross Carrying Amount (definite-lived)	$ 20,386	$ 20,386
Accumulated Amortization	6,330	5,640
Net Carrying Amount	$ 14,056	$ 14,746
Other intellectual property
Trademarks and Other Intangibles
Weighted Average Amortization Period	7 years	7 years
Gross Carrying Amount (definite-lived)	$ 762	$ 762
Accumulated Amortization	591	537
Net Carrying Amount	$ 171	$ 225
Copyrights and other intellectual property
Trademarks and Other Intangibles
Weighted Average Amortization Period	9 years	10 years
Gross Carrying Amount (definite-lived)	$ 227	$ 190
Accumulated Amortization	138	128
Net Carrying Amount	89	62
Trademarks
Trademarks and Other Intangibles
Gross Carrying Amount (indefinite-lived)	$ 44,500	$ 44,500
Halston Heritage | Trademarks
Trademarks and Other Intangibles
Weighted Average Amortization Period	18 years	18 years
Gross Carrying Amount (definite-lived)	$ 38,194	$ 38,194
Accumulated Amortization	5,254	4,192
Net Carrying Amount	$ 32,940	$ 34,002
Lori Goldstein Brand | Trademarks
Trademarks and Other Intangibles
Weighted Average Amortization Period	4 years
Gross Carrying Amount (definite-lived)	$ 10,300
Accumulated Amortization	644
Net Carrying Amount	$ 9,656

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Trademarks and Other Intangibles - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense for intangible assets	$ 1,550	$ 1,140	$ 2,460	$ 2,280

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Trademarks and Other Intangibles - Schedule of Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Finite Lived Intangible Assets Future Amortization Expense:
2021 (July 1 through December 31)	$ 3,110
2022	6,219
2023	6,219
2024	6,199
2025	4,257
Thereafter	30,908
Net Carrying Amount	$ 56,912

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Significant Contracts - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Product Information [Line Items]
Net revenue	$ 10,764	$ 5,050	$ 18,573	$ 14,577
Accounts receivable	10,662		10,662		$ 8,889
Sales [Member] | Customer Concentration Risk [Member] | QVC, Inc. [Member]
Product Information [Line Items]
Net revenue	$ 5,450	$ 4,040	$ 9,190	$ 8,740
Concentration Risk, Percentage	51.00%	81.00%	50.00%	60.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | QVC, Inc. [Member]
Product Information [Line Items]
Concentration Risk, Percentage			53.00%		50.00%
Accounts receivable	$ 5,610		$ 5,610		$ 4,460

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Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for doubtful accounts receivable	$ 1,284		$ 1,284		$ 1,151
Bad debt expense (recovery)	0	$ 472	132	$ 683
Accounts receivable	10,662		10,662		$ 8,889
COVID19
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for doubtful accounts receivable	1,100		1,100
Bad debt expense (recovery)		$ 472	132	$ 586
Accounts receivable	$ 1,500		$ 1,500

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Leases - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Lessee, Lease, Description [Line Items]
Operating lease expense	$ 0.4	$ 0.4	$ 0.8	$ 0.8
Weighted average remaining lease term for operating leases	6 years		6 years
Weighted average discount rate	6.25%		6.25%
Cash payments for operating lease expense	$ 0.7	$ 0.1	$ 1.3	$ 0.7
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term	8 months		8 months
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term	8 years		8 years

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Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Leases [Abstract]
2021 (July 1 through December 31)	$ 1,228
2022	1,891
2023	1,711
2024	1,711
2025	1,710
After 2025	3,321
Total lease payments	11,572
Less: Discount	1,983
Present value of lease liabilities	9,589
Current portion of lease liabilities	1,720	$ 2,101
Non-current portion of lease liabilities	$ 7,869	$ 8,469

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Debt - Net Carrying Amount of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt
Unamortized deferred finance costs related to term loan	$ (1,046)	$ (112)
Total	24,829	16,638
Current portion of long-term debt	4,000	2,800
Long-term debt	20,829	13,838
Revolving Credit Facility
Debt
Term loan debt	1,500
Current portion of long-term debt	1,500
Xcel Term Loan
Debt
Term loan debt	24,375	$ 16,750
Current portion of long-term debt	$ 2,500

