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Xcel Brands

xelb · NASDAQ Consumer Cyclical
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Ticker xelb
Exchange NASDAQ
Sector Consumer Cyclical
Industry Apparel - Manufacturers
Employees 51-200
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FY2022 Annual Report · Xcel Brands
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

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

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2022
OR

Commission File Number: 001-37527
XCEL BRANDS, INC.
(Exact name of Registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

76-0307819
(I.R.S. Employer 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
Common Stock, $0.001 par value per share

Trading Symbol
XELB

     Name of each exchange on which registered

NASDAQ Global Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes     ☐    No     ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes     ☐    No     ☒

Securities registered pursuant to Section 12(g) of the Act: None

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 past 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    ☐
Non-accelerated filer    ☒

     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 check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.     ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements.      ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).     ☐

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

The  aggregate  market  value  of  the  voting  and  non-voting  common  equity  held  by  non-affiliates  computed  by  reference  to  the  price  at  which  the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter was $11,906,000 based upon the closing price of such common stock on June 30, 2022.

The number of shares of the issuer’s common stock issued and outstanding as of April 14, 2023 was 19,624,860 shares.

Documents Incorporated By Reference: None

    
    
Table of Contents

PART I

TABLE OF CONTENTS

     Page

Business

Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4

Properties
Legal Proceedings
Mine Safety Disclosures

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 6
Item 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 10
Item 11
Item 12

Item 13
Item 14

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

PART IV

Item 15

Exhibit and Financial Statement Schedules
Signatures

2

3
13
33
33
34
34

34

37
37
49
50
87
87
88
88

88
96
99

101
102

103
105

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PART I

FORWARD-LOOKING STATEMENTS

This  Annual  Report  on  Form  10-K  contains  forward-looking  statements  within  the  meaning  of  Section  27A  of  the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve
risks and uncertainties. All statements other than statements of historical fact contained in this Annual Report, including
statements  regarding  future  events,  our  future  financial  performance,  business  strategy,  and  plans  and  objectives  of
management  for  future  operations,  are  forward-looking  statements.  We  have  attempted  to  identify  forward-looking
statements  by  terminology  including  “anticipates,”  “believes,”  “can,”  “continue,”  “ongoing,”  “could,”  “estimates,”
“expects,” “intends,” “may,” “appears,” “suggests,” “future,” “likely,” “goal,” “plans,” “potential,” “projects,” “predicts,”
“seeks,”  “should,”  “would,”  “guidance,”  “confident,”  or  “will”  or  the  negative  of  these  terms  or  other  comparable
terminology.  These  forward-looking  statements  include,  but  are  not  limited  to,  statements  regarding  our  anticipated
revenue, expenses, profitability, strategic plans, and capital needs. These statements are based on information available to
us on the date hereof and our current expectations, estimates, and projections and are not guarantees of future performance.
Forward-looking  statements  involve  known  and  unknown  risks,  uncertainties,  assumptions,  and  other  factors,  including,
without limitation, the risks outlined under “Risk Factors” or elsewhere in this Annual Report, as well as adverse effects on
us, our licensees, and customers due to natural disasters, pandemic disease, and other unexpected events, which may cause
our  or  our  industry’s  actual  results,  levels  of  activity,  performance,  or  achievements  to  differ  materially  from  those
expressed  or  implied  by  these  forward-looking  statements.  Moreover,  we  operate  in  a  very  competitive  and  rapidly
changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can
we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause
our actual results to differ materially from those contained in any forward-looking statements. You should not place undue
reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no
obligation  to  update  any  forward-looking  statements,  whether  as  a  result  of  new  information,  future  events,  changed
circumstances, or any other reason.

The "LOGO by Lori Goldstein™," "Halston," "Halston Heritage," "H by Halston®," "H Halston™," "Roy Frowick," "Judith
Ripka  LTD™,"  "Judith  Ripka  Collection™,"  "Judith  Ripka  Legacy™,"  "Judith  Ripka®,”  "Judith  Ripka  Sterling™,"  "C.
Wonder™," and "C. Wonder Limited™" brands and all related logos and other trademarks or service marks of the Company
appearing  in  this  Annual  Report  are  the  property  of  the  Company.  Brands  and  all  related  logos  and  other  trademarks  or
service marks of other entities (for example, QVC, HSN, etc.) are the property of those respective entities.

Item 1.   Business

Overview

Xcel Brands, Inc. (the “Company,” “Xcel,” or “We”) 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.  Xcel  was  founded  in  2011  with  a  vision  to  reimagine  shopping,  entertainment,  and  social  media  as  one  thing.
Currently, the Company’s brand portfolio consists of the LOGO by Lori Goldstein brand (the “Lori Goldstein Brand”), the
Halston brands (the "Halston Brand"), the Judith Ripka brands (the "Ripka Brand"), the C Wonder brands (the "C Wonder
Brand"),  the  Longaberger  brand  (the  “Longaberger  Brand”),  the  Isaac  Mizrahi  brands  (the  "Isaac  Mizrahi  Brand"),  and
other proprietary brands.

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

● We manage the Longaberger Brand through our 50% ownership interest in Longaberger Licensing, LLC.

● We manage the Q Optix business through our 50% ownership interest in Q Optix, LLC.

● The Company wholly owned and managed the Isaac Mizrahi Brand through May 31, 2022. On May 31, 2022, we

sold a majority interest in the brand to a third party, but retained a 30% noncontrolling interest in the brand

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and continue to participate in the operations of the business.

Xcel is 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.  The  Company’s  brands  have  generated  over  $3  billion  in  retail  sales  via  live
streaming in interactive television and digital channels alone.

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

● Distribution and/or licensing of our brands for sale through interactive television (i.e., QVC, HSN, The Shopping

Channel, TVSN, CJO, JTV, etc.);

● wholesale distribution through joint ventures or licensing of our brands to retailers that sell to the end consumer;

● direct-to-consumer distribution of our brands through e-commerce and live streaming;

● 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; and

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

operating infrastructure and distribution relationships.

We believe that Xcel offers a unique value proposition to our retail and direct-to-consumer customers, and our licensees for
the following reasons:

● our management team, including our officers’ and directors’ experience in, and relationships within the industry;

● our deep knowledge, expertise, and proprietary technology in live streaming;

● our design, production, sales, marketing, and supply chain and integrated technology platform that enables us to

design and distribute trend-right product; and

● our significant media and internet presence and distribution.

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.

Recent Highlights and Developments

In April 2021, we acquired the Lori Goldstein brands, including LOGO by Lori Goldstein, a sophisticated lifestyle brand
designed to bring style to the masses and that speaks to everyday women. The acquisition focuses on growing the popular
brand through our omni-channel approach including live streaming, e-commerce, and interactive television, and expanding
the brand into new products and categories.

In May 2022, we sold a majority interest in the Isaac Mizrahi Brand to a third party, but retained a 30% noncontrolling
interest in the brand and continue to participate in the operations of the business. This sale was a transformative moment in
Xcel’s history and represents the first time we have monetized one of our brands since Xcel was founded in 2011. We used
the proceeds from the sale to repay all of our outstanding debt and position us to fund various strategic initiatives as we
concentrate our resources on growing our brands, new brand launches, and investing in live streaming technology and new
business partnerships.

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In the third quarter of 2022, we launched Q Optix, a multi-branded optical business on HSN and QVC. The business is
conducted through a joint venture whereby we leverage inventory and systems of our partner without any material working
capital investments.

In the first quarter of 2023, we began to restructure our business operations by entering into new licensing agreements and
joint  venture  arrangements  with  best-in-class  business  partners.  We  entered  into  a  new  interactive  television  licensing
agreement with America’s Collectibles Network, Inc. d/b/a JTV (“JTV”) for the Ripka Brand, and a separate license with
JTV  for  the  Ripka  Brand’s  e-commerce  business.  For  apparel,  similar  transactions  have  recently  been  executed.  In
conjunction with the launch of the C Wonder Brand on HSN, we licensed the wholesale production operations related to
the brand to One Jeanswear Group, LLC (“OJG”); this new license with OJG also includes other new celebrity brands that
we  plan  to  launch  in  2023  and  beyond.  For  the  Halston  Brand,  we  plan  on  entering  into  a  joint  venture  related  to  the
brand’s wholesale apparel business with another leading manufacturer (the “Halston JV”).  The Halston JV will develop an
apparel  business  under  the  H  Halston  brand  through  department  stores,  e-commerce,  and  other  retailers.  We  expect  the
transition of these operating businesses to be completed by the second quarter of 2023. We believe that this evolution of
our operating model will provide us with significant cost savings and allow us to reduce and better manage our exposure to
operating risks. We expect that our new partnerships will result in excess of $10 million of cost savings on an annualized
basis,  with  the  majority  of  these  savings  beginning  in  the  beginning  of  the  second  quarter  of  2023.  Based  on  these  new
operating  structures,  including  cost  savings  and  significantly  reducing  the  Company’s  exposure  to  operating  risk,  the
Company expects to generate sufficient cash flow to fund its obligations and operating needs.

Company History and Corporate Information

The Company was incorporated on August 31, 1989 in the State of Delaware under the name Houston Operating Company.
On  April  19,  2005,  we  changed  our  name  to  NetFabric  Holdings,  Inc.  On  September  29,  2011,  Xcel  Brands,  Inc.,  a
privately-held Delaware corporation (which we refer to as Old Xcel), Netfabric Acquisition Corp., a Delaware corporation
and  wholly  owned  subsidiary  of  the  Company,  and  certain  stockholders  of  the  Company  entered  into  an  agreement  of
merger and plan of reorganization pursuant to which Netfabric Acquisition Corp. was merged with and into Old Xcel, with
Old Xcel surviving as a wholly owned subsidiary of the Company. On September 29, 2011, we changed our name to Xcel
Brands, Inc.

Our principal office is located at 1333 Broadway, New York, NY 10018. Our telephone number is (347) 727-2474.

Additionally,  we  maintain  websites  for  our  respective  brands  and  an  e-commerce  site  for  our  Judith  Ripka  brand  at
www.isaacmizrahi.com,  www.halston.com,  www.cwonder.com,  www.longaberger.com,  www.lorigoldstein.com,  and
www.judithripka.com. Our corporate website is www.xcelbrands.com. None of the content on our websites is incorporated
by reference into this Annual Report on Form 10-K.

Our Brand Portfolio

Currently,  our  brand  portfolio  consists  of  the  Lori  Goldstein,  Halston,  Judith  Ripka,  C  Wonder,  Longaberger,  and  Isaac
Mizrahi Brands, and other proprietary brands, including the various labels under these brands.

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Lori Goldstein

Lori  Goldstein  helped  the  fashion  industry  recognize  the  value  and  influence  of  a  visionary  stylist  by  telling  powerful,
transformative, and authentic stories through the static image. After 35 years behind the camera, Lori ventured in front of it
in  2009  when  she  launched  LOGO  by  Lori  Goldstein,  an  exclusive  collection  for  QVC.  LOGO  was  born  from  Lori's
lifelong passion for layering clothes and her "anything goes with everything" approach to fashion, and is a sophisticated
lifestyle brand that embraces Lori's aesthetic and speaks to everyday women. LOGO draws inspiration from the beauty of
women of all ages and sizes and gives them the tools and fashion pieces to be their most fabulous selves. We acquired the
Lori Goldstein brands, including LOGO by Lori Goldstein, in April 2021, and the brand is currently available through the
QVC channel.

Halston

The  Halston  brand  was  founded  by  Roy  Halston  Frowick  in  the  1960s,  and  quickly  became  one  of  the  most  important
American  fashion  brands  in  the  world,  becoming  synonymous  with  glamour,  sophistication,  and  femininity.  Halston’s
groundbreaking designs and visionary style still influence designers around the world today. We acquired the H Halston
brands in December 2014, and since our acquisition of the Halston Heritage brands in February 2019, we own all Halston
labels  under  our  brands.  The  brand  is  available  across  various  distribution  channels  including  premium  and  better
department stores, e-commerce, interactive television, and national specialty retailers.

Judith Ripka

Judith Ripka is a luxury jewelry brand founded by Judith Ripka in 1977. This brand has become known worldwide for its
distinctive  designs  featuring  intricate  metalwork,  vibrant  colors,  and  distinctive  use  of  texture.  The  Judith  Ripka  Fine
Jewelry collection consists of pieces in 18 karat gold and sterling silver with precious colored jewels and diamonds, and is
currently  available  in  fine  jewelry  stores,  luxury  retailers,  and  via  e-commerce.  Ms.  Ripka  launched  an  innovative
collection of fine jewelry on QVC under the Judith Ripka Brand in 1996, where the brand offers customers fine jewelry,
watches,  and  accessories  at  more  accessible  price  points,  including  precious  and  semi-precious  stones.  We  acquired  the
Ripka brand in April 2014. In December 2017, we launched our Judith Ripka Fine Jewelry e-commerce operations and in
January 2018, we launched the Judith Ripka Fine Jewelry wholesale operations. In 2021, we opened a retail store for Judith
Ripka Fine Jewelry in Westchester, New York; we subsequently closed the store in 2022.

C Wonder

The  C  Wonder  brand  was  founded  by  J.  Christopher  Burch  in  2011  to  offer  a  wide-ranging  assortment  of  beautiful,
versatile,  and  spirited  products  that  are  designed  to  transport  its  customers  to  a  place  they  have  never  been.  C  Wonder
offers  women’s  clothing,  footwear,  jewelry  and  accessories,  and  delightful  surprises  at  every  turn.  We  acquired  the  C
Wonder Brand in July 2015, and the brand is available at mass merchant retailers, clubs, and certain off-price retailers.

Longaberger

Longaberger is an iconic American heritage home and collectibles brand that began making baskets in 1896 and launched a
direct sales company in 1973 by the Longaberger family. The brand is best known for its distinctive handwoven baskets.
We acquired a 50% ownership interest in this brand through a business venture with Hilco Global in November 2019, and
are actively managing this brand to build on its history and bring it into the future as a digital first live-streaming and social
commerce business. We launched our Longaberger e-commerce and live-streaming operations in February 2020.

Q Optix

Q Optix is a multi-branded optical business on HSN and QVC. The business is conducted through a joint venture, which
was formed in June 2022 and in which we hold a 50% ownership interest, whereby we leverage inventory and systems of
our partner without any material working capital investments. We launched sales of Q Optix products in June 2022.

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Isaac Mizrahi

Isaac  Mizrahi  is  an  iconic  American  brand  that  stands  for  timeless,  cosmopolitan  style.  Isaac  Mizrahi,  the  designer,
launched his eponymous label in 1987 to critical acclaim, including four Council of Fashion Designers of America (CFDA)
awards. Since then, this brand has become known and beloved around the world for its colorful and stylish designs. As a
true  lifestyle  brand,  under  Xcel’s  ownership  it  has  expanded  into  over  150  different  product  categories  including
sportswear,  footwear,  handbags,  watches,  eyewear,  tech  accessories,  home,  and  other  merchandise.  Under  our  omni-
channel retail sales strategy, the brand is available across various distribution channels to reach customers wherever they
shop: better department stores, such as Saks and Hudson’s Bay; interactive television, including QVC and The Shopping
Channel;  and  national  specialty  retailers.  The  brand  is  also  sold  in  various  global  locations,  including  Canada,  Italy,  the
United Kingdom, and Japan. We acquired the Isaac Mizrahi brand in September 2011, and in May 2022, we sold a majority
interest in the brand to a third party, retaining a 30% noncontrolling interest in the brand.

Growth Strategy

Our vision is intended to reimagine shopping, entertainment, and social media as one thing. To fulfill this vision, we plan to
continue  to  grow  the  reach  of  our  brand  portfolio  by  leveraging  our  technology  and  live-streaming  platforms,  design
expertise,  our  integrated  design,  production  and  supply  chain  technology  platforms,  marketing  expertise,  and  our
relationships  with  our  retail  and  direct-to-consumer  customers,  key  licensees,  manufacturers,  and  retailers.  We  also
continue  to  market  our  brands  through  our  innovative  true  omni-channel  retail  sales  strategy.  Our  strategy  includes
distribution through interactive television, e-commerce, live streaming, and traditional brick-and-mortar retail channels. By
leveraging  the  reach  and  consumer  engagement  of  our  media  partners,  and  by  developing  rich  online  video  and  social
media  content  under  our  brands,  our  strategy  is  to  drive  increased  customer  engagement  and  generate  sales  across  our
channels of distribution. Key elements of our strategy include:

● Acquire,  Develop  or  Partner  with  Brands.  We  plan  to  continue  to  pursue  the  acquisition  and/or  development  of
additional brands or the rights to brands which we believe are synergistic and complementary to our overall strategy.
Our brand acquisition and development strategy are focused on dynamic brands that we believe are synergistic to our
existing portfolio of brands, strategic to our growth in a channel of distribution, and expected to be accretive to our
earnings.

● Expand  and  Leverage  our  Live-Streaming  Platform.  In  2020,  we  launched  our  live-streaming  platform  through  our
Longaberger brand social commerce 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.

● Continue  to  Develop  our  Integrated  Technologies  Platform.  We  continue  to  develop  our  integrated  technologies
including live-streaming and direct sales, e-commerce, customer relationship management, 3D design, trend analytics,
data  science,  and  consumer  insight  testing  as  a  refinement  of  our  marketing,  design,  production  and  supply  chain
capabilities in order to market, design, plan, and distribute our products more efficiently and intelligently. Driven by
short-lead marketing, such as live streaming, social media, and new direct-to-consumer business models, consumers
now expect more from brands and retailers, and we believe that the solution is to deliver to the customer what they
want, when they want it, at a price that is fair. Advances in 3D design technologies and software allow us to design
more efficiently, seamlessly communicate technical aspects of designs with our manufacturing partners, and produce
better, more consistent products. Additionally, photo-realistic images generated by the current generation of 3D design
software can be used to perform consumer insight testing on products, to determine demand and plan quantities for
production even before a sample is made. Trend analytics including advanced algorithms focused on internet searches,
social media, and inventory trends provide a forward-looking view of consumer design preferences and allow us to
design into trends early-on, while data analytics will allow us to review performance and respond quickly in our read-
and-react design, production and supply chain model. Live streaming and customer relationship management systems
enable  us  to  better  demonstrate  our  products  and  foster  high  engagement  with  our  customers.  We  will  also  seek  to
utilize machine learning and artificial intelligence to automate at least a portion of these functions.

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We believe that our investment into these technologies position us to provide unique solutions to a rapidly changing
environment. More importantly, we believe that it will help us continue to grow our business across our brands, and
the integrated technologies platform itself should develop more significant value as we continue to build and develop
it.

● Expand Other Retail Partnerships. We have entered into promotional collaborations and/or marketing agreements with
large global companies such as Sesame Street, Crayola, Hewlett Packard, Revlon, Johnson & Johnson, and Kleenex,
and  have  developed  exclusive  programs  through  certain  licensees  for  specialty  retailers  such  as  Best  Buy  and  Bed
Bath & Beyond. We plan to continue to develop strategic relationships under our brands that can leverage our media
reach through interactive television and social media to drive traffic and sales for our brands and retail partners and
enhance the visibility of our brands.

● Expand  Wholesale  License  Relationships.  We  have  entered  into  numerous  license  agreements  for  various  product
categories  under  our  brands.  We  have  expanded  the  presence  of  our  brands  at  department  stores  and  have  launched
additional  categories  in  the  department  store  channel,  including  footwear,  handbags,  dresses,  costume  jewelry,  and
sunglasses.  We  continue  to  seek  opportunities  to  expand  the  businesses  of  our  licensees,  as  well  as  entering  into
licenses for new categories under each of our brands where the category is authentic to the brand, for both our existing
brands as well as brands that we may acquire and/or develop in the future.

● Deliver  Quality  Product  Offerings.  We  employ  a  professional  team  to  provide  best  in  class  design,  production  and
distribution  to  ensure  that  our  products  adhere  to  stringent  quality  standards  and  design  specifications  that  we  have
developed.  We  intend  to  continue  to  invest  in  our  design  and  marketing  capabilities  in  order  to  differentiate  our
services to our customers and licensees and our brands in the marketplace.

Licensing, Design, Production and Marketing

Interactive TV

Qurate Retail Group (“Qurate”) is an important strategic partner in our interactive television business, and is our largest
licensee for our Lori Goldstein and Isaac Mizrahi brands. Qurate’s business model is to promote and sell products through
its interactive television programs featured on QVC and HSN and related e-commerce and mobile platforms. We employ
and manage on-air spokespersons under each of these brands in order to promote products under our brands on QVC and
HSN. Qurate’s programming currently reaches over 200 million homes worldwide. Our agreements with Qurate allow our
on-air  spokespersons  to  promote  our  non-Qurate  product  lines  and  strategic  partnerships  under  the  Mizrahi,  Ripka,  and
Halston brands through QVC’s and HSN’s programs, subject to certain parameters including the payment of a portion of
our non-Qurate revenues to Qurate. We believe that our ability to continue to leverage Qurate’s media platform, reach, and
attractive customer base to cross-promote products in and drive traffic to our other channels of distribution provides us a
unique advantage.

The  licensing  business  model  allows  us  to  focus  on  our  core  competencies  of  design,  production,  marketing,  and  brand
management  without  much  of  the  investment  requirements  in  inventory  associated  with  traditional  consumer  product
companies. Our brands licensed to Qurate are licensed through our various wholly owned subsidiaries.

Qurate Agreements

Through our wholly owned subsidiaries, we have entered into direct-to-retail license agreements with Qurate, pursuant to
which  we  design,  and  Qurate  sources  and  sells,  various  products  under  our  LOGO  by  Lori  Goldstein  brand,  the
Longaberger  brand,  and  the  Judith  Ripka  brand.  These  agreements  include,  respectively,  the  Qurate  Agreement  for  the
LOGO by Lori Goldstein Brand (the “LOGO Qurate Agreement”) and the Qurate Agreement for the Longaberger Brand
(the  “Longaberger  Qurate  Agreement”).  We  were  also  previously  party  to  similar  agreements  with  Qurate  related  to  the
IsaacMizrahiLIVE brand (the “IM Qurate Agreement”) and the H Halston brand (the “H Qurate Agreement. Qurate owns
the  rights  to  all  designs  produced  under  these  agreements  (collectively,  the  “Qurate  Agreements”),  and  the  agreements
include the sale of products across various categories through Qurate’s television media and related internet sites.

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Pursuant to these agreements, we granted to Qurate and its affiliates the exclusive, worldwide right to promote our branded
products,  and  the  right  to  use  and  publish  the  related  trademarks,  service  marks,  copyrights,  designs,  logos,  and  other
intellectual property rights owned, used, licensed and/or developed by us, for varying terms as set forth below.

Agreement
LOGO Qurate Agreement
Longaberger Qurate Agreement
IM Qurate Agreement
H Qurate Agreement

     Current Term Expiry     Automatic Renewal     Brand with QVC      QVC Product Launch

Xcel Commenced

November 1, 2023
October 31, 2023  
*
**

April 2021

one-year period
two-year period   November 2019 
September 2011
not applicable
January 2015  
not applicable  

2009
2019
2010
2015

*  On  May  31,  2022,  in  connection  with  the  sale  of  a  majority  interest  in  the  Isaac  Mizrahi  brand  to  a  third  party,  this
agreement was assigned to IM Topco, LLC, in which Xcel retains a noncontrolling interest.

** In the fourth quarter of 2020, the Company transitioned and discontinued licensing of the H Halston brand to Qurate.
The Company began wholesale supply sales of the H Halston products under arrangements with HSN and certain Qurate
global affiliates and other unrelated interactive television networks.

In  addition  to  the  foregoing  agreements,  on  August  30,  2022,  Qurate  and  Xcel  amended  its  licensing  agreement  for  the
Judith Ripka brand to terminate the license period effective December 31, 2021. Effective January 1, 2022, the agreement
is  effective  with  respect  to  a  sell-off  period,  under  which  Qurate  may  continue  to  license  the  Ripka  brand  on  a  non-
exclusive basis for as long as necessary to sell off any of its remaining inventory.

In connection with the foregoing and during the same periods, Qurate and its subsidiaries have the exclusive, worldwide
right  to  use  the  names,  likenesses,  images,  voices,  and  performances  of  our  spokespersons  to  promote  the  respective
products.

Under the Qurate Agreements, Qurate is obligated to make payments to us on a quarterly basis, based upon the net retail
sales  of  the  specified  branded  products.  Net  retail  sales  are  defined  as  the  aggregate  amount  of  all  revenue  generated
through  the  sale  of  the  specified  branded  products  by  Qurate  and  its  subsidiaries  under  the  Qurate  Agreements,  net  of
customer returns, and excluding freight, shipping and handling charges, and sales, use, or other taxes.

Notwithstanding  our  grant  of  worldwide  promotion  rights  to  Qurate,  we  may,  with  the  permission  of  Qurate,  sell  the
respective branded products (i) to better or prestige retailers, but excluding discount divisions of such companies and mass
merchants,  (ii)  via  specifically  branded  brick-and-mortar  retail  stores,  and  (iii)  via  company  websites,  in  exchange  for
making reverse royalty payments to Qurate based on the net retail sales of such products through such channels – with the
exception of the Longaberger Brand, for which no reverse royalty payments are required to be made to Qurate under the
terms of the applicable agreement.

Also, under the Qurate Agreements, except for the Longaberger Qurate Agreement, we are required for a period of time to
pay  a  royalty  participation  fee  to  Qurate  on  revenue  earned  from  the  sale,  license,  consignment,  or  any  other  form  of
distribution of any products, bearing, marketed in connection with or otherwise associated with the specified trademarks
and brands. Such royalty participation fees are recorded as a reduction to net licensing revenue.

Under the Qurate Agreements, we are generally restricted from selling products under the specified respective brands or
trademarks  (including  the  trademarks,  copyrights,  designs,  logos,  and  related  intellectual  property  themselves)  to  certain
mass merchants. The Qurate Agreements generally prohibit us from selling products under the specified respective brands
or  any  of  our  other  trademarks  and  brands  to  a  direct  competitor  of  Qurate  (generally  defined  as  any  entity  other  than
Qurate whose primary means of deriving revenue is the transmission of interactive television programs) without Qurate’s
consent.  In  addition,  during  the  term  of  the  Ripka  Qurate  Agreement,  and  for  one  year  thereafter,  we  may  not,  without
Qurate’s  consent,  promote,  advertise,  endorse,  or  sell  (i)  the  specified  branded  products  through  any  means  or  (ii)  any
products through interactive television. During the term of the H Qurate Agreement, and for one year thereafter, we may
not, without Qurate’s consent, promote, advertise, endorse, or sell any products, including the H by Halston brands,

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through interactive television. In addition to the foregoing, certain of the agreements permit us to promote brick-and-mortar
collections on Qurate’s television programs subject to certain terms and restrictions.

For the years ended December 31, 2022 and 2021, net licensing revenue from Qurate collectively accounted for 44% and
50%, respectively, of the total net revenue of the Company.

Other Licensing Agreements

We have entered into numerous other licensing agreements for sales and distribution through e-commerce and traditional
brick-and-mortar retailers. Authorized distribution channels include department stores, mass merchant retailers, clubs, and
national specialty retailers. Under our other licenses, a supplier is granted rights, typically on an exclusive basis, to a single
or small group of related product categories for sale to multiple accounts within an approved channel of distribution and
territory.  Our  other  license  agreements  typically  provide  the  licensee  with  the  exclusive  rights  for  a  certain  product
category in a specified territory and/or distribution channel under a specific brand or brands. Our other license agreements
cover various categories, including but not limited to women’s apparel, footwear, and accessories; bath and body; jewelry;
home  products;  men’s  apparel  and  accessories;  children’s  and  infant  apparel,  footwear,  and  accessories;  and  electronics
cases and accessories. The terms of the agreements generally range from three to six years with renewal options.

We are in discussions with other potential licensees and strategic partners to license and/or co-brand our brand portfolio for
additional categories. In certain cases, we have engaged licensing agents to assist in the procurement of such licenses for
which  we  or  our  licensees  pay  such  agents’  fees  based  upon  a  percentage  of  the  net  sales  of  licensed  products  by  such
licensees,  or  a  percentage  of  the  royalty  payments  that  we  receive  from  such  licensees.  While  many  of  the  new  and
proposed licensing agreements will likely require us to provide seasonal design services, most of our new and prospective
licensing  partners  have  their  own  design  staff,  and  we  therefore  expect  low  incremental  overhead  costs  related  to
expanding our licensing business. We will endeavor, where possible, to require licensees to provide guaranteed minimum
royalties under their license agreements.

Our licensees currently sell our branded licensed products through brick-and-mortar retailers, e-commerce, and in certain
cases supply products to interactive television companies for sale through their television programs and/or through their
internet websites. We generally recognize revenues from our other licenses based on a percentage of the sales of products
under our brands, but excluding (i) sales of products to interactive television networks, where we receive a retail royalty
directly  from  the  interactive  television  licensee,  and  (ii)  sales  of  products  through  e-commerce  sites  operated  by  us.
Additionally, based upon guaranteed minimum royalty provisions required under many of the license agreements, we are
able to recognize revenue related to certain other licenses based on the greater of the sales-based royalty or the guaranteed
minimum royalty.

Wholesale and e-Commerce

In  2022,  we  added  our  Q  Optix  business  to  our  wholesale  operations.  Our  focus  is  to  continue  to  grow  our  direct-to-
consumer and live-streaming businesses into a significant portion of our overall business.

Collaborations

In certain cases, the Company collaborates with and provides promotional services to other brands or companies, which
arrangements  may  include  the  use  of  our  brands  for  the  promotion  of  such  company  or  brands  through  the  internet,
television,  or  other  digital  content,  print  media,  or  other  marketing  campaigns  featuring  in-person  appearances  by  our
celebrity spokespersons, the development of limited collections of products (which may include co-branded products) for
such  company,  or  other  services  as  determined  on  a  case-by-case  basis.  These  have  included  promotions  with  Sesame
Street, Crayola, Hewlett Packard, Revlon, Johnson & Johnson, and Kleenex.

We  also  provide  certain  technology  services  to  our  retail  partners  and  certain  of  our  licensees  under  our  proprietary
integrated technology platform.

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Marketing

Marketing  is  a  critical  element  to  maximize  brand  value  to  our  licensees  and  our  Company.  We  employ  live  streaming,
social media, and other marketing and public relations support for our brands.

Given  our  true  omni-channel  retail  sales  strategy  focusing  on  the  sale  of  branded  products  through  various  distribution
channels  (including  live-streaming,  e-commerce,  interactive  television,  and  traditional  brick-and-mortar  sales  channels),
our  marketing  efforts  currently  focus  on  leveraging  micro  and  mega-influencers,  entertainment  tie-ins,  PR  and  editorial,
social media campaigns, personal appearances, and digital content in order to drive retail sales of product and consumer
awareness across our various sales distribution channels. We seek to create the intersection where shopping, entertainment,
and social media meet. As such, our marketing is currently conducted primarily through live-streaming and social media,
videos, images, and other digital content that are all updated regularly and are amplified by micro and mega-influencers
and  entertainment  tie-ins.  Our  efforts  also  include  promoting  namesakes  of  our  brands  and  our  personalities  through
various media including live-streaming, television, design for performances, and other events. We also work with our retail
partners to leverage their marketing resources, including e-commerce platforms and related digital marketing campaigns,
social media platforms, direct mail pieces, and public relations efforts.

We  also  market  the  Judith  Ripka  Fine  Jewelry  brand  through  www.judithripka.com,  Halston  Brand  through
www.halston.com, 
through
www.lorigoldstein.com, and the Longaberger brand through www.longaberger.com. Through our websites, we are able to
present the products under our brands to customers with branding that reflects each brand’s heritage and unique point of
view.

the  Lori  Goldstein  brand 

through  www.cwonder.com, 

the  C  Wonder  brand 

Our e-commerce businesses’ growth is dependent on live-streaming and other marketing to drive traffic to our websites and
converting our visitors into customers.

Competition

Each of our current brands has and any future acquired brand will likely have many competitors within each of its specific
distribution channels that span a broad variety of product categories, including the apparel, footwear, accessories, jewelry,
home furnishings and décor, food products, and sporting goods industries. These competitors have the ability to compete
with the Company and our licensees in terms of fashion, quality, price, products, and/or marketing, and ultimately retail
floor space and consumer spending.

Because many of our competitors have significantly greater cash, revenues, and resources than we do, we must work to
differentiate ourselves from our direct and indirect competitors to successfully compete for market share with the brands
we own and for future acquisitions. We believe that the following factors help differentiate our Company in an increasingly
crowded competitive landscape:

● our management team, including our officers’ and directors’ historical track records and relationships within the

industry;

● our brand management platform, which has a strong focus on design, product, marketing, and technology; and

● our  operating  strategies  of  wholesale  and  direct-to  consumer  sales  and  licensing  brands  with  significant  media
presence and driving sales through our true omni-channel retail sales strategy across interactive television, brick-
and-mortar, live streaming, and e-commerce distribution channels.

We expect our existing and future licenses to relate to products in the apparel, footwear, accessories, jewelry, home goods,
and other consumer products industries, in which our licensees face intense competition, including from our other brands
and  licensees.  In  general,  competitive  factors  include  quality,  price,  style,  name  recognition,  and  service.  In  addition,
various fashion trends and the limited availability of shelf space could affect competition for our licensees’ products. Many
of  our  licensees’  competitors  have  greater  financial,  distribution,  marketing,  and  other  resources  than  our  licensees  and
have achieved significant name recognition for their brand names. Our licensees may be unable to successfully compete

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in the markets for their products, and we may not be able to continue to compete successfully with respect to our licensing
arrangements.

Trademarks

The  Company,  through  its  wholly  owned  subsidiaries,  owns  and  exploits  the  Lori  Goldstein  brands,  which  include  the
trademarks and brands LOGO by Lori Goldstein, LOGO, LOGO Links, LOGO Lounge, LOGO Layers, and LOGO Luna;
the Halston brands, which include the trademarks and brands Halston, Halston Heritage, Roy Frowick, H by Halston, and
H Halston; the Ripka brands, which include the trademarks and brands Judith Ripka LTD, Judith Ripka Collection, Judith
Ripka Legacy, Judith Ripka, and Judith Ripka Sterling; and the C Wonder brands, which include the trademarks and brands
C  Wonder  and  C  Wonder  Limited.  We  manage  and  have  a  50%  ownership  interest  in  the  brands  and  trademarks  of  the
Longaberger brand through our business venture with Hilco Global. We have a 50% ownership interest in the brands and
trademarks  of  the  Q  Optix  brand  through  our  business  venture  with  Vita  Frame  LLC.  We  also  have  a  30%  ownership
interest in the Mizrahi brands, which include the trademarks and brands Isaac Mizrahi, Isaac Mizrahi New York, IMNYC
Isaac Mizrahi, and IsaacMizrahiLIVE, through our business venture with WHP Global.

Where laws limit our ability to record in our name trademarks that we have purchased, we have obtained by way of license
all  necessary  rights  to  operate  our  business.  Certain  of  these  trademarks  and  associated  marks  are  registered  or  pending
registration with the U.S. Patent and Trademark Office in block letter and/or logo formats, as well as in combination with a
variety  of  ancillary  designs  for  use  in  connection  with  a  variety  of  product  categories,  such  as  apparel,  footwear  and
various other goods and services including, in some cases, home furnishings and decor. The Company intends to renew and
maintain registrations as appropriate prior to expiration and it makes efforts to diligently prosecute all pending applications
consistent with the Company’s business goals. In addition, the Company registers its trademarks in certain other countries
and regions around the world as it deems appropriate.

The  Company  and  its  licensees  do  not  presently  earn  a  material  amount  of  revenue  from  either  the  licensing  of  our
trademarks  internationally  or  the  sale  of  products  under  our  trademarks  internationally.  However,  the  Company  has
registered  its  trademarks  in  certain  territories  where  it  expects  that  it  may  do  business  in  the  foreseeable  future.  If  the
Company or a licensee intends to make use of the trademarks in international territories, the Company will seek to register
its trademarks in such international territories as it deems appropriate based upon factors including the revenue potential,
prospective market, and trademark laws in such territory or territories.

Generally,  the  Company  is  primarily  responsible  for  monitoring  and  protecting  its  trademarks  around  the  world.  The
Company seeks to require its licensing partners to advise the Company of any violations of its trademark rights of which its
licensing  partners  become  aware  and  relies  primarily  upon  a  combination  of  federal,  state,  and  local  laws,  as  well  as
contractual restrictions to protect its intellectual property rights both domestically and internationally.

Human Capital

Our  employees’  knowledge,  social,  and  personality  attributes  enable  our  company  to  achieve  its  goals,  develop  our
business, and remain innovative. As of December 31, 2022, we had 69 full-time employees and 12 part-time employees.
We value our employees and are committed to providing a healthy and safe work environment. For certain key employees,
including  our  executives,  brand  ambassadors,  and  spokespersons,  we  typically  enter  into  multi-year  employment
agreements. Overall, we believe that our relationship with our employees is good. None of our employees are represented
by a labor union.

Government Regulation

We are subject to federal, state, and local laws and regulations affecting our business, including those promulgated under
the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber
Product  Identification  Act,  the  rules  and  regulations  of  the  Consumer  Product  Safety  Commission,  and  various
environmental  laws  and  regulations.  We  believe  that  we  are  in  compliance  in  all  material  respects  with  all  applicable
governmental regulations.