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Debt - Xcel Loan Narrative (Details)			3 Months Ended		6 Months Ended
	Apr. 14, 2021 USD ($) loan installment	Feb. 11, 2019 USD ($) loan	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($) installment	Jun. 30, 2020 USD ($)	Aug. 12, 2021 USD ($)	Jun. 24, 2021 USD ($)
Debt
Loss on extinguishment of debt			$ (821,000)		$ (821,000)
Payment of breakage fees					367,000
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC
Debt
Number of term loans | loan	2
Loss on extinguishment of debt			(800,000)
Unamortized deferred finance costs			100,000
Breakage fees			700,000
Payment of breakage fees					367,000
Debt extinguishment fee payable			367,000		$ 367,000
Number of equal installments in breakage fees payable | installment					3
Percentage of closing fee	2.50%
Closing fee paid	$ 625,000
Legal and other fees	500,000
Deferred issuance cost	$ 1,100,000
Number of quarterly installments | installment	16
Quarterly installment payment	$ 625,000
Final payment amount	15,000,000.0
Xcel Term Loan
Debt
Incremental term loans	$ 25,000,000.0
Floor rate of LIBOR (as percentage)	1.00%
Interest expense			$ 522,000	$ 310,000	$ 798,000	$ 623,000
Effective interest rate (as percentage)			9.00%	6.60%	7.80%	6.60%
Xcel Term Loan | On Or Before First Anniversary
Debt
Percentage of prepayment premium	3.00%
Xcel Term Loan | After First Anniversary And On Or Before Second Anniversary
Debt
Percentage of prepayment premium	2.00%
Xcel Term Loan | After Second Anniversary And On Or Before Third Anniversary
Debt
Percentage of prepayment premium	1.00%
Xcel Term Loan A
Debt
Face amount of loan	$ 10,000,000.0
Percentage of quarterly principal installment payment	80.00%
Xcel Term Loan A | LIBOR
Debt
Basis spread on variable rate	4.00%
Xcel Term Loan B
Debt
Face amount of loan	$ 15,000,000.0
Percentage of quarterly principal installment payment	20.00%
Percentage of quarterly principal installment payment	100.00%
Xcel Term Loan B | LIBOR
Debt
Basis spread on variable rate	8.00%
Second Amended And Restated Loan And Security Agreement | Xcel Term Loan
Debt
Face amount of loan		$ 22,000,000.0
Number of term loans | loan		2
Second Amended And Restated Loan And Security Agreement | Xcel Term Loan A
Debt
Face amount of loan		$ 7,300,000
Second Amended And Restated Loan And Security Agreement | Xcel Term Loan B
Debt
Face amount of loan		$ 14,700,000
Revolving Credit Facility
Debt
Amount of future financing	$ 4,000,000.0
Percentage of the amount of eligible accounts receivable	85.00%
Interest expense			$ 1,000
Amount borrowed								$ 1,500,000
Revolving Credit Facility | Subsequent Events
Debt
Amount of future financing							$ 1,500,000
Revolving Credit Facility | Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC
Debt
Notice period to terminate or prepay	30 days
Revolving Credit Facility | Xcel Term Loan | Base Rate
Debt
Basis spread on variable rate	1.50%
Revolving Credit Facility | Xcel Term Loan | LIBOR
Debt
Basis spread on variable rate	3.75%
Revolving Credit Facility | Xcel Term Loan | Fed Funds Effective Rate Overnight Index Swap Rate [Member]
Debt
Basis spread on variable rate	2.00%

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Debt - Xcel Term Loan Remaining Principal Payments (Details) - Xcel Term Loan - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt
2021 (July 1 to December 31)	$ 1,250
2022	2,500
2023	2,500
2024	2,500
2025	15,625
Total	$ 24,375	$ 16,750