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Item 1A.   Risk Factors

In addition to the other information contained herein or incorporated herein by reference, the risks and uncertainties and
other  factors  described  below  could  have  a  material  adverse  effect  on  our  business,  financial  condition,  results  of
operations and share price and could also cause our future business, financial condition and results of operations to differ
materially from the results contemplated by any forward-looking statement we may make herein, in any other document we
file with the Securities and Exchange Commission (“SEC”), or in any press release or other written or oral statement we
may  make.  Please  also  see  “Forward-Looking  Statements”  on  page  3  for  additional  information  regarding  Forward-
Looking Statements.

Summary of Risk Factors

Our business is subject to a number of risks, which include, but are not limited to, risks related to:

● our limited amount of cash;

● our concentration of revenue with a limited number of licensees;

● restrictions related to certain key licensing agreements;

● conducting operations through joint ventures and our dependence on the joint ventures;

● our dependency upon our spokespersons;

● the operational performance and/or strategic initiatives of our licensees and retail partners;

● continued market acceptance of our brands and products;

● the use of social media and influencers to market brands and products;

● changing consumer preferences and shifting industry trends;

● execution of our growth strategy, including the acquisition of new brands;

● our dependency on our Chief Executive Officer and other key executives;

● intense competition in the apparel, fashion, and jewelry industries, and within our licensees’ markets;

● product sourcing, including our arrangements with foreign suppliers, supply and logistics considerations, and our

dependency on independent manufacturers; and

● protection of our trademarks and other intellectual property rights.

An investment in our securities is subject to a number of risks, which include, but are not limited to, risks related to:

● management’s significant control over matters requiring shareholder approval;

● potential difficulty in liquidating an investment in shares of our common stock;

● the potential impact of SEC “penny stock” rules on trading of our shares of our common stock;

● declines of and volatility in the market price of our common stock;

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● the potential issuance of a substantial number of shares of common stock upon exercise of warrants and options;

● the potential impact of Rule 144 restrictions on our shares of common stock as a former shell company;

● our intent to not pay any cash dividends for the foreseeable future; and

● provisions of our corporate charter documents which could delay or prevent change of control.

We are also subject to general risks, which include, but are not limited to, risks related to:

● a pandemic or outbreak of disease or similar public health threat, or fear of such an event;

● supply chain disruptions;

● the Ukrainian-Russian conflict;

● a decline in general economic conditions or consumer spending levels;

● inflation and/or a potential recession;

● extreme or unseasonable weather conditions;

● potential impairment of our trademarks and other intangible assets under accounting guidelines;

● changes in our effective tax rates or adverse outcomes resulting from examination of our tax returns;

● maintenance and security of our information technology systems;

● changes in laws and regulations;

● maintaining an effective system of internal control; and

● limitations on liabilities of our directors and executive officers.

Risks Related to Our Business

We have a limited amount of cash to grow our operations. If we cannot obtain additional sources of cash, our growth
prospects  and  future  profitability  may  be  materially  adversely  affected,  and  we  may  not  be  able  to  implement  our
business  plan.  Such  additional  financing  may  not  be  available  on  satisfactory  terms  or  it  may  not  be  available  when
needed, or at all.

As  of  December  31,  2022,  we  had  cash  and  cash  equivalents  of  approximately  $4.6  million,  and  during  the  year  ended
December 31, 2022, we used $14.2 million of cash in operating activities. Although we believe that our existing cash and
our anticipated cash flow from operations will be sufficient to sustain our operations at our current expense levels for at
least twelve months subsequent to the date of the filing of this Annual Report on Form 10-K, we may require significant
additional  cash  to  satisfy  our  working  capital  requirements,  expand  our  operations  or  acquire  and  develop  additional
brands.  Our  inability  to  finance  our  growth,  either  internally  through  our  operations  or  externally,  may  limit  our  growth
potential  and  our  ability  to  execute  our  business  strategy  successfully.  If  we  issue  securities  to  raise  capital  to  finance
operations and/or pay down or restructure our debt, our existing stockholders may experience dilution. In addition, the new
securities may have rights senior to those of our common stock.

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A substantial portion of our net licensing revenue is concentrated with a limited number of licensees such that the loss
of any of such licensees could decrease our revenue and impair our cash flows.

A substantial portion of our net licensing revenue has been paid by Qurate, through the respective agreements with Qurate
through QVC and HSN. During the years ended December 31, 2022 and 2021, Qurate accounted for approximately 44%
and  50%,  respectively,  of  our  total  net  revenue.  Because  we  are  dependent  on  these  agreements  with  Qurate  for  a
significant portion of our revenues, if Qurate were to have financial difficulties, or if Qurate decides not to renew or extend
its existing agreements with us, our revenue and cash flows could be reduced substantially. Our cash flow would also be
significantly impacted if there were significant delays in our collection of receivables from Qurate. Additionally, we have
limited control over the programming that Qurate devotes to our brands or its promotional sales with our brands (such as
“Today’s Special Value” sales). Qurate has reduced the programming time it devotes to jewelry and, accordingly, also to
our Ripka brand, and if Qurate further reduces or modifies its programming or promotional sales related to our brands, our
revenues and cash flows could be reduced substantially. In order to increase sales of a brand through Qurate, we generally
require  additional  television  programming  time  dedicated  to  the  brand  by  Qurate.  Qurate  is  not  required  to  devote  any
minimum amount of programming time for any of our brands.

While  our  business  with  Qurate  has  grown  since  we  first  launched  one  of  our  brands  on  QVC,  our  Qurate  revenues
declined  from  2021  to  2022,  as  a  result  of  the  May  31,  2022  sale  of  a  controlling  interest  of  the  Isaac  Mizrachi  brand
through the sale of a 70% interest in IM Topco, LLC. There can be no guarantee that our Qurate revenues will grow in the
future or that they will not decline further. Additionally, there can be no assurance that our other licensees will be able to
generate  sales  of  products  under  our  brands  or  grow  their  existing  sales  of  products  under  our  brands,  and  if  they  do
generate sales, there is no guarantee that they will not cause a decline in sales of products being sold through Qurate.

Our  agreements  with  Qurate  restrict  us  from  selling  products  under  our  brands  with  certain  retailers,  or  branded
products  we  sell  on  Qurate  to  any  other  retailer  except  certain  interactive  television  channels  in  other  territories
approved  by  Qurate,  and  provides  Qurate  with  a  right  to  terminate  the  respective  agreement  if  we  breach  these
provisions.

Although most of our licenses and our Qurate Agreements prohibit the sale of products under our brands to retailers who
are  restricted  by  Qurate,  and  our  license  agreements  with  other  interactive  television  companies  prohibit  such  licensees
from  selling  products  to  retailers  restricted  by  Qurate  under  the  brands  we  sell  on  Qurate  outside  of  certain  approved
territories, one or more of our licensees could sell to a restricted retailer or territory, putting us in breach of our agreements
with Qurate and exposing us to potential termination by Qurate. A breach of any of these agreements could also result in
Qurate  seeking  monetary  damages,  seeking  an  injunction  against  us  and  our  other  licensees,  reducing  the  programming
time allocated to our brands, and/or terminating the respective agreement, which could have a material adverse effect on
our net income and cash flows.

We have recently begun to conduct certain of our operations through a joint venture. Joint ventures could fail to meet
our  expectations  or  cease  to  deliver  anticipated  benefits.  There  could  also  be  disagreements  with  our  joint  venture
partners that could adversely affect our interest a joint venture.

In May 2022, we sold a majority interest in Isaac Mizrachi brand through the sale of a 70% interest in IM Topco, LLC. We
may enter into additional joint ventures in the future. Our operating results are, in part, dependent upon the performance of
IM  Topco,  LLC  and,  in  the  future,  could  also  be  dependent  in  part  upon  the  performance  of  future  joint  ventures.  Joint
ventures involve numerous risks, and could fail to meet our initial or ongoing expectations. We provide certain services to
IM Topco, LLC and may provide services to future joint ventures, but we do not control the day-to-day operations of IM
Topco,  LLC  and  may  not  control  the  day-to-day  operations  of  future  joint  ventures.  The  anticipated  synergies  or  other
benefits of a joint venture may fail to materialize due to changing business conditions or changes in our business priorities
or those of our joint venture partners. Our joint venture partners, as well as any future partners, may have interests that are
different from our interests that may result in conflicting views as to the conduct of the business or future direction of the
joint  venture.  In  the  event  that  we  have  a  disagreement  with  a  joint  venture  partner  with  respect  to  a  particular  issue  to
come before the joint venture, or as to the management or conduct of the business of the joint venture, we may not be able
to resolve such disagreement in our favor. Any such disagreement could have a material adverse effect on our interest in
the joint venture, the business of the joint venture, or the portion of our growth strategy related to the joint venture.

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We  are  dependent  on  our  joint  ventures  to  provide  timely  and  accurate  information  about  their  sales  and  operations,
which we rely upon to effectively manage their brands.

IM  Topco,  LLC  is,  and  we  expect  future  joint  ventures  will  be,  contractually  obligated  to  provide  timely  and  accurate
information  regarding  their  sales  and  operations.  We  rely  on  this  information  to  prepare  our  consolidated  financial
statements. Any delay in reporting reduces our visibility into the results of operations for IM Topco, LLC and any future
joint ventures, and our inability to collect timely and accurate information may affect our ability to timely complete our
financial statements and timely file reports and other information with the SEC and may adversely affect our business and
results of operations.

We are dependent upon the promotional services of Lori Goldstein and our other spokespersons as they relate to our
respective brands.

If we lose the services of Lori Goldstein, we may not be able to fully comply with the terms of our agreement with Qurate,
and it may result in significant reductions in the value of the LOGO by Lori Goldstein brand and our prospects, revenues,
and cash flows. Lori Goldstein is a key individual in our continued promotion of the LOGO by Lori Goldstein brand and
the principal salesperson of the LOGO by Lori Goldstein brand on Qurate. Failure of Lori Goldstein to provide services to
Qurate could result in a termination of related agreements with Qurate, which could trigger an event of default under our
credit facility. Although we have entered into an employment agreement with Ms. Goldstein, there is no guarantee that we
will not lose her services. To the extent that any of Ms. Goldstein’s services become unavailable to us, we will likely need
to find a replacement for Ms. Goldstein to promote the LOGO by Lori Goldstein brand. Competition for skilled designers
and high-profile brand promoters is intense, and compensation levels may be high, and there is no guarantee that we would
be able to identify and attract a qualified replacement, or if Ms. Goldstein’s services are not available to us, that we would
be  able  to  promote  the  LOGO  by  Lori  Goldstein  brand  as  well  as  we  are  able  to  with  Ms.  Goldstein.  This  could
significantly affect the value of the LOGO by Lori Goldstein brand and our ability to market the brand, and could impede
our ability to fully implement our business plan and future growth strategy, which would harm our business and prospects.
Additionally, while we acquired all trademarks, image, and likeness of Lori Goldstein, pursuant to the acquisition of the
LOGO by Lori Goldstein assets and her employment agreement, Ms. Goldstein has retained certain rights to participate in
outside  business  activities,  including  hosting  and  appearing  in  television  shows,  movies  and  theater  productions,  and
writing  and  publishing  books  and  other  publications.  Ms.  Goldstein’s  participation  in  these  personal  business  ventures
could limit her availability to us and affect her ability to perform under this employment agreement. Finally, there is no
guarantee that Ms. Goldstein will not take an action that consumers view as negative, which may harm the LOGO by Lori
Goldstein brand as well as our business and prospects.

We will also be dependent upon the services of our other spokespersons and our joint venture partner’s spokesperson to
promote our other brands and the brands of our joint venture. The loss of a spokesperson or a joint ventures’ spokesperson
could  significantly  affect  the  value  of  the  related  brand  or  our  related  joint  venture  interest  and  our  or  our  related  joint
venture’s ability to market the brand which would harm our business and prospects.

The failure of our licensees to adequately produce, market, source, and sell quality products bearing our brand names
in  their  license  categories  or  to  pay  their  obligations  under  their  license  agreements  could  result  in  a  decline  in  our
results of operations.

Our revenues are dependent on payments made to us under our licensing agreements. Although the licensing agreements
for our brands typically require the advance payment to us of a portion of the licensing fees and in many cases provide for
guaranteed minimum royalty payments to us, the failure of our licensees to satisfy their obligations under these agreements
or  their  inability  to  operate  successfully  or  at  all,  could  result  in  their  breach  and/or  the  early  termination  of  such
agreements,  the  non-renewal  of  such  agreements,  or  our  decision  to  amend  such  agreements  to  reduce  the  guaranteed
minimums or sales royalties due thereunder, thereby eliminating some or all of that stream of revenue. Moreover, during
the  terms  of  the  license  agreements,  we  are  substantially  dependent  upon  the  efforts  and  abilities  of  our  licensees  to
maintain  the  quality  and  marketability  of  the  products  bearing  our  trademarks,  as  their  failure  to  do  so  could  materially
tarnish our brands, thereby harming our future growth and prospects. In addition, the failure of our licensees to meet their
production, manufacturing, sourcing, and distribution requirements or actively market the branded licensed products could
cause a decline in their sales and potentially decrease the amount of royalty payments (over and above the guaranteed

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minimums) due to us. A weak economy or softness in the apparel and retail sectors could exacerbate this risk. This, in turn,
could decrease our potential revenues. The concurrent failure by several of our material licensees to meet their financial
obligations to us could adversely affect our business, results of operations, and cash flows.

We are subject to the risks associated with our Judith Ripka brand’s wholesale and direct-to-consumer model.

We commenced e-commerce sales and wholesale distribution of our Judith Ripka brand in 2017 and 2018, respectively. In
2019, we completed the transition of our non-interactive television operations of our Judith Ripka brand from a licensing
model to a wholesale and direct-to-consumer model. We opened a brick-and-mortar retail store for the Judith Ripka brand
in 2021, which we subsequently closed in 2022. As a result, we do not have a well-established history of conducting these
operations.

We produce product for our Judith Ripka brands to hold as inventory for sales through our website and wholesale accounts.
If  we  misjudge  the  market  for  our  Judith  Ripka  products,  we  may  be  faced  with  significant  excess  inventory  for  some
products and missed opportunities for other products. In addition, weak sales and mark downs by our retailers or our need
to  liquidate  excess  inventory  could  adversely  affect  our  results  of  operations.  If  we  are  not  successful  in  managing  our
inventory balances, our cash flows and operating results may be adversely affected.

If  our  retail  customers  change  their  buying  patterns,  request  additional  allowances,  develop  their  own  private  label
brands  or  enter  into  agreements  with  national  brand  manufacturers  to  sell  their  products  on  an  exclusive  basis,  our
sales to these customers could be materially adversely affected.

Our  retail  customers’  buying  patterns,  as  well  as  the  need  to  provide  additional  allowances  to  customers,  could  have  a
material  adverse  effect  on  our  business,  results  of  operations  and  financial  condition.  Customers’  strategic  initiatives,
including developing their own private labels brands, selling national brands on an exclusive basis, reducing the number of
vendors  they  purchase  from,  or  reducing  the  floor  space  dedicated  to  our  brands  could  also  impact  our  sales  to  these
customers. There is a trend among major retailers to concentrate purchasing among a narrowing group of vendors. To the
extent  that  any  key  customer  reduces  the  number  of  its  vendors  or  allocates  less  floor  space  for  our  products  and,  as  a
result, reduces or eliminates purchases from us, there could be a material adverse effect on us.

Our business is dependent on continued market acceptance of our brands, our joint venture brands, and any future
brands we may acquire directly or through a joint venture, and the products of our licensees.

Although certain of our licensees guarantee minimum net sales and minimum royalties to us, some of our licensees are not
yet selling licensed products or currently have limited distribution of licensed products, and a failure of our brands or of
our joint venture brands or of products bearing our brands or our joint venture brands to achieve or maintain broad market
acceptance  could  cause  a  reduction  of  our  licensing  revenues,  diminish  the  value  of  and  generally  affect  the  operating
results of our joint ventures, and could further cause existing licensees not to renew their agreements. Such failure could
also cause the devaluation of our trademarks, which are our primary assets and the primary assets of our joint ventures,
making it more difficult for us or our joint ventures to renew our current licenses upon their expiration or enter into new or
additional  licenses  for  such  trademarks.  In  addition,  if  such  devaluation  of  our  trademarks  were  to  occur,  a  material
impairment in the carrying value of one or more of our trademarks, which had an aggregate carrying value of $47.7 million
as  of  December  31,  2022,  could  also  occur  and  be  charged  as  an  expense  to  our  operating  results.  Continued  market
acceptance  of  our  brands,  our  joint  ventures’  brands,  and  our  licensees’  products,  as  well  as  market  acceptance  of  any
future  products  bearing  any  future  brands  we  may  acquire,  is  subject  to  a  high  degree  of  uncertainty  and  constantly
changing  consumer  tastes,  preferences,  and  purchasing  patterns.  Creating  and  maintaining  market  acceptance  of  our
licensees’  products  and  creating  market  acceptance  of  new  products  and  categories  of  products  bearing  our  marks  may
require substantial marketing efforts, which may, from time to time, also include our expenditure of significant additional
funds  to  keep  pace  with  changing  consumer  demands,  which  funds  may  or  may  not  be  available  on  a  timely  basis,  on
acceptable  terms  or  at  all.  Additional  marketing  efforts  and  expenditures  may  not,  however,  result  in  either  increased
market acceptance of, or additional licenses for, our trademarks or increased market acceptance, or sales, of our licensees’
products. Furthermore, we do not actually design or manufacture all of the products bearing our marks, and therefore, have
less control over such products’ quality and design than a traditional product manufacturer might have. The failure of our

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licensees and joint ventures to maintain the quality of their products could harm the reputation and marketability of our
brands and our joint ventures’ brands, which would adversely impact our business and the business of our joint ventures.

Negative claims or publicity regarding Xcel, IM Topco, LLC, any future joint ventures, our or their brands, or products
could  adversely  affect  our  reputation  and  sales  regardless  of  whether  such  claims  are  accurate.  Social  media,  which
accelerates  the  dissemination  of  information,  can  increase  the  challenges  of  responding  to  negative  claims.  In  the  past,
many apparel companies have experienced periods of rapid growth in sales and earnings followed by periods of declining
sales and losses. Our businesses may be similarly affected in the future.

Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other
penalties.

We use and our joint ventures may use third-party social media platforms as, among other things, marketing tools. We also
maintain, and our joint ventures may maintain, relationships with many social media influencers and engage in sponsorship
initiatives. As existing e-commerce and social media platforms continue to rapidly evolve and new platforms develop, we
and our joint ventures must continue to maintain a presence on these platforms and establish presences on new or emerging
popular  social  media  platforms.  If  we  or  our  joint  ventures  are  unable  to  cost-effectively  use  social  media  platforms  as
marketing tools or if the social media platforms we or our joint ventures use change their policies or algorithms, we or our
joint ventures may not be able to fully optimize such platforms, and our and their ability to maintain and acquire customers
and our financial condition may suffer.

Furthermore, as laws and regulations and public opinion rapidly evolve to govern the use of these platforms and devices,
the  failure  by  us,  our  employees,  our  network  of  social  media  influencers,  our  sponsors  or  third  parties  acting  at  our
direction to abide by applicable laws and regulations in the use of these platforms and devices or otherwise could subject us
to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our
business, financial condition and operating results.

In  addition,  an  increase  in  the  use  of  social  media  for  product  promotion  and  marketing  may  cause  an  increase  in  the
burden on us and our joint ventures to monitor compliance of such materials, and increase the risk that such materials could
contain  problematic  product  or  marketing  claims  in  violation  of  applicable  regulations.  For  example,  in  some  cases,  the
Federal Trade Commission has sought enforcement action where an endorsement has failed to clearly and conspicuously
disclose a financial relationship or material connection between an influencer and an advertiser.

We  do  not  prescribe  what  our  influencers  post,  and  if  we  were  held  responsible  for  the  content  of  their  posts  or  their
actions, we could be fined or forced to alter our practices, which could have an adverse impact on our business.

Negative commentary regarding us, our joint ventures or our or their products or influencers and other third parties who are
affiliated with us or our joint ventures may also be posted on social media platforms and may be adverse to our or our joint
ventures’ reputation or business. Influencers with whom we or our joint ventures maintain relationships could engage in
behavior or use their platforms to communicate directly with our customers in a manner that reflects poorly on our or our
joint ventures’ brand and may be attributed to us or our joint ventures or otherwise adversely affect us or our joint ventures.
It is not possible to prevent such behavior, and the precautions we and our joint ventures take to detect this activity may not
be effective in all cases. Our and our joint ventures’ target consumers often value readily available information and often
act  on  such  information  without  further  investigation  and  without  regard  to  its  accuracy.  The  harm  may  be  immediate,
without affording us and our joint ventures an opportunity for redress or correction.

If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends
in a timely manner, our business, financial condition, and operating results could be harmed.

Our  success  largely  depends  on  our  ability  to  consistently  gauge  tastes  and  trends  and  provide  a  diverse  and  balanced
assortment of merchandise that satisfies customer demands in a timely manner. Our ability to accurately forecast demand
for our products could be affected by many factors, including an increase or decrease in demand for our products or for
products  of  our  competitors,  our  failure  to  accurately  forecast  acceptance  of  new  products,  product  introductions  by
competitors, unanticipated changes in general market conditions, and weakening of economic conditions or consumer

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confidence  in  future  economic  conditions.  We  typically  enter  into  agreements  to  manufacture  and  purchase  our
merchandise in advance of the applicable selling season and our failure to anticipate, identify or react appropriately, or in a
timely manner to changes in customer preferences, tastes and trends or economic conditions could lead to, among other
things,  missed  opportunities,  excess  inventory  or  inventory  shortages,  markdowns  and  write-offs,  all  of  which  could
negatively impact our profitability and have a material adverse effect on our business, financial condition, and operating
results. Failure to respond to changing customer preferences and fashion trends could also negatively impact the image of
our brands with our customers and result in diminished brand loyalty.

If  major  department,  mass  merchant,  and  specialty  store  chains  consolidate,  continue  to  close  stores,  or  cease  to  do
business, our business could be negatively affected.

We sell our products through major department, mass merchant, and specialty store chains. Continued consolidation in the
retail industry, as well as store closing or retailers ceasing to do business, could negatively impact our business. Various
customers  of  ours  have  encountered  reductions  in  operations  including  Macy’s  and  Kohl’s,  as  well  as  other  store  chains
that have reduced the number of stores they operated, Lord & Taylor, which closed all of its stores, and JC Penney and
Christopher & Banks, each of which filed for bankruptcy. Store closings could adversely affect our business and results of
operations. Consolidation could reduce the number of our customers and potential customers. With increased consolidation
in the retail industry, we are increasingly dependent on retailers whose bargaining strength may increase and whose share
of our business may grow. As a result, we may face greater pressure from these customers to provide more favorable terms,
including  increased  support  of  their  retail  margins.  As  purchasing  decisions  become  more  centralized,  the  risks  from
consolidation  increase.  A  store  group  could  decide  to  close  stores,  decrease  the  amount  of  product  purchased  from  us,
modify  the  amount  of  floor  space  allocated  to  apparel  in  general  or  to  our  products  specifically,  or  focus  on  promoting
private  label  products  or  national  brand  products  for  which  it  has  exclusive  rights  rather  than  promoting  our  products.
Customers  are  also  concentrating  purchases  among  a  narrowing  group  of  vendors.  These  types  of  decisions  by  our  key
customers could adversely affect our business.

We  expect  to  achieve  growth  based  upon  our  plans  to  expand  our  business  under  our  existing  brands.  If  we  fail  to
manage our expected future growth, our business and operating results could be materially harmed.

We  expect  to  achieve  growth  in  our  existing  brands  through  expansion  of  our  wholesale  business  and  e-commerce
platforms.  Revenue  growth  is  expected  to  come  from  new  wholesale  accounts  and  increased  traffic  to  our  e-commerce
sites.  We  continue  to  seek  new  opportunities  and  international  expansion  through  interactive  television  and  licensing
arrangements.  The  success  of  our  company,  however,  will  still  remain  largely  dependent  on  our  ability  to  build  and
maintain broad market acceptance of our brands, to contract with and retain key licensees and on our licensees’ ability to
accurately predict upcoming fashion and design trends within customer bases and fulfill the product requirements of retail
channels within the global marketplace.

Our ability to compete effectively and to manage future growth, if any, will depend on the sufficiency and adequacy of our
current  resources  and  infrastructure  and  our  ability  to  continue  to  identify,  attract  and  retain  personnel  to  manage  our
brands  and  integrate  any  brands  we  may  acquire  into  our  operations.  There  can  be  no  assurance  that  our  personnel,
systems, procedures and controls will be adequate to support our operations and properly oversee our brands. The failure to
support  our  operations  effectively  and  properly  oversee  our  brands  could  cause  harm  to  our  brands  and  have  a  material
adverse effect on the value of such brands and on our reputation, business, financial condition and results of operations. In
addition, we may be unable to leverage our core competencies in managing apparel and jewelry brands to managing brands
in new product categories.

Also, there can be no assurance that we will be able to achieve and sustain meaningful growth. Our growth may be limited
by  a  number  of  factors  including  increased  competition  among  branded  products  at  brick-and-mortar,  internet  and
interactive  retailers,  decreased  airtime  on  QVC,  competition  for  retail  licenses  and  brand  acquisitions,  and  insufficient
capitalization for future transactions.

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We  are  dependent  upon  our  Chief  Executive  Officer  and  other  key  executives.  If  we  lose  the  services  of  these
individuals, we may not be able to fully implement our business plan and future growth strategy, which would harm our
business and prospects.

Our success is largely dependent upon the efforts of Robert W. D’Loren, our Chief Executive Officer and Chairman of our
board  of  directors.  Our  continued  success  is  largely  dependent  upon  his  continued  efforts  and  those  of  our  other  key
executives.  Although  we  entered  into  an  employment  agreement  with  Mr.  D’Loren,  as  well  as  employment  agreements
with other executives and key employees, such persons can terminate their employment with us at their option, and there is
no guarantee that we will not lose the services of our executive officers or key employees. To the extent that any of their
services become unavailable to us, we will be required to hire other qualified executives, and we may not be successful in
finding  or  hiring  adequate  replacements.  This  could  impede  our  ability  to  fully  implement  our  business  plan  and  future
growth strategy, which would harm our business and prospects.

If  we  are  unable  to  identify  and  successfully  acquire  additional  trademarks,  our  growth  may  be  limited  and,  even  if
additional trademarks are acquired, we may not realize anticipated benefits due to integration or licensing difficulties.

While  we  are  focused  on  growing  our  existing  brands,  we  intend  to  selectively  seek  to  acquire  additional  intellectual
property, either directly or through the formation of joint ventures. However, as our competitors continue to pursue a brand
management  model,  acquisitions  may  become  more  expensive  and  suitable  acquisition  candidates  could  become  more
difficult to find. In addition, even if we successfully acquire additional intellectual property or the rights to use additional
intellectual property, we may not be able to achieve or maintain profitability levels that justify our investment in, or realize
planned benefits with respect to, those additional brands.

Although we will seek to temper our acquisition risks by following acquisition guidelines relating to purchase price and
valuation, projected returns, existing strength of the brand, its diversification benefits to us, its potential licensing scale and
creditworthiness  of  licensee  base,  acquisitions,  whether  they  be  of  additional  intellectual  property  assets  or  of  the
companies  that  own  them,  entail  numerous  risks,  any  of  which  could  detrimentally  affect  our  reputation,  our  results  of
operations, and/or the value of our common stock. These risks include, among others:

● unanticipated costs associated with the target acquisition or its integration with our company;

● our ability to identify or consummate additional quality business opportunities, including potential licenses and

new product lines and markets;

● negative effects on reported results of operations from acquisition related charges and costs, and amortization of

acquired intangibles;

● diversion of management’s attention from other business concerns;

● the challenges of maintaining focus on, and continuing to execute, core strategies and business plans as our brand

and license portfolio grows and becomes more diversified;

● adverse effects on existing licensing and other relationships;

● potential  difficulties  associated  with  the  retention  of  key  employees,  and  difficulties,  delays  and  unanticipated
costs associated with the assimilation of personnel, operations, systems and cultures, which may be retained by us
in connection with or as a result of our acquisitions;

● risks  of  entering  new  domestic  and  international  markets  (whether  it  be  with  respect  to  new  licensed  product
categories or new licensed product distribution channels) or markets in which we have limited prior experience;
and

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● increased concentration in our revenues with one or more customers in the event that the brand has distribution

channels in which we currently distribute products under one or more of our brands.

When  we  acquire  intellectual  property  assets  or  the  companies  that  own  them,  our  due  diligence  reviews  are  subject  to
inherent  uncertainties  and  may  not  reveal  all  potential  risks.  We  may  therefore  fail  to  discover  or  inaccurately  assess
undisclosed or contingent liabilities, including liabilities for which we may have responsibility as a successor to the seller
or the target company. As a successor, we may be responsible for any past or continuing violations of law by the seller or
the target company. Although we will generally attempt to seek contractual protections through representations, warranties
and indemnities, we cannot be sure that we will obtain such provisions in our acquisitions or that such provisions will fully
protect us from all unknown, contingent or other liabilities or costs. Finally, claims against us relating to any acquisition
may necessitate our seeking claims against the seller for which the seller may not, or may not be able to, indemnify us or
that may exceed the scope, duration or amount of the seller’s indemnification obligations.

Acquiring  additional  intellectual  property  could  also  have  a  significant  effect  on  our  financial  position  and  could  cause
substantial  fluctuations  in  our  quarterly  and  yearly  operating  results.  Acquisitions  could  result  in  the  recording  of
significant  goodwill  and  intangible  assets  on  our  financial  statements,  the  amortization  or  impairment  of  which  would
reduce  our  reported  earnings  in  subsequent  years.  No  assurance  can  be  given  with  respect  to  the  timing,  likelihood  or
financial or business effect of any possible transaction. Moreover, our ability to grow through the acquisition of additional
intellectual property will also depend on the availability of capital to complete the necessary acquisition arrangements. In
the  event  that  we  are  unable  to  obtain  debt  financing  on  acceptable  terms  for  a  particular  acquisition,  we  may  elect  to
pursue  the  acquisition  through  the  issuance  by  us  of  shares  of  our  common  stock  (and,  in  certain  cases,  convertible
securities) as equity consideration, which could dilute our common stock and reduce our earnings per share, and any such
dilution could reduce the market price of our common stock unless and until we were able to achieve revenue growth or
cost  savings  and  other  business  economies  sufficient  to  offset  the  effect  of  such  an  issuance.  Acquisitions  of  additional
brands  may  also  involve  challenges  related  to  integration  into  our  existing  operations,  merging  diverse  cultures,  and
retaining  key  employees.  Any  failure  to  integrate  additional  brands  successfully  in  the  future  may  adversely  impact  our
reputation and business.

As a result, there is no guarantee that our stockholders will achieve greater returns as a result of any future acquisitions we
complete.

Intense competition in the apparel, fashion, and jewelry industries could reduce our sales and profitability.

As a fashion company, we face intense competition from other domestic and foreign apparel, footwear, accessories, and
jewelry  manufacturers  and  retailers.  Competition  has  and  may  continue  to  result  in  pricing  pressures,  reduced  profit
margins, lost market share, or failure to grow our market share, any of which could substantially harm our business and
results of operations. Competition is based on many factors including, without limitation, the following:

● establishing and maintaining favorable brand recognition;

● developing products that appeal to consumers;

● pricing products appropriately;

● determining and maintaining product quality;

● obtaining access to sufficient floor space in retail locations;

● providing appropriate services and support to retailers;

● maintaining and growing market share;

● developing and maintaining a competitive e-commerce site;

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● hiring and retaining key employees; and

● protecting intellectual property.

Competition in the apparel, fashion and jewelry industries is intense and is dominated by a number of very large brands,
many of which have longer operating histories, larger customer bases, more established relationships with a broader set of
suppliers,  greater  brand  recognition,  and  greater  financial,  research  and  development,  marketing,  distribution,  and  other
resources than we do. These capabilities of our competitors may allow them to better withstand downturns in the economy
or  apparel,  fashion  and  jewelry  industries.  Any  increased  competition,  or  our  failure  to  adequately  address  any  of  these
competitive factors which we have seen from time to time, could result in reduced sales, which could adversely affect our
business, financial condition, and operating results.

Competition, along with such other factors as consolidation within the retail industry and changes in consumer spending
patterns, could also result in significant pricing pressure and cause the sales environment to be more promotional, as it has
been in recent years, impacting our financial results. If promotional pressure remains intense, either through actions of our
competitors or through customer expectations, this may cause a further reduction in our sales and gross margins and could
have a material adverse effect on our business, financial condition, and operating results.

Because of the intense competition within our existing and potential wholesale licensees’ markets and the strength of
some of their competitors, we and our licensees may not be able to continue to compete successfully.

We expect our existing and future licenses to relate to products in the apparel, footwear, accessories, jewelry, home goods,
and  other  consumer  industries,  in  which  our  licensees  face  intense  competition,  including  from  our  other  brands  and
licensees. In general, competitive factors include quality, price, style, name recognition, and service. In addition, various
fashion trends and the limited availability of shelf space could affect competition for our licensees’ products. Many of our
licensees’  competitors  have  greater  financial,  distribution,  marketing,  and  other  resources  than  our  licensees  and  have
achieved significant name recognition for their brand names. Our licensees may be unable to successfully compete in the
markets  for  their  products,  and  we  may  not  be  able  to  continue  to  compete  successfully  with  respect  to  our  contractual
arrangements.

If our competition for licenses increases, or any of our current licensees elect not to renew their licenses or renew on
terms less favorable than today, our growth plans could be slowed and our business, financial condition and results of
operations would be adversely affected.

To  the  extent  we  seek  to  acquire  additional  brands,  we  will  face  competition  to  retain  licenses  and  to  complete  such
acquisitions.  The  ownership,  licensing,  and  management  of  brands  is  becoming  a  more  widely  utilized  method  of
managing  consumer  brands  as  production  continues  to  become  commoditized  and  manufacturing  capacity  increases
worldwide. We face competition from numerous direct competitors, both publicly and privately-held, including traditional
apparel  and  consumer  brand  companies,  other  brand  management  companies  and  private  equity  groups.  Companies  that
traditionally focused on wholesale manufacturing and sourcing models are now exploring licensing as a way of growing
their businesses through strategic licensing partners and direct-to-retail contractual arrangements. Furthermore, our current
or potential licensees may decide to develop or purchase brands rather than renew or enter into contractual agreements with
us. In addition, this increased competition could result in lower sales of products offered by our licensees under our brands.
If our competition for licenses increases, it may take us longer to procure additional licenses, which could slow our growth
rate.

The extent of our foreign sourcing may adversely affect our business.

We and our licensees work with several manufacturers overseas, primarily located in China and Thailand. A manufacturing
contractor’s failure to ship products to us in a timely manner or to meet the required quality standards could cause us to
miss the delivery date requirements of our customers for those items. The failure to make timely deliveries may cause

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customers  to  cancel  orders,  refuse  to  accept  deliveries  or  demand  reduced  prices,  any  of  which  could  have  a  material
adverse effect on us. As a result of the magnitude of our foreign sourcing, our business is subject to the following risks:

● political  and  economic  instability  in  countries  or  regions,  especially  Asia,  including  heightened  terrorism  and
other  security  concerns,  which  could  subject  imported  or  exported  goods  to  additional  or  more  frequent
inspections, leading to delays win deliveries or impoundment of goods;

● imposition  of  regulations,  quotas  and  other  trade  restrictions  relating  to  imports,  including  quotas  imposed  by

bilateral textile agreements between the U.S. and foreign countries;

● currency exchange rates;

● imposition of increased duties, taxes and other charges on imports;

● pandemics and disease outbreaks such as COVID-19;

● labor union strikes at ports through which our products enter the U.S.;

● labor shortages in countries where contractors and suppliers are located;

● restrictions on the transfer of funds to or from foreign countries;

● disease  epidemics  and  health-related  concerns,  which  could  result  in  closed  factories,  reduced  workforces,

scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas;

● the migration and development of manufacturing contractors, which could affect where our products are or are

planned to be produced;

● increases in the costs of fuel, travel and transportation;

● reduced  manufacturing  flexibility  because  of  geographic  distance  between  our  foreign  manufacturers  and  us,
increasing the risk that we may have to mark down unsold inventory as a result of misjudging the market for a
foreign-made product; and

● violations by foreign contractors of labor and wage standards and resulting adverse publicity.

If  these  risks  limit  or  prevent  us  from  manufacturing  products  in  any  significant  international  market,  prevent  us  from
acquiring  products  from  foreign  suppliers,  or  significantly  increase  the  cost  of  our  products,  our  operations  could  be
seriously  disrupted  until  alternative  suppliers  are  found  or  alternative  markets  are  developed,  which  could  negatively
impact our business.

Fluctuations in the price, availability and quality of raw materials could cause delays and increase costs and cause our
operating results and financial condition to suffer.

Fluctuations in the price, availability and quality of the fabrics or other raw materials, particularly cotton, silk, leather and
synthetics used in our manufactured apparel, and gold, silver and other precious and semi-precious metals and gem stones
used in our jewelry, could have a material adverse effect on cost of sales or our ability to meet customer demands. The
prices  of  fabrics,  precious  and  semi-precious  metals  and  gemstones  depend  largely  on  the  market  prices  of  the  raw
materials used to produce them. The price and availability of the raw materials and, in turn, the fabrics, precious and semi-
precious metals and gem stones used in our apparel and jewelry may fluctuate significantly, depending on many factors,
including crop yields, weather patterns, labor costs and changes in oil prices. We may not be able to create suitable design
solutions that utilize raw materials with attractive prices or, alternatively, to pass higher raw materials prices and related
transportation costs on to our customers. We are not always successful in our efforts to protect our business from the

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volatility of the market price of raw materials, and our business can be materially affected by dramatic movements in prices
of raw materials. The ultimate effect of this change on our earnings cannot be quantified, as the effect of movements in raw
materials prices on industry selling prices are uncertain, but any significant increase in these prices could have a material
adverse effect on our business, financial condition, and operating results.

Our  reliance  on  independent  manufacturers  could  cause  delays  or  quality  issues  which  could  damage  customer
relationships.

We use approximately eight independent manufacturers to assemble or produce all of our products. We are dependent on
the  ability  of  these  independent  manufacturers  to  adequately  finance  the  production  of  goods  ordered  and  maintain
sufficient manufacturing capacity. The use of independent manufacturers to produce finished goods and the resulting lack
of direct control could subject us to difficulty in obtaining timely delivery of products of acceptable quality. We generally
do  not  have  long-term  written  agreements  with  any  independent  manufacturers.  As  a  result,  any  single  manufacturing
contractor could unilaterally terminate its relationship with us at any time. Supply disruptions from these manufacturers (or
any of our other manufacturers) could have a material adverse effect on our ability to meet customer demands, if we are
unable  to  source  suitable  replacement  materials  at  acceptable  prices  or  at  all.  Moreover,  alternative  manufacturers,  if
available, may not be able to provide us with products or services of a comparable quality, at an acceptable price or on a
timely  basis.  We  may  also,  from  time  to  time,  make  a  decision  to  enter  into  a  relationship  with  a  new  manufacturer.
Identifying  a  suitable  supplier  is  an  involved  process  that  requires  us  to  become  satisfied  with  their  quality  control,
responsiveness and service, financial stability and labor and other ethical practices. There can be no assurance that there
will not be a disruption in the supply of our products from independent manufacturers or that any new manufacturer will be
successful in producing our products in a manner we expected. The failure of any independent manufacturer to perform or
the loss of any independent manufacturer could have a material adverse effect on our business, results of operations, and
financial condition.

If  our  independent  manufacturers  fail  to  use  ethical  business  practices  and  comply  with  applicable  laws  and
regulations, our brand image could be harmed due to negative publicity.

We  have  established  and  currently  maintain  operating  guidelines  which  promote  ethical  business  practices  such  as  fair
wage  practices,  compliance  with  child  labor  laws  and  other  local  laws.  While  we  monitor  compliance  with  those
guidelines, we do not control our independent manufacturers or their business practices. Accordingly, we cannot guarantee
their compliance with our guidelines. A lack of demonstrated compliance could lead us to seek alternative suppliers, which
could  increase  our  costs  and  result  in  delayed  delivery  of  our  products,  product  shortages  or  other  disruptions  of  our
operations.

Violation  of  labor  or  other  laws  by  our  independent  manufacturers  or  the  divergence  of  an  independent  manufacturer’s
labor or other practices from those generally accepted as ethical in the U.S. or other markets in which we do business could
also attract negative publicity for us and our brand. From time to time, our audit results have revealed a lack of compliance
in  certain  respects,  including  with  respect  to  local  labor,  safety  and  environmental  laws.  Other  fashion  companies  have
faced criticism after highly-publicized incidents or compliance issues have occurred or been exposed at factories producing
their  products.  To  the  extent  our  manufacturers  do  not  bring  their  operations  into  compliance  with  such  laws  or  resolve
material  issues  identified  in  any  of  our  audit  results,  we  may  face  similar  criticism  and  negative  publicity.  This  could
diminish the value of our brand image and reduce demand for our merchandise. In addition, other fashion companies have
encountered organized boycotts of their products in such situations. If we, or other companies in our industry, encounter
similar problems in the future, it could harm our brand image, stock price and results of operations.

Monitoring  compliance  by  independent  manufacturers  is  complicated  by  the  fact  that  expectations  of  ethical  business
practices  continually  evolve,  may  be  substantially  more  demanding  than  applicable  legal  requirements  and  are  driven  in
part by legal developments and by diverse groups active in publicizing and organizing public responses to perceived ethical
shortcomings. Accordingly, we cannot predict how such expectations might develop in the future and cannot be certain that
our guidelines would satisfy all parties who are active in monitoring and publicizing perceived shortcomings in labor and
other business practices worldwide.

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Our failure to protect our proprietary rights could compromise our competitive position and decrease the value of our
brands.

We  own,  through  our  wholly  owned  subsidiaries,  various  U.S.  federal  trademark  registrations  and  foreign  trademark
registrations for our brands, together with pending applications for registration, which are vital to the success and further
growth of our business and which we believe have significant value. We rely primarily upon a combination of trademarks,
copyrights,  and  contractual  restrictions  to  protect  and  enforce  our  intellectual  property  rights  domestically  and
internationally. We believe that such measures afford only limited protection and, accordingly, there can be no assurance
that  the  actions  taken  by  us  to  establish,  protect,  and  enforce  our  trademarks  and  other  proprietary  rights  will  prevent
infringement of our intellectual property rights by others, or prevent the loss of licensing revenue or other damages caused
therefrom.

For instance, despite our efforts to protect and enforce our intellectual property rights, unauthorized parties may attempt to
copy aspects of our intellectual property, which could harm the reputation of our brands, decrease their value, and/or cause
a decline in our licensees’ sales and thus our revenues. Further, we and our licensees may not be able to detect infringement
of our intellectual property rights quickly or at all, and at times, we or our licensees may not be successful in combating
counterfeit, infringing, or knockoff products, thereby damaging our competitive position. In addition, we depend upon the
laws of the countries where our licensees’ products are sold to protect our intellectual property. Intellectual property rights
may  be  unavailable  or  limited  in  some  countries  because  standards  of  registration  and  ownership  vary  internationally.
Consequently, in certain foreign jurisdictions, we have elected or may elect not to apply for trademark registrations.

While we generally apply for trademarks in most countries where we license or intend to license our trademarks, we may
not accurately predict all of the countries where trademark protection will ultimately be desirable. If we fail to timely file a
trademark application in any such country, we may be precluded from obtaining a trademark registration in such country at
a  later  date.  Failure  to  adequately  pursue  and  enforce  our  trademark  rights  could  damage  our  brands,  enable  others  to
compete with our brands and impair our ability to compete effectively.

In addition, in the future, we may be required to assert infringement claims against third parties or more third parties may
assert infringement claims against us. Any resulting litigation or proceeding could result in significant expense to us and
divert the efforts of our management personnel, whether or not such litigation or proceeding is determined in our favor. To
the  extent  that  any  of  our  trademarks  were  ever  deemed  to  violate  the  proprietary  rights  of  others  in  any  litigation  or
proceeding  or  as  a  result  of  any  claim,  we  may  be  prevented  from  using  them,  which  could  cause  a  termination  of  our
contractual arrangements, and thus our revenue stream, with respect to those trademarks. Litigation could also result in a
judgment or monetary damages being levied against us.

Risks Related to an Investment in Our Securities

Management exercises significant control over matters requiring shareholder approval, which may result in the delay or
prevention of a change in our control.

Pursuant to voting agreements, certain shareholders agreed to appoint a person designated by our board of directors as their
collective  irrevocable  proxy  and  attorney-in-fact  with  respect  to  the  shares  of  the  common  stock  received  by  them.  The
proxy holder will vote in favor of matters recommended or approved by the board of directors. The board of directors has
designated  Robert  W.  D’Loren  as  proxy.  Also,  pursuant  to  separate  voting  agreements,  certain  other  stockholders  have
agreed to appoint Mr. D’Loren as their respective irrevocable proxy and attorney-in-fact with respect to the shares of the
common  stock  issued  to  them  by  us.  The  proxy  holder  shall  vote  in  favor  of  matters  recommended  or  approved  by  the
board of directors.

The combined voting power of the common stock ownership of our directors and executive officers is approximately 54%
of  our  voting  securities  as  of  April  14,  2023.  As  a  result,  our  management  through  such  stock  ownership  will  exercise
significant influence over all matters requiring shareholder approval, including the election of our directors and approval of
significant corporate transactions. This concentration of ownership in management may also have the effect of delaying or
preventing a change in control of us that may be otherwise viewed as beneficial by stockholders other than management.

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There  is  also  a  risk  that  our  existing  management  and  a  limited  number  of  stockholders  may  have  interests  which  are
different from certain stockholders and that they will pursue an agenda which is beneficial to themselves at the expense of
other stockholders.

Our failure to meet the continued listing requirements of the Nasdaq Global Market could result in a delisting of our
common  stock,  which  could  negatively  impact  the  market  price  and  liquidity  of  our  common  stock  and  our  ability  to
access the capital markets.

On  November  22,  2022,  we  received  a  letter  from  the  Listing  Qualifications  Department  of  The  Nasdaq  Stock  Market
(“Nasdaq”) notifying us that the minimum bid price per share for our common stock fell below $1.00 for a period of 30
consecutive  business  days.  Therefore,  the  Company  did  not  meet  the  minimum  bid  price  requirement  set  forth  in  the
Nasdaq Listing Rules.

The letter also states that pursuant to Nasdaq Listing Rules 5810(c)(3)(A), we will be provided 180 calendar days to regain
compliance with the minimum bid price requirement, or until May 22, 2023.

We can regain compliance if, at any time during the Tolling Period or such 180-day period, the closing bid price of our
common  stock  is  at  least  $1.00  for  a  minimum  period  of  10  consecutive  business  days.  If  by  May  22,  2023,  we  do  not
regain compliance with the Nasdaq Listing Rules, we may be eligible for additional time to regain compliance pursuant to
Nasdaq Listing Rule 5810(c)(3)(A)(ii). To qualify, we would need to submit a transfer application and a $5,000 application
fee.  We  would  also  need  to  provide  written  notice  to  Nasdaq  of  our  intention  to  cure  the  minimum  bid  price  deficiency
during  the  second  compliance  period  by  effecting  a  reverse  stock  split,  if  necessary.  As  part  of  its  review  process,  the
Nasdaq staff will make a determination of whether it believes we will be able to cure this deficiency. Should the Nasdaq
staff conclude that we will not be able to cure the deficiency, or should we determine not to submit a transfer application or
make the required representation, Nasdaq will provide notice that our shares of common stock will be subject to delisting.

If  we  do  not  regain  compliance  within  the  allotted  compliance  period,  including  any  extensions  that  may  be  granted  by
Nasdaq, Nasdaq will provide notice that our shares of common stock will be subject to delisting from the Nasdaq Global
Market. At such time, we may appeal the delisting determination to a hearings panel.

We  intend  to  monitor  our  common  stock  closing  bid  price  between  now  and  May  22,  2023  and  will  consider  available
options to resolve the Company’s noncompliance with the minimum bid price requirement, as may be necessary. There can
be  no  assurance  that  the  Company  will  be  able  to  regain  compliance  with  the  minimum  bid  price  requirement  or  will
otherwise be in compliance with other Nasdaq listing criteria.

Our common stock may be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive
disclosure  to  their  customers  prior  to  executing  trades  in  penny  stocks.  These  disclosure  requirements  may  cause  a
reduction in the trading activity of our common stock, which could make it more difficult for our stockholders to sell
their securities.

Rule 3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity
security that has a minimum bid price of less than $5.00 per share, subject to a limited number of exceptions, including for
having  securities  registered  on  certain  national  securities  exchanges.  If  our  common  stock  were  delisted  from  the
NASDAQ, market liquidity for our common stock could be severely and adversely affected.

For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a
person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to
the transaction setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s
account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience
and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that
person and that that person has sufficient knowledge and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.

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The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC
relating to the penny stock market, which, in highlight form, sets forth:

● the basis on which the broker or dealer made the suitability determination; and

● that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure  also  has  to  be  made  about  the  risks  of  investing  in  penny  stocks  in  both  public  offerings  and  in  secondary
trading  and  commission  payable  to  both  the  broker-dealer  and  the  registered  representative,  current  quotations  for  the
securities  and  the  rights  and  remedies  available  to  an  investor  in  cases  of  fraud  in  penny  stock  transactions.
Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.

Because  of  these  regulations,  broker-dealers  may  not  wish  to  engage  in  the  above-referenced  necessary  paperwork  and
disclosures  and/or  may  encounter  difficulties  in  their  attempt  to  sell  shares  of  our  common  stock,  which  may  affect  the
ability of selling stockholders or other holders to sell their shares in any secondary market and have the effect of reducing
the  level  of  trading  activity  in  any  secondary  market.  These  additional  sales  practice  and  disclosure  requirements  could
impede the sale of our common stock even if and when our common stock becomes listed on the NASDAQ Global Market.
In addition, the liquidity for our common stock may decrease, with a corresponding decrease in the price of our common
stock.

No assurance can be given that our stock will not be subject to these “penny stock” rules in the future.

Investors  should  be  aware  that,  according  to  Commission  Release  No.  34-29093,  the  market  for  “penny  stocks”  has
suffered in recent years from patterns of fraud and abuse. Such patterns include: (1) control of the market for the security
by  one  or  a  few  broker-dealers  that  are  often  related  to  the  promoter  or  issuer;  (2)  manipulation  of  prices  through
prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask  differential  and  markups  by  selling  broker-dealers;  and  (5)  the  wholesale  dumping  of  the  same  securities  by
promoters  and  broker-dealers  after  prices  have  been  manipulated  to  a  desired  level,  along  with  the  resulting  inevitable
collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase
the future volatility of our share price.

Our common stock has historically been thinly traded, and you may be unable to sell at or near ask prices or at all if
you need to sell or liquidate a substantial number of shares at one time.

Although our common stock is listed on the NASDAQ Global Market, our common stock has historically been traded at
relatively low volumes. As a result, the number of persons interested in purchasing our common stock at or near bid prices
at  any  given  time  may  be  relatively  small.  This  situation  is  attributable  to  a  number  of  factors,  including  that  we  are
currently a small company which is still relatively unknown to securities analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and that even if we came to the attention of
such  persons,  they  tend  to  be  risk-averse  and  reluctant  to  follow  an  unproven  company  such  as  ours  or  purchase  or
recommend the purchase of our shares until such time as we become more seasoned and viable. As a consequence, there
may be periods of several days or more when trading activity in our shares is minimal, as compared to a seasoned issuer
which  has  a  large  and  steady  volume  of  trading  activity  that  will  generally  support  continuous  sales  without  an  adverse
effect on share price. We cannot provide any assurance that a broader or more active public trading market for our common
stock will develop or be sustained, or that trading levels will be sustained.

The market price of our common stock has declined over the past several years and may be volatile, which could reduce
the market price of our common stock.

Currently the publicly traded shares of our common stock are not widely held, and do not have significant trading volume,
and,  therefore,  may  experience  significant  price  and  volume  fluctuations.  Although  our  common  stock  is  quoted  on  the
NASDAQ  Global  Market,  this  does  not  assure  that  a  meaningful,  consistent  trading  market  will  develop  or  that  the
volatility will decline. This market volatility could reduce the market price of the common stock, regardless of our

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operating performance. In addition, the trading price of the common stock has been volatile over the past several years and
could  change  significantly  over  short  periods  of  time  in  response  to  actual  or  anticipated  variations  in  our  quarterly
operating  results,  announcements  by  us,  our  licensees  or  our  respective  competitors,  factors  affecting  our  licensees’
markets generally and/or changes in national or regional economic conditions, making it more difficult for shares of the
common stock to be sold at a favorable price or at all. The market price of the common stock could also be reduced by
general  market  price  declines  or  market  volatility  in  the  future  or  future  declines  or  volatility  in  the  prices  of  stocks  for
companies in the trademark licensing business or companies in the industries in which our licensees compete.

We may issue a substantial number of shares of common stock upon exercise of outstanding warrants and options.

As of December 31, 2022, we had outstanding warrants and options to purchase 5,730,375 shares of our common stock
with a weighted average exercise price of $2.14. The holders of warrants and options will likely exercise such securities at
a time when the market price of our common stock exceeds the exercise price. Therefore, exercises of warrants and options
will result in a decrease in the net tangible book value per share of our common stock and such decrease could be material.

issuance  of  shares  upon  exercise  of  outstanding  warrants  and  options  will  dilute  our 

The 
then-existing
stockholders’  percentage  ownership  of  our  company,  and  such  dilution  could  be  substantial.  In  addition,  our  growth
strategy includes the acquisition of additional brands, and we may issue shares of our common stock as consideration for
acquisitions. Sales or the potential for sale of a substantial number of such shares could adversely affect the market price of
our common stock, particularly if our common stock remains thinly traded at such time.

As of December 31, 2022, we had an aggregate of 3,291,909 shares of common stock available for grants under our 2021
Equity  Incentive  Plan  (the  "2021  Plan")  to  our  directors,  executive  officers,  employees,  and  consultants.  Issuances  of
common stock pursuant to the exercise of stock options or other stock grants or awards which may be granted under our
2021 Plan will dilute your interest in us.

Holders of our common stock may be subject to restrictions on the use of Rule 144 by shell companies or former shell
companies.

Historically, the SEC has taken the position that Rule 144 under the Securities Act of 1933, as amended, or the Securities
Act, is not available for the resale of securities initially issued by companies that are, or previously were, shell companies
(we were considered a shell company on and prior to September 29, 2011), to their promoters or affiliates despite technical
compliance with the requirements of Rule 144. The SEC prohibits the use of Rule 144 for resale of securities issued by
shell companies (other than business transaction related shell companies) or issuers that have been at any time previously a
shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are
met:  the  issuer  of  the  securities  that  was  formerly  a  shell  company  has  ceased  to  be  a  shell  company;  the  issuer  of  the
securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; the issuer of the securities
has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such
shorter  period  that  the  issuer  was  required  to  file  such  reports  and  materials),  other  than  Form  8-K  reports;  and  at  least
one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status
as an entity that is not a shell company. As such, due to the fact that we had been a shell company prior to September 2011,
holders of “restricted securities” within the meaning of Rule 144, when reselling their shares pursuant to Rule 144, shall be
subject to the conditions set forth herein.

We do not anticipate paying cash dividends on our common stock.

You should not rely on an investment in our common stock to provide dividend income, as we have not paid dividends on
our  common  stock,  and  we  do  not  plan  to  pay  any  dividends  in  the  foreseeable  future.  Instead,  we  plan  to  retain  any
earnings  to  maintain  and  expand  our  existing  licensing  operations,  further  develop  our  trademarks,  and  finance  the
acquisition  of  additional  trademarks.  Accordingly,  investors  must  rely  on  sales  of  their  common  stock  after  price
appreciation,  which  may  never  occur,  as  the  only  way  to  realize  any  return  on  their  investment.  In  addition,  our  credit
facility limits the amount of cash dividends we may pay while amounts under the credit facility are outstanding.

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Provisions of our corporate charter documents could delay or prevent change of control.

Our certificate of incorporation authorizes our board of directors to issue up to 1,000,000 shares of preferred stock without
stockholder  approval,  in  one  or  more  series,  and  to  fix  the  dividend  rights,  terms,  conversion  rights,  voting  rights,
redemption  rights  and  terms,  liquidation  preferences,  and  any  other  rights,  preferences,  privileges,  and  restrictions
applicable to each new series of preferred stock. The designation of preferred stock in the future could make it difficult for
third  parties  to  gain  control  of  our  company,  prevent  or  substantially  delay  a  change  in  control,  discourage  bids  for  the
common stock at a premium, or otherwise adversely affect the market price of the common stock.

General Risks

A pandemic outbreak of disease or similar public health threat, or fear of such an event, could have a material adverse
impact on the Company's business, operating results and financial condition.

A  pandemic  or  outbreak  of  disease  or  similar  public  health  threat,  such  as  the  COVID-19  pandemic,  or  fear  of  such  an
event,  could  have  a  material  adverse  impact  on  our  business,  operating  results,  and  financial  condition.  The  current
COVID-19 pandemic has caused a disruption to our business, beginning in March 2020.

The  impacts  of  the  ongoing  COVID-19  pandemic  (including  actions  taken  by  national,  state,  and  local  governments  in
response to COVID-19) have negatively impacted the U.S. and global economy, disrupted consumer spending and global
supply chains, and created significant volatility and disruption of financial markets. More specifically, COVID-19 has had,
and continues to have, a significant negative impact on our business. The initial onset of the pandemic in 2020 resulted in a
sudden  decrease  in  sales  for  many  of  the  Company’s  products,  from  which  we  have  yet  to  fully  recover.  The  global
pandemic has affected the financial health of certain of our customers, and the bankruptcy of certain other customers; as a
result,  we  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. Due to the ongoing COVID-19 pandemic, there is
significant uncertainty surrounding the Company’s future results of operations and cash flows. Continued impacts of the
pandemic could materially adversely affect our near-term and long-term revenues, earnings, liquidity, and cash flows.

Supply  chain  disruptions  have  adversely  affected,  and  could  continue  to  adversely  affect,  our  ability  to  import  our
products in a timely manner and our freight costs.

The  effects  of  the  COVID-19  pandemic  on  the  shipping  industry  have  negatively  impacted  our  ability  to  import  our
products in a manner that allows for timely delivery to our customers. Congestion at ports of loading and ports of entry
have caused significant delays in deliveries and changes to the itineraries of our steamship carriers. Use of alternate routes
or delivery methods would require additional trucking for us and our customers. Truck driver shortages, shortages of truck
equipment and the inability of ports to provide reliable pick up times, have also negatively impacted our ability to timely
receive  goods.  If  we  are  unable  to  mitigate  these  supply  chain  disruptions,  our  ability  to  meet  customer  expectations,
manage inventory and complete sales could be materially adversely affected.

Contractual  shipping  rates  have  increased  as  a  result  of  increased  demand  for  container  space  and  the  logistical  delays
experienced by the shipping industry. Our costs have increased as a result of higher contractual shipping rates and the need
to  purchase  additional  container  space  on  the  secondary  market  at  higher  spot  rates.  Terminals  are  also  now  imposing
additional fees on importers not picking up containers on time, even when equipment and labor shortages negatively affect
the ability of importers to pick up in a timely manner.

If we are unable to secure container space on a vessel due to limited availability, we may experience delays in shipping
product from our overseas suppliers and ultimately to our customers. Furthermore, even when we are able to secure space,
ports  around  the  world  are  experiencing  congestion,  slowing  transit  times  of  product  through  ports  of  entry  which
negatively affects our ability to timely receive and deliver product to our retail partners and customers.

If we are unable to mitigate these supply chain disruptions, our ability to meet customer expectations, manage inventory
and complete sales could be materially adversely affected. In addition, if we are unable to offset higher freight and other
costs through product price increases or other measures, our results of operations may be adversely affected.

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The Ukrainian-Russian conflict could have a material adverse impact on our business.

The Ukrainian-Russian conflict, the responses thereto, such as sanctions imposed by the United States and other western
democracies,  and  any  expansion  thereof  is  likely  to  have  unpredictable  and  wide-ranging  effects  on  the  domestic  and
global  economy  and  financial  markets,  which  could  have  an  adverse  effect  on  our  business  and  results  of  operations.
Already the conflict has caused market volatility, a sharp increase in certain commodity prices, such as wheat and oil, and
an increasing number and frequency of cybersecurity threats. So far, we have not experienced any direct impact from the
conflict and, as our business is conducted exclusively in the United States, we are probably less vulnerable than companies
with international operations. Nevertheless, we will continue to monitor the situation carefully and, if necessary, take action
to protect our business, operations, and financial condition.

A decline in general economic conditions resulting in a decrease in consumer spending levels and an inability to access
capital may adversely affect our business.

The  success  of  our  operations  depends  on  consumer  spending.  Consumer  spending  is  impacted  by  a  number  of  factors
which are beyond our control, including actual and perceived economic conditions affecting disposable consumer income
(such  as  unemployment,  wages,  energy  costs  and  consumer  debt  levels),  customer  traffic  within  shopping  and  selling
environments, business conditions, interest rates and availability of credit and tax rates in the general economy and in the
international, regional and local markets in which our products are sold and the impact of natural disasters and pandemics
and  disease  outbreaks  such  as  the  COVID-19  pandemic.  Global  economic  conditions  historically  included  significant
recessionary  pressures  and  declines  in  employment  levels,  disposable  income  and  actual  and/or  perceived  wealth  and
further declines in consumer confidence and economic growth. A depressed economic environment is often characterized
by  a  decline  in  consumer  discretionary  spending  and  has  disproportionately  affected  retailers  and  sellers  of  consumer
goods,  particularly  those  whose  goods  are  viewed  as  discretionary  or  luxury  purchases,  including  fashion  apparel  and
accessories such as ours. Such factors as well as another shift towards recessionary conditions have in the past, and could
in the future, devalue our brands, which could result in an impairment in its carrying value, which could be material, create
downward  pricing  pressure  on  the  products  carrying  our  brands,  and  adversely  impact  our  sales  volumes  and  overall
profitability.  Further,  economic  and  political  volatility  and  declines  in  the  value  of  foreign  currencies  could  negatively
impact  the  global  economy  as  a  whole  and  have  a  material  adverse  effect  on  the  profitability  and  liquidity  of  our
operations, as well as hinder our ability to grow through expansion in the international markets. In addition, domestic and
international political situations also affect consumer confidence, including the threat, outbreak or escalation of terrorism,
military conflicts or other hostilities around the world. Furthermore, changes in the credit and capital markets, including
market disruptions, limited liquidity, and interest rate fluctuations, may increase the cost of financing or restrict our access
to potential sources of capital for future acquisitions.

The  risks  associated  with  our  business  are  more  acute  during  periods  of  economic  slowdown  or  recession.  Accordingly,
any prolonged economic slowdown or a lengthy or severe recession with respect to either the U.S. or the global economy is
likely to have a material adverse effect on our results of operations, financial condition, and business prospects.

Inflation and/or a potential recession could adversely impact our business and results of operations.

Many of the components of our cost of goods sold are subject to price increases that are attributable to factors beyond our
control, including but not limited to, global economic conditions, trade barriers or restrictions, supply chain disruptions,
changes  in  crop  size,  product  scarcity,  demand  dynamics,  currency  rates,  water  supply,  weather  conditions,  import  and
export requirements, and other factors. The cost of raw materials, labor, manufacturing, energy, fuel, shipping and logistics,
and  other  inputs  related  to  the  production  and  distribution  of  our  products  have  increased  and  may  continue  to  increase
unexpectedly.

Beginning in the first quarter of 2022, input costs increased significantly. We expect the pressures of input cost inflation to
continue for at least some portion of 2023. We may not be able to mitigate the impact of inflation and cost increases or pass
these costs along to our customers.

In  addition,  poor  economic  and  market  conditions,  including  a  potential  recession,  may  negatively  impact  market
sentiment, decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer

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products, which would adversely affect our operating income and results of operations. If we are unable to take effective
measures in a timely manner to mitigate the impact of the inflation as well as a potential recession, our business, financial
condition, and results of operations could be adversely affected.

Extreme or unseasonable weather conditions could adversely affect our business.

Extreme  weather  events  and  changes  in  weather  patterns  can  influence  customer  trends  and  shopping  habits.  Extended
periods of unseasonably warm temperatures during the fall and winter seasons, or cool weather during the summer season,
may  diminish  demand  for  our  seasonal  merchandise.  Heavy  snowfall,  hurricanes  or  other  severe  weather  events  in  the
areas in which our retail stores and the retail stores of our wholesale customers are located may decrease customer traffic in
those stores and reduce our sales and profitability. If severe weather events were to force closure of or disrupt operations at
the  distribution  centers  we  use  for  our  merchandise,  we  could  incur  higher  costs  and  experience  longer  lead  times  to
distribute our products to our retail stores, wholesale customers or digital channel customers. If prolonged, such extreme or
unseasonable weather conditions could adversely affect our business, financial condition, and results of operations.

Our trademarks and other intangible assets are subject to impairment charges under accounting guidelines.

Our  intangible  assets  including  our  trademarks  had  a  net  carrying  value  of  $47.7  million  as  of  December  31,  2022  and
represent  a  substantial  portion  of  our  assets.  Under  accounting  principles  generally  accepted  in  the  United  States  of
America  (“GAAP”),  finite-lived  intangible  assets  are  amortized  over  their  estimated  useful  lives,  and  reviewed  for
impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Non-
renewal of license agreements or other factors affecting our market segments or brands could result in significantly reduced
revenue for a brand, which could result in a devaluation of the affected trademark. If such devaluations of our trademarks
were  to  occur,  a  material  impairment  in  the  carrying  value  of  one  or  more  of  our  trademarks  could  also  occur  and  be
charged  as  a  non-cash  expense  to  our  operating  results,  which  could  be  material.  Any  write-down  of  intangible  assets
resulting from future periodic evaluations would, as applicable, either decrease our net income or increase our net loss and
those decreases or increases could be material.

Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could
adversely affect our results.

Our  future  effective  tax  rates  could  be  adversely  affected  by  changes  in  the  valuation  of  our  deferred  tax  assets  and
liabilities, or by changes in tax laws or by a change in allocation of state and local jurisdictions, or interpretations thereof.
The  Company  currently  files  U.S.  federal  tax  returns  and  various  state  tax  returns.  Tax  years  that  remain  open  for
assessment  for  federal  and  state  purposes  include  years  ended  December  31,  2019  through  December  31,  2022.  We
regularly  assess  the  likelihood  of  recovering  the  amount  of  deferred  tax  assets  recorded  on  the  balance  sheet  and  the
likelihood  of  adverse  outcomes  resulting  from  examinations  by  various  taxing  authorities  in  order  to  determine  the
adequacy of our provision for income taxes. Although under the 2017 Tax Cuts and Jobs Act Federal tax rates are lower,
certain expenses will be either reduced or eliminated, causing the Company to have increased taxable income, which may
have an adverse effect on our future income tax obligations. We cannot guarantee that the outcomes of these evaluations
and continuous examinations will not harm our reported operating results and financial condition.

We must successfully maintain and/or upgrade our information technology systems.

We rely on various information technology systems to manage our operations, which subject us to inherent costs and risks
associated with maintaining, upgrading, replacing, and changing these systems, including impairment of our information
technology, potential disruption of our internal control systems, substantial capital expenditures, demands on management
time,  cyber  security  breaches  and  other  risks  of  delays  or  difficulties  in  upgrading,  transitioning  to  new  systems,  or  of
integrating new systems into our current systems.

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System security risk issues as well as other major system failures could disrupt our internal operations or information
technology services, and any such disruption could negatively impact our net sales, increase our expenses and harm our
reputation.

Experienced computer programmers and hackers, and even internal users, may be able to penetrate our network security
and  misappropriate  our  confidential  information  or  that  of  third  parties,  including  our  customers,  enter  into  or  facilitate
fraudulent  transactions,  create  system  disruptions  or  cause  shutdowns.  In  addition,  employee  error,  malfeasance  or  other
errors in the storage, use or transmission of any such information could result in a disclosure to third parties outside of our
network. As a result, we could incur significant expenses addressing problems created by any such inadvertent disclosure
or any security breaches of our network. In addition, we rely on third parties for the operation of our websites, and for the
various social media tools and websites we use as part of our marketing strategy.

Consumers  are  increasingly  concerned  over  the  security  of  personal  information  transmitted  over  the  internet,  consumer
identity theft and user privacy, and any compromise of customer information could subject us to customer or government
litigation  and  harm  our  reputation,  which  could  adversely  affect  our  business  and  growth.  Moreover,  we  could  incur
significant  expenses  or  disruptions  of  our  operations  in  connection  with  system  failures  or  breaches.  In  addition,
sophisticated  hardware  and  operating  system  software  and  applications  that  we  procure  from  third  parties  may  contain
defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation
of our systems. The costs to us to eliminate or alleviate security problems, viruses and bugs, or any problems associated
with our newly transitioned systems or outsourced services could be significant, and the efforts to address these problems
could  result  in  interruptions,  delays  or  cessation  of  service  that  may  impede  our  sales,  distribution  or  other  critical
functions.  In  addition  to  taking  the  necessary  precautions  ourselves,  we  require  that  third-party  service  providers
implement reasonable security measures to protect our customers’ identity and privacy as well as credit card information.
We  do  not,  however,  control  these  third-party  service  providers  and  cannot  guarantee  that  no  electronic  or  physical
computer break-ins and security breaches will occur in the future. We could also incur significant costs in complying with
the multitude of state, federal and foreign laws regarding the use and unauthorized disclosure of personal information, to
the extent they are applicable. In the case of a disaster affecting our information technology systems, we may experience
delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance,
failures  to  adequately  support  our  operations  and  other  breakdowns  in  normal  communication  and  operating  procedures
that could materially and adversely affect our financial condition and results of operations.

Changes in laws could make conducting our business more expensive or otherwise change the way we do business.

We  are  subject  to  numerous  domestic  and  international  regulations,  including  labor  and  employment,  customs,  truth-in-
advertising,  consumer  protection,  data  protection,  and  zoning  and  occupancy  laws  and  ordinances  that  regulate  retailers
generally  or  govern  the  importation,  promotion  and  sale  of  merchandise  and  the  operation  of  stores  and  warehouse
facilities.  If  these  regulations  were  to  change  or  were  violated  by  our  management,  employees,  vendors,  independent
manufacturers  or  partners,  the  costs  of  certain  goods  could  increase,  or  we  could  experience  delays  in  shipments  of  our
products, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and
hurt our business and results of operations.

In  addition  to  increased  regulatory  compliance  requirements,  changes  in  laws  could  make  ordinary  conduct  of  business
more  expensive  or  require  us  to  change  the  way  we  do  business.  Laws  related  to  employee  benefits  and  treatment  of
employees, including laws related to limitations on employee hours, supervisory status, leaves of absence, mandated health
benefits,  overtime  pay,  unemployment  tax  rates  and  citizenship  requirements,  could  negatively  impact  us,  by  increasing
compensation and benefits costs, which would in turn reduce our profitability.

Moreover,  changes  in  product  safety  or  other  consumer  protection  laws  could  lead  to  increased  costs  to  us  for  certain
merchandise, or additional labor costs associated with readying merchandise for sale. It is often difficult for us to plan and
prepare for potential changes to applicable laws and future actions or payments related to such changes could be material to
us.

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If  we  fail  to  maintain  an  effective  system  of  internal  control,  we  may  not  be  able  to  report  our  financial  results
accurately or in a timely fashion, and we may not be able to prevent fraud. In such case, our stockholders could lose
confidence  in  our  financial  reporting,  which  would  harm  our  business  and  could  negatively  impact  the  price  of  our
stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our Annual Report on Form 10-K
our assessment of the effectiveness of our internal control over financial reporting. We have dedicated a significant amount
of time and resources to ensure compliance with this legislation for the years ended December 31, 2022 and 2021, and will
continue to do so for future fiscal periods. We cannot be certain that future material changes to our internal control over
financial  reporting  will  be  effective.  If  we  cannot  adequately  maintain  the  effectiveness  of  our  internal  control  over
financial reporting, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such
action could adversely affect our financial results and the market price of our common stock. Moreover, if we discover a
material  weakness,  the  disclosure  of  that  fact,  even  if  quickly  remedied,  could  reduce  the  market’s  confidence  in  our
financial statements and harm our stock price.

Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control
over financial reporting until we are no longer a “smaller reporting company.” At such time that an attestation is required,
our independent registered public accounting firm may issue a report that is adverse or qualified in the event that they are
not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not
enable us to avoid a material weakness or significant deficiency in the future.

There  are  limitations  on  the  liabilities  of  our  directors  and  executive  officers.  Under  certain  circumstances,  we  are
obligated  to  indemnify  our  directors  and  executive  officers  against  liability  and  expenses  incurred  by  them  in  their
service to us.

Pursuant to our amended and restated certificate of incorporation and under Delaware law, our directors are not liable to us
or our stockholders for monetary damages for breach of fiduciary duty, except for liability for breach of a director’s duty of
loyalty, acts or omissions by a director not in good faith or which involve intentional misconduct or a knowing violation of
law, dividend payments or stock repurchases that are unlawful under Delaware law or any transaction in which a director
has derived an improper personal benefit. In addition, we have entered into indemnification agreements with each of our
directors  and  executive  officers.  These  agreements,  among  other  things,  require  us  to  indemnify  each  director  and
executive officer for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts, incurred by any
such person in any action or proceeding, including any action by us or in our right, arising out of the person’s services as
one  of  our  directors  or  executive  officers.  The  costs  associated  with  providing  indemnification  under  these  agreements
could be harmful to our business and have an adverse effect on results of operations.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2.      Properties

We currently lease and maintain our corporate offices and operations facility located at 1333 Broadway, 10th floor, New
York, New York. We entered into a lease agreement on July 8, 2015 for such offices of approximately 29,600 square feet of
office space. This lease commenced on March 1, 2016 and shall expire on October 30, 2027.

We previously leased approximately 18,500 square feet of office space at 475 Tenth Avenue, 4th Floor, New York, New
York; this location represented our former corporate offices and operations facility. We subleased the office space at 475
Tenth Avenue to a third-party subtenant through February 27, 2022, and our lease of this office space expired by its terms
on February 28, 2022.