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Debt - Financial Covenants (Details)	Apr. 14, 2021 USD ($)
April 1, 2021 to September 30, 2021
Debt
Minimum EBITDA	$ 3,000,000
April 1, 2021 to December 31, 2021
Debt
Minimum EBITDA	4,400,000
April 1, 2021 to March 31, 2022
Debt
Minimum EBITDA	6,000,000
For the trailing twelve month periods ending June 30, 2022 and September 30, 2022
Debt
Minimum EBITDA	6,500,000
For the trailing twelve month periods ending December 31, 2022, March 31, 2023, June 30, 2023, and September 30, 2023
Debt
Minimum EBITDA	7,000,000
For the trailing twelve month periods ending December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025
Debt
Minimum EBITDA	7,500,000
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC
Debt
Minimum liquid assets to meet loan covenants	$ 4,000,000.0
Threshold loan to value ratio	50
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC | Fiscal Quarter Ending December 31 2021
Debt
Leverage ratio required for loan covenant	6.75
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC | Fiscal Quarter Ending On Or After March 31, 2022
Debt
Leverage ratio required for loan covenant	4.00
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC | Nine months period ended December 31, 2021
Debt
Fixed charge coverage ratio required to meet loan covenant	1.05
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC | Twelve fiscal month period ended March 31, 2022
Debt
Fixed charge coverage ratio required to meet loan covenant	1.20
Loan And Security Agreement With BHI And First Eagle Alternative Credit LLC | twelve fiscal month period ending June 30 2022
Debt
Fixed charge coverage ratio required to meet loan covenant	1.25

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Government assistance - PPP Loan (Details) - USD ($)		3 Months Ended	6 Months Ended
	Apr. 20, 2020	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Debt Instrument [Line Items]
Grants recognized as a reduction to operating expenses		$ 1,640,000		$ 1,640,000
Paycheck Protection Program, CARES Act [Member]
Debt Instrument [Line Items]
Face amount of loan	$ 1,806,000
Stated interest rate (as percentage)	1.00%
Term of loan	2 years
Grants recognized as a reduction to operating expenses		$ 1,640,000		$ 1,640,000
Interest expense			$ 0

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Stockholders' Equity - 2011 Equity Incentive Plan (Details) - 2011 Equity Incentive Plan	Jun. 30, 2021 shares
Stockholders' Equity
Number of common stock eligible for issuance	13,000,000
Shares of common stock available for issuance (in shares)	2,611,155
Shares of common stock reserved for issuance (in shares)	9,038,795

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Stockholders' Equity - Stock Options (Details) - USD ($)			3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 01, 2021	Mar. 15, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Number of Options
Outstanding, beginning balance (in shares)					7,179,375
Granted (in shares)					490,390
Canceled (in shares)					(8,050)
Exercised (in shares)					92,820
Expired/Forfeited (in shares)					(1,721,070)
Outstanding, ending balance (in shares)			5,847,825		5,847,825		7,179,375
Exercisable (in shares)			1,963,658		1,963,658
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)					$ 3.14
Granted (in dollars per share)					1.88
Canceled (in dollars per share)					1.86
Exercised (in dollars per share)					1.76
Expired/Forfeited (in dollars per share)					5.63
Outstanding, ending balance (in dollars per share)			$ 2.33		2.33		$ 3.14
Exercisable (in dollars per share)			$ 3.42		$ 3.42
Other disclosures
Outstanding Weighted Average Remaining Contractual Life (in Years)					5 years 9 months 10 days		4 years 11 months 4 days
Exercisable Weighted Average Remaining Contractual Life (in Years)					2 years 3 months 29 days
Aggregate Intrinsic Value, Outstanding			$ 2,792,000		$ 2,792,000		$ 0
Aggregate Intrinsic Value, Exercisable			0		0
Employee Stock Option
Other disclosures
Compensation expense			40,000	$ 45,000	198,000	$ 113,000
Unrecognized compensation expense			$ 151,000		$ 151,000
Weighted average period of recognition					1 year 1 month 24 days
Employee Stock Option | Employee
Number of Options
Granted (in shares)		365,390
Weighted Average Exercise Price
Granted (in dollars per share)		$ 1.86
Employee Stock Option | Non Management Directors
Number of Options
Granted (in shares)	125,000
Weighted Average Exercise Price
Granted (in dollars per share)	$ 1.93
Other disclosures
Vesting percentage per year	50.00%
Employee Stock Option | Five year expiration
Stockholders' Equity
Expiration period					5 years
Employee Stock Option | Seven year expiration
Stockholders' Equity
Expiration period					7 years
Employee Stock Option | Ten year expiration
Stockholders' Equity
Expiration period					10 years