We also lease approximately 1,300 square feet of retail space for a former retail store location in Westchester, New York,
which was closed in the first quarter of 2022. This lease shall expire on January 31, 2029; however, we are currently in the
process of negotiating the termination of this lease.

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Item 3.      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,  results  of
operations, or cash flows.

Item 4.       Mine Safety Disclosures

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Market Information

Our common stock is listed on the NASDAQ Global Market, under the trading symbol “XELB.”

The table below sets forth the range of quarterly high and low sales prices for our common stock in 2022 and 2021:

December 31, 2022
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

December 31, 2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Holders

High

Low

$
$
$
$

$
$
$
$

 1.64
 1.66
 1.29
 1.03

 2.47
 2.99
 2.77
 1.98

$
$
$
$

$
$
$
$

 1.01
 1.06
 0.95
 0.68

 1.19
 1.56
 1.49
 1.06

As of December 31, 2022, the number of our stockholders of record was 561 (excluding beneficial owners and any shares
held in street name or by nominees).

Dividends

We have never declared or paid any cash dividends on our common stock. We expect to retain future earnings to finance
our  operations  and  expansion.  The  payment  of  cash  dividends  in  the  future  will  be  at  the  discretion  of  our  board  of
directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants, and other factors
the board of directors considers relevant.

Securities authorized for issuance under equity compensation plans

2021 Equity Incentive Plan

Our 2021 Equity Incentive Plan, which we refer to as the 2021 Plan, is designed and utilized to enable the Company to
offer its employees, officers, directors, consultants, and others whose past, present, and/or potential contributions to the

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Company  have  been,  are,  or  will  be  important  to  the  success  of  the  Company,  an  opportunity  to  acquire  a  proprietary
interest in the Company. The following is a description of the 2021 Plan.

● The 2021 Plan provides for the grant of stock options, restricted stock, restricted stock units, performance awards,
or cash awards (any grant under the 2021 Plan, an “Award”). The stock options may be incentive stock options or
non-qualified stock options.

● A total of 4,000,000 shares of common stock are eligible for issuance under the 2021 Plan.

● The 2021 Plan may be administered by the Board of Directors (the “Board”) or a committee consisting of two or
more  members  of  the  Board  of  Directors  appointed  by  the  Board  (for  purposes  of  this  description,  any  such
committee, a “Committee”).

● Officers and other employees of our Company or any parent or subsidiary of our Company who are at the time of
the  grant  of  an  Award  employed  by  us  or  any  parent  or  subsidiary  of  our  Company  are  eligible  to  be  granted
options or other Awards under the 2021 Plan. In addition, non-qualified stock options and other Awards may be
granted  under  the  2021  Plan  to  any  person,  including,  but  not  limited  to,  directors,  independent  agents,
consultants, and attorneys who the Board or the Committee, as the case may be, believes has contributed or will
contribute to our success.

● With respect to incentive stock options granted to an eligible employee owning stock possessing more than 10%
of  the  total  combined  voting  power  of  all  classes  of  our  stock  or  the  stock  of  a  parent  or  subsidiary  of  our
Company  immediately  before  the  grant  (each,  a  “10%  Stockholder”),  such  incentive  stock  option  shall  not  be
exercisable more than 5 years from the date of grant.

● The exercise price of a stock option will not be less than the fair market value of the shares underlying the option
on the date the option is granted, provided, however, that the exercise price of a stock option granted to a 10%
Stockholder may not be less than 110% of such fair market value.

● Restricted  stock  awards  give  the  recipient  the  right  to  receive  a  specified  number  of  shares  of  common  stock,
subject  to  such  terms,  conditions  and  restrictions  as  the  Board  or  the  Committee,  as  the  case  may  be,  deems
appropriate.  Restrictions  may  include  limitations  on  the  right  to  transfer  the  stock  until  the  expiration  of  a
specified period of time and forfeiture of the stock upon the occurrence of certain events such as the termination
of employment prior to expiration of a specified period of time.

● Restricted stock unit awards will be settled in cash or shares of common stock, in an amount based on the fair
market value of our common stock on the settlement date. The RSUs will be subject to forfeiture and restrictions
on  transferability  as  set  forth  in  the  2021  Plan  and  the  applicable  award  agreement  and  as  may  be  otherwise
determined by the Board or the Committee. There were no RSUs outstanding as of December 31, 2022.

● Certain Awards made under the Plan may be granted so that they qualify as “performance-based compensation”
(as  this  term  is  used  in  Internal  Revenue  Code  Section  162(m)  and  the  regulations  thereunder)  and  are  exempt
from the deduction limitation imposed by Code Section 162(m) (these Awards are referred to as “Performance-
Based Awards”). Under Internal Revenue Code Section 162(m), our tax deduction may be limited to the extent
total  compensation  paid  to  the  chief  executive  officer,  or  any  of  the  four  most  highly  compensated  executive
officers (other than the chief executive officer) exceeds $1 million in any one tax year. In accordance with the
2017 Tax Cuts and Jobs Act, the tax deductibility for each of these executives will be limited to $1,000,000 of
compensation  annually,  including  any  performance-based  compensation.  Among  other  criteria,  Awards  only
qualify as performance-based awards if at the time of grant the compensation committee is comprised solely of
two or more “outside directors” (as this term is used in Internal Revenue Code Section 162(m) and the regulations
thereunder).  In  addition,  we  must  obtain  stockholder  approval  of  material  terms  of  performance  goals  for  such
“performance-based compensation.”

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● All stock options and certain stock awards, performance awards, and stock units granted under the Plan, and the
compensation  attributable  to  such  Awards,  are  intended  to  (i)  qualify  as  performance-based  awards  or  (ii)  be
otherwise exempt from the deduction limitation imposed by Internal Revenue Code Section 162(m).

● Cash awards may be issued under the 2021 Plan either alone or in addition to or in tandem with other Awards
granted  under  the  2021  Plan  or  other  payments  made  to  a  participant  not  under  the  2021  Plan.  The  Board  or
Committee  shall  determine  the  eligible  persons  to  whom,  and  the  time  or  times  at  which,  cash  awards  will  be
made, the amount that is subject to the cash award, the circumstances and conditions under which such amount
shall be paid, in whole or in part, the time of payment, and all other terms and conditions of the Awards. Each
cash award shall be confirmed by, and shall be subject to the terms of, an agreement executed

● No Awards may be granted on or after the tenth anniversary of the effective date of the 2021 Plan.

2011 Equity Incentive Plan

The  key  terms  and  provisions  of  our  Amended  and  Restated  2011  Equity  Incentive  Plan,  which  we  refer  to  as  the  2011
Plan, were substantially similar to the 2021 Plan described above, with the major difference being the number of shares of
common stock reserved for issuance under the 2011 Plan. Stock-based awards (including options, warrants, and restricted
stock) previously granted under the 2011 Plan remain outstanding, and shares of common stock may be issued to satisfy
options or warrants previously granted under the 2011 Plan, although no new awards may be granted under the 2011 Plan.

Issuances

From  time  to  time,  the  Company  issues  stock-based  compensation  to  its  officers,  directors,  employees,  and  consultants
through its equity compensation plans. The maximum term of options granted is generally five years and generally options
vest over a period of six months to two years. However, the Board may approve other vesting schedules. Options may be
exercised  in  whole  or  in  part.  The  exercise  price  of  stock  options  granted  is  generally  the  fair  market  value  of  the
Company’s common stock on the date of grant.

The  fair  value  of  each  stock  option  award  is  estimated  using  the  Black-Scholes  option  pricing  model  based  on  certain
assumptions.  The  assumption  for  expected  term  is  based  on  evaluations  of  expected  future  employee  exercise  behavior.
Because  of  a  lack  of  historical  information  related  to  exercise  activity,  we  use  the  simplified  method  to  determine  the
expected  term.  The  risk-free  interest  rate  is  based  on  the  U.S.  Treasury  rates  at  the  date  of  grant  with  maturity  dates
approximately  equal  to  the  expected  term  at  the  grant  date.  The  historical  volatility  of  our  common  stock  is  used  as  the
basis for the volatility assumption. The Company has never paid cash dividends, and does not currently intend to pay cash
dividends, and thus assumes a 0% dividend yield.

The following table sets forth information as of December 31, 2022 regarding compensation plans under which our equity
securities are authorized for issuance:  

Plan Category
Equity compensation Plans (1)

Number of Securities
to be Issued Upon
Exercise of

Weighted Average
Exercise Price of

Outstanding Options, Outstanding Options,
Warrants and Rights Warrants and Rights

(a)
 5,730,375

$

(b)

 2.14

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)

 3,291,909

(1)   Pursuant to our 2011 and 2021 Equity Incentive Plans.

Recent Sales of Unregistered Securities

There were no sales of unregistered or registered securities during the years ended December 2022 and 2021.

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Purchases of equity securities by the issuer and affiliated purchasers

We did not repurchase any shares of common stock during the fourth fiscal quarter ended December 31, 2022.

Item 6.

[Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The  following  discussion  and  analysis  should  be  read  together  with  our  consolidated  financial  statements  and  the  notes
thereto,  included  in  Item  8  of  this  Annual  Report  on  Form  10-K.  This  discussion  summarizes  the  significant  factors
affecting  our  consolidated  operating  results,  financial  condition  and  liquidity  and  cash  flows  for  the  years  ended
December 31, 2022 and 2021. Except for historical information, the matters discussed in this Management’s Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations  are  forward-looking  statements  that  involve  risks  and
uncertainties and are based upon judgments concerning factors that are beyond our control.

Overview

Xcel  Brands  is  a  media  and  consumer  products  company  engaged  in  the  design,  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.  The  Company’s  brands  have
generated over $3 billion in retail sales via live streaming in interactive television and digital channels alone.

Xcel was founded in 2011 with a vision to reimagine shopping, entertainment, and social media as one thing. Currently,
Xcel’s brand portfolio consists of the LOGO by Lori Goldstein Brand, the Halston Brand, the Ripka Brand, the C Wonder
Brand, the Longaberger Brand, the Isaac Mizrahi Brand, and other proprietary brands.

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

● We manage the Longaberger Brand through our 50% ownership interest in Longaberger Licensing, LLC.

● We manage the Q Optix business through our 50% ownership interest in Q Optix, LLC.

● The Company wholly owned and managed the Isaac Mizrahi Brand through May 31, 2022. On May 31, 2022, we
sold a majority interest in the brand to a third party, but retained a 30% noncontrolling interest in the brand and
continue to participate in the operations of the business.

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

● Distribution and/or licensing of our brands for sale through interactive television (i.e., QVC, HSN, The Shopping

Channel, TVSN, CJO, JTV, etc.);

● wholesale distribution through joint ventures or licensing of our brands to retailers that sell to the end consumer;

● direct-to-consumer distribution of our brands through e-commerce and live streaming;

● 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; and

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

operating infrastructure and distribution relationships.

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We believe that we offer a unique value proposition to our retail and direct-to-consumer customers, and our licensees for
the following reasons:

● our management team, including our officers’ and directors’ experience in, and relationships within the industry;

● our deep knowledge, expertise, and proprietary technology in live streaming;

● our design, production, sales, marketing, and supply chain and integrated technology platform that enables us to

design and distribute trend-right product; and

● our significant media and internet presence and distribution.

Our vision is intended to reimagine shopping, entertainment, and social media as one thing. By leveraging live streaming,
digital, and social media content across all distribution channels, we seek to drive consumer engagement and generate retail
sales  across  our  brands.  Our  strong  relationships  with  leading  retailers,  interactive  television  companies,  and  streaming
networks  enable  us  to  reach  consumers  in  over  200  million  homes  worldwide  and  hundreds  of  millions  of  social  media
followers.

We  believe  our  design,  production,  and  joint  venture  supply  chain  platform  provides  significant  competitive  advantages
compared with traditional wholesale consumer products companies that design, manufacture, and distribute products. We
focus on our core competencies of live streaming, marketing, design, integrated technologies, production and joint venture
supply chain platform, and brand development. We believe that we offer a 360-degree solution to our retail partners that
addresses many of the challenges facing the retail industry today. We believe our platform is highly scalable. Additionally,
we believe we can acquire additional brands into our platform in order to leverage our operating infrastructure, marketing
capabilities, and distribution network.

Critical Accounting Policies and Estimates

The  preparation  of  consolidated  financial  statements  in  conformity  with  GAAP  requires  management  to  make  estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period.  Critical  accounting  policies  are  those  that  are  the  most  important  to  the  portrayal  of  our  financial  condition  and
results of operations, and that require our most difficult, subjective, and complex judgments as a result of the need to make
estimates  about  the  effect  of  matters  that  are  inherently  uncertain.  Critical  accounting  estimates  are  those  that  involve  a
significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial
condition or results of operations. While our significant accounting policies and estimates are described in more detail in
the  notes  to  our  consolidated  financial  statements,  our  most  critical  accounting  policies  and  estimates,  discussed  below,
pertain to revenue recognition, trademarks and other intangible assets, income taxes, and equity method investments. These
include but are not limited to the estimation of the useful lives of our trademarks, the estimation of the future cash flows
related to our trademarks, and the estimation of our incremental borrowing rate (for purposes of accounting for leases). In
applying  such  policies,  we  must  use  some  amounts  that  are  based  upon  our  informed  judgments  and  best  estimates.
Estimates,  by  their  nature,  are  based  upon  judgments  and  available  information.  The  estimates  that  we  make  are  based
upon  historical  factors,  current  circumstances,  and  the  experience  and  judgment  of  management.  We  evaluate  our
assumptions and estimates on an ongoing basis.

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Revenue Recognition

Licensing

In connection with our licensing model, we follow Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 606-10-55-65, by which we recognize net licensing revenue at the later of when (1) the subsequent
sale or usage occurs or (2) the performance obligation to which some or all of the sales- or usage-based royalty has been
allocated is satisfied (in whole or in part). More specifically, we separately identify:

(i)   Contracts for which, based on experience, royalties are expected to exceed any applicable minimum guaranteed
payments, and to which an output-based measure of progress based on the “right to invoice” practical expedient is
applied because the royalties due for each period correlate directly with the value to the customer of our performance
in  each  period  (this  approach  is  identified  as  “View  A”  by  the  FASB  Revenue  Recognition  Transition  Resource
Group, “TRG”); and

(ii)      Contracts  for  which  revenue  is  recognized  based  on  minimum  guaranteed  payments  using  an  appropriate
measure  of  progress,  in  which  minimum  guaranteed  payments  are  straight-lined  over  the  term  of  the  contract  and
recognized ratably based on the passage of time, and to which the royalty recognition constraint to the sales-based
royalties  in  excess  of  minimum  guaranteed  is  applied  and  such  sales-based  royalties  are  recognized  to  the  distinct
period only when the minimum guaranteed is exceeded on a cumulative basis (this approach is identified as “View C”
by the TRG).

Wholesale Sales

We  generate  revenue  through  sale  of  branded  jewelry  and  apparel  to  both  domestic  and  international  customers  who,  in
turn,  sell  the  products  to  their  consumers.  We  recognize  revenue  within  net  sales  in  the  accompanying  consolidated
statements  of  operations  when  performance  obligations  identified  under  the  terms  of  contracts  with  our  customers  are
satisfied,  which  occurs  upon  the  transfer  of  control  of  the  merchandise  in  accordance  with  the  contractual  terms  and
conditions of the sale. Shipping to customers is accounted for as a fulfillment activity and is recorded within other selling,
general and administrative expenses.

Direct to Consumer Sales

Our revenue associated with our e-commerce jewelry operations and the Longaberger brand is recognized within net sales
in the accompanying consolidated statements of operations at the point in time when product is shipped to the customer.
Shipping  to  customers  is  accounted  for  as  a  fulfillment  activity  and  is  recorded  within  other  selling,  general  and
administrative  expenses.  Revenue  associated  with  our  fine  jewelry  brick-and-mortar  retail  store  is  recognized  within  net
sales in the accompanying consolidated statements of operations at the point of sale.

Trademarks and Other Intangible Assets

We  follow  ASC  Topic  350,  “Intangibles  -  Goodwill  and  Other.”  Under  this  standard,  goodwill  and  indefinite-lived
intangible  assets  are  not  amortized,  but  are  required  to  be  assessed  for  impairment  at  least  annually.  Our  finite-lived
intangible assets are amortized over their estimated useful lives. We estimate the useful lives of our intangible assets based
principally on our expected use and strategic plans for each asset, our own historical experience with similar assets, and our
expectations related to demand, competition, and other economic factors.

Indefinite-Lived Intangible Asset

We  tested  our  indefinite-lived  intangible  asset  for  recovery  in  accordance  with  ASC  820-10-55-3F,  which  states  that  the
income  approach  (“Income  Approach”)  converts  future  amounts  (for  example,  cash  flows)  into  a  single  current  (that  is,
discounted)  amount.  When  the  Income  Approach  is  used,  fair  value  measurement  reflects  current  market  expectations
about  those  future  amounts.  The  Income  Approach  is  based  on  the  present  value  of  future  earnings  expected  to  be
generated  by  a  business  or  asset.  Income  projections  for  a  future  period  are  discounted  at  a  rate  commensurate  with  the
degree of

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risk  associated  with  future  proceeds.  A  residual  or  terminal  value  is  also  added  to  the  present  value  of  the  income  to
quantify the value of the business beyond the projection period. As such, recoverability of such assets is measured by a
comparison of the carrying amount of the asset to its expected future discounted net cash flows. If the carrying amount of
such assets is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying
amount of the assets exceeds the recoverability of the assets.

We also re-evaluated on an annual basis whether events and circumstances continue to support an indefinite useful life.

We performed the annual impairment testing as described above for the year ended December 31, 2021, and concluded that
there was no impairment of our indefinite-lived intangible asset. We subsequently sold our indefinite-lived intangible asset
in May 2022 for a gain.

Finite-Lived Intangibles

Our  finite-lived  intangible  assets,  including  Trademarks,  are  reviewed  for  impairment  whenever  events  or  changes  in
circumstances indicate that their carrying value may not be recoverable. An impairment loss is recognized if the carrying
amount of a finite-lived intangible asset is not recoverable and its carrying amount exceeds its fair value.

With reference to our finite-lived intangible assets’ impairment process, we group assets and liabilities at the lowest level
for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the
asset group against the sum of undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying
amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the
asset group exceeds its fair value based on discounted cash flows analysis or appraisals.

There were no impairment charges recorded for finite-lived intangible assets for the years ended December 31, 2022 and
2021.

Income Taxes

Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities.
Deferred income taxes are determined based on the temporary difference between the financial reporting and tax bases of
assets and liabilities using enacted rates in effect during the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We consider
forecasted  earnings,  future  taxable  income,  and  prudent  and  feasible  tax  planning  strategies  in  determined  the  need  for
these valuation allowances.

With  respect  to  any  uncertainties  in  income  taxes  recognized  in  our  financial  statements,  tax  positions  are  initially
recognized in the financial statements when it is more likely than not that the position will be sustained upon examination
by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that
has a probability of fifty percent or greater of being realized upon ultimate settlement with the tax authority, assuming full
knowledge  of  the  position  and  all  relevant  facts.  Tax  years  that  remain  open  for  assessment  for  federal  and  state  tax
purposes include the years ended December 31, 2019 through December 31, 2022.

Equity Method Investments

We  account  for  our  investments  in  entities  over  which  we  have  the  ability  to  exercise  significant  influence,  but  do  not
control the entity, under the equity method of accounting, and we recognize our proportionate share of income or losses
from the entity within other income (expense) in the consolidated statement of operations.

We initially measure our investment in an equity method investee at cost. In cases where we retain a noncontrolling interest
in an investee which we had previously consolidated, we initially measure such retained interest at fair value. In estimating
fair value in such cases, we seek to maximize the use of observable inputs (market data obtained from independent sources)

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and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and
liabilities).

Subsequent recognition of an investor’s proportionate share of income or losses of an equity method investee is generally
determined  based  on  the  investor’s  proportional  ownership  interest.  However,  in  cases  where  contractual  agreements
specify allocation ratios for profits and losses, specified costs and expenses, and/or distributions of cash from operations,
that  differ  from  our  ownership  interest,  we  use  such  specified  allocation  ratios  for  purposes  of  determining  our  share  of
income or losses from the investee if the agreement is considered substantive.

Recently Issued Accounting Pronouncements

In  June  2016,  the  FASB  issued  Accounting  Standards  Update  (“ASU”)  No.  2016-13,  "Financial  Instruments  –  Credit
Losses  (Topic  326):  Measurement  of  Credit  Losses  on  Financial  Instruments,"  which  was  subsequently  amended  in
November 2018 through ASU No. 2018-19. This ASU will require entities to estimate lifetime expected credit losses for
financial  instruments,  including  trade  and  other  receivables,  which  will  result  in  earlier  recognition  of  credit  losses.
Subsequently, the FASB issued additional guidance in ASU No. 2019-05 in May 2019, ASU No. 2019-10 and 2019-11 in
November  2019,  ASU  No.  2020-02  in  February  2020,  and  ASU  No.  2022-02  in  March  2022.  Among  other  things,  the
additional guidance deferred the application of the new guidance on credit losses for smaller reporting companies to fiscal
years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating
the new guidance to determine the impact the adoption of this guidance will have on our results of operations, cash flows,
and financial condition when it is adopted during the first quarter of 2023.

Recently Adopted Accounting Pronouncements

We adopted ASU No. 2021-10, “Government Assistance (Topic 823): Disclosures by Business Entities about Government
Assistance” effective January 1, 2022. This ASU requires certain financial statement disclosures about transactions with a
government  that  are  accounted  for  by  applying  a  grant  or  contribution  accounting  model  by  analogy.  As  this  ASU  only
affects financial statement disclosures, the adoption of this guidance did not have any impact on our results of operations,
cash flows, or financial condition.

We  adopted  ASU  No.  2019-12,  “Income  Taxes  (Topic  740):  Simplifying  the  Accounting  for  Income  Taxes”  effective
January 1, 2021. 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 our results of operations, cash flows, or financial condition.

Summary of Operating Results

The  consolidated  financial  statements  and  related  notes  included  elsewhere  in  this  Form  10-K  are  as  of  or  for  the  years
ended December 31, 2022 (the “Current Year”), and December 31, 2021 (the “Prior Year”).

Revenues

Current Year net revenue decreased approximately $12.1 million to $25.8 million from $37.9 million for the Prior Year.

Net  licensing  revenue  decreased  by  $7.1  million  in  the  Current  Year  to  approximately  $14.7  million,  compared  with
approximately $21.8 million in the Prior Year. This decrease in licensing revenue was primarily attributable to the May 31,
2022 sale of a majority interest in the Isaac Mizrahi brand through the sale of a 70% interest in IM Topco, LLC to WHP,
partially offset by increased licensing revenue generated by the Lori Goldstein brand, which we acquired on April 1, 2021.

Net  sales  decreased  by  $5.0  million  in  the  Current  Year  to  approximately  $11.1  million,  compared  with  approximately
$16.1  million  in  the  Prior  Year.  This  decrease  in  net  sales  was  primarily  attributable  to  declines  in  apparel  wholesale
revenue  and,  to  a  lesser  extent,  in  wholesale  jewelry  sales,  mainly  driven  by  a  combination  of  retailers  pausing  on
purchases

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triggered by excess inventory levels, and the temporary closing of overseas factories due to COVID-19, causing delays in
product delivery resulting in cancelled orders.

Cost of Goods Sold and Gross Profit

Current Year cost of goods sold was $8.0 million, compared with $10.7 million for the Prior Year, due to the lower volumes
of  product  sales  in  the  Current  Year.  Gross  profit  (net  revenue  less  cost  of  goods  sold)  decreased  approximately  $9.5
million  to  $17.8  million  from  $27.3  million  in  the  Prior  Year,  primarily  driven  by  the  aforementioned  decrease  in  net
licensing revenue.

Gross profit margin from product sales (net sales less cost of goods sold, divided by net sales) declined from approximately
34%  in  the  Prior  Year  to  approximately  28%  in  the  Current  Year,  primarily  due  to  the  selling-off  of  seasoned  apparel
inventory during the earlier portion of 2022, and inventory write-downs related to cancelled sales orders for the reasons
outlined above in the discussion of revenues.

Operating Costs and Expenses

Operating costs and expenses increased approximately $0.5 million, or approximately 1%, from $39.8 million in the Prior
Year  to  $40.3  million  in  the  Current  Year.  This  slight  increase  was  primarily  driven  by  the  combination  of  (i)  higher
shipping  and  logistics  costs,  as  well  as  cost  increases  from  other  service  providers  and  vendors  due  to  the  current
inflationary  economic  environment,  and  (ii)  increased  trademark  amortization  expense,  related  to  the  acquisition  of  the
Lori Goldstein brand on April 1, 2021, largely offset by (iii) lower asset impairment charges in the Current Year, and (iv)
the elimination of salary and other expenses associated with the Isaac Mizrahi brand after the sale of a majority interest in
that brand on May 31, 2022.

Other Income (Expense)

We recognized a gain on the sale of a majority interest in the Isaac Mizrahi brand in the Current Year of approximately
$20.6 million, which was comprised of $46.2 million of cash proceeds plus the recognition of the fair value of our retained
interest  in  the  brand  of  $19.8  million,  less  $0.9  million  of  fees  and  expenses  directly  related  to  the  transaction  and  the
derecognition of the brand trademarks previously recorded on our balance sheet of $44.5 million.

We  account  for  our  interest  in  the  ongoing  operations  of  IM  Topco,  LLC  using  the  equity  method  of  accounting.  We
recognized an equity method loss of approximately $1.2 million related to our investment for Current Year, based on the
distribution provisions and preferences set forth in the related business venture agreement.

Other income (expense) for the Current Year also includes a $0.9 million gain on the reduction of contingent obligations. In
connection with our 2019 purchase of the Halston Heritage trademarks, we agreed to pay the seller additional consideration
of  up  to  an  aggregate  of  $6.0  million,  based  on  royalties  earned  from  2019  through  December  31,  2022.  This  potential
earn-out was initially recorded as a liability of $0.9 million, based on the difference at the date of acquisition between the
fair value of the acquired assets of the Halston Heritage trademarks and the total consideration paid. The final royalty target
year ended on December 31, 2022, and the seller ultimately did not earn any additional consideration based on the formula
set forth in the related asset purchase agreement.

Interest and Finance Expense

Interest and finance expense for the Current Year was $3.5 million, compared with $3.6 million for the Prior Year.

This  slight  decrease  was  primarily  attributable  to  the  fact  that  we  had  no  interest  expense  from  June  1,  2022  through
December 31, 2022, as all of our outstanding term loan was repaid on May 31, 2022 and we have not incurred any new
debt. The decrease was partially offset by the higher loss on early extinguishment of debt as a result of the aforementioned
May 31, 2022 repayment in the Current Year, compared with losses on extinguishment in the Prior Year.

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Income Tax Benefit

The effective income tax benefit rate for the Current Year was approximately 10.0% resulting in a $0.4 million income tax
benefit.  During  the  Current  Year,  the  effective  tax  rate  was  primarily  attributable  to  the  impacts  of  stock-based
compensation,  which  decreased  the  effective  rate  by  approximately  6.1%,  and  federal  tax  true-ups,  which  decreased  the
effective tax rate by approximately 5.1%. The effective tax rate was also impacted by recurring permanent differences; the
largest such recurring permanent differences were state and local tax provisions, which increased the effective rate in 2022
by approximately 6.1%, and disallowed excess compensation, which decreased the effective rate in 2022 by approximately
5.3%.

The effective income tax benefit rate for the Prior Year was approximately 19.3% resulting in a $3.1 million income tax
benefit.  During  the  Prior  Year,  the  effective  tax  rate  was  impacted  by  the  impact  of  stock-based  compensation,  which
decreased  the  effective  rate  by  approximately  5.6%.  The  effective  tax  rate  was  also  impacted  by  recurring  permanent
differences;  the  largest  such  recurring  permanent  differences  were  state  and  local  tax  provisions,  which  increased  the
effective rate in 2021 by approximately 4.6%, and disallowed excess compensation, which decreased the effective rate in
2021 by approximately 0.7%.

Net Loss

We had a net loss of approximately $5.4 million for the Current Year, compared with a net loss of approximately $13.0
million for the Prior Year, as a result of the factors discussed above.

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

We  had  a  non-GAAP  net  loss  of  $15.0  million  or  $(0.77)  per  share  (“non-GAAP  diluted  EPS”)  based  on  19,624,669
weighted average shares outstanding for the Current Year, compared with a non-GAAP net loss of $6.2 million, or $(0.32)
per share based on 19,455,987 weighted average shares outstanding for the Prior Year. 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
asset  impairments,  amortization  of  trademarks,  our  proportional  share  of  trademark  amortization  of  equity  method
investees,  stock-based  compensation,  loss  on  early  extinguishment  of  debt,  certain  adjustments  to  the  provision  for
doubtful  accounts  related  to  the  bankruptcy  of  and  economic  impact  on  certain  retail  customers  due  to  the  COVID-19
pandemic, gain on sale of assets, gain on reduction of contingent obligations, and 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  approximately  $(12.5)  million  for  the  Current Year,  compared  with  Adjusted  EBITDA  of
approximately $(2.5) million for the Prior Year. Adjusted EBITDA is a non-GAAP unaudited measure, which we define as
net income (loss) attributable to Xcel Brands, Inc. stockholders before asset impairments, depreciation and amortization,
our proportional share of trademark amortization of equity method investees, interest and finance expenses (including loss
on  early  extinguishment  of  debt,  if  any),  income  taxes,  other  state  and  local  franchise  taxes,  stock-based  compensation,
certain  adjustments  to  the  provision  for  doubtful  accounts  related  to  the  bankruptcy  of  and  economic  impact  on  certain
retail customers due to the COVID-19 pandemic, gain on sale of assets, and gain on reduction of contingent obligation.

Management  uses  non-GAAP  net  income,  non-GAAP  diluted  EPS,  and  Adjusted  EBITDA  as  measures  of  operating
performance to assist in comparing performance from period to period on a consistent basis and to identify business trends
relating to the Company’s results of operations. Management believes non-GAAP net income, non-GAAP diluted EPS, and
Adjusted  EBITDA  are  also  useful  because  these  measures  adjust  for  certain  costs  and  other  events  that  management
believes  are  not  representative  of  our  core  business  operating  results,  and  thus  these  non-GAAP  measures  provide
supplemental information to assist investors in evaluating the Company’s financial results.

Non-GAAP  net  income,  non-GAAP  diluted  EPS,  and  Adjusted  EBITDA  should  not  be  considered  in  isolation  or  as
alternatives to net income, earnings per share, or any other measure of financial performance calculated and presented in
accordance with GAAP. Given that non-GAAP net income, non-GAAP diluted EPS, and Adjusted EBITDA are financial
measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our non-GAAP net

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income,  non-GAAP  diluted  EPS,  and  Adjusted  EBITDA  may  not  be  comparable  to  similarly  titled  measures  of  other
companies,  including  companies  in  our  industry,  because  other  companies  may  calculate  these  measures  in  a  different
manner than we do.

In  evaluating  non-GAAP  net  income,  non-GAAP  diluted  EPS,  and  Adjusted  EBITDA,  you  should  be  aware  that  in  the
future we may or may not incur expenses similar to some of the adjustments in this report. Our presentation of non-GAAP
net income, non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by
these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider non-GAAP
net income, non-GAAP diluted EPS, and Adjusted EBITDA alongside other financial performance measures, including our
net income and other GAAP results, and not rely on any single financial measure.

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:  

($ in thousands)
Net loss attributable to Xcel Brands, Inc. stockholders
Asset impairments
Amortization of trademarks
Proportional share of trademark amortization of equity method investee
Stock-based compensation
Loss on early extinguishment of debt
Certain adjustments to provision for doubtful accounts
Gain on sale of assets
Gain on reduction of contingent obligation
Income tax benefit
Non-GAAP net loss

Year Ended December 31, 

2022
 (4,018)
 274
 6,079
 1,202
 620
 2,324
 413
 (20,586)
 (900)
 (431)
 (15,023)

$

$

2021
 (12,184)
 1,372
 5,435
 —
 720
 1,516
 132
 —
 —
 (3,192)
 (6,201)

$

$

The following table is a reconciliation of diluted loss per share to non-GAAP diluted EPS:

Diluted loss per share attributable to Xcel Brands, Inc. stockholders
Asset impairments
Amortization of trademarks
Proportional share of trademark amortization of equity method investee
Stock-based compensation
Loss on early extinguishment of debt
Certain adjustments to provision for doubtful accounts
Gain on sale of assets
Gain on reduction of contingent obligation
Income tax benefit
Non-GAAP diluted EPS
Diluted weighted average shares outstanding

$

$

Year Ended December 31, 

2022

 (0.20)
 0.01
 0.31
 0.06
 0.03
 0.12
 0.02
 (1.05)
 (0.05)
 (0.02)
 (0.77)
 19,624,669

$

$

2021

 (0.63)
 0.07
 0.28
 —
 0.04
 0.08
 0.01
 —
 —
 (0.17)
 (0.32)
 19,455,987

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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:

($ in thousands)
Net loss attributable to Xcel Brands, Inc. stockholders
Asset impairments
Depreciation and amortization
Proportional share of trademark amortization of equity method investee
Interest and finance expense
Income tax benefit
State and local franchise taxes
Stock-based compensation
Certain adjustments to provision for doubtful accounts
Gain on sale of assets
Gain on reduction of contingent obligation
Adjusted EBITDA

Year Ended December 31, 

2022

2021

$

$

 (4,018)
 274
 7,263
 1,202
 3,527
 (431)
 102
 620
 413
 (20,586)
 (900)
 (12,534)

$

$

 (12,184)
 1,372
 6,830
 —
 3,579
 (3,106)
 142
 720
 132
 —
 —
 (2,515)

Liquidity and Capital Resources

General

As of December 31, 2022 and 2021, our cash and cash equivalents were $4.6 million and $4.5 million, respectively.

Restricted cash at December 31, 2021 consisted of $0.7 million of cash deposited as collateral for an irrevocable standby
letter of credit associated with the lease of our current corporate office and operating facility. There was no restricted cash
at December 31, 2022, as the aforementioned letter of credit had expired and was not renewed.

Our  principal  capital  requirements  have  been  to  fund  working  capital  needs,  acquire  new  brands,  and  to  a  lesser  extent,
capital expenditures. Notwithstanding our recent investments in our ERP system and our brick-and-mortal retail store in
2020 and 2021, respectively, our business operating model generally does not require material capital expenditures, and as
of  December  31,  2022,  we  have  no  significant  commitments  for  future  capital  expenditures.  Material  cash  requirements
from known contractual and other obligations are discussed under “Obligations and Commitments” below.

Working Capital

Our  working  capital  (current  assets  less  current  liabilities,  excluding  the  current  portion  of  lease  obligations  and  any
contingent  liabilities  payable  in  common  stock)  was  $8.8  million  and  $7.9  million  as  of  December  31,  2022  and  2021,
respectively. Commentary on components of our cash flows for the Current Year compared with the Prior Year is set forth
below.

Liquidity and Management’s Plans

The Company incurred net losses of approximately $5.4 million ($25.9 million excluding the gain on sale of a majority
interest in the Isaac Mizrahi brand) and $13.0 million during the years ended December 31, 2022 and 2021, respectively,
and  had  an  accumulated  deficit  of  approximately  $32.8  million  and  $28.8  million  as  of  December  31,  2022  and  2021,
respectively.  Included  in  the  net  losses  were  non-cash  expenses  of  approximately  $8.2  million  and  $7.5  million  for  the
years ended December 31, 2022 and 2021, respectively. Net cash used in operating activities was $14.2 million in 2022 and
$6.6 million in 2021. These factors raise uncertainties about the Company’s ability to continue as a going concern.

Management  plans  to  mitigate  an  expected  shortfall  of  capital  and  to  support  future  operations  by  shifting  the  business
from a wholesale/licensing hybrid model into a licensing plus business model and to divest or restructure the Longaberger
brand.  In  the  first  quarter  of  2023,  we  began  to  restructure  our  business  operations  by  entering  into  new  licensing
agreements and joint venture arrangements with best-in-class business partners. We entered into a new interactive

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television licensing agreement with America’s Collectibles Network, Inc. d/b/a JTV (“JTV”) for the Ripka Brand, and a
separate license with JTV for the Ripka Brand’s e-commerce business. For apparel, similar transactions have recently been
executed. In conjunction with the launch of the C Wonder Brand on HSN, we licensed the wholesale production operations
related to the brand to One Jeanswear Group, LLC (“OJG”); this new license with OJG also includes other new celebrity
brands that we plan to launch in 2023 and beyond. For the Halston Brand, we plan on entering into a joint venture related
to  the  brand’s  wholesale  apparel  business  with  another  leading  manufacturer  (the  “Halston  JV”).  The  Halston  JV  will
develop an apparel business under the H Halston brand through department stores, e-commerce, and other retailers. The
Halston JV will include a wholesale license to Xcel. We expect the transition of these operating businesses to be completed
by the second quarter of 2023. We believe that this evolution of our operating model will provide us with significant cost
savings and allow us to reduce and better manage our exposure to operating risks. As of March 31, 2023, steps have been
taken to reduce payroll by $6 million and operating cost by approximately $7 million over the next twelve months. Further,
the Company intends to obtain a line of credit to provide additional capital resources. However, there is no assurance that
this line of credit or any other external financing will be obtained.

Based on these recent changes in our business model, management expects to generate adequate cash flows to meet the
Company’s  operating  and  capital  expenditure  needs,  for  at  least  the  twelve  months  subsequent  to  the  filing  date  of  this
Annual  Report  on  Form  10-K,  and  therefore,  such  conditions  and  uncertainties  with  respect  to  the  Company’s  ability  to
continue as a going concern as of December 31, 2022, have subsequently been alleviated.

Operating Activities

Net  cash  (used  in)  provided  by  operating  activities  was  approximately  $(14.2)  million  and  $(6.6)  million  in  the
Current Year and Prior Year, respectively.

The Current Year’s cash used in operating activities was primarily attributable to the combination of the net loss of $(5.4)
million  plus  non-cash  items  of  approximately  $(10.2)  million,  partially  offset  by  a  net  change  in  operating  assets  and
liabilities of approximately $1.4 million. Non-cash items were primarily comprised of, but not limited to, the net gain on
sale of assets of $(20.6) million, $7.3 million of depreciation and amortization, a $2.3 million loss on extinguishment of
debt,  and  the  $1.2  million  undistributed  proportional  share  of  net  income  of  equity  method  investee.  The  net  change  in
operating assets and liabilities notably included a decrease in accounts receivable of $2.1 million, a decrease in inventory
of  $0.5  million,  a  decrease  in  prepaid  expenses  and  other  assets  of  $0.6  million,  and  decreases  in  various  operating
liabilities of $(1.4) million. The decrease in accounts receivable was primarily related to the Current Year sale of a majority
interest in the Isaac Mizrahi brand, resulting in lower licensing revenues and thus lower receivable balances. The decreases
in inventory and other operating assets and liabilities were primarily reflective of the declines in our wholesale business
due to retailers pausing or canceling orders during the Current Year.

The Prior Year’s cash used in operating activities was primarily attributable to the combination of the net loss of $(13.0)
million  plus  non-cash  expenses  of  approximately  $7.7  million,  and  a  net  change  in  operating  assets  and  liabilities  of
approximately  $(1.2)  million.  Non-cash  net  expenses  were  primarily  comprised  of  $6.8  million  of  depreciation  and
amortization,  $1.4  million  of  asset  impairment  charges,  $0.3  million  of  amortization  of  deferred  finance  costs,  a  $1.5
million loss on extinguishment of debt, $0.7 million of stock-based compensation, and $(3.2) million of deferred income
tax benefit. The net change in operating assets and liabilities notably included a decrease in accounts receivable of $1.1
million, an increase in inventory of $(2.2) million, an increase in prepaid expenses and other assets of $(0.8) million, and
an  increase  in  accounts  payable,  accrued  expenses  and  other  current  liabilities  of  $1.2  million.  The  changes  in  accounts
receivable and payable were primarily related to the timing of collections and payments, 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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Investing Activities

Net  cash  provided  by  investing  activities  for  the  Current  Year  was  approximately  $44.5  million,  and  was  attributable  to
$45.4 million of net proceeds from the sale of a majority interest in the Isaac Mizrahi brand to WHP, partially offset by
$0.6 million of capital contributions to our equity method investee and approximately $0.3 million of capital expenditures.

Net cash used in investing activities for the Prior Year was approximately $4.8 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 Judith Ripka fine jewelry retail store (which opened in the second quarter of 2021 and was
subsequently closed in the first quarter of 2022).  

Financing Activities

Net  cash  used  in  financing  activities  for  the  Current  Year  was  approximately  $31.0  million,  which  mainly  consisted  of
$29.0  million  of  repayments  of  our  term  loan  debt,  and,  to  a  lesser  extent,  $1.5  million  of  prepayment  and  other  fees
associated with the early extinguishment of debt, as well as $0.4 million of shares repurchased related to withholding taxes
on vested restricted stock.  

Net  cash  provided  by  financing  activities  for  the  Prior  Year  was  approximately  $10.5  million,  and  was  primarily
attributable to a net increase in debt obligations of $13.5 million, due to debt refinancing transactions entered into on April
14,  2021  and  December  30,  2021,  as  well  as  cash  contributions  received  from  the  noncontrolling  interest  holder  in
Longaberger  Licensing,  LLC  of  $1.0  million.  These  sources  of  cash  were  partially  offset  by  deferred  finance  costs  and
other  fees  paid  in  connection  with  the  aforementioned  debt  refinancing  transactions  of  $(2.7)  million,  and  principal
payments made on term loan debt of $(1.3) million during the year.

Obligations and Commitments

Contingent Obligation – Lori Goldstein Earn-Out

In connection with the April 1, 2021 purchase of the Lori Goldstein trademarks (see Note 3 of the consolidated financial
statements  for  additional  information),  we  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 liability in the accompanying consolidated balance sheets, based on the difference at the date of
acquisition between the fair value of the acquired assets of the Lori Goldstein brand and the total consideration paid. Based
on  the  performance  of  the  Lori  Goldstein  brand  through  December  31,  2022,  approximately  $0.2  million  of  additional
consideration has been earned and is payable to the Seller in 2023. At December 31, 2022, $0.2 million of the balance is
recorded as a current liability and $6.4 million is recorded as a long-term liability; at December 31, 2021, the entire balance
was recorded as a long-term liability.

Contingent Obligation – Isaac Mizrahi Transaction

In connection with the May 31, 2022 transaction related to the sale of a majority interest in the Isaac Mizrahi brand, we
agreed with WHP (the buyer) that, in the event that IM Topco, LLC receives less than $13.3 million in aggregate royalties
for  any  four  consecutive  calendar  quarters  over  a  three-year  period  ending  on  May  31,  2025,  WHP  will  be  entitled  to
receive from us up to $16 million, less all amounts of net cash flow distributed to WHP on an accumulated basis, as an
adjustment to the purchase price previously paid by WHP. Such amount would be payable by us in either cash or equity
interests in IM Topco, LLC held by us. Based on IM Topco’s earnings from May 31, 2022 through December 31, 2022 and
the applicable distribution provisions, WHP earned $4.32 million in cash flow, which reduces the potential purchase price
adjustment  to  $11.68  million.  No  amount  has  been  recorded  in  the  accompanying  consolidated  balance  sheets  related  to
this contingent obligation, and management believes the likelihood of any such payment is remote.

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Contingent Obligation – Halston Heritage Earn-Out

In  connection  with  the  February  11,  2019  purchase  of  the  Halston  Heritage  trademarks  from  the  H  Company  IP,  LLC
(“HIP”), we agreed to pay HIP additional consideration (the “Halston Heritage Earn-Out”) of up to an aggregate of $6.0
million, based on royalties earned from 2019 through December 31, 2022. This additional consideration would have been
payable  in  shares  of  our  common  stock.  The  Halston  Heritage  Earn-Out  of  $0.9  million  was  recorded  as  a  long-term
liability on February 11, 2019 and as of December 31, 2021, based on the difference at the date of acquisition between the
fair value of the acquired assets of the Halston Heritage Trademarks and the total consideration paid.

The final royalty target year ended on December 31, 2022, and HIP ultimately did not earn any additional consideration
based on the formula set forth in the related asset purchase agreement. As such, during the year ended December 31, 2022,
we recorded a $0.9 million gain on the reduction of contingent obligations in the accompanying consolidated statement of
operations. As of December 31, 2022, there were no amounts remaining under the Halston Heritage Earn-Out.

Real Estate Leases

As described in Item 2 of this Annual Report on Form 10-K, as of December 31, 2022 we had real estate leases for our
current  office  and  a  retail  store  location,  with  remaining  lease  terms  between  approximately  five  to  seven  years.  We
recorded an impairment charge related to the right-of-use asset for the retail store as of December 31, 2021, subsequently
closed  the  retail  store  in  2022,  and  are  currently  in  the  process  of  negotiating  the  termination  of  the  retail  store  lease;
however, the lease liability for the retail store remains on our consolidated balance sheet as a liability and is included in the
future payment obligations set forth below.

Future payments under our real estate leases are expected to be approximately $1.7 million for each of the years ending
December 31, 2023 – 2026, $1.5 million for the year ending December 31, 2027, and $0.2 million thereafter.

Employment Contracts

We  have  entered  into  contracts  with  certain  executives  and  key  employees.  The  future  minimum  payments  under  these
contracts  is  expected  to  be  approximately  $19.9  million,  of  which,  approximately  $4.3  million  is  expected  to  be  paid  in
2023,  approximately  $2.1  million  is  expected  to  be  paid  for  each  of  the  years  ending  December  31,  2024  –  2030,  and
approximately $0.5 million is expected to be paid in 2031.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material
effect on our financial condition, results of operations or liquidity.

Other Factors

We continue to seek to expand and diversify the types of licensed products being produced under our brands. We plan to
continue to diversify the distribution channels within which licensed products are sold, in an effort to reduce dependence
on any particular retailer, consumer, or market sector within each of our brands. The Lori Goldstein brand, Halston 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.

While the recent sale of a majority interest in the Isaac Mizrahi brand is expected to result in a short-term decrease in our
revenues, as that brand represented a significant portion of our historical revenues, we will seek to replace those revenues
in the long-term with new strategic business initiatives. The proceeds from the sale, as well as future cash flows from our
retained  interest  in  the  Isaac  Mizrahi  brand,  are  expected  to  position  us  to  fund  various  strategic  initiatives  as  we
concentrate our resources on growing our brands, new brand launches, and investing in live streaming technology and new
business partnerships.

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We  continue  to  work  towards  expanding  and  developing  more  efficient  ways  to  operate  our  wholesale  and  e-commerce
businesses,  and  complement  these  operations  with  our  licensing  business.  In  addition,  we  continue  to  seek  new
opportunities, including expansion through interactive television, live streaming, our design, production and supply chain
platform, additional domestic and international licensing arrangements, and acquiring additional brands, including recent
launches of our Victor Glemaud and C Wonder by Christian Sirano businesses on HSN.

However,  the  impacts  of  the  ongoing  COVID-19  pandemic  (including  actions  taken  by  national,  state,  and  local
governments  in  response  to  COVID-19)  has  negatively  impacted  the  U.S.  and  global  economy,  disrupted  consumer
spending and global supply chains, and created significant volatility and disruption of financial markets. More specifically,
COVID-19 has had, and continues to have, a significant negative impact on our business. The initial onset of the pandemic
in  2020  resulted  in  a  sudden  decrease  in  sales  for  many  of  the  Company’s  products,  from  which  we  have  yet  to  fully
recover. The global pandemic has affected the financial health of certain of our customers, and the bankruptcy of certain
other customers; as a result, we recognized bad debt expense of approximately $0.4 million and $0.1 million in the Current
Year and Prior Year, respectively, 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. Due to the ongoing COVID-
19  pandemic,  there  is  significant  uncertainty  surrounding  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.

In addition, the global shipping industry is currently experiencing challenges related to port delays and tight availability for
carriers  and  containers.  This  situation  has  negatively  impacted  our  supply  chain  partners,  including  third  party
manufacturers,  logistics  providers,  and  other  vendors,  as  well  as  the  supply  chains  of  our  licensees,  and  has  resulted  in
increased cost of supply and freight costs for us and our licensees. Such higher costs are currently expected to continue for
at least some portion of 2023.

Further, the cost of raw materials, labor, manufacturing, energy, fuel, shipping and logistics, and other inputs related to the
production and distribution of our products have increased and may continue to increase unexpectedly. Beginning in the
first quarter of 2022, input costs increased significantly. We expect the pressures of input cost inflation to continue for at
least some portion of 2023. We may not be able to mitigate the impact of inflation and cost increases or pass these costs
along to our customers.

Also,  poor  economic  and  market  conditions,  including  a  potential  recession,  may  negatively  impact  market  sentiment,
decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer products, which
would  adversely  affect  our  operating  income  and  results  of  operations.  If  we  are  unable  to  take  effective  measures  in  a
timely manner to mitigate the impact of the inflation as well as a potential recession, our business, financial condition, and
results of operations could be adversely affected.

Our  long-term  success,  however,  will  still  remain  largely  dependent  on  our  ability  to  build  and  maintain  our  brands’
awareness and continue to attract wholesale and direct-to-consumer customers, and contract with and retain key licensees
and potential business partners, as well as our and our licensees’ ability to accurately predict upcoming fashion and design
trends within their respective customer bases and fulfill the product requirements of the particular retail channels within the
global  marketplace.  Unanticipated  changes  in  consumer  fashion  preferences  and  purchasing  patterns,  slowdowns  in  the
U.S. economy, changes in the prices of supplies, consolidation of retail establishments, and other factors noted in Item 1A
of this Annual Report on Form 10-K could adversely affect our licensees’ ability to meet and/or exceed their contractual
commitments to us and thereby adversely affect our future operating results.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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Item 8.      Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of
Xcel Brands, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Xcel Brands, Inc. and Subsidiaries (the “Company”) as
of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for
each  of  the  two  years  in  the  period  ended  December  31,  2022,  and  the  related  notes  (collectively  referred  to  as  the
“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United
States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on  the  Company’s  financial  statements  based  on  our  audits.  We  are  a  public  accounting  firm  registered  with  the  Public
Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We  conducted  our  audits  in  accordance  with  the  standards  of  the  PCAOB.  Those  standards  require  that  we  plan  and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether  due  to  error  or  fraud.  The  Company  is  not  required  to  have,  nor  were  we  engaged  to  perform,  an  audit  of  its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that  was  communicated  or  required  to  be  communicated  to  the  audit  committee  and  that:  (1)  relates  to  accounts  or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken  as  a  whole,  and  we  are  not,  by  communicating  the  critical  audit  matter  below,  providing  separate  opinions  on  the
critical audit matter or on the accounts or disclosures to which it relates.

Liquidity and Management’s Plans

Critical Audit Matter Description

As described further in Note 1 to the financial statements, the Company has incurred recurring losses from operations,
has  an  accumulated  deficit  and  insufficient  revenues  to  cover  its  operating  costs.  The  ability  of  the  Company  to
continue as a going concern is dependent on executing its business plans and meeting its obligations as they come due
within the next twelve months from the filing date of this Annual Report on Form 10-K. Accordingly, the Company
has determined that these factors raise substantial doubt and uncertainty as to the Company’s ability to continue as a

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going  concern.    However,  management  has  implemented  plans  which  are  expected  to  mitigate  these  conditions  or
events, and therefore, such conditions or events of substantial doubt have been alleviated.

How the Critical Audit Matter was Addressed in the Audit

We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and
uncertainty  regarding  the  Company’s  available  capital  and  the  risk  of  bias  in  management’s  judgments  and
assumptions  in  their  determination.  Our  audit  procedures  related  to  considering  whether  the  results  of  our  audit
procedures,  when  considered  in  the  aggregate,  indicate  that  there  could  be  substantial  doubt  about  the  Company’s
ability to continue as a going concern for a reasonable period of time, obtaining information about management’s plans
that are intended to mitigate the effect of such conditions or events, and assessing the likelihood that such plans can be
effectively implemented, included the following, among others:

● We reviewed the Company’s assessment and conclusions regarding their ability to generate cashflows for at

least twelve months from the filing date of this Annual Report on Form 10-K.

● We inquired of Company management and reviewed Company records to assess whether there are additional

factors that contribute to the uncertainties disclosed.

● We assessed whether the Company’s determination that there are factors that raise such uncertainties about

its ability to continue as a going concern, was adequately disclosed in the financial statements.

● We  reviewed  and  evaluated  management's  plans  for  alleviating  such  conditions  and  uncertainties  and
considered  whether  it  is  likely  that  these  conditions  and  uncertainties  would  be  mitigated  for  a  reasonable
period of time and that such plans can be effectively implemented.  

● We performed testing procedures such as reviewing; prospective financial information for the twelve-month
period beginning with the filing date of this Annual Report on Form 10-K, actual operating performance for
periods  subsequent  to  December  31,  2022,  implemented  reductions  in  operating  expenses,  and  plans  for
further reductions to support expected cashflows.  

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2021.

New York, NY

April 17, 2023

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Xcel Brands, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share data)

     December 31, 2022      December 31, 2021

Assets
Current Assets:

Cash and cash equivalents
Accounts receivable, net of allowances of $63 and $1,090, respectively
Inventory
Prepaid expenses and other current assets

Total current assets

Non-current Assets:

Property and equipment, net
Operating lease right-of-use assets
Trademarks and other intangibles, net
Equity method investment
Restricted cash
Deferred tax assets, net
Other assets

Total non-current assets

Total Assets

Liabilities and Stockholders' Equity
Current Liabilities:

Accounts payable, accrued expenses and other current liabilities
Accrued income taxes payable
Accrued payroll
Current portion of operating lease obligations
Current portion of long-term debt
Current portion of contingent obligations

Total current liabilities

Long-Term Liabilities:

Long-term portion of operating lease obligations
Long-term debt, net, less current portion
Long-term portion of contingent obligations

Total long-term liabilities

Total Liabilities

Commitments and Contingencies

Stockholders' Equity:

Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued and outstanding
Common stock, $.001 par value, 50,000,000 shares authorized, and 19,624,860 and 19,571,119 shares
issued and outstanding at December 31, 2022 and December 31, 2021, respectively
Paid-in capital
Accumulated deficit

Total Xcel Brands, Inc. stockholders' equity

Noncontrolling interest
Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

$

$

$

$

4,608
5,110
2,845
1,457
14,020

1,418
5,420
47,665
19,195

—  

1,107
110
74,915

88,935

$

$

3,958
568
416
1,376

—  
243
6,561

5,839

—  

6,396
12,235
18,796

—  

20
103,592
(32,797)
70,815
(676)
70,139

4,483
7,640
3,375
1,681
17,179

2,549
6,314
98,304
—
739
141
555
108,602

125,781

6,169
64
577
1,207
2,500
—
10,517

7,252
25,531
7,539
40,322
50,839

—

20
103,039
(28,779)
74,280
662
74,942

$

88,935

$

125,781

See accompanying Notes to Consolidated Financial Statements.

53

 
   
  
 
   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
  
 
  
 
 
 
 
 
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
Xcel Brands, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share and per share data)

Table of Contents

Revenues

Net licensing revenue
Net sales

Net revenue

Cost of goods sold

Gross profit

Operating costs and expenses

Salaries, benefits and employment taxes
Other selling, general and administrative expenses
Stock-based compensation
Depreciation and amortization
Asset impairment charges

Total operating costs and expenses

Other income (expense)

Gain on sale of majority interest in Isaac Mizrahi brand
Loss from equity method investment
Gain on reduction of contingent obligation

Total other income (expense)

Operating loss

Interest and finance expense

Interest expense - term loan debt
Other interest and finance charges, net
Loss on early extinguishment of debt
Total interest and finance expense

Loss before income taxes

Income tax benefit

Net loss

Net loss attributable to noncontrolling interest

Net loss attributable to Xcel Brands, Inc. stockholders

Loss per common share attributable to Xcel Brands, Inc. stockholders:

Basic and diluted net loss per share

Weighted average number of common shares outstanding:

For the Year Ended
December 31, 

2022

2021

14,737
11,044
25,781
7,980
17,801

16,802
15,386
620
7,263
274
40,345

20,586
(1,202)
900
20,284

(2,260)

1,187
16
2,324
3,527

(5,787)

(431)

(5,356)
(1,338)
(4,018)

(0.20)

$

$

$

21,876
16,056
37,932
10,667
27,265

16,535
14,364
720
6,830
1,372
39,821

—
—
—
—

(12,556)

1,916
147
1,516
3,579

(16,135)

(3,106)

(13,029)
(845)
(12,184)

(0.63)

$

$

$

Basic and diluted weighted average common shares outstanding

19,624,669

19,455,987

See accompanying Notes to Consolidated Financial Statements.

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Xcel Brands, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)

Xcel Brands, Inc. Stockholders

Balance as of January 1, 2021

Compensation expense in connection with stock options and
restricted stock

Shares issued to executive in connection with stock grants for
bonus payments

Shares issued to directors in connection with restricted stock
grants

Shares issued to consultants in connection with restricted stock
grants

Shares issued to employee in connection with contractual
agreement

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

Shares repurchased from employees in exchange for
withholding taxes

Additional investment in Longaberger Licensing, LLC by
noncontrolling interest

Common Stock
Shares
19,260,862

Paid-in
     Amount     Capital
  102,324

19

Accumulated Noncontrolling

Deficit

(16,595)

Interest

     Total

507

$ 86,255

—  

—  

343

—  

—  

343

181,179

50,000

40,336

21,676

1

—

—

—

282

—

75

31

—

—

—

—

—  

283

—

—

—

—

75

31

—

26,253

—  

—  

—  

—  

(9,187)

—  

(16)

—  

—  

(16)

—  

—  

—  

—  

1,000

1,000

Net loss for the year ended December 31, 2021

—  

—  

—  

(12,184)

(845)

  (13,029)

Balance as of December 31, 2021

19,571,119

20

  103,039

(28,779)

662

  74,942

Compensation expense in connection with stock options and
restricted stock

Shares issued to executive in connection with stock grants for
bonus payments

Shares repurchased from executive in exchange for withholding
taxes

Shares issued to directors in connection with restricted stock
grants

Shares issued to consultants in connection with restricted stock
grants

Shares issued to consultant in connection with sale transaction
(see Note 3 and Note 7)

Shares issued to key employee in connection with stock grant

Shares repurchased from key employee in exchange for
withholding taxes related to vesting of restricted shares

—  

—  

534

—  

—  

534

178,727

(53,882)

50,000

20,064

65,275

33,557

—

—

—

—

—

—  

281

(85)

—

33

97

50

—

—

—

—

—

—

—

—

—

—

—  

—  

281

(85)

—

33

97

50

(240,000)

—  

(357)

—  

—  

(357)

Net loss for the year ended December 31, 2022

—  

—  

—  

(4,018)

(1,338)

(5,356)

Balance as of December 31, 2022

19,624,860

$

20

$ 103,592

$

(32,797)

$

(676)

$ 70,139

See accompanying Notes to Consolidated Financial Statements.

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Xcel Brands, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)

Cash flows from operating activities

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense
Asset impairment charges
Amortization of deferred finance costs included in interest expense
Stock-based compensation
Provision for doubtful accounts
Undistributed proportional share of net income of equity method investee
Loss on early extinguishment of debt
Deferred income tax benefit
Gain on sale of majority interest in Isaac Mizrahi brand
Gain on reduction of contingent obligation

Changes in operating assets and liabilities:

Accounts receivable
Inventory
Prepaid expenses and other current and non-current assets
Accounts payable, accrued expenses, accrued payroll, accrued income taxes payable, and other current liabilities
Lease-related assets and liabilities
Other liabilities

Net cash used in operating activities

Cash flows from investing activities

Net proceeds from sale of majority interest in Isaac Mizrahi brand
Capital contribution to equity method investee
Cash consideration for acquisition of Lori Goldstein assets
Purchase of other intangible assets
Purchase of property and equipment

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from exercise of stock options
Shares repurchased including vested restricted stock in exchange for withholding taxes
Cash contribution from noncontrolling interest
Proceeds from revolving loan debt
Proceeds from long-term debt
Payment of deferred finance costs
Payment of revolving loan debt
Payment of long-term debt
Payment of prepayment, breakage and other fees associated with early extinguishment of long-term debt

Net cash (used in) provided by financing activities

Net decrease in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Reconciliation to amounts on consolidated balance sheets:

Cash and cash equivalents
Restricted cash

Total cash, cash equivalents, and restricted cash

Supplemental disclosure of non-cash activities:

Contingent obligation related to acquisition of Lori Goldstein assets at fair value
Liability for equity-based bonuses and other equity-based payments

Supplemental disclosure of cash flow information:

Cash paid during the period for interest
Cash paid during the period for income taxes

For the Year Ended December 31, 

2022

2021

$

(5,356)

$

(13,029)

7,263
274
156
620
413
1,202
2,324
(965)
(20,586)
(900)

2,117
530
566
(1,372)
(244)
(224)
(14,182)

45,386
(600)
—
—
(265)
44,521

—
(442)
—
—
—
—  
—
(29,000)
(1,511)
(30,953)

(614)

5,222

4,608

$

4,608

$
—  
$

4,608

— $
$

(283)

1,032

$
— $

$

$

$

$
$

$
$

6,830
1,372
308
720
102
—
1,516
(3,192)
—
—

1,147
(2,159)
(818)
1,228
(581)
—
(6,556)

—
—
(3,661)
(39)
(1,095)
(4,795)

5
(16)
1,000
2,498
54,000
(2,173)
(2,498)
(41,750)
(559)
10,507

(844)

6,066

5,222

4,483
739
5,222

6,639
(13)

1,799
91

See accompanying Notes to Consolidated Financial Statements.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

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

Xcel Brands, Inc. (“Xcel” and, together with its subsidiaries, 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 LOGO by Lori Goldstein brand (the “Lori Goldstein Brand”), the
Halston brands (the “Halston Brand”), the Judith Ripka brands (the "Ripka Brand"), the C Wonder brands (the “C Wonder
Brand”),  the  Longaberger  brand  (the  “Longaberger  Brand”),  the  Isaac  Mizrahi  brands  (the  “Isaac  Mizrahi  Brand”),  and
other proprietary brands.

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

● The  Company  manages  the  Longaberger  Brand  through  its  50%  ownership  interest  in  Longaberger  Licensing,
LLC;  the  Company  consolidates  Longaberger  Licensing,  LLC  and  recognizes  noncontrolling  interest  for  the
remaining ownership interest held by a third party (see Note 3 for additional details).

● The Company manages the Q Optix business through its 50% ownership interest in Q Optix, LLC.

● The Company wholly owned and managed the Isaac Mizrahi Brand through May 31, 2022. On May 31, 2022, the
Company sold to a third party a majority interest in a newly-created subsidiary that was formed to hold the Isaac
Mizrahi Brand trademarks, but retained a noncontrolling interest in the brand through a 30% ownership interest in
IM  Topco,  LLC  and  continues  to  participate  in  the  operations  of  the  business;  the  Company  accounts  for  its
interest in IM Topco, LLC using the equity method of accounting (see Note 3 for additional details).

The  Company  designs,  produces,  markets,  and  distributes  products,  licenses  its  brands  to  third  parties,  and  generates
licensing  revenues  through  contractual  arrangements  with  manufacturers  and  retailers.  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.

The Company’s wholesale and direct-to-consumer operations are presented as "Net sales" and "Cost of goods sold" in the
Consolidated Statements of Operations, separately from the Company’s licensing revenues.

Liquidity and Management’s Plans

The Company incurred net losses of approximately $5.4 million ($25.9 million excluding the gain on sale of a majority
interest in the Isaac Mizrahi brand) and $13.0 million during the years ended December 31, 2022 and 2021, respectively,
and  had  an  accumulated  deficit  of  approximately  $32.8  million  and  $28.8  million  as  of  December  31,  2022  and  2021,
respectively.  Included  in  the  net  losses  were  non-cash  expenses  of  approximately  $8.2  million  and  $7.5  million  for  the
years ended December 31, 2022 and 2021, respectively. Net cash used in operating activities was $14.2 million in 2022 and
$6.6 million in 2021. The Company had working capital (current assets less current liabilities, excluding the current portion
of lease obligations) of approximately $8.8 million and $7.9 million as of December 31, 2022 and 2021, respectively. The
Company’s  cash  and  cash  equivalents  were  approximately  $4.6  million  as  of  December  31,  2022.  The  aforementioned
factors raise uncertainties about the Company’s ability to continue as a going concern.  

Management  plans  to  mitigate  an  expected  shortfall  of  capital  and  to  support  future  operations  by  shifting  the  business
from a wholesale/licensing hybrid model into a licensing plus business model and to divest or restructure the Longaberger
brand. In the first quarter of 2023, the Company began to restructure its business operations by entering into new licensing
agreements and joint venture arrangements with best-in-class business partners. The Company entered into a new

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

interactive  television  licensing  agreement  with  America’s  Collectibles  Network,  Inc.  d/b/a  JTV  (“JTV”)  for  the  Ripka
Brand, and a separate license with JTV for the Ripka Brand’s e-commerce business. For apparel, similar transactions have
recently  been  executed.  In  conjunction  with  the  launch  of  the  C  Wonder  Brand  on  HSN,  the  Company  licensed  the
wholesale production operations related to the brand to One Jeanswear Group, LLC (“OJG”); this new license with OJG
also includes other new celebrity brands that the Company plans to launch in 2023 and beyond. For the Halston Brand,
management plans on entering into a joint venture related to the brand’s wholesale apparel business with another leading
apparel  manufacturer  (the  “Halston  JV”).  The  Halston  JV  will  develop  an  apparel  business  under  the  H  Halston  brand
through  department  stores,  e-commerce,  and  other  retailers.  The  Halston  JV  will  include  a  wholesale  license  to  Xcel.
Management expects the transition of these operating businesses to be completed by second quarter of 2023. Management
believes that this evolution of the Company’s operating model will provide the Company with significant cost savings and
allow the Company to reduce and better manage its exposure to operating risks. As of March 31, 2023, steps have been
taken to reduce payroll costs by $6 million and operating expenses by $7 million over the next twelve months. Further, the
Company intends to obtain a line of credit to provide additional capital resources. However, there is no assurance that this
line of credit or any other external financing will be obtained.

Based on these recent changes in the Company’s business model, management expects to generate adequate cash flows to
meet the Company’s operating and capital expenditure needs, for at least the twelve months subsequent to the filing date of
this Annual Report on Form 10-K, and therefore, such conditions and uncertainties with respect to the Company’s ability to
continue as a going concern as of December 31, 2022, have subsequently been alleviated.

2.   Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Xcel, its wholly owned subsidiaries, and entities in which
Xcel has a controlling financial interest as of and for the years ended December 31, 2022 (the "Current Year") and 2021
(the  "Prior  Year").  The  consolidated  financial  statements  have  been  prepared  in  accordance  with  accounting  principles
generally  accepted  in  the  United  States  of  America  (“U.S.  GAAP”)  and  in  accordance  with  the  accounting  rules  under
Regulation  S-X,  as  promulgated  by  the  Securities  and  Exchange  Commission  (“SEC”).  All  significant  intercompany
accounts  and  transactions  have  been  eliminated  in  consolidation,  and  net  earnings  have  been  adjusted  by  the  portion  of
operating results of consolidated entities attributable to noncontrolling interests.

Use of Estimates

The  preparation  of  the  consolidated  financial  statements  in  conformity  with  U.S.  GAAP  requires  management  to  make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate
of  the  effect  of  a  condition,  situation,  or  set  of  circumstances  that  existed  at  the  date  of  the  consolidated  financial
statements, which management considered in formulating its estimate, could change in the near term due to one or more
future confirming events. Accordingly, the actual results could differ significantly from estimates.

The Company deems the following items to require significant estimates from management:

● Allowance for doubtful accounts;

● Useful lives of trademarks;

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

● Assumptions used in the valuation of intangible assets, including cash flow estimates for initial determinations of

fair value and/or impairment analysis; and

● Stock-based compensation.

Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Accounts Receivable

Accounts receivable are reported net of the allowance for doubtful accounts. The allowance for doubtful accounts is based
on  the  Company’s  ongoing  discussions  with  its  licensees,  wholesale  and  digital  customers,  and  its  evaluation  of  each
customer’s payment history, account aging, and financial position.

As of December 31, 2022 and 2021, the Company had $5.1 million and $7.6 million, respectively, of accounts receivable,
net of allowances for doubtful accounts of $0.1 million and $1.1 million, respectively. The Company recognized bad debt
expense  of  $0.4  million  and  $0.1  million  for  the  Current  Year  and  Prior  Year,  respectively,  which  was  related  to  the
bankruptcy  of  several  retail  customers  due  to  the  novel  coronavirus  disease  pandemic.  The  Company  wrote-off
approximately $1.5 million of such customers’ outstanding receivable balances in the Current Year.

There is no earned revenue that has been accrued but not billed as of December 31, 2022 and 2021.

As of December 31, 2022, approximately $1.7 million of the Company's outstanding receivables were assigned to a third-
party agent pursuant to a services agreement entered into during the Current Year, under which the Company assigned, for
purposes  of  collection  only,  the  right  to  collect  certain  specified  receivables  on  the  Company's  behalf  and  solely  for  the
Company's  benefit.  Under  such  agreement,  the  Company  retains  ownership  of  such  assigned  receivables,  and  receives
payment  from  the  agent  (less  certain  fees  charged  by  the  agent)  upon  the  agent's  collection  of  the  receivables  from
customers.  During  the  Current  Year,  the  Company  paid  approximately  $0.05  million  in  fees  to  the  agent  under  the
aforementioned services agreement.

Inventory

Inventory is recorded at the lower of cost or net realizable value, with cost determined on a weighted average basis. The
Company  holds  finished  goods  inventory  for  its  direct-to-consumer  operations.  Apparel  and  jewelry  finished  goods
inventory  is  purchased  to  satisfy  orders  received  from  its  wholesale  operations.  The  Company  periodically  reviews  the
composition of its inventories in order to identify obsolete, slow-moving or otherwise non-saleable items. If non-saleable
items  are  observed  and  there  are  no  alternate  uses  for  the  inventories,  the  Company  will  record  a  write-down  to  net
realizable  value  in  the  period  that  the  decline  in  value  is  first  recognized.  Write-downs  for  inventory  shrinkage,
representing the risk of physical loss of inventory, are estimated based on historical experience and are adjusted based upon
physical inventory counts.

Property and Equipment

Furniture, equipment, and software are stated at cost less accumulated depreciation and amortization, and are depreciated
using the straight-line method over their estimated useful lives, generally three (3) to seven (7) years. Depreciation expense
for the years ended December 31, 2022 and 2021 was approximately $1.1 million and $1.3 million, respectively.

Leasehold  improvements  are  amortized  over  the  shorter  of  their  estimated  useful  lives  or  the  terms  of  the  leases.
Betterments and improvements are capitalized, while repairs and maintenance are expensed as incurred.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Costs  to  develop  or  acquire  software  for  internal  use  incurred  during  the  preliminary  project  stage  and  the  post
implementation  stage  are  expensed,  while  internal  and  external  costs  to  acquire  or  develop  software  for  internal  use
incurred during the application development stage – including design, configuration, coding, testing, and installation – are
generally capitalized.

The  Company’s  long-lived  property  and  equipment  assets  are  reviewed  for  impairment  whenever  events  or  changes  in
circumstances indicate that their carrying value may not be recoverable. An impairment loss is recognized if the carrying
amount of an asset is not recoverable and its carrying amount exceeds its fair value. With reference to such impairment
testing,  the  Company  groups  assets  and  liabilities  at  the  lowest  level  for  which  identifiable  cash  flows  are  largely
independent of the cash flows of other assets and liabilities and evaluates the asset group against the sum of undiscounted
future  cash  flows.  If  the  undiscounted  cash  flows  do  not  indicate  the  carrying  amount  of  the  asset  is  recoverable,  an
impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based
on undiscounted cash flows analysis or appraisals. The inputs utilized in the impairment analysis are classified as Level 3
inputs within the fair value hierarchy as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 820, “Fair Value Measurement.”

As a result of management’s decision to close its brick-and-mortar fine jewelry retail store, the Company recognized a $0.7
million impairment charge in the Prior Year related to furniture and fixtures, equipment, and leasehold improvement assets
of the store, and a $0.7 million impairment charge in the Prior Year related to the operating lease right-of-use asset for the
store. Separately, the Company recognized impairment charges of $0.3 million in the Current Year related to store fixtures
purchased for an apparel program with one of the Company’s retail partners.

Trademarks and Other Intangible Assets

The  Company  follows  FASB  ASC  Topic  350,  “Intangibles  -  Goodwill  and  Other.”  Under  this  standard,  goodwill  and
indefinite-lived  intangible  assets  are  not  amortized,  but  are  required  to  be  assessed  for  impairment  at  least  annually  (the
Company utilizes December 31 as its testing date) and when events occur or circumstances change that would more likely
than not reduce the fair value of the asset below its carrying amount.

Indefinite-Lived Intangible Asset

The Company tests its indefinite-lived intangible asset for recovery in accordance with ASC-820-10-55-3F, which states
that the income approach (“Income Approach”) converts future amounts (for example cash flows) to a single current (that
is, discounted) amount. When the Income Approach is used, fair value measurement reflects current market expectations
about  those  future  amounts.  The  Income  Approach  is  based  on  the  present  value  of  future  earnings  expected  to  be
generated  by  a  business  or  asset.  Income  projections  for  a  future  period  are  discounted  at  a  rate  commensurate  with  the
degree of risk associated with future proceeds. A residual or terminal value is also added to the present value of the income
to quantify the value of the business beyond the projection period. As such, recoverability of assets to be held and used is
measured  by  a  comparison  of  the  carrying  amount  of  the  asset  to  its  expected  future  discounted  net  cash  flows.  If  the
carrying amount of such assets is considered to be impaired, the impairment to be recognized is measured as the amount by
which the carrying amount of the assets exceeds the recoverable amount of the assets.

The  Company  performed  its  annual  impairment  testing  as  described  above  for  the  year  ended  December  31,  2021,  and
concluded  that  there  was  no  impairment  of  its  indefinite-lived  intangible  asset.  The  Company  subsequently  sold  its
indefinite-lived intangible asset during the Current Year for a gain (see Note 3 for additional details).