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Stockholders' Equity - Non-Vested Options (Details)	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Number of Options
Granted (in shares)	490,390
Employee Stock Option
Number of Options
Beginning Balance (in shares)	4,116,167
Granted (in shares)	490,390
Vested (in shares)	(647,390)
Forfeited or Canceled (in shares)	(75,000)
Ending Balance (in shares)	3,884,167
Weighted Average Grant Date Fair Value
Beginning Balance (in dollars per share) | $ / shares	$ 0.08
Granted (in dollars per share) | $ / shares	0.40
Vested (in dollars per share) | $ / shares	0.43
Forfeited or Canceled (in dollars per share) | $ / shares	0.08
Ending Balance (in dollars per share) | $ / shares	$ 0.06

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Stockholders' Equity - Warrants (Details) - Warrant - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Number of Other than Options
Outstanding and exercisable, beginning balance (in shares)			579,815
Granted (in shares)			0
Canceled (in shares)			0
Exercised (in shares)			0
Expired/Forfeited (in shares)			0
Outstanding and exercisable, ending balance (in shares)	579,815		579,815		579,815
Weighted Average Exercise Price
Outstanding and exercisable, beginning balance (in dollars per share)			$ 4.63
Granted (in dollars per share)			0
Canceled (in dollars per share)			0
Exercised (in dollars per share)			0
Expired/Forfeited (in dollars per share)			0
Outstanding and exercisable, ending balance (in dollars per share)	$ 4.63		$ 4.63		$ 4.63
Weighted Average Remaining Contractual Life (in Years), Outstanding and exercisable			9 months 25 days		1 year 3 months 25 days
Aggregate Intrinsic Value, Outstanding and exercisable	$ 0		$ 0		$ 0
Other disclosures
Compensation expense	$ 0	$ 0	$ 0	$ 0
Five year expiration
Stockholders' Equity
Expiration period			5 years
Ten year expiration
Stockholders' Equity
Expiration period			10 years

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Stockholders' Equity - Stock Awards (Details) - Restricted Stock - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Number of Other than Options
Outstanding, beginning balance (in shares)			780,833
Granted (in shares)			245,224
Canceled (in shares)			0
Vested (in shares)			(195,224)
Expired/Forfeited (in shares)			0
Outstanding, ending balance (in shares)	830,833		830,833
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)			$ 4.09
Granted (in dollars per share)			1.65
Canceled (in dollars per share)			0
Vested (in dollars per share)			1.58
Expired/Forfeited (in dollars per share)			0
Outstanding, ending balance (in dollars per share)	$ 3.96		$ 3.96
Other disclosures
Compensation expense	$ 37,000	$ 10,000	$ 47,000	$ 33,000
Unrecognized compensation expense	$ 84,000		$ 84,000
Weighted average period of recognition			1 year 9 months