Finite-Lived Intangible Assets

The  Company’s  finite-lived  intangible  assets,  including  Trademarks,  are  reviewed  for  impairment  whenever  events  or
changes in circumstances indicate that their carrying value may not be recoverable. An impairment loss is recognized if the
carrying amount of a finite-lived intangible asset is not recoverable and its carrying amount exceeds its fair value.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

With reference to finite-lived intangible assets impairment testing, the Company groups assets and liabilities at the lowest
level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluates
the  asset  group  against  the  sum  of  undiscounted  future  cash  flows.  If  the  undiscounted  cash  flows  do  not  indicate  the
carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount
of the asset group exceeds its fair value based on discounted cash flows analysis or appraisals. The inputs utilized in the
finite-lived intangible assets impairment analysis are classified as Level 3 inputs within the fair value hierarchy as defined
in ASC Topic 820, “Fair Value Measurement.”

No impairment charges were recorded related to finite-lived intangible assets for the Current Year or Prior Year.

The  Company’s  finite-lived  intangible  assets  are  amortized  over  their  estimated  useful  lives  of  three  (3)  to  eighteen
(18)  years.  The  Company  re-evaluates  the  remaining  useful  life  of  its  finite-lived  intangible  assets  on  an  annual  basis,
based  on  consideration  of  current  events  and  circumstances,  the  expected  use  of  the  asset,  and  the  effects  of  demand,
competition, and other economic factors. No changes were made to the estimated useful lives of intangible assets in the
Current Year or Prior Year.

Restricted Cash

Restricted cash was $0.7 million as of December 31, 2021. This balance consisted of cash deposited as collateral for an
irrevocable  standby  letter  of  credit  associated  with  the  lease  of  the  Company’s  current  corporate  office  and  operating
facility at 1333 Broadway, New York City. There was no restricted cash at December 31, 2022, as the aforementioned letter
of credit expired and was not renewed.

Investments in Unconsolidated Affiliates

The Company holds a noncontrolling equity interest in IM Topco, LLC, which was entered into during the Current Year
(see Note 3 for additional details). This investment is accounted for in accordance with ASC Topic 323, “Investments –
Equity  Method  and  Joint  Ventures,”  as  the  Company  has  the  ability  to  exercise  significant  influence  over  operating  and
financial policies but does not control the affiliate. As of December 31, 2022, the carrying value of this investment on the
Company’s  consolidated  balance  sheet  was  $19.2  million.  The  Company  recognizes  its  share  of  the  ongoing  operating
results of IM Topco LLC (based on the distribution provisions set forth in the related business venture agreement) as other
income (expense) in the accompanying consolidated statement of operations for the Current Year.  

The  Company  also  holds  a  limited  partner  ownership  interest  in  an  unconsolidated  affiliate,  which  was  entered  into  in
2016.  This  investment  is  accounted  for  in  accordance  with  ASC  Topic  321,  “Investments  –  Equity  Securities,”  and  is
included  within  other  assets  on  the  Company’s  consolidated  balance  sheets  at  December  31,  2022  and  2021.  As  of
December  31,  2022  and  2021,  the  carrying  value  of  this  investment  was  $0.1  million.  This  investment  does  not  have  a
readily  determinable  fair  value  and  in  accordance  with  ASC  820-10-35-59,  the  investment  is  valued  at  cost,  less
impairment, plus or minus observable price changes of an identical or similar investment of the same issuer.

Deferred Finance Costs

The  Company  previously  incurred  costs  (primarily  professional  fees  and  lender  underwriting  fees)  in  connection  with
borrowings under senior secured term loans. Such costs were deferred on the consolidated balance sheet as a reduction to
the carrying value of the associated borrowing, and were amortized as interest expense using the effective interest method.

Contingent Obligations

When  accounting  for  asset  acquisitions,  if  any  contingent  obligations  exist  and  the  fair  value  of  the  assets  acquired  is
greater  than  the  consideration  paid,  any  contingent  obligations  are  recognized  and  recorded  as  the  positive  difference
between the fair value of the assets acquired and the consideration paid for the acquired assets.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

When  accounting  for  asset  acquisitions,  if  any  contingent  obligations  exist  and  the  fair  value  of  the  assets  acquired  are
equal to the consideration paid, any contingent obligations are recognized based upon the Company’s best estimate of the
amount that will be paid to settle the liability.

The Company recorded contingent obligations in connection with the acquisitions of the Halston Heritage trademarks in
2019 and the LOGO by Lori Goldstein trademarks in 2021. See Note 3 and Note 9 for additional information related to
contingent obligations.

Under  the  applicable  accounting  guidance,  the  Company  is  required  to  carry  such  contingent  liability  balances  on  its
consolidated  balance  sheet  until  the  measurement  period  of  the  earn-out  expires  and  all  related  contingencies  have  been
resolved.

Revenue Recognition

The Company applies the guidance in ASC Topic 606, “Revenue from Contracts with Customers” to recognize revenue.

Licensing

The Company recognizes revenue continuously over time as it satisfies its continuous obligation of granting access to its
licensed intellectual properties, which are deemed symbolic intellectual properties under the applicable revenue accounting
guidance.  Payments  are  typically  due  after  sales  have  occurred  and  have  been  reported  by  the  licensees  or,  where
applicable,  in  accordance  with  minimum  guaranteed  payment  provisions.  The  timing  of  performance  obligations  is
typically  consistent  with  the  timing  of  payments,  though  there  may  be  differences  if  contracts  provide  for  advances  or
significant escalations of contractually guaranteed minimum payments. There were no such differences that would have a
material impact on the Company’s consolidated balance sheets at December 31, 2022 and 2021. In accordance with ASC
606-10-55-65, the Company recognizes net licensing revenue at the later of when (1) the subsequent sale or usage occurs
or (2) the performance obligation to which some or all of the sales- or usage-based royalty has been allocated is satisfied
(in whole or in part). More specifically, the Company separately identifies:

(i) Contracts  for  which,  based  on  experience,  royalties  are  expected  to  exceed  any  applicable  minimum
guaranteed  payments,  and  to  which  an  output-based  measure  of  progress  based  on  the  “right  to  invoice”
practical expedient is applied because the royalties due for each period correlate directly with the value to the
customer of the Company’s performance in each period (this approach is identified as “View A” by the FASB
Revenue Recognition Transition Resource Group, “TRG”); and

(ii) Contracts  for  which  revenue  is  recognized  based  on  minimum  guaranteed  payments  using  an  appropriate
measure of progress, in which minimum guaranteed payments are straight-lined over the term of the contract
and recognized ratably based on the passage of time, and to which the royalty recognition constraint to the
sales-based  royalties  in  excess  of  minimum  guaranteed  is  applied  and  such  sales-based  royalties  are
recognized to the distinct period only when the minimum guaranteed is exceeded on a cumulative basis (this
approach is identified as “View C” by the TRG).

The  Company  does  not  typically  perform  by  transferring  goods  or  services  to  customers  before  the  customer  pays
consideration  or  before  payment  is  due,  thus  the  amounts  of  contract  assets  as  defined  by  ASC  606-10-45-3  related  to
licensing contracts were not material as of December 31, 2022 and 2021. The Company’s unconditional right to receive
consideration  based  on  the  terms  and  conditions  of  licensing  contracts  is  presented  as  accounts  receivable  on  the
accompanying  consolidated  balance  sheets.  The  Company  typically  does  not  receive  consideration  in  advance  of
performance  and,  consequently,  amounts  of  contract  liabilities  as  defined  by  ASC  606-10-45-2  related  to  licensing
contracts were not material as of December 31, 2022 and 2021.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

The  Company  does  not  disclose  the  amount  attributable  to  unsatisfied  or  partially  satisfied  performance  obligations  for
variable  revenue  contracts  (identified  under  “View  A”  above)  in  accordance  with  the  optional  exemption  allowed  under
ASC  606.  The  Company  did  not  have  any  revenue  recognized  in  the  reporting  period  from  performance  obligations
satisfied,  or  partially  satisfied,  in  previous  periods.  Remaining  minimum  guaranteed  payments  for  active  contracts  as  of
December  31,  2022  are  expected  to  be  recognized  ratably  in  accordance  with  View  C  over  the  remaining  term  of  each
contract based on the passage of time and through December 2024, subject to renewal or extension upon termination.

Wholesale Sales

The Company generates revenue through the design, sourcing, and sale of branded jewelry and apparel to both domestic
and international customers who, in turn, sell the products to the consumer. The Company recognizes revenue within net
sales in the accompanying consolidated statements of operations when performance obligations identified under the terms
of contracts with its customers are satisfied, which occurs upon the transfer of control of the merchandise in accordance
with the contractual terms and conditions of the sale. Shipping to customers is accounted for as a fulfillment activity and is
recorded within other selling, general and administrative expenses.

Direct to Consumer Sales

The  Company’s  revenue  associated  with  its  e-commerce  businesses  is  recognized  within  net  sales  in  the  accompanying
consolidated statements of operations at the point in time when product is shipped to the customer. Shipping to customers
is  accounted  for  as  a  fulfillment  activity  and  is  recorded  within  other  selling,  general  and  administrative  expenses.  The
Company’s  revenue  related  to  its  brick-and-mortar  retail  store  is  recognized  within  net  sales  in  the  accompanying
consolidated statements of operations at the point of sale to the customer.

Advertising Costs

All  costs  associated  with  production  for  the  Company’s  advertising,  marketing,  and  promotion  are  expensed  during  the
periods when the activities take place. All other advertising costs, such as print and online media, are expensed when the
advertisement  occurs.  The  Company  incurred  approximately  $2.6  million  and  $2.5  million  in  advertising  and  marketing
costs for the Current Year and Prior Year, respectively, which are included within other selling, general and administrative
expenses in the accompanying consolidated statements of operations.  

Leases

The  Company  determines  if  an  arrangement  is  a  lease  (as  defined  in  ASC  Topic  842,  “Leases”)  at  the  inception  of  the
arrangement. The Company generally recognizes a right-of-use (“ROU”) asset, representing its right to use the underlying
leased  asset  for  the  lease  term,  and  a  liability  for  its  obligation  to  make  future  lease  payments  (the  lease  liability)  at
commencement date (the date on which the lessor makes the underlying asset available for use) based on the present value
of lease payments over the lease term. The Company does not recognize ROU assets and lease liabilities for lease terms of
12 months or less, but recognizes such lease payments in operations on a straight-line basis over the lease terms.

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.

For  real  estate  leases  of  office  space,  the  Company  accounts  for  the  lease  and  non-lease  components  as  a  single  lease
component. Variable lease payments that do not depend on an index or rate (such as real estate taxes and building insurance
and lessee’s shares thereof), if any, are excluded from lease payments at lease commencement date for initial measurement.
Subsequent  to  initial  measurement,  these  variable  payments  are  recognized  when  the  event  determining  the  amount  of
variable consideration to be paid occurs.

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Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Lease  expense  for  operating  lease  payments  is  generally  recognized  on  a  straight-line  basis  over  the  lease  term.  The
Company recognizes income from subleases (in which the Company is the sublessor) on a straight-line basis over the term
of the sublease, as a reduction to lease expense.

Stock-Based Compensation

The  Company  accounts  for  stock-based  compensation  in  accordance  with  ASC  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 stock 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, the expected life of the awards and the expected stock price volatility over the terms of the awards. The expected life is
based  on  the  estimated  average  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 risk-free rate is based on the U.S. Treasury rate
for the expected term at the time of grant, volatility is based on the historical volatility of the Company’s common stock,
and 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, based on the quoted
market price of the Company’s common shares on the NASDAQ Global Market.

Non-employee awards are measured at the grant date fair value of the equity instruments to be issued, and the Company
recognizes compensation cost for grants to non-employees on a straight-line basis over the period of the grant.

The Company accounts for forfeitures as a reduction of compensation cost in the period when such forfeitures occur.

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. Expense for such awards is recognized only to
the extent that the achievement of the specified performance target(s) has been met or is considered probable.

Income Taxes

Current  income  taxes  are  based  on  the  respective  period’s  taxable  income  for  federal  and  state  income  tax  reporting
purposes.  Deferred  tax  liabilities  and  assets  are  determined  based  on  the  difference  between  the  financial  statement  and
income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected
to reverse. A valuation allowance is required if, based on the weight of available evidence, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.

The Company applies the FASB guidance on accounting for uncertainty in income taxes, which prescribes a recognition
threshold  and  measurement  process  for  financial  statement  recognition  and  measurement  of  a  tax  position  taken  or
expected  to  be  taken  in  a  tax  return,  and  also  addresses  derecognition,  classification,  interest,  and  penalties  related  to
uncertain tax positions. The Company has no unrecognized tax benefits as of December 31, 2022 and 2021. Interest and
penalties  related  to  uncertain  tax  positions,  if  any,  are  recorded  in  income  tax  expense.  Tax  years  that  remain  open  for
assessment for federal and state tax purposes include the years ended December 31, 2019 through December 31, 2022.

The income tax effects of changes in tax laws are recognized in the period when enacted.

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Fair Value

XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

ASC Topic 820, “Fair Value Measurement,” defines fair value and establishes a framework for measuring fair value under
U.S. GAAP. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that
the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the
liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the
fair value of the Company’s assets and liabilities, the Company seeks to maximize the use of observable inputs (market
data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how
market participants would price assets and liabilities).

Fair Value of Financial Instruments

For  certain  of  the  Company’s  financial  instruments,  including  cash  and  cash  equivalents,  restricted  cash,  accounts
receivable,  and  accounts  payable,  the  carrying  amounts  approximate  fair  value  due  to  the  short-term  maturities  of  these
instruments.  The  carrying  value  of  term  loan  debt  approximates  fair  value  because  the  fixed  interest  rate  approximates
current market rates and in the instances it does not, the impact is not material. When debt interest rates are below market
rates,  the  Company  considers  the  discounted  value  of  the  difference  of  actual  interest  rates  and  its  internal  borrowing
against the scheduled debt payments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and
cash  equivalents,  restricted  cash,  and  accounts  receivable.  The  Company  limits  its  credit  risk  with  respect  to  cash  by
maintaining  cash,  cash  equivalents,  and  restricted  cash  balances  with  high  quality  financial  institutions.  At  times,  the
Company’s cash, cash equivalents, and restricted cash may exceed federally insured limits. Concentrations of credit risk
with  respect  to  accounts  receivable  are  minimal  due  to  the  collection  history  and  due  to  the  nature  of  the  Company’s
royalty revenues. Generally, the Company does not require collateral or other security to support accounts receivable.

Earnings (Loss) Per Share

Basic  earnings  (loss)  per  share  is  computed  by  dividing  net  income  (loss)  available  to  common  stockholders  by  the
weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive
securities. Diluted earnings (loss) per share reflect, in periods in which they have a dilutive effect, the effect of common
shares issuable upon the exercise of stock options and warrants using the treasury stock method. The difference between
basic and diluted weighted-average common shares results from the assumption that all dilutive stock options and warrants
outstanding were exercised into common stock if the effect is not anti-dilutive.

Recently Issued Accounting Pronouncements

In  June  2016,  the  FASB  issued  Accounting  Standards  Update  (“ASU”)  No.  2016-13,  "Financial  Instruments  –  Credit
Losses  (Topic  326):  Measurement  of  Credit  Losses  on  Financial  Instruments,"  which  was  subsequently  amended  in
November 2018 through ASU No. 2018-19. This ASU will require entities to estimate lifetime expected credit losses for
financial  instruments,  including  trade  and  other  receivables,  which  will  result  in  earlier  recognition  of  credit  losses.
Subsequently, the FASB issued additional guidance in ASU No. 2019-05 in May 2019, ASU No. 2019-10 and 2019-11 in
November  2019,  ASU  No.  2020-02  in  February  2020,  and  ASU  No.  2022-02  in  March  2022.  Among  other  things,  the
additional guidance deferred the application of the new guidance on credit losses for smaller reporting companies to fiscal
years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently
evaluating the new guidance to determine the impact the adoption of this guidance will have on the Company’s results of
operations, cash flows, and financial condition when it is adopted during the first quarter of 2023.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Recently Adopted Accounting Pronouncements

The  Company  adopted  ASU  No.  2019-12,  “Income  Taxes  (Topic  740):  Simplifying  the  Accounting  for  Income  Taxes”
effective January 1, 2021. 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.

The Company adopted ASU No. 2021-10, “Government Assistance (Topic 823): Disclosures by Business Entities about
Government Assistance.” This ASU requires certain financial statement disclosures about transactions with a government
that are accounted for by applying a grant or contribution accounting model by analogy. As this ASU only affects financial
statement disclosures, the adoption of this guidance did not have any impact on the Company’s results of operations, cash
flows, or financial condition.

3. Acquisitions, Divestitures and Variable Interest Entities

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
ASC Subtopic 805-50. Based on the performance of the Lori Goldstein brand through December 31, 2022, approximately
$0.2 million of additional consideration has been earned and is payable to the Seller in 2023.

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
Cash paid subsequent to closing
Total direct initial consideration
Direct transaction expenses
Contingent obligation (Lori Goldstein Earn-Out)
Total consideration

$

$

1,600
2,045
3,645
16
6,639
10,300

The aggregate purchase price was 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 consolidated

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Notes to Consolidated Financial Statements
December 31, 2022 and 2021

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, such success-related
bonuses having been approved by the Board of Directors on March 18, 2021. These bonuses were expensed on the Closing
Date and 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. The Company therefore recognized $1.2 million and
$0.9 million of salary expense within salaries, benefits and employment taxes in the accompanying consolidated statements
of  operations,  and  $0.8  million  and  $0.6  million  of  consulting  expense  within  other  selling,  general  and  administrative
expenses  in  the  accompanying  consolidated  statements  of  operations,  in  the  Current  Year  and  Prior  Year,  respectively,
related to such agreements.

Sale of Majority Interest in Isaac Mizrahi Brand

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

The purchase price paid by WHP to the Company at the closing of the transaction in exchange for the 70% membership
interest  in  IM  Topco  consisted  of  $46.2  million  in  cash.  Pursuant  to  the  purchase  agreement,  the  Company  will  also  be
entitled to receive an “earn-out” payment in the amount of $2.0 million if, during the period from January 1, 2023 through
December 31, 2023, (i) IM Topco receives Net Royalty Revenue (as defined in the purchase agreement) in an amount equal
to or greater than $17.5 million and (ii) IM Topco generates EBITDA (as defined in the purchase agreement) in an amount
equal  to  or  greater  than  $11.8  million.  Additionally,  in  the  event  that  IM  Topco  receives  less  than  $13.347  million  in
aggregate royalties for any four consecutive calendar quarters over a three-year period ending on the third anniversary of
the  closing,  WHP  will  be  entitled  to  receive  from  the  Company  up  to  $16  million,  less  all  amounts  of  net  cash  flow
distributed to WHP for such period, as an adjustment to the purchase price, payable in either cash or equity interests in IM
Topco  held  by  the  Company.  Based  on  IM  Topco’s  earnings  from  May  31,  2022  through  December  31,  2022  and  the
applicable  distribution  provisions,  WHP  earned  $4.32  million  in  cash  flow,  which  reduces  the  potential  purchase  price
adjustment to $11.68 million.

In connection with the aforementioned membership purchase agreement, on May 31, 2022, the Company and WHP entered
into an Amended and Restated Limited Liability Company Agreement of IM Topco (the “Business Venture Agreement”)
governing the operation of IM Topco as a partnership between the Company and WHP following the closing. Pursuant to
the Business Venture Agreement, IM Topco is managed by a single Manager appointed by the vote of a majority-in-interest
of IM Topco’s members, and WHP serves as the sole Manager of IM Topco. The Business Venture Agreement contains
customary provisions for the governance of a partnership, including with respect to decision making, access to information,
restrictions on transfer of interests, and covenants.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Pursuant to the Business Venture Agreement, IM Topco’s Net Cash Flow (as defined in the agreement) shall be distributed
to the members during each fiscal year no less than once per fiscal quarter, as follows:

(i)

first, 100% to WHP, until WHP has received an aggregate amount during such fiscal year equal to $8,852,000;

(ii) second, 100% to Xcel, until Xcel has received an aggregate amount during such fiscal year equal to $1,316,200;

and

(iii) thereafter, in proportion to the members’ respective ownership interests.

The amounts described in (i) and (ii) above are subject to adjustment in certain circumstances as set forth in the Business
Venture Agreement.

The Company also entered into a number of other related agreements on May 31, 2022 in connection with the transaction,
as described below:

● The  Company  entered  into  a  services  agreement  with  IM  Topco,  pursuant  to  which  the  Company  will  provide
certain design and support services (including assistance with the operations of the interactive television business
and related talent support) to IM Topco in exchange for payments of $0.3 million per fiscal year.

● The  Company  entered  into  a  license  agreement  with  IM  Topco,  pursuant  to  which  IM  Topco  granted  the
Company a license to use certain Isaac Mizrahi trademarks on and in connection with the design, manufacture,
distribution,  sale,  and  promotion  of  women’s  sportswear  products  in  the  United  States  and  Canada  during  the
term of the agreement, in exchange for the payment of royalties in connection therewith. The initial term of this
agreement ends December 31, 2026, and provides guaranteed royalties of $0.4 million per year to IM Topco.

● The Company’s licensing agreement with Qurate Retail Group related to the Isaac Mizrahi Brand (see Note 5)

was assigned to IM Topco as of May 31, 2022.

● The  Company’s  employment  agreement  with  Mr.  Mizrahi  and  the  Company’s  services  agreement  with  Laugh
Club (see Note 11) were transferred to IM Topco. In addition, all 522,500 unvested shares of restricted stock of
the  Company  held  by  Mr.  Mizrahi  (for  which  all  stock-based  compensation  expense  had  been  previously
recognized  in  prior  periods)  were  immediately  vested,  with  240,000  of  such  shares  being  surrendered  for
cancellation  in  satisfaction  of  withholding  tax  obligations.  In  addition,  the  Company  issued  33,557  additional
shares  of  common  stock  of  the  Company  (valued  at  $50,000)  to  Mr.  Mizrahi,  which  vested  immediately,  and
made a $100,000 cash payment to Mr. Mizrahi.

Management assessed and evaluated the ownership structure and other terms of the May 27, 2022 membership purchase
agreement and Business Venture Agreement, as well as considered the Company’s continuing involvement with the Isaac
Mizrahi Brand through the aforementioned services agreement and licensing agreement, and concluded that (i) IM Topco is
not  a  Variable  Interest  Entity  under  ASC  Topic  810,  and  (ii)  the  Company  has  significant  influence  over,  but  does  not
control, IM Topco. As such, on May 31, 2022, the Company de-recognized the carrying amount of the Isaac Mizrahi Brand
trademarks  of  $44.5  million  and  recognized  the  fair  value  of  its  retained  interest  in  IM  Topco  of  approximately  $19.8
million as an equity method investment on the accompanying consolidated balance sheet. The fair value of the Company’s
retained interest was determined by applying the Company’s ownership percentage to the implied enterprise value of IM
Topco, which was calculated based on the price paid by WHP for the 70% controlling interest, as the May 31, 2022 sale
transaction was considered an arms-length transaction between knowledgeable market participants and the most relevant
and reasonable indication of value to utilize. The inputs and assumptions for this nonrecurring fair value measurement are
classified as Level 3 within the fair value hierarchy defined in ASC Topic 820.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

The Company incurred approximately $0.9 million of expenses directly related to this transaction, including legal fees and
agent  fees,  of  which  $0.1  million  of  the  agent  fees  were  paid  through  the  issuance  of  65,275  shares  of  the  Company’s
common stock, which were recognized as a reduction to the gain from the transaction. The Company recognized a net pre-
tax  gain  from  the  transaction  of  $20.6  million,  which  is  classified  as  other  income  in  the  consolidated  statement  of
operations for the Current Year.

In  addition  to  the  amounts  described  above,  the  Company’s  Board  of  Directors  awarded  cash  bonuses  totaling
approximately  $1.0  million  to  certain  members  of  the  Company’s  senior  management.  These  bonuses  are  included  in
Salaries, benefits and employment taxes in the accompanying consolidated statement of operations for Current Year.

During  the  Current  Year  subsequent  to  the  May  27,  2022  transaction,  the  Company  made  a  capital  contribution  to  IM
Topco of $0.6 million in cash, which did not change the Company’s noncontrolling ownership interest of 30%.

The Company accounts for its interest in the ongoing operations of IM Topco as other income (expense) under the equity
method  of  accounting.  The  Company  recognized  an  equity  method  loss  of  approximately  $1.2  million  related  to  its
investment for the year ended December 31, 2022, based on the aforementioned distribution provisions and preferences set
forth in the Business Venture Agreement.

Summarized  financial  information  for  IM  Topco  for  the  period  commencing  May  31,  2022  (the  date  of  the  sale  of  a
majority interest in IM Topco) through December 31, 2022 is as follows:

($ in thousands)
Revenues
Gross profit
Income from continuing operations
Net income

Longaberger Licensing, LLC Variable Interest Entity

$

7,791
7,791
317
317

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

During the Prior Year, the Members made capital contributions to LL of $1.0 million each in order to fund LL’s working
capital requirements. This resulted in increases to the carrying value of Hilco Global’s noncontrolling interest in LL for the
Prior year of $1.0 million. The impacts of Xcel’s capital contributions were eliminated in consolidation.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

4.   Trademarks and Other Intangibles   

Trademarks and other intangibles, net consist of the following:

     Weighted     
Average

December 31, 2022

($ in thousands)
Trademarks (finite-lived)
Copyrights and other intellectual property
Total

($ in thousands)
Trademarks (indefinite-lived)
Trademarks (finite-lived)
Non-compete agreement
Copyrights and other intellectual property
Total

  Amortization Gross Carrying Accumulated
Amortization
Amount
21,346
298
21,644

Period
15 years
8 years

68,880
429
69,309

$

$

     Weighted     
Average

December 31, 2021

  Amortization  Gross Carrying Accumulated
Amortization
Amount
$

$

— $

Net Carrying
Amount

47,534
131
47,665

$

Net Carrying
Amount

44,500
68,880
562
429
114,371

$

15,268
562
237
16,067

$

$

44,500
53,612
—
192
98,304

Period
n/a
15 years
7 years
8 years

During  the  Current  Year,  the  Company  sold  its  $44.5  million  of  indefinite-lived  trademarks  related  to  the  Isaac  Mizrahi
Brand (see Note 3 for details). Also during the Current Year, the Company retired its intangible asset for a non-compete
agreement related to the Halston Brand, as such intangible asset had reached the end of its estimated useful life and had
become fully amortized.

Amortization expense for intangible assets for the Current Year and Prior Year was approximately $6.1 million and $5.6
million, respectively.

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

($ in thousands)
Year Ending December 31, 
2023
2024
2025
2026
2027
Thereafter (through 2036)

Total

5.   Significant Contracts

Qurate Agreements

Amortization
Expense

$

$

6,140
6,120
4,177
3,533
3,507
24,188
47,665

Through  its  wholly  owned  subsidiaries,  the  Company  has  direct-to-retail  license  agreements  with  Qurate  Retail  Group
(“Qurate”), pursuant to which the Company designs, and Qurate sources and sells, various products under the LOGO by
Lori  Goldstein  brand,  the  Longaberger  brand,  and  the  Judith  Ripka  brand.  These  agreements  include,  respectively,  the
LOGO  Qurate  Agreement,  Longaberger  Qurate  Agreement,  and  the  Ripka  Qurate  Agreement.  The  Company  was  also
previously a party to similar agreements with Qurate related to the Isaac Mizrahi brand (the IM Qurate Agreement) and the
H by Halston brand (the H Qurate Agreement). Qurate owns the rights to all designs produced under the aforementioned

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

agreements (collectively, the “Qurate Agreements”), and the Qurate Agreements include the sale of products across various
categories through Qurate’s television media (including QVC and HSN) and related internet sites.

Pursuant to the agreements, the Company granted to Qurate and its affiliates the exclusive, worldwide right to promote the
Company’s branded products, and the right to use and publish the related trademarks, service marks, copyrights, designs,
logos, and other intellectual property rights owned, used, licensed, and/or developed by the Company, for varying terms as
set forth below.

Agreement
LOGO Qurate Agreement
Longaberger Qurate Agreement
Ripka Qurate Agreement
IM Qurate Agreement
H Qurate Agreement

Current Term
Expiry
November 1, 2023
October 31, 2023  
*
**
***

Xcel Commenced
     Brand with QVC     
April 2021

Automatic
Renewal
one-year period
two-year period  November 2019 
not applicable  
not applicable
not applicable  

April 2014
September 2011
January 2015  

QVC Product
Launch
2009
2019
1999
2010
2015

* On August 30, 2022, Qurate and the Company amended the Ripka Qurate Agreement such that the license period was
terminated effective December 31, 2021. Effective January 1, 2022, the agreement entered a sell-off period, under which
Qurate  may  continue  to  license  the  Ripka  brand  on  a  non-exclusive  basis  for  as  long  as  necessary  to  sell  off  any  of  its
remaining inventory.

** On May 31, 2022, in connection with the sale of a majority interest in the Isaac Mizrahi brand to WHP, this agreement
was assigned to IM Topco, LLC. See Note 3 for additional details.

*** In the fourth quarter of 2020, the Company transitioned and discontinued licensing of the H Halston brand to Qurate.
The Company began wholesale supply sales of the H Halston products under arrangements with HSN and certain Qurate
global affiliates and other unrelated interactive television networks.

In  connection  with  the  Qurate  Agreements  and  during  the  same  periods,  Qurate  and  its  subsidiaries  have  the  exclusive,
worldwide  right  to  use  the  names,  likenesses,  images,  voices,  and  performances  of  the  Company’s  spokespersons  to
promote the respective products.

Under the Qurate Agreements, Qurate is obligated to make payments to the Company on a quarterly basis, based primarily
upon  a  percentage  of  the  net  retail  sales  of  the  specified  branded  products.  Net  retail  sales  are  defined  as  the  aggregate
amount of all revenue generated through the sale of the specified branded products by Qurate and its subsidiaries under the
Qurate Agreements, net of customer returns, and excluding freight, shipping and handling charges, and sales, use, or other
taxes.

Also, under the Qurate Agreements, except for the Longaberger Qurate Agreement, the Company will pay for a period of
time  a  royalty  participation  fee  to  Qurate  on  revenue  earned  from  the  sale,  license,  consignment,  or  any  other  form  of
distribution of any products, bearing, marketed in connection with, or otherwise associated with the specified trademarks
and brands. Such royalty participation fees are recorded as a reduction to net licensing revenue.

Net  licensing  revenue  from  Qurate  totaled  $11.4  million  and  $18.8  million  for  the  Current  Year  and  Prior  Year,
respectively,  representing  approximately  44%  and  50%  of  the  Company’s  total  net  revenue,  respectively.  As  of
December  31,  2022  and  2021,  the  Company  had  receivables  from  Qurate  of  $0.9  million  and  $3.5  million,  representing
approximately 17% and 46% of the Company’s accounts receivable, respectively. The December 31, 2022 and 2021 Qurate
receivables did not include any earned revenue accrued but not yet billed as of the respective balance sheet dates.

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6.   Debt  

XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

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

($ in thousands)
Term loan debt
Unamortized deferred finance costs related to term loan debt

Total

Current portion of debt
Long-term debt

December 31, 
2022

December 31, 
2021

$

$

— $
—  
—  
—  
— $

29,000
(969)
28,031
2,500
25,531

On  May  31,  2022,  the  Company  used  $30.1  million  of  the  proceeds  received  from  the  transaction  related  to  the  Isaac
Mizrahi Brand (see Note 3) to repay all amounts outstanding under the December 30, 2021 term loan agreement with First
Eagle Alternative Credit Agent, LLC (“FEAC”) described below, consisting of $28.4 million in principal amount, a $1.4
million  prepayment  fee,  and  approximately  $0.3  million  in  interest  and  related  expenses.  As  a  result,  the  Company
recognized  a  loss  on  early  extinguishment  of  debt  of  approximately  $2.3  million  during  the  Current  Year,  consisting  of
approximately  $1.4  million  of  debt  prepayment  premium,  the  immediate  write-off  of  approximately  $0.8  million  of
unamortized deferred finance costs, and approximately $0.1 million of other costs.

Term Loan Debt (through May 31, 2022)

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.  Under  that  amended  loan  agreement,  the  aggregate  amount  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. These two term loans bore interest at a fixed
rate of 5.1% and 6.25% per annum, respectively. 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.

April 2021 Term Loan Debt

On April 14, 2021, Xcel, as Borrower, and its wholly-owned subsidiaries entered into a new loan and security agreement
with  BHI  as  administrative  agent  and  collateral  agent,  FEAC  as  co-collateral  agent,  and  the  financial  institutions  party
thereto as lenders. Pursuant to this loan agreement, the lenders made two term loans: (1) a term loan in the amount of $10.0
million and (2) a term loan in the amount of $15.0 million. These two term loans bore interest at “LIBOR” plus 4.0% per
annum, and “LIBOR” plus 8.0% per annum, respectively, with “LIBOR” defined 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.  This  loan  agreement  also  provided  that  the  lenders  make  available  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, as defined.

Management  assessed  and  determined  that  the  April  2021  loan  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 Prior Year.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Upon  entering  into  the  April  2021  loan  agreement,  Xcel  paid  a  2.5%  closing  fee  in  the  amount  of  $0.6  million  to  the
administrative agent for the benefit of each lender having a term loan commitment; the Company also paid approximately
$0.6 million of various legal and other fees in connection with the execution of the loan agreement. These fees and costs
totaling approximately $1.2 million were deferred on the Company’s balance sheet as a reduction of the carrying value of
the term loan debt, to be subsequently amortized to interest expense over the term of the debt using the effective interest
method.

Under  the  April  2021  loan  agreement,  the  debt  was  to  mature  on  April  14,  2025,  with  principal  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.
The Company made the required principal payments on June 30, 2021 and September 30, 2021 (totaling $1.25 million) as
scheduled.

The Company, BHI, FEAC, and the lenders subsequently amended the April 2021 loan agreement multiple times during
2021  –  on  August  12,  2021,  September  29,  2021,  and  November  12,  2021.  While  these  amendments  modified  financial
covenants and/or adjusted the maximum amount available under the revolving loan facility, there were no changes made to
the total principal balance, interest rate, maturity date, or any other terms of the loan agreement.

December 2021 Term Loan Debt

On  December  30,  2021,  Xcel,  as  Borrower,  and  its  wholly-owned  subsidiaries  entered  into  a  new  loan  and  security
agreement with FEAC, as lead arranger and as administrative agent and collateral agent, and the financial institutions party
thereto as lenders. Pursuant to this loan agreement, the lenders made a term loan in the aggregate amount of $29.0 million.
This  term  loan  bore  interest  at  “LIBOR”  plus  7.5%  per  annum,  with  “LIBOR”  defined  as  the  greater  of  (a)  the  rate  of
interest  per  annum  for  deposits  in  dollars  for  an  interest  period  equal  to  three  months  as  published  by  Bloomberg  or  a
comparable  or  successor  quoting  service  at  approximately  11:00  a.m.  (London  time)  two  business  days  prior  to  the  last
business day of each calendar month and (b) 1.0% per annum. The December 2021 loan agreement also provides that Xcel
may request the lenders make incremental term loans of up to $25.0 million, with the terms and conditions of any such
incremental term loans to be agreed in an amendment to the agreement prior to funding.

Management assessed and determined that the December 2021 loan agreement resulted in an extinguishment of the April
2021  term  loan  debt,  and  accordingly  recognized  a  loss  of  approximately  $0.74  million  (consisting  of  $0.92  million  of
unamortized deferred finance costs and $(0.18) of net fees owed to BHI less refunds of certain costs related to the April
2021 term loan debt) during the Prior Year.

Upon  entering  into  the  December  2021  loan  agreement,  Xcel  paid  a  1.75%  closing  fee  to  FEAC  for  the  benefit  of  the
lenders; 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 $0.97 million were deferred on the Company’s balance
sheet as of December 31, 2021 as a reduction of the carrying value of the term loan debt, to be subsequently amortized to
interest expense over the term of the debt using the effective interest method.

The  December  2021  term  loan  was  to  mature  on  April  14,  2025.  Principal  on  this  debt  was  payable  in  quarterly
installments  of  $625,000  on  each  of  March  31,  June  30,  September  30  and  December  31  of  each  year,  commencing  on
March  31,  2022  and  ending  on  March  31,  2025,  with  a  final  payment  of  $20,875,000  on  the  maturity  date  of  April  14,
2025.

Under the December 2021 loan agreement, Xcel had the right upon thirty (30) days prior written notice to prepay all or any
portion of the term loan debt and accrued and unpaid interest thereon. Based on the terms of the loan agreement, when the
term loan was repaid in full on May 31, 2022, Xcel was required to pay a prepayment premium of five percent (5.00%),
which amounted to approximately $1.4 million.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

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

The various term loan agreements described above also contained customary covenants, including reporting requirements,
trademark  preservation,  and  certain  financial  covenants  (on  a  consolidated  basis  with  Xcel  and  its  wholly-owned
subsidiaries); the Company was in compliance with all applicable covenants under the respective loan agreements as of and
for all periods presented in the financial statements.

For  the  Current  Year  and  Prior  Year,  the  Company  incurred  interest  expense  of  approximately  $1.2  million  and  $1.9
million, respectively, related to term loan debt. The effective interest rate related to term loan debt was approximately 9.8%
and 8.7% for the Current Year and Prior Year, respectively.

Revolving Loan Debt

Under the terms of the April 2021 loan agreement discussed above, the lenders made a revolving loan facility available to
Xcel. On June 24, 2021, Xcel borrowed $1.5 million under the aforementioned revolving loan facility, and on September
30,  2021,  Xcel  borrowed  $998,000  under  the  revolving  loan  facility.  Xcel  repaid  the  outstanding  balance  in  full  on
December  30,  2021.  The  revolving  loan  facility  bore  interest  at  a  rate  of  4.75%  per  annum,  and  the  Company  incurred
related  interest  expense  of  approximately  $0.1  million  for  the  Prior  Year.  As  of  December  31,  2021,  the  Company  no
longer  had  access  to  a  revolving  loan  facility  under  the  terms  of  the  new  loan  agreement  entered  into  on  December  30,
2021.

7.   Stockholders’ Equity

The  Company  has  authority  to  issue  up  to  51,000,000  shares,  consisting  of  50,000,000  shares  of  common  stock  and
1,000,000 shares of preferred stock.

Equity Incentive Plans

The Company’s 2021 Equity Incentive Plan (the “2021 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 4,000,000 shares of common stock are eligible for issuance under the 2021 Plan. The
2021 Plan provides for the grant of any or all of the following types of awards: stock options (incentive or non-qualified),
restricted  stock,  restricted  stock  units,  performance  awards,  or  cash  awards.  The  2021  Plan  is  administered  by  the
Company’s Board of Directors, or, at the Board’s discretion, a committee of the Board.

In addition, stock-based awards (including options, warrants, and restricted stock) previously granted under the Company’s
2011  Equity  Incentive  Plan  (the  “2011  Plan”)  remain  outstanding  and  shares  of  common  stock  may  be  issued  to  satisfy
options or warrants previously granted under the 2011 Plan, although no new awards may be granted under the 2011 Plan.

Stock-Based Compensation

Total  expense  recognized  for  all  forms  of  stock-based  compensation  was  approximately  $0.72  million  in  both  the
Current Year and Prior Year. Of the Current Year expense amount, approximately $0.41 million related to employees and
approximately $0.31 million related to directors and consultants; approximately $0.62 million was recorded as an operating
cost  and  approximately  $0.10  million  was  recorded  as  a  reduction  to  other  income.  Of  the  Prior  Year  expense  amount,
approximately $0.55 million related to employees and approximately $0.17 million related to directors and consultants; all
of the Prior Year expense amount was recorded as an operating cost.

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Stock Options

XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Options granted under the Company’s equity incentive plans 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 option activity for the Current Year is as follows:

Outstanding at January 1, 2022

Granted
Canceled
Exercised
Expired/Forfeited

Outstanding at December 31, 2022, and expected to vest
Exercisable at December 31, 2022

Current Year stock option grants were as follows:

Weighted
Average
Remaining
Contractual
Life

Aggregate
Intrinsic

     (in Years)      Value

Weighted
Average
Exercise
Price

2.25  
1.61  
—  
—  
2.81  
2.12  
2.89  

5.46

$

—

4.76
1.75

$
$

—
—

Number of

     Options
  5,630,970
605,850

$

—  
—  

(622,510)
  5,614,310
  1,916,810

$
$

On April 20, 2022, the Company granted options to purchase an aggregate of 380,850 shares of common stock to various
employees. The exercise price of the options is $1.62 per share, and all options vested immediately on the date of grant.

On  April  20,  2022  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 $1.62 per share, and 50% of the options vest on each of April
20, 2023 and April 20, 2024.

On  April  26,  2022,  the  Company  granted  options  to  purchase  an  aggregate  of  100,000  shares  of  common  stock  to  a
consultant. The exercise price of the options is $1.58 per share, and all options vested immediately on the date of grant.

Prior Year stock option grants were as follows:

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. One-half of the options vested on April 1, 2022,
and the remaining half of the options will vest on April 1, 2023.

On July 1, 2021, the Company granted options to purchase an aggregate of 20,000 shares of common stock to a member of
management. The exercise price of the options is $2.76 per share. One-half of the options vested on June 1, 2022, and the
remaining half of the options will vest on June 1, 2023.

On  August  13,  2021,  the  Company  granted  options  to  purchase  an  aggregate  of  10,000  shares  of  common  stock  to  an
employee. The exercise price of the options is $2.00 per share. One-half of the options were to vest on August 13, 2022,
with  the  remaining  half  of  the  options  to  vest  on  August  13,  2023,  but  all  of  these  options  were  forfeited  when  the
employee left the Company in the Current Year.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

The fair value of the options granted was estimated at the date of grant using the Black-Scholes option pricing model with
the following assumptions:

Expected Volatility
Expected Dividend Yield
Expected Life (Term, in years)
Risk-Free Interest Rate

Year Ended December 31, 
2021
2022

  57.14 – 92.65 %  29.49 – 82.99 %
— %

— %  

0.67 – 3.25  
1.60 – 2.80 %  

2.5 – 3.25
0.24 – 0.52 %

Compensation  expense  related  to  stock  options  for  the  Current Year  and  Prior Year  was  approximately  $0.5  million  and
$0.3  million,  respectively.  Total  unrecognized  compensation  expense  related  to  unvested  stock  options  (excluding  stock
options with performance-based vesting) at December 31, 2022 amounts to approximately $0.1 million and is expected to
be recognized over a weighted average period of 1.12 years.

Of  the  total  stock  options  outstanding  at  December  31,  2022,  the  vesting  of  3,500,000  options  is  contingent  upon  the
Company’s common stock achieving certain target prices as follows:

Target Prices
$3.00
$5.00
$7.00
$9.00
$11.00

Number of Options Vesting
1,000,000
850,000
700,000
550,000
400,000

As  of  December  31,  2022,  none  of  these  3,500,000  performance-based  stock  options  have  vested,  and  no  compensation
expense has been recorded related to such options.

The following table summarizes the Company’s stock option activity for non-vested options for the Current Year:

Balance at January 1, 2022

Granted
Vested
Forfeited or Canceled

Balance at December 31, 2022

76

     Weighted
 Average 
Grant Date 
Fair Value

$

$

0.07
0.79
0.72
1.09
0.05

Number of
Options
3,873,334
605,850
(771,684)
(10,000)
3,697,500

 
    
    
 
 
 
 
    
    
    
    
 
 
 
 
 
 
 
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Warrants

XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Warrants  granted  by  the  Company  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 warrant activity for the Current Year is as follows:

Outstanding and exercisable at January 1, 2022

Granted
Canceled
Exercised
Expired/Forfeited

Outstanding and exercisable at December 31, 2022

Weighted
Average
Weighted
Remaining
Average   Contractual
Exercise  

Life

Aggregate
Intrinsic
Value

$

—

(in Years)     
2.57

Number of
     Warrants     
116,065

$
—  
—  
—  
—  
$

Price

3.15  
—  
—  
—  
—  
3.15  

116,065

1.57

$

—

No compensation expense was recorded in the Current Year or Prior Year related to warrants.

Stock Awards

A summary of the Company’s restricted stock activity for the Current Year is as follows:

Outstanding at January 1, 2022

Granted
Canceled
Vested
Expired/Forfeited

Outstanding at December 31, 2022

Current Year stock award grants were as follows:

Number of
Restricted
Shares
815,833
347,623

$

—  

(830,123)

—  
$

333,333

Weighted
Average
Grant Date
Fair Value

4.00
1.58
—
3.11
—
3.71

On  April  20,  2022,  the  Company  issued  an  aggregate  of  50,000  shares  of  common  stock  to  non-management  directors,
which vest evenly over two years, of which 50% shall vest on April 20, 2023, and 50% shall vest on April 20, 2024.

On April 20, 2022, the Company issued 20,064 shares of common stock to a consultant, which vested immediately.

On May 31, 2022, the Company issued 65,275 shares of common stock to a consultant in connection with the transaction
related to the Isaac Mizrahi Brand (see Note 3); these shares vested immediately.

On May 31, 2022, the Company issued 33,557 shares of common stock to Isaac Mizrahi, which vested immediately (see
Note 3 for additional details).

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Additionally, on April 20, 2022, the Company issued 178,727 shares of common stock to a member of senior management
as  payment  for  a  performance  bonus  earned  in  2021.  These  shares  vested  immediately.  The  Company  had  previously
recognized compensation expense of approximately $0.28 million in the Prior Year to accrue for this performance bonus.

Prior Year stock award grants were as follows:

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. One-half of the shares vested on April 1, 2022, and the remaining half shall vest on April 1, 2023.

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

On July 1, 2021, the Company issued 9,399 shares of stock to a consultant, which vested immediately.

On October 1, 2021, the Company issued 16,892 shares of stock to a consultant, which vested immediately.

On October 29, 2021, the Company issued 12,489 shares of stock to an employee pursuant to the terms of a contractual
agreement, which vested immediately.

Additionally, on May 7, 2021, the Company issued 181,179 shares of common stock to a member of senior management as
payment for a performance bonus earned 2020. These shares vested immediately. The Company recognized compensation
expense of approximately $0.3 million in 2020 to accrue for this performance bonus.

Notwithstanding the foregoing, each grantee may extend the first anniversary of all or a portion of the restricted stock by
six months and, thereafter one or more times may further extend such date with respect to all or a portion of the restricted
stock until the next following date exactly six months thereafter, by providing written notice of such election to extend such
date with respect to all or a portion of the restricted stock prior to such date.

Total compensation expense related to stock awards for the Current Year and Prior Year (inclusive of the amounts detailed
above) was approximately $0.3 million and $0.4 million, respectively. Total unrecognized compensation expense related to
unvested  restricted  stock  grants  at  December  31,  2022  amounts  to  $0.1  million  and  is  expected  to  be  recognized  over  a
weighted average period of 1.10 years.

The following table provides information with respect to restricted stock purchased and retired by the Company during the
Current Year and Prior Year:

Date
April 20, 2022 (i)
May 31, 2022 (i)
Total 2022

October 29, 2021 (i)

Total 2021

Total Number
of Shares

Actual
Price Paid

     Purchased      per Share     

53,882
240,000
293,882

9,187
9,187

$

$

1.57  
1.49  
1.50  

1.73  
1.73  

Number of
Shares
Purchased as
Part of
Publicly
Announced
Plan

Fair value of
Re-Purchased
Shares
84,000
—  
—  
358,000
— $ 442,000

—  
— $

16,000
16,000

(i) The shares were exchanged from employees and directors in connection with the income tax withholding obligations
on behalf of such employees and directors from the vesting of restricted stock or the receipt of stock awards. The 2011
Plan and 2021 Plan allow for award holders to surrender vested shares to cover withholding tax liabilities.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Shares Available Under the Company’s Equity Incentive Plans

At December 31, 2022, there were 3,291,909 shares of common stock available for award grants under the 2021 Plan.

Shares Reserved for Issuance

At December 31, 2022, there were 9,022,284 shares of common stock reserved for issuance, including 5,316,025 shares
reserved  pursuant  to  unexercised  warrants  and  stock  options  previously  granted  under  the  2011  Plan,  414,350  shares
reserved pursuant to unexercised stock options granted under the 2021 Plan, and 3,291,909 shares available for issuance
under the 2021 Plan.

Dividends

The Company has not paid any dividends to date.

8. Earnings (Loss) Per Share

The  following  table  is  a  reconciliation  of  the  numerator  and  denominator  of  the  basic  and  diluted  net  loss  per  share
computations for the years ended December 31, 2022 and 2021:

Numerator:
Net loss attributable to Xcel Brands, Inc. stockholders (in thousands)

$

(4,018)

$

(12,184)

Year Ended
December 31, 

2022

2021

Denominator:
Basic weighted average number of shares outstanding
   Add: Effect of warrants
   Add: Effect of stock options
Diluted weighted average number of shares outstanding

Basic net loss per share
Diluted net loss per share

19,624,669  
—  
—

19,624,669  

19,455,987  
—  
—
19,455,987

$
$

(0.20)
(0.20)

$
$

(0.63)
(0.63)

As a result of the net loss presented for the Current Year and Prior Year, the Company calculated diluted loss per share
using basic weighted-average shares outstanding for both years, as utilizing diluted shares would be anti-dilutive to loss per
share.

The computation of basic and diluted loss per share excludes the common stock equivalents of the following potentially
dilutive securities because their inclusion would be anti-dilutive:

Stock options
Warrants
Total

Year Ended
December 31, 

2022
5,614,310
116,065
5,730,375  

2021
5,630,970
116,065
5,747,035  

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

9.   Commitments and Contingencies

Leases

The Company has an operating lease for its corporate offices and operations facility, as well as certain equipment with a
term of 12 months or less. The Company is currently not a party to any finance leases.

The  Company's  real  estate  leases  have  remaining  lease  terms  between  approximately  5  to  7  years.  As  of  December  31,
2022, the weighted average remaining lease term was 5.0 years and the weighted average discount rate was 6.25%.

The Company leases office space under an operating lease agreement related to the Company’s main headquarters located
in  New  York  City.  This  lease  commenced  on  March  1,  2016  and  expires  on  October  30,  2027.  This  lease  requires  the
Company to pay additional rents related to increases in certain taxes and other costs on the property.

The Company also has an operating lease for its former retail store location in Westchester, New York, which was closed in
the  Current  Year.  This  lease  shall  expire  on  January  31,  2029;  however,  the  Company  is  currently  in  the  process  of
negotiating the termination of this lease. The Company recorded an impairment charge of $0.7 million to fully impair the
remaining balance of the right-of-use asset for this lease in the Prior Year.

The  Company  had  an  operating  lease  for  its  former  corporate  offices  and  operations  facility,  which  was  subleased  to  a
third-party  subtenant  through  February  27,  2022,  and  the  Company's  lease  of  this  office  space  expired  by  its  terms  on
February 28, 2022.

For  the  years  ended  December  31,  2022  and  2021,  total  lease  expense  included  in  selling,  general  and  administrative
expenses  on  the  Company's  consolidated  statements  of  operations  was  approximately  $1.6  million  and  $1.7  million,
respectively.  The  Company’s  total  lease  costs  for  the  years  ended  December  31,  2022  and  2021  were  comprised  of  the
following:

($ in thousands)
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost

2022
$ 1,474
55
217
(104)
$ 1,642

2021
$ 2,047
68
178
(622)
$ 1,671

Cash paid for amounts included in the measurement of operating lease liabilities was $1.7 million and $2.0 million in the
Current Year and Prior Year, respectively. Cash received from subleasing was $0.1 million and $0.7 million in the Current
Year and Prior Year, respectively.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

As of December 31, 2022, the maturities of lease liabilities were as follows:

($ in thousands)
2023
2024
2025
2026
2027
Thereafter (through 2028)
Total lease payments
Less: Discount
Present value of lease liabilities
Current portion of lease liabilities
Non-current portion of lease liabilities

$

$

1,678
1,711
1,711
1,711
1,452
158
8,421
1,206
7,215
1,376
5,839

Employment Agreements

The Company has employment contracts with certain executives and key employees. The future minimum payments under
these contracts are as follows:

($ in thousands)
Year Ended December 31, 
2023
2024
2025
2026
2027
Thereafter

Total future minimum employment contract payments

Employment
Contract
Payments

4,313
2,150
2,150
2,150
2,150
6,988
19,901

$

$

In  addition  to  the  employment  contract  payments  stated  above,  the  Company’s  employment  contracts  with  certain
executives  and  key  employees  contain  performance-based  bonus  provisions.  These  provisions  include  bonuses  based  on
the Company achieving revenues in excess of established targets and/or on operating results.

Certain  of  the  employment  agreements  contain  severance  and/or  change  in  control  provisions.  Aggregate  potential
severance compensation amounted to approximately $3.6 million as of December 31, 2022.

Contingent Obligation – Halston Heritage Earn-Out

In  connection  with  the  February  11,  2019  purchase  of  the  Halston  Heritage  trademarks  from  the  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  from  2019  through  December  31,  2022.  This  additional  consideration  would
have  been  payable  in  shares  of  common  stock  of  the  Company.  The  Halston  Heritage  Earn-Out  of  $0.9  million  was
recorded as a long-term liability on February 11, 2019 and as of December 31, 2021, based on the difference at the date of
acquisition  between  the  fair  value  of  the  acquired  assets  of  the  Halston  Heritage  Trademarks  and  the  total  consideration
paid.

The final royalty target year ended on December 31, 2022, and HIP ultimately did not earn any additional consideration
based on the formula set forth in the related asset purchase agreement. As such, during the year ended December 31, 2022,
the Company recorded a $0.9 million gain on the reduction of contingent obligations in the accompanying consolidated

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

statement of operations. As of December 31, 2022, there were no amounts remaining under the Halston Heritage Earn-Out.

Contingent Obligation – Lori Goldstein Earn-Out

In connection with the April 1, 2021 purchase of the Lori Goldstein trademarks (see Note 3 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 liability in the
accompanying consolidated balance sheets, 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. Based on the
performance  of  the  Lori  Goldstein  brand  through  December  31,  2022,  approximately  $0.2  million  of  additional
consideration has been earned and is payable to the Seller in 2023. At December 31, 2022, $0.2 million of the balance is
recorded as a current liability and $6.4 million is recorded as a long-term liability; at December 31, 2021, the entire balance
was recorded as a long-term liability.

Contingent Obligation – Isaac Mizrahi Transaction

In connection with the May 31, 2022 transaction related to the sale of a majority interest in the Isaac Mizrahi Brand (see
Note 3 for additional information), the Company has agreed with WHP that, in the event that IM Topco receives less than
$13.3 million in aggregate royalties for any four consecutive calendar quarters over a three-year period ending on May 31,
2025, WHP will be entitled to receive from the Company up to $16 million, less all amounts of net cash flow distributed to
WHP on an accumulated basis, as an adjustment to the purchase price previously paid by WHP. Such amount would be
payable by the Company in either cash or equity interests in IM Topco held by the Company. No amount has been recorded
in  the  accompanying  consolidated  balance  sheets  related  to  this  contingent  obligation,  and  management  believes  the
likelihood of any such payment is remote. Based on IM Topco’s earnings from May 31, 2022 through December 31, 2022
and the applicable distribution provisions, WHP earned $4.32 million in cash flow, which reduces the potential purchase
price adjustment to $11.68 million.

Legal Proceedings

From time to time, the Company becomes involved in legal claims and litigation in the ordinary course of business. In the
opinion of management, based on consultations with legal counsel, the disposition of litigation currently pending against
the Company is unlikely to have, individually or in the aggregate, a materially adverse effect on the Company’s business,
financial  position,  results  of  operations,  or  cash  flows.  The  Company  routinely  assesses  all  its  litigation  and  threatened
litigation  as  to  the  probability  of  ultimately  incurring  a  liability,  and  records  its  best  estimate  of  the  ultimate  loss  in
situations where it assesses the likelihood of loss as probable.

Other Matters

On November 22, 2022, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock
Market (“Nasdaq”) notifying the Company that the minimum bid price per share for its common stock fell below $1.00 for
a period of 30 consecutive business days. Therefore, the Company did not meet the minimum bid price requirement set
forth in the Nasdaq Listing Rules.

The  letters  also  state  that  pursuant  to  Nasdaq  Listing  Rules  5810(c)(3)(A),  the  Company  will  be  provided  180  calendar
days to regain compliance with the minimum bid price requirement, or until May 22, 2022.

In  accordance  with  Nasdaq  Listing  Rule  5810(c)(3)(A),  the  Company  can  regain  compliance  if,  at  any  time  during  the
Tolling  Period  or  such  180-day  period,  the  closing  bid  price  of  the  Company’s  common  stock  is  at  least  $1.00  for  a
minimum period of 10 consecutive business days. If by May 22, 2023, the Company does not regain compliance with the
Nasdaq Listing Rules, the Company may be eligible for additional time to regain compliance pursuant to Nasdaq Listing

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

Rule 5810(c)(3)(A)(ii). To qualify, the Company would need to submit a transfer application and a $5,000 application fee.
The  Company  would  also  need  to  provide  written  notice  to  Nasdaq  of  its  intention  to  cure  the  minimum  bid  price
deficiency  during  the  second  compliance  period  by  effecting  a  reverse  stock  split,  if  necessary.  As  part  of  its  review
process, the Nasdaq staff will make a determination of whether it believes the Company will be able to cure this deficiency.
Should  the  Nasdaq  staff  conclude  that  the  Company  will  not  be  able  to  cure  the  deficiency,  or  should  the  Company
determine  not  to  submit  a  transfer  application  or  make  the  required  representation,  Nasdaq  will  provide  notice  that  the
Company’s shares of common stock will be subject to delisting.

If the Company does not regain compliance within the allotted compliance period, including any extensions that may be
granted  by  Nasdaq,  Nasdaq  will  provide  notice  that  the  Company’s  shares  of  common  stock  will  be  subject  to  delisting
from the Nasdaq Global Market. At such time, the Company may appeal the delisting determination to a hearings panel.

The Company intends to monitor its closing bid price and the market value of its publicly held common stock between now
and  May  22,  2023,  and  will  consider  available  options  to  resolve  the  Company’s  noncompliance  with  the  minimum  bid
price requirement, as may be necessary. There can be no assurance that the Company will be able to regain compliance
with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.

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  circulate  throughout  the  U.S.  and  the  world.  The  COVID-19  pandemic  (including  actions
taken  by  national,  state,  and  local  governments  in  response  to  COVID-19)  has  negatively  impacted  the  U.S.  and  global
economy,  disrupted  consumer  spending  and  global  supply  chains,  and  created  significant  volatility  and  disruption  of
financial markets.

COVID-19 has had, and continues to have, a significant negative impact on the Company’s business. The initial onset of
the pandemic in 2020 resulted in a sudden decrease in sales for many of the Company’s products, from which the Company
has yet to fully recover. Additionally, COVID-19 has also impacted, and continues to impact, the Company’s supply chain
partners,  including  third  party  manufacturers,  logistics  providers,  and  other  vendors,  as  well  as  the  supply  chains  of  its
licensees. These supply chains have experienced, and may continue to experience in the future, disruptions as a result of
closed factories, factories operating with a reduced workforce, or other logistics constraints, including vessel, container and
other transportation shortages, labor shortages, and port congestion.

Due  to  the  ongoing  COVID-19  pandemic,  there  is  significant  uncertainty  surrounding  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.

10.   Income Taxes

The  Company  accounts  for  income  taxes  in  accordance  with  ASC  Topic  740.  Deferred  tax  assets  and  liabilities  are
determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured
using  the  enacted  tax  rates  and  laws  that  will  be  in  effect  when  the  differences  are  expected  to  reverse.  A  valuation
allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. In determining
the need for a valuation allowance, management reviews both positive and negative evidence pursuant to the requirements
of  ASC  Topic  740,  including  current  and  historical  results  of  operations,  future  income  projections,  and  the  overall
prospects of the Company’s business.

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

The income tax provision (benefit) for federal and state and local income taxes in the consolidated statements of operations
consists of the following:

($ in thousands)
Current:
Federal
State and local

Total current

Deferred:
Federal
State and local

Total deferred
Total benefit

Years Ended December 31, 

2022

2021

$

$

300
234
534

(509)
(456)
(965)
(431)

$

$

—
86
86

(2,376)
(816)
(3,192)
(3,106)

The reconciliation of income tax benefit computed at the federal and state and local statutory rates to the Company’s loss
before taxes is as follows:

U.S. statutory federal rate
State and local rate, net of federal tax benefit
Stock compensation
Excess compensation deduction
Federal true-ups
Life insurance
Change in tax rate
Other permanent differences

Income tax benefit

Years Ended December 31, 

2022

2021

21.00 %  
6.10  
(6.14) 
(5.32) 
(5.09) 
(0.52) 
—
—  
10.03 %  

21.00 %
4.64
(5.56)
(0.68)
(0.10)
(0.10)
0.06
(0.01)
19.25 %

The significant components of net deferred tax assets (liabilities) of the Company consist of the following:

($ in thousands)
Deferred tax assets

Stock-based compensation
Federal, state and local net operating loss carryforwards
Accrued compensation and other accrued expenses
Allowance for doubtful accounts
Basis difference arising from discounted note payable
Foreign tax credit
Charitable contribution carryover
Property and equipment
Interest expense

Total deferred tax assets

Deferred tax liabilities

Basis difference arising from intangible assets of acquisition

Total deferred tax liabilities

Net deferred tax assets

84

$

December 31, 

2022

2021

$

712
3,175
748
—  
11
—  
—  
497
—  

5,143

1,274
6,684
728
309
11
219
77
488
602
10,392

(4,036)
(4,036)

(10,251)
(10,251)

$

1,107

$

141

    
    
 
   
  
 
 
 
 
 
  
 
  
 
 
 
 
 
 
    
    
 
 
 
 
 
 
 
 
 
    
    
 
   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

As  of  December  31,  2022  and  2021,  the  Company  had  approximately  $10.9  million  and  $20.8  million,  respectively,  of
federal net operating loss carryforwards ("NOLs") available to offset future taxable income. The NOL as of December 31,
2017  of  $0.3  million  has  an  expiration  period  through  2037.  The  NOL  generated  during  tax  years  beginning  after
December 31, 2017 of $10.9 million has an indefinite life and does not expire.

As of December 31, 2022 and 2021, management does not believe the Company has any material uncertain tax positions
that  would  require  it  to  measure  and  reflect  the  potential  lack  of  sustainability  of  a  position  on  audit  in  its  consolidated
financial  statements.  The  Company  will  continue  to  evaluate  its  uncertain  tax  positions  in  future  periods  to  determine  if
measurement  and  recognition  in  its  consolidated  financial  statements  is  necessary.  The  Company  does  not  believe  there
will be any material changes in its unrecognized tax positions over the next year.

11.   Related Party Transactions

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. This employment
agreement remained in effect through May 31, 2022. On May 31, 2022, this agreement was transferred to IM Topco as part
of the transaction in which the Company sold a majority interest in the Isaac Mizrahi Brand trademarks to a third party (see
Note 3 for details).

The employment agreement provided Mr. Mizrahi with a base salary of $1.8 million, $2.0 million, and $2.1 million per
annum for 2020, 2021, and 2022, respectively. Mr. Mizrahi was also 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 and 2022. The
Bonus  consisted  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 below:

● “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  Qurate’s  QVC  channel  on  Mondays

(subject to certain expectations) up to a maximum of 40 such appearances in a calendar year.

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 provided services to Mr. Mizrahi necessary for Mr. Mizrahi to perform his services
pursuant to the employment agreement. The Company paid Laugh Club an annual fee of $0.72 million for such services.
This services agreement remained in effect through May 31, 2022. On May 31, 2022, this agreement was transferred to IM
Topco as part of the transaction in which the Company sold a majority interest in the Isaac Mizrahi Brand trademarks to a
third party (see Note 3 for details).

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XCEL BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2022 and 2021

In  addition,  on  May  31,  2022,  all  522,500  unvested  shares  of  restricted  stock  of  the  Company  held  by  Mr.  Mizrahi  (for
which all stock-based compensation expense had been previously recognized in prior periods) were immediately vested,
with 240,000 of such shares being surrendered for cancellation in satisfaction of withholding tax obligations. Also on May
31,  2022,  the  Company  issued  33,557  additional  shares  of  common  stock  of  the  Company  (valued  at  $50,000)  to  Mr.
Mizrahi, which vested immediately, and made a $100,000 cash payment to Mr. Mizrahi.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

On  October  1,  2021,  the  Company  dismissed  CohnReznick  LLP  (“CR”)  as  its  independent  registered  public  accounting
firm.  CR’s  report  on  the  financial  statements  of  the  Company  as  of  and  for  the  year  ended  December  31,  2020  did  not
contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting  principles.  In  connection  with  the  audit  of  the  financial  statements  of  the  Company  for  the  year  ended
December 31, 2020 and the subsequent interim period through October 1, 2021, there were no disagreements on any matter
of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements
if  not  resolved  to  their  satisfaction  would  have  caused  them  to  make  reference  in  connection  with  CR’s  opinion  to  the
subject matter of the disagreement.

On  September  30,  2021,  the  Audit  Committee  of  the  Board  of  Directors  appointed  Marcum  LLP  (“Marcum”)  as  the
Company’s new independent registered public accounting firm. Prior to September 30, 2021, the Company did not consult
with Marcum regarding (1) the application of accounting principles to a specified transactions, (2) the type of audit opinion
that might be rendered on the Company’s financial statements, (3) written or oral advice was provided that would be an
important  factor  considered  by  the  Company  in  reaching  a  decision  as  to  an  accounting,  auditing,  or  financial  reporting
issues,  or  (4)  any  matter  that  was  the  subject  of  a  disagreement  between  the  Company  and  its  predecessor  auditor  as
described in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-
K.

The  Company’s  Audit  Committee  of  the  Board  of  Directors  participated  in  and  approved  the  decision  to  change  our
independent registered public accounting firm.

There  were  no  disagreements  with  the  Company’s  auditors  which  would  require  disclosure  under  Item  304(b)  of
Regulation S-K.

Item 9A. Controls and Procedures

The  Company  maintains  disclosure  controls  and  procedures  that  are  designed  to  ensure  that  information  required  to  be
disclosed in its Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management,
including the Company’s Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions
regarding  required  disclosure.  Such  controls  and  procedures,  by  their  nature,  can  provide  only  reasonable  assurance
regarding management’s control objectives.

Our  Chief  Executive  Officer  and  Chief  Financial  Officer  evaluated  the  effectiveness  of  our  disclosure  controls  and
procedures as defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),  as  of  December  31,  2022.  Based  on  that  evaluation,  our  Chief  Executive  Officer  and  Chief  Financial  Officer
concluded  that  our  disclosure  controls  and  procedures  were  effective  as  of  December  31,  2022,  to  ensure  that  all
information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time specified in SEC rules and forms and is accumulated and communicated to our
management,  including  our  principal  executive  and  principal  accounting  officers  to  allow  timely  decisions  regarding
required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control  over  financial  reporting  is  a  process  designed  by,  or  under  the  supervision  of,  the  chief  executive  officer  and
principal financial officer and effected by our board of directors, management, and other personnel, 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.

Under  the  supervision  and  with  the  participation  of  our  management,  including  our  Chief  Executive  Officer  and  Chief
Financial Officer, we conducted an evaluation of the design and effectiveness of our internal control over financial

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reporting  based  on  the  criteria  set  forth  in  Internal  Control-Integrated  Framework  (2013)  issued  by  the  Committee  of
Sponsoring  Organizations  of  the  Treadway  Commission  (“COSO”).  Based  on  our  evaluation  under  the  framework
described  above,  our  management  has  concluded  that  our  internal  control  over  financial  reporting  was  effective  as  of
December 31, 2022.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the
Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission
that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) during our most recent completed fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

Item 9B.   Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Item 10.   Directors, Executive Officers and Corporate Governance

PART III

The following table sets forth the names, ages, and positions of our executive officers and directors as of the date hereof.
Executive officers are appointed by our board of directors. Each executive officer holds office until resignation, is removed
by the Board, or a successor is elected and qualified. Each director holds office until a successor is elected and qualified or
earlier resignation or removal.

NAME
Robert W. D’Loren
James F. Haran

Seth Burroughs
Mark DiSanto
James Fielding
Michael R. Francis
Howard Liebman
Deborah Weinswig

    AGE    

POSITION

 65   Chairman of the Board of Directors and Chief Executive Officer and President
 62   Chief Financial Officer and Assistant Secretary, and Principal Financial and

Accounting Officer

 43   Executive Vice President of Business Development and Treasury and Secretary
 61   Director
 58   Director
 60   Director
 80   Director
 52   Director

Below are the biographies of each of our officers and directors as of December 31, 2022.

Robert  W.  D’Loren  has  been  the  Chairman  of  our  Board  and  our  Chief  Executive  Officer  and  President  since
September 2011. Mr. D’Loren has been an entrepreneur, innovator, and pioneer of the consumer branded products industry
for over 35 years. Mr. D’Loren has spearheaded the Company’s omni-channel platform, connecting the channels of digital,
brick-and-mortar, social media, and direct-response television to create a single customer view and brand experience for
Xcel’s brands. He served as Chairman and CEO of IPX Capital, LLC and its subsidiaries, a consumer products investment
company, from 2009 to 2011. He continues to serve as IPX Capital LLC’s Chairman.

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Prior to founding the Company, from June 2006 to July 2008, Mr. D’Loren was a director, President and CEO of NexCen
Brands, Inc., a global brand acquisition and management company with holdings that included The Athlete’s Foot, Waverly
Home,  Bill  Blass,  MaggieMoo’s,  Marble  Slab  Creamery,  Pretzel  Time,  Pretzelmaker,  Great  American  Cookies,  and  The
Shoe Box.

From  2002  to  2006,  Mr.  D’Loren’s  work  among  consumer  brands  continued  as  President  and  CEO  of  UCC  Capital
Corporation, an intellectual property investment company where he invested in the consumer branded products, media, and
entertainment  sectors.  From  1997  to  2002,  Mr.  D’Loren  founded  and  acted  as  President  and  Chief  Operating  Officer  of
CAK Universal Credit Corporation, an intellectual property finance company. Mr. D’Loren’s total career debt and equity
investments in over 30 entertainment and consumer branded products companies have exceeded $1.0 billion. In 1985, he
founded and served as President and CEO of the D’Loren Organization, an investment and restructuring firm responsible
for over $2 billion of transactions. Mr. D’Loren has also served as an asset manager for Fosterlane Management, as well as
a manager with Deloitte.

Mr. D’Loren has served on the Board of Directors for Iconix Brand Group, Longaberger Company, Business Loan Center,
and as a board advisor to The Athletes Foot and Bill Blass, Ltd. He also serves on the board of directors for the Achilles
Track  Club  International.  Mr.  D’Loren  is  a  Certified  Public  Accountant  and  holds  an  M.S.  degree  from  Columbia
University and a B.S. degree from New York University.

James F. Haran  has  been  our  Chief  Financial  Officer  since  September  2011.  Mr.  Haran  served  as  CFO  of  IPX  Capital,
LLC and its related subsidiaries, from June 2008 to September 2011. Mr. Haran was the Executive Vice President, Capital
Markets for NexCen Brands, Inc. from 2006 to May 2008 and Chief Financial Officer and Chief Credit Officer for UCC
Capital Corporation, and its predecessor company, CAK Universal Credit Corp., from 1998 to 2006. Prior to joining UCC,
Mr. Haran was a partner at Sidney Yoskowitz and Company P.C., a registered diversified certified public accounting firm.
During  his  tenure,  which  began  in  1987,  his  focus  was  on  real  estate  and  financial  services  companies.  Mr.  Haran  is  a
Certified Public Accountant and holds a B.S. degree from State University of New York at Plattsburgh.

Seth Burroughs  has  been  our  Executive  Vice  President  of  Business  Development  and  Treasury  since  September  2011.
From  June  2006  to  October  2010,  Mr.  Burroughs  served  as  Vice  President  of  NexCen  Brands,  Inc.  Prior  to  his  role  at
NexCen, from 2003 to 2006, Mr. Burroughs served as Director of M&A Advisory and Investor Relations at UCC Capital
Corporation,  an  intellectual  property  investment  company,  where  he  worked  on  $500  million  in  acquisitions  and  $300
million  in  specialty  financing  as  an  advisor  to  consumer  branded  products  companies  in  the  franchising  and  apparel
industries. From 2001 to 2003, Mr. Burroughs worked as a Senior Financial Analyst at The Pullman Group where he was
involved with structuring the first securitizations of music royalties, including the Bowie Bonds, and as a Financial Analyst
at Merrill Lynch’s private client group. Mr. Burroughs received a B.S. degree in economics from The Wharton School of
Business at the University of Pennsylvania.

Mark DiSanto has served as a member of our Board since October 2011. Since 1988, Mr. DiSanto has served as the Chief
Executive  Officer  of  Triple  Crown  Corporation,  a  regional  real  estate  development  and  investment  company  with
commercial  and  residential  development  projects  exceeding  1.5  million  square  feet.  Mr.  DiSanto  received  a  degree  in
business administration from Villanova University’s College of Commerce and Finance, a J.D. degree from the University
of Toledo College of Law, and an M.S. degree in real estate development from Columbia University.

James Fielding  was  appointed  as  a  member  of  our  Board  in  July  2018.  He  is  a  25-year  veteran  in  the  consumer  retail
space, and previously served as the Global Head of Consumer Products for Dreamworks Animation and Awesomeness TV.
Prior to that, Mr. Fielding served as the CEO of Claire’s Stores Inc., where he oversaw strategic growth and international
development  for  the  retail  chain’s  3,000-plus  stores  worldwide.  From  May  2008  to  2012  Mr.  Fielding  served  as  the
President of Disney Stores Worldwide.

Michael R. Francis has served as a member of our Board since June 2015. Mr. Francis is founder and CEO of Fairview
Associates,  LLC,  a  retail  and  branding  consultancy.  From  February  2012  to  December  2015,  Mr.  Francis  served  as  the
Chief Global Brand Officer of DreamWorks Animation SKG, which creates world-class entertainment, including animated
feature films, television specials and series, and live-entertainment properties for audiences around the world. During this
tenure with DreamWorks, Mr. Francis was responsible for global consumer products, retail, brand strategy, creative

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design, location-based entertainment, digital, publishing, and franchise development. From November 2010 to June 2011,
Mr.  Francis  served  as  the  President  of  J.C.  Penney  Company,  Inc.,  one  of  the  largest  department  store  operators  in  the
United  States.  Prior  to  November  2010,  Mr.  Francis  spent  more  than  26  years  with  Target  Corporation,  an  American
retailing company and the second-largest discount retailer in the United States, in various roles including Executive Vice
President and Global Chief Marketing Officer. Mr. Francis has a B.A. degree in international studies from the University of
Michigan.