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Stockholders' Equity - Additional Information (Details) - USD ($)				3 Months Ended		6 Months Ended
	May 07, 2021	Apr. 26, 2021	Apr. 01, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Restricted Stock
Stockholders' Equity
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period						245,224
Compensation expense related to stock options				$ 37,000	$ 10,000	$ 47,000	$ 33,000
Unrecognized compensation expense				84,000		$ 84,000
Weighted average period of recognition						1 year 9 months
Restricted Stock | Non Management Directors
Stockholders' Equity
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			50,000
Award vesting period (in years)			2 years
Restricted Stock | Non Management Directors | April 1, 2022
Stockholders' Equity
Percentage of options vested per tranche			50.00%
Restricted Stock | Non Management Directors | April 1, 2023
Stockholders' Equity
Percentage of options vested per tranche			50.00%
Restricted Stock | Consultant
Stockholders' Equity
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		14,045
Restricted Stock | Senior Management
Stockholders' Equity
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	181,179
Management Stock Bonus
Stockholders' Equity
Compensation expense related to stock options				354,000			291,000
Reduction to compensation expense						$ 8,000
Warrant
Stockholders' Equity
Compensation expense related to stock options				$ 0	$ 0	$ 0	$ 0

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Earnings Per Share - Dilutive Earnings Per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Abstract]
Basic (in shares)	19,449,116	19,132,244	19,355,795	19,001,321
Diluted (in shares)	19,449,116	19,132,244	19,355,795	19,001,321

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Earnings Per Share - Anti-dilutive Securities Excluded (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Abstract]
Stock options and warrants (in shares)	6,427,640	8,119,940	6,427,640	8,119,940

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Effective income tax rate	43.00%	(49.00%)	25.00%	5.00%
Income tax (benefit) provision	$ (1,346)	$ 428	$ (1,484)	$ (124)
Effect of vesting of restricted shares of common stock on effective tax rate		41.00%		16.00%
Effect of state taxes on effective tax rate	15.00%	2.00%	7.00%	5.00%
Effect of permanent differences on effective tax rate	7.00%	27.00%	3.00%	8.00%
Effect of potential federal net operating loss carryback due to the CARES Act on effective tax rate		3.00%		4.00%

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Related Party Transactions (Details)		3 Months Ended		6 Months Ended
	Feb. 24, 2020 USD ($) item	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)
Wife Of Robert W. D'Loren
Asset Purchase Agreement
Period for which the related party has worked in company's ERP system				2 years
Compensation		$ 11,000	$ 33,000	$ 21,000	$ 70,000
Isaac Mizrahis
Asset Purchase Agreement
Number Of Agreement Extension Periods | item	2
Extension term	1 year
Initial cash bonus basis for Calculation	$ 2,500,000
Subsequent cash bonus basis for Calculation	$ 3,000,000.0
DRT Bonus	10.00%
Bricks-and-Mortar Bonus	10.00%
Endorsement Bonus	40.00%
Monday bonus per appearance	$ 10,000
Maximum appearances eligible for Monday bonus | item	40
Termination compensation period	2 years
Period of restriction of doing similar activity post termination	1 year
Maximum ownership interest in investment	3.00%
Period of restriction for solicit business relations post termination.	1 year
2020	$ 1,800,000
2021	2,000,000.0
2022	2,100,000
2023	2,250,000
2024	2,400,000
Isaac Mizrahis | Laugh Club
Asset Purchase Agreement
Annual fee	$ 720,000

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Commitments and Contingencies (Details) - USD ($) $ in Thousands			6 Months Ended	12 Months Ended
	Apr. 01, 2021	Feb. 11, 2019	Jun. 30, 2021	Dec. 31, 2020	Mar. 31, 2021
Lori Goldstein Brand
Commitments and Contingencies
Contingent consideration			$ 12,500
Asset Acquisition, Contingent Obligation	$ 6,639		$ 6,600
Asset Acquisition, Royalties Term			6 years
Halston Heritage Trademarks
Commitments and Contingencies
Contingent consideration		$ 6,000
Earn-out liability recorded				$ 900	$ 900
COVID19
Commitments and Contingencies
Additional allowance for doubtful accounts			$ 100	$ 1,000

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Subsequent Events - Narratives (Details) - Revolving Credit Facility - USD ($) $ in Millions	Aug. 12, 2021	Apr. 14, 2021
Subsequent Event [Line Items]
Amount of future financing		$ 4.0
Subsequent Events
Subsequent Event [Line Items]
Amount of future financing	$ 1.5