Howard Liebman has served as a member of our Board since October 2011. He was President, Chief Operating Officer
and a director of Hobart West Group, a provider of national court reporting and litigation support services, from 2007 until
the  sale  of  the  business  in  2008.  Mr.  Liebman  served  as  a  consultant  to  Hobart  from  2006  to  2007.  Mr.  Liebman  was
President,  Chief  Financial  Officer,  and  a  director  of  Shorewood  Packaging  Corporation,  a  multinational  manufacturer  of
high-end  value-added  paper  and  paperboard  packaging  for  the  entertainment,  tobacco,  cosmetics  and  other  consumer
products markets. Mr. Liebman joined Shorewood in 1994 as Executive Vice President and Chief Financial Officer, and
served as its President from 1999 until Shorewood was acquired by International Paper in 2000. Mr. Liebman continued as
Executive Vice President of Shorewood until his retirement in 2005. Mr. Liebman is a Certified Public Accountant and was
an audit partner with Deloitte and Touche, LLP (and its predecessors) from 1974 to 1994.

Deborah Weinswig  was  appointed  as  a  member  of  our  Board  in  January  2018.  She  is  a  Managing  Director  of  Funding
Global Retail & Technology (“FGRT”), the think tank for the Hong Kong-based Fung Group, since April 2014 where she
is responsible for building the team’s research capabilities and providing insights into the disruptive technologies that are
reshaping  today’s  global  retail  landscape.  Prior  to  leading  FGRT,  Weinswig  served  as  Chief  Customer  Officer  for
Profitect Inc., a predictive analytics and big data software provider. From March 2002 to October 2013, Ms. Weinswig was
employed by Citigroup, Inc., most recently where she was Managing Director and Head of the Global Staples & Consumer
Discretionary team at Citi Research. Ms. Weinswig also serves as an e-commerce expert for the International Council of
Shopping Centers’ Research Task Force and was a founding member of the Oracle Retail Industry Strategy Council. Lastly,
she is a member of the Board of Directors of Kiabi (affiliated with the Auchan Group). Ms. Weinswig is a Certified Public
Accountant and holds an MBA from the University of Chicago.

Directors’ Qualifications

In furtherance of our corporate governance principles, each of our directors brings unique qualities and qualifications to our
Board. We believe that all of our directors have a reputation for honesty, integrity, and adherence to high ethical standards.
They  each  have  demonstrated  business  acumen,  leadership,  and  an  ability  to  exercise  sound  judgment,  as  well  as  a
commitment  to  serve  the  Company  and  our  Board.  The  following  descriptions  demonstrate  the  qualifications  of  each
director:

Robert W. D’Loren has extensive experience in and knowledge of the licensing and commercial business industries and
financial  markets.  This  knowledge  and  experience,  including  his  experience  as  director,  president,  and  chief  executive
officer of a global brand management company, provide us with valuable insight to formulate and create our acquisition
strategy and how to manage and license acquired brands.

Mark DiSanto has considerable experience in building and running businesses and brings his strong business acumen to
the Board.

James Fielding brings extensive senior level experience in the consumer retail space, as well as strong relationships in the
media and retail industries.

Michael R. Francis brings extensive senior level experience in the media and retail industries, as well as relationships in
the media and retail industries.

Howard Liebman brings comprehensive knowledge of accounting, the capital markets, mergers and acquisitions, financial
reporting,  and  financial  strategies  from  his  extensive  public  accounting  experience  and  prior  service  as  Chief  Financial
Officer of a public company.

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Deborah Weinswig brings thought leadership in the retail and licensing industries, particularly in the areas of sourcing and
logistics.

Key Employees

Lori Goldstein is Chief Creative Officer and Spokeswoman for the Lori Goldstein Brands. As Chief Creative Officer, she
is responsible for providing design input and guidance to Xcel Brands for all brands under her name. Ms. Goldstein’s work
has covered a vast range, from her collaborations with photographers Annie Leibovitz at Vanity Fair to Steven Meisel at
Vogue Italia, to her styling for designers Donatella Versace and Vera Wang. Ms. Goldstein stepped in front of the camera in
2009  when  she  launched  LOGO  by  Lori  Goldstein,  her  exclusive  collection  for  QVC.  She  is  the  author  of  “Style  Is
Instinct,”  which  was  published  in  2013.  In  2014,  Ms.  Goldstein’s  brand  was  awarded  “Apparel  Product  Concept  of  the
Year” and she was named QVC Ambassador.

Employment Agreements with Executives

Robert W. D’Loren

On February 28, 2019, and effective as of January 1, 2019, the Company entered into a three-year employment agreement
with  Robert  W.  D’Loren  for  him  to  continue  to  serve  as  Chief  Executive  Officer  of  the  Company,  referred  to  as  the
D’Loren Employment Agreement. Following the initial three-year term, the agreement automatically renewed for a one-
year term in 2022 and again in 2023, and will be automatically renewed for one-year terms thereafter unless either party
gives written notice of intent to terminate at least 90 days prior to the termination of the then current term. Pursuant to the
D’Loren Employment Agreement, Mr. D’Loren’s annual base salary is $0.89 million. The Company’s board of directors or
the compensation committee may approve increases (but not decreases) from time to time. Following the initial three-year
term, Mr. D’Loren’s base salary will be reviewed at least annually. Mr. D’Loren receives an allowance for an automobile
appropriate  for  his  level  of  position  and  the  Company  pays  (in  addition  to  monthly  lease  or  other  payments)  all  of  the
related expenses for gasoline, insurance, maintenance, repairs, or any other costs with Mr. D’Loren’s automobile.

Bonus

Mr. D’Loren will be eligible to receive an annual cash bonus in an amount equal to (i) 2.5% of all income generated from
the sales of the Company’s products and by the trademarks and other intellectual property owned, operated or managed by
us  (“IP  Income”),  in  excess  of  $8.0  million  earned  and  received  by  us  in  such  fiscal  year:  provided  that  any  IP  income
generated through net sales shall be multiplied by (x) 7% in the case of net sales from wholesale sales, and private label
sales  and  (y)  3%  in  the  case  of  net  sales  from  e-commerce  sales  through  the  Company’s  web  sites  and  (ii)  5%  of  the
Company’s adjusted EBITDA (as defined in the D’Loren Employment Agreement) for such fiscal year. Mr. D’Loren shall
have the right to elect to receive the cash bonus through the issuance of shares of the Company’s common stock.

Pursuant  to  the  D’Loren  Agreement,  Mr.  D’Loren  was  granted  an  option  to  purchase  up  to  2,578,947  shares  of  the
Company’s common stock at an exercise price of $1.72 per share. The option is exercisable until February 28, 2029 and
shall  vest,  subject  to  Mr.  D’Loren  remaining  employed  by  the  Company  and  based  upon  the  Company’s  common  stock
achieving the following target prices:

Target Prices
$3.00
$5.00
$7.00
$9.00
$11.00

     Number of Option Shares Vesting

 736,842
 626,316
 515,789
 405,263
 294,737

Severance

If Mr. D’Loren’s employment is terminated by the Company without cause, or if Mr. D’Loren resigns with good reason, or
if the Company fails to renew the term, then Mr. D’Loren will be entitled to receive his unpaid base salary and cash

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bonuses through the termination date and a lump sum payment equal to the base salary in effect on the termination date for
the  longer  of  two  years  from  the  termination  date  or  the  remainder  of  the  then-current  term.  Additionally,  Mr.  D’Loren
would be entitled to two hundred times the average annual cash bonuses paid in the preceding 12 months. Mr. D’Loren
would  also  be  entitled  to  continue  to  participate  in  the  Company’s  group  medical  plan  or  receive  reimbursement  for
premiums  paid  for  other  medical  insurance  in  an  amount  not  to  exceed  the  cost  to  participate  in  the  Company’s  plan,
subject to certain conditions, for a period of 36 months from the termination date.

Change of Control

In the event Mr. D’Loren’s employment is terminated within 12 months following a change of control by the Company
without cause or by Mr. D’Loren with good reason, he would be entitled to a lump sum payment equal to two times (i) his
base salary in effect on the termination date for the longer of two years from the termination date or the remainder of the
then-current  term  and  (ii)  two  times  the  average  annual  cash  bonuses  paid  in  the  preceding  12  months,  minus  $100.
“Change of control,” as defined in Mr. D’Loren’s employment agreement, means a merger or consolidation to which we
are a party, a sale, lease or other transfer, exclusive license or other disposition of all or substantially all of our assets, a sale
or transfer by our stockholders of voting control, in a single transaction or a series of transactions or, if during any twelve
consecutive  month  period,  the  individuals  who  at  the  beginning  of  such  period,  constitute  the  board  of  directors  of  the
Company (the “Incumbent Directors”) cease (other than due to death) to constitute a majority of the members of the board
at the end of such period; provided that directors elected by or on the recommendation of a majority of the directors who so
qualify as Incumbent Directors shall be deemed to be Incumbent Directors. Upon a change of control, notwithstanding the
vesting and exercisability schedule in any stock option or other grant agreement between Mr. D’Loren and the Company,
all  unvested  stock  options,  shares  of  restricted  stock  and  other  equity  awards  granted  by  the  Company  to  Mr.  D’Loren
pursuant  to  any  such  agreement  shall  immediately  vest,  and  all  such  stock  options  shall  become  exercisable  and  remain
exercisable for the lesser of 180 days after the date the change of control occurs or the remaining term of the applicable
option.

Non-Competition and Non-Solicitation

During the term of his employment by the Company and for a one-year period after the termination of such employment
(unless Mr. D’Loren’s employment was terminated without cause or was terminated by him for good reason, in which case
only for his term of employment and a six-month period after the termination of such employment), Mr. D’Loren may not
permit his name to be used by or participate in any business or enterprise (other than the mere passive ownership of not
more  than  5%  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  our  business  in  the  United
States, its territories and possessions and any foreign country in which we do business as of the date of termination of his
employment.  Also,  during  his  employment  and  for  a  one-year  period  after  the  termination  of  such  employment,
Mr. D’Loren 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  of  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.

James Haran

On February 28, 2019, and effective as of January 1, 2019, the Company entered into a two-year employment agreement
with  James  Haran  for  him  to  continue  to  serve  as  the  Company’s  Chief  Financial  Officer,  referred  to  as  the  Haran
Employment  Agreement.  Following  the  initial  two-year  term,  the  agreement  automatically  renewed  for  successive  one-
year terms in 2021, 2022, and 2023, and will be automatically renewed for one-year terms thereafter unless either party
gives written notice of intent to terminate at least 30 days prior to the expiration of the then current term. Pursuant to the
Haran Employment Agreement, Mr. Haran’s annual base salary is $0.37 million per annum. The board of directors or the
compensation committee may approve increases (but not decreases) from time to time. Following the initial two-year term,
the base salary shall be reviewed at least annually. In addition, Mr. Haran receives a car allowance of $1,500 per month.

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Bonus

Mr. Haran will be eligible to receive a performance cash bonus in an amount equal to (i) 0.23% of all IP Income in excess
of $12.0 million earned and received by us in such fiscal year; provided that any IP income generated through net sales
shall be multiplied by (x) 7% in the case of net sales from wholesale sales, and private label sales and (y) 3% in the case of
net sales from e-commerce sales through the Company’s web sites plus (ii) 0.375% of the Company’s adjusted EBITDA
(as defined in the Haran Employment Agreement) for such fiscal year. Notwithstanding the foregoing, for (i) 2019, $0.04
million of Mr. Haran’s bonus was guaranteed, of which $0.01 million was paid to Mr. Haran upon execution of the Haran
Employment Agreement and $0.03 million was paid prior to June 30, 2019, and (ii) for 2020, $0.03 million of Mr. Haran’s
bonus was guaranteed and paid prior to June 30, 2020, in each case.

Pursuant to the Haran Employment Agreement, Mr. Haran was granted an option to purchase up to 552,632 shares of the
Company’s common stock at an exercise price of $1.72 per share. The option is exercisable until February 28, 2029 and
shall  vest,  subject  to  Mr.  Haran  remaining  employed  with  the  Company  and  based  upon  the  Company’s  common  stock
achieving target prices as follows:

Target Prices
$3.00
$5.00
$7.00
$9.00
$11.00

    Number of Option Shares Vesting

 157,895
 134,211
 110,526
 86,842
 63,158

Severance

If Mr. Haran’s employment is terminated by the Company without cause, or if Mr. Haran resigns with good reason, or if the
Company  fails  to  renew  the  term,  then  Mr.  Haran  will  be  entitled  to  receive  his  unpaid  base  salary  and  cash  bonuses
through  the  termination  date  and  a  lump  sum  payment  equal  to  his  base  salary  in  effect  on  the  termination  date  for
12  months.  Mr.  Haran  would  also  be  entitled  to  continue  to  participate  in  our  group  medical  plan,  subject  to  certain
conditions, for a period of 12 months from the termination date.

Change of Control

In  the  event  Mr.  Haran’s  employment  is  terminated  within  12  months  following  a  change  of  control  by  the  Company
without cause or by Mr. Haran with good reason, Mr. Haran would be entitled to a lump sum payment equal to his base
salary  in  effect  on  the  termination  date  for  12  months  following  such  termination.  “Change  of  control,”  as  defined  in
Mr.  Haran’s  employment  agreement,  means  a  merger  or  consolidation  to  which  we  are  a  party,  a  sale,  lease  or  other
transfer,  exclusive  license  or  other  disposition  of  all  or  substantially  all  of  our  assets,  or  a  sale  or  transfer  by  our
stockholders of voting control, in a single transaction or a series of transactions. Upon a change of control, notwithstanding
the  vesting  and  exercisability  schedule  in  any  stock  option  or  other  grant  agreement  between  Mr.  Haran  and  us,  all
unvested stock options, shares of restricted stock and other equity awards granted by us to Mr. Haran pursuant to any such
agreement shall immediately vest, and all such stock options shall become exercisable and remain exercisable for the lesser
of 180 days after the date the change of control occurs or the remaining term of the applicable option.

Non-Competition and Non-Solicitation

During the term of his employment by the Company and for a one-year period after the termination of such employment,
Mr. Haran may not permit his name to be used by or participate in any business or enterprise (other than the mere passive
ownership of not more than 5% 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 our business in
the  United  States,  its  territories  and  possessions  and  any  foreign  country  in  which  we  do  business  as  of  the  date  of
termination  of  such  employment.  Also,  during  his  employment  and  for  a  one-year  period  after  the  termination  of  his
employment, Mr. Haran 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

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any of 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.

Seth Burroughs

On February 28, 2019, and effective as of January 1, 2019, the Company entered into a two-year employment agreement
with Seth Burroughs for him to continue to serve as the Company’s Executive Vice President – Business Development and
Treasury,  referred  to  as  the  Burroughs  Employment  Agreement.  Following  the  initial  two-year  term,  the  agreement
automatically renewed for successive one-year terms in 2021, 2022, and 2023, and will be automatically renewed for one-
year terms thereafter unless either party gives written notice of intent to terminate at least 30 days prior to the expiration of
the  then  current  term.  Pursuant  to  the  Burroughs  Employment  Agreement,  Mr.  Burroughs’  annual  base  salary  is  $0.34
million per annum. The board of directors or the compensation committee may approve increases (but not decreases) from
time to time. Following the initial two-year term, the base salary shall be reviewed at least annually.

Bonus

Mr. Burroughs will be eligible to receive a performance cash bonus in an amount equal to (i) 0.23% of all IP Income in
excess of $12.0 million earned and received by us in such fiscal year; provided that any IP income generated through net
sales shall be multiplied by (x) 7% in the case of net sales from wholesale sales, and private label sales and (y) 3% in the
case  of  net  sales  from  e-commerce  sales  through  the  Company’s  web  sites  plus  (ii)  0.375%  of  the  Company’s  adjusted
EBITDA (as defined in the Haran Employment Agreement) for such fiscal year.

Pursuant to the Burroughs Employment Agreement, Mr. Burroughs was granted an option to purchase up to 368,421 shares
of the Company’s common stock at an exercise price of $1.72 per share. The option is exercisable until February 28, 2029
and shall vest, subject to Mr. Burroughs remaining employed with the Company and based upon the Company’s common
stock achieving target prices as follows:

Target Prices
$3.00
$5.00
$7.00
$9.00
$11.00

    Number of Option Shares Vesting

 105,263
 89,474
 73,684
 57,895
 42,105

Severance

If Mr. Burrough’s employment is terminated by the Company without cause, or if Mr. Burroughs resigns with good reason,
or if the Company fails to renew the term, then Mr. Burroughs will be entitled to receive his unpaid base salary and cash
bonuses through the termination date and a lump sum payment equal to his base salary in effect on the termination date for
12 months. Mr. Burroughs would also be entitled to continue to participate in our group medical plan, subject to certain
conditions, for a period of 12 months from the termination date.

Change of Control

In the event Mr. Burroughs’ employment is terminated within 12 months following a change of control by the Company
without cause or by Mr. Burroughs with good reason, Mr. Burroughs would be entitled to a lump sum payment equal to his
base salary in effect on the termination date for 12 months following such termination. “Change of control,” as defined in
Mr. Burroughs’ employment agreement, means a merger or consolidation to which we are a party, a sale, lease or other
transfer,  exclusive  license  or  other  disposition  of  all  or  substantially  all  of  our  assets,  or  a  sale  or  transfer  by  our
stockholders of voting control, in a single transaction or a series of transactions. Upon a change of control, notwithstanding

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the  vesting  and  exercisability  schedule  in  any  stock  option  or  other  grant  agreement  between  Mr.  Burroughs  and  us,  all
unvested stock options, shares of restricted stock and other equity awards granted by us to Mr. Burroughs pursuant to any
such agreement shall immediately vest, and all such stock options shall become exercisable and remain exercisable for the
lesser of 180 days after the date the change of control occurs or the remaining term of the applicable option.

Non-Competition and Non-Solicitation

During the term of his employment by the Company and for a one-year period after the termination of such employment,
Mr.  Burroughs  may  not  permit  his  name  to  be  used  by  or  participate  in  any  business  or  enterprise  (other  than  the  mere
passive ownership of not more than 5% 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  our
business in the United States, its territories and possessions and any foreign country in which we do business as of the date
of  termination  of  such  employment.  Also,  during  his  employment  and  for  a  one-year  period  after  the  termination  of  his
employment,  Mr.  Burroughs  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 of 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.

Family Relationships

There are no family relationships among our directors or officers.

Independence of the Board of Directors

The  board  has  determined  that  Messrs.  Howard  Liebman,  Mark  DiSanto,  James  Fielding,  Michael  R.  Francis,  and
Ms.  Deborah  Weinswig  meet  the  director  independence  requirements  under  the  applicable  listing  rule  of  the  NASDAQ
Stock  Market  LLC  (“NASDAQ”).  Each  current  member  of  the  Audit  Committee,  Compensation  Committee,  and
Nominating  Committee  is  independent  and  meets  the  applicable  rules  and  regulations  regarding  independence  for  such
committee, including those set forth in the applicable NASDAQ rules, and each member is free of any relationship that
would interfere with his individual exercise of independent judgment.

Section 16(a) Beneficial Ownership Reporting Compliance

To  our  knowledge,  based  solely  on  a  review  of  Forms  3  and  4  and  any  amendments  thereto  furnished  to  our  Company
pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934, or representations that no Forms 5 were required, all
Section  16(a)  filing  requirements  applicable  to  our  officers,  directors,  and  beneficial  owners  of  more  than  10%  of  our
equity securities were timely filed.  

Code of Ethics

On September 29, 2011, we adopted a code of ethics that applies to our officers, employees, and directors, including our
Chief Executive Officer, Chief Financial Officer and senior executives. Our Code of Ethics can be accessed on our website,
www.xcelbrands.com.

Audit Committee and Audit Committee Financial Expert

Our board of directors has appointed an Audit Committee which consists of Mr. Liebman, Mr. DiSanto, and Ms. Weinswig.
Each of such persons has been determined to be an “independent director” under the applicable NASDAQ and SEC rules,
which is the independence standard that was adopted by our board of directors. The board of directors has determined that
Mr.  Liebman  meets  the  requirements  to  serve  as  the  Audit  Committee  Financial  Expert  by  our  board  of  directors.  The
Audit Committee operates under a written charter adopted by our board of directors. The Audit Committee

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assists  the  board  of  directors  by  providing  oversight  of  our  accounting  and  financial  reporting  processes,  appoints  the
independent registered public accounting firm, reviews with the registered independent registered public accounting firm
the  scope  and  results  of  the  audit  engagement,  approves  professional  services  provided  by  the  independent  registered
public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range
of audit and non-audit fees and reviews the adequacy of internal accounting controls.

Compensation Committee

Our board of directors has appointed a Compensation Committee consisting of Messrs. DiSanto and Fielding. Each of such
persons has been determined to be an “independent director” under the applicable NASDAQ rules. Our board of directors
has adopted a written Compensation Committee Charter that sets forth the committee’s responsibilities. The committee is
responsible  for  determining  all  forms  of  compensation  for  our  executive  officers,  and  establishing  and  maintaining
executive compensation practices designed to enhance long-term stockholder value.

Nominating Committee

Our board of directors has appointed a Nominating Committee consisting of Messrs. DiSanto and Liebman. Each of such
persons has been determined to be an “independent director” under the applicable NASDAQ rules. Our board of directors
has adopted a written Nominating Committee Charter that sets forth the committee’s responsibilities.

Item 11.   Executive Compensation

The following table sets forth information regarding all cash and non-cash compensation earned, during the years ended
December  31,  2022  and  2021,  by  our  principal  executive  officer  and  our  two  other  most  highly  compensated  executive
officers, which we refer to collectively as the named executive officers, for services in all capacities to the Company:

Summary Compensation Table

Name

Robert W. D’Loren

Title

Year

Salary
 (1)

  CEO and Chairman  2022 $ 888,500
  2021 $ 888,500

Bonus
 (2)
$ 863,534
$ 382,640

 Awards
 (3)
$ 280,601
$ 282,640

     All Other

 Compensation
 10,698
$
$

Total
$  2,043,333
 — $  1,553,780

James F. Haran

CFO

Seth Burroughs

EVP - Business
Development
and Treasury

  2022 $ 366,000
  2021 $ 366,000

$ 139,672
$  39,310

  2022 $ 340,600
2021 $ 340,600

$ 154,672
$  63,310

$
$

$
$

 — $
 — $

 — $
 — $

 3,332

$
 — $

 509,004
 405,310

 — $
 — $

 495,272
 403,910

(1) Robert W. D’Loren’s salary amount for 2022 includes a voluntary temporary deferral of salary of $178,265, which was

paid to Mr. D’Loren in 2023.

(2) Bonuses  in  2021  include  amounts  paid  in  accordance  with  the  executives’  respective  employment  agreements  (see
“Employment Agreements with Executives” in Item 10). Bonuses in 2022 include (i) amounts paid in accordance with
the executives’ respective employment agreements and (ii) amounts awarded by the board of directors as transaction
bonuses related to the May 2022 sale of a majority interest in the Isaac Mizrahi brand.

(3) The amounts shown represent the grant date fair value of fully-vested common stock awards issued as payment for

performance bonuses earned in the prior year.

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Outstanding Equity Awards as of December 31, 2022

Options and Warrant Awards

Stock Awards

Number of
Number of
Securities 
Securities 
Underlying    Underlying 
Unexercised   Unexercised 
Options &
Options &  
 Warrants,
 Warrants,  

      Exercisable      Unexercisable    

 2,578,947 (1)$

  Option or
Warrant 
Exercise Expiration 

 Price     
 1.72

Date
2/28/2029

  Number of 
Shares of
 Stock that
 Have Not

 Vested     

Market 
Value of
Shares of
  Stock that 
Have Not 
Vested

 552,632 (1)$

 1.72

2/28/2029

 368,421 (1)$

 1.72

2/28/2029  

 — $

 — $

 — $

 —

 —

 —

Name
Robert W. D’Loren

Title
CEO, Chairman

James F. Haran

CFO

Seth Burroughs

  EVP - Bus. Development

& Treasury

 —

 —

 —

(1) These options shall become exercisable based upon the Company’s common stock achieving specified target prices as
outlined in the executive’s employment agreement, and expire on February 28, 2029. See “Employment Agreements
with Executives” in Item 10.

Director Compensation

We pay our non-employee directors $3,000 for each board of directors and committee meeting attended, up to a maximum
of $12,000 per year for board of directors’ meetings and up to a maximum of $12,000 per year for committee meetings,
except that the chairman of each committee receives $4,000 for each such committee meeting attended, up to a maximum
of $16,000 per year.

The following table sets forth information with respect to each non-employee director’s compensation for the year ended
December 31, 2022. The dollar amounts shown for Stock Awards represent the grant date fair value of the restricted stock
awards or stock options granted during the fiscal year calculated in accordance with ASC Topic 718.

Name

Mark DiSanto (1) (2)
Michael R. Francis (1) (2)
Howard Liebman (1) (2)
Deborah Weinswig (1) (2)
James Fielding (1) (2)

Fees Earned
or Paid 
in Cash
 21,000
 9,000
 28,000
 21,000
 12,000

$
$
$
$
$

Stock
Awards
 16,200
 16,200
 16,200
 16,200
 16,200

$
$
$
$
$

Option
Awards
 23,536
 23,536
 23,536
 23,536
 23,536

$
$
$
$
$

Total
 60,736
 48,736
 67,736
 60,736
 51,736

$
$
$
$
$

(1) On April 20, 2022, each non-employee directory was granted 10,000 shares of restricted stock pursuant to the terms
and  conditions  of  the  2021  Equity  Incentive  Plan.  Such  shares  of  restricted  stock  will  vest  evenly  over  two  years,
whereby 50% shall vest on April 20, 2023 and 50% shall vest on April 20, 2024. Notwithstanding the foregoing, each
grantee may extent the vesting date of all or a portion of the restricted shares by six months and, thereafter one or more
times  may  further  extend  such  date  with  respect  to  all  or  a  portion  of  the  restricted  shares  until  the  next  following
October 20 or April 20, as the case may be. The grant date fair value of the shares was $1.62 per share.

(2) On April 20, 2022, each non-employee director was granted options to purchase 25,000 shares of stock pursuant to the
terms and conditions of the 2021 Equity Incentive Plan. Such options will vest evenly over two years, whereby 50%
shall vest on April 20, 2023 and 50% shall vest on April 20, 2024. The exercise price of the options is $1.62 per share.

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2021 Equity Incentive Plan

Our 2021 Equity Incentive Plan, which we refer to as the 2021 Plan, is designed and utilized to enable the Company to
offer  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.

The 2021 Plan provides for the grant of stock options, restricted stock, restricted stock units, performance awards, or cash
awards. The stock options may be incentive stock options or non-qualified stock options. A total of 4,000,000 shares of
common stock are eligible for issuance under the 2021 Plan. The 2021 Plan may be administered by the board of directors
or a committee consisting of two or more members of the board of directors appointed by the board of directors.

Officers  and  other  employees  of  Xcel  or  any  parent  or  subsidiary  of  Xcel  who  are  at  the  time  of  the  grant  of  an  award
employed by us or any parent or subsidiary of Xcel are eligible to be granted options or other awards under the 2021 Plan.
In addition, non-qualified stock options and other awards may be granted under the 2021 Plan to any person, including, but
not limited to, directors, independent agents, consultants, and attorneys who the board of directors or the committee, as the
case may be, believes has contributed or will contribute to our success.

Cash awards may be issued under the 2021 Plan either alone or in addition to or in tandem with other awards granted under
the 2021 Plan or other payments made to a participant not under the 2021 Plan. The board or committee, as the case may
be, shall determine the eligible persons to whom, and the time or times at which, cash awards will be made, the amount that
is subject to the cash award, the circumstances and conditions under which such amount shall be paid, in whole or in part,
the time of payment, and all other terms and conditions of the awards.

With respect to incentive stock options granted to an eligible employee owning stock possessing more than 10% of the total
combined  voting  power  of  all  classes  of  our  stock  or  the  stock  of  a  parent  or  subsidiary  of  our  Company  immediately
before the grant, such incentive stock option shall not be exercisable more than 5 years from the date of grant. The exercise
price of an incentive stock option will not be less than the fair market value of the shares underlying the option on the date
the option is granted, provided, however, that the exercise price of an incentive stock option granted to a 10% stockholder
may not be less than 110% of such fair market value. The exercise price of a non-qualified stock option may not be less
than fair market value of the shares of common stock underlying the option on the date the option is granted.

Restricted stock awards give the recipient the right to receive a specified number of shares of common stock, subject to
such terms, conditions and restrictions as the board or the committee, as the case may be, deems appropriate. Restrictions
may include limitations on the right to transfer the stock until the expiration of a specified period of time and forfeiture of
the stock upon the occurrence of certain events such as the termination of employment prior to expiration of a specified
period of time. Restricted stock unit (“RSU”) awards will be settled in cash or shares of common stock, in an amount based
on the fair market value of our common stock on the settlement date. The RSUs will be subject to forfeiture and restrictions
on transferability as set forth in the 2021 Plan and the applicable award agreement and as may be otherwise determined by
the board or the committee. There were no RSUs outstanding as of December 31, 2022.

Certain awards made under the 2021 Plan may be granted so that they qualify as “performance-based compensation” (as
this  term  is  used  in  Internal  Revenue  Code  Section  162(m)  and  the  regulations  thereunder)  and  are  exempt  from  the
deduction limitation imposed by Code Section 162(m). Under Internal Revenue Code Section 162(m), our tax deduction
may  be  limited  to  the  extent  total  compensation  paid  to  the  chief  executive  officer,  or  any  of  the  four  most  highly
compensated  executive  officers  (other  than  the  chief  executive  officer)  exceeds  $1  million  in  any  one  tax  year.  Among
other  criteria,  awards  only  qualify  as  performance-based  awards  if  at  the  time  of  grant  the  compensation  committee  is
comprised solely of two or more “outside directors” (as this term is used in Internal Revenue Code Section 162(m) and the
regulations thereunder). In addition, we must obtain stockholder approval of material terms of performance goals for such
performance-based compensation.

All  stock  options  and  certain  stock  awards,  performance  awards,  and  stock  units  granted  under  the  2021  Plan,  and  the
compensation attributable to such awards, are intended to (i) qualify as performance-based awards or (ii) be otherwise

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exempt from the deduction limitation imposed by Internal Revenue Code Section 162(m). No awards may be granted on or
after the fifth anniversary of the effective date of the 2021 Plan.

The 2021 Equity Incentive Plan became effective April 19, 2022. Prior to the effectiveness of the 2021 Plan, the Company
made awards under our Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”), the key terms and provisions
of which were substantially similar to the 2021 Plan described above, with the major difference being the number of shares
of common stock eligible for issuance. Stock-based awards (including options, warrants, and restricted stock) previously
granted under our 2011 Plan remain outstanding, and shares of common stock may be issued to satisfy options or warrants
previously granted under the 2011 Plan, although no new awards may be granted under the 2011 Plan.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The  following  table  lists,  as  of  April  14,  2023,  the  number  of  shares  of  common  stock  beneficially  owned  by  (i)  each
person  or  entity  known  to  the  Company  to  be  the  beneficial  owner  of  more  than  5%  of  the  outstanding  common  stock;
(ii) each named executive officer and director of the Company, and (iii) all officers and directors as a group. Information
relating  to  beneficial  ownership  of  common  stock  by  our  principal  stockholders  and  management  is  based  upon
information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange
Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power
to dispose of or direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of
which  that  person  has  a  right  to  acquire  beneficial  ownership  within  60  days.  Under  the  Securities  and  Exchange
Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may
be  deemed  to  be  a  beneficial  owner  of  securities  as  to  which  he  or  she  may  not  have  any  pecuniary  beneficial  interest.
Except as noted below, each person has sole voting and investment power. Unless otherwise indicated, the address for such
person is c/o Xcel Brands, Inc., 1333 Broadway, 10th Floor, New York, New York 10018.

The percentages below are calculated based on 19,624,860 shares of common stock issued and outstanding as of April 14,
2023:

Name and Address
Named executive officers and directors:
Robert W. D’Loren (1)
James F. Haran (2)
Seth Burroughs (3)
Howard Liebman (4)
Mark DiSanto (5)
Michael R. Francis (6)
Deborah Weinswig (7)
James Fielding (8)

Number of 
Shares 
of Common 
Stock 
Beneficially 
Owned

 8,124,560  
 204,018  
 310,549  
 188,665  
 1,559,176  
 231,500  
 140,500  
 107,500  

Percent 
Beneficially 
Owned

 41.40 %
 1.04
 1.58
*
 7.90
 1.17
*
*

All directors and executive officers as a group (8 persons) (9)

 10,866,468  

 54.03

5% Shareholders:
Isaac Mizrahi (10)
Hilco Trading, LLC (11)
5 Revere Drive, Suite 206, Northbrook, IL 60062
Burch Acquisition LLC (12)
840 First Avenue, Suite 200, King of Prussia, PA 19406

*  Less than 1%.

99

 2,416,882  
 1,667,767  

 12.26
 8.52

 1,000,000  

 5.11

 
 
    
    
 
 
 
 
 
 
 
 
 
 
 
 
 
   
  
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(1) Consists  of  (i)  1,738,990  shares  held  by  Mr.  D’Loren,  (ii)  607,317  shares  owned  by  Irrevocable  Trust  of  Rose
Dempsey  (or  the  Irrevocable  Trust)  of  which  Mr.  D’Loren  and  Mr.  DiSanto  are  the  trustees  and  as  to  which
Mr. D’Loren has sole voting and dispositive power, (iii) 1,988,390 shares of common stock held in the name of Isaac
Mizrahi, (iv) 1,666,667 shares of common stock held in the name of Hilco Trading, LLC, and (v) 2,123,196 shares of
common stock as to which holders thereof granted to Mr. D’Loren irrevocable proxy and attorney-in-fact with respect
to the shares. Certain holders or grantees have entered into certain agreements, pursuant to which appoint a person
designated by our board of directors as their irrevocable proxy and attorney-in-fact with respect to the shares set forth
in clauses (iii), (iv), and (v). Mr. D’Loren does not have any pecuniary interest in these shares described in clauses
(iii), (iv), and (v) and disclaims beneficial ownership thereof. Does not include 326,671 shares held by the D’Loren
Family  Trust  (or  the  Family  Trust)  of  which  Mark  DiSanto  is  a  trustee  and  has  sole  voting  and  dispositive  power.
Does not include 2,578,947 options that are not yet exercisable.

(2) Consists of (i) 204,018 shares of common stock. Does not include 552,632 options that are not yet exercisable.

(3) Consists of (i) 310,549 shares of common stock. Does not include 368,421 options that are not yet exercisable.

(4) Consists of (i) 36,165 shares of common stock, (ii) 50,000 restricted shares, and (iii) immediately exercisable options

to purchase 102,500 shares.

(5) Consists  of  (i)  326,671  shares  held  by  the  D’Loren  Family  Trust,  of  which  Mark  DiSanto  is  trustee  and  has  sole
voting and dispositive power over the shares held by the D’Loren Family Trust, (ii) 1,027,613 shares held by Mark X.
DiSanto  Investment  Trust,  of  which  Mark  DiSanto  is  trustee  and  has  sole  voting  and  dispositive  power  over  the
shares  held  by  the  Trust,  (iii)  20,000  restricted  shares,  (iv)  102,500  shares  issuable  upon  exercise  of  warrants  and
options that have vested, and (v) 82,392 shares held by other trusts, of which Mark DiSanto is trustee and has sole
voting and dispositive power over the shares held by the trusts.

(6) Consists  of  (i)  109,000  shares  of  common  stock,  (ii)  20,000  restricted  shares,  and  (iii)  immediately  exercisable

options to purchase 102,500 shares.

(7) Consists of (i) 38,000 restricted shares and (ii) immediately exercisable options to purchase 102,500 shares.

(8) Consists of (i) 10,000 shares of common stock, (ii) 20,000 restricted shares, and (iii) immediately exercisable options

to purchase 77,500 shares.

(9)

Includes  (i)  4,452,715  shares  of  common  stock,  (ii)  148,000  restricted  shares,  (iii)  487,500  shares  issuable  upon
exercise  of  options  that  are  currently  exercisable,  and  (iv)  5,778,253  other  shares  of  common  stock  as  to  which
holders thereof granted to Mr. D’Loren irrevocable proxy and attorney-in-fact with respect to the shares.

(10) Consists  of  (i)  2,266,882  shares  of  common  stock  and  (ii)  immediately  exercisable  options  to  purchase  150,000

shares.

(11) The  H  Company  IP,  LLC,  or  HIP,  directly  owns  1,000,000  shares  of  common  stock,  which  we  refer  to  as  the  H
Company  Shares.  House  of  Halston,  LLC,  or  HOH,  is  the  parent  company  of  HIP  and  may  be  deemed  to  share
beneficial ownership of the H Company Shares by virtue of its ability to direct the business and investment decisions
of HIP. The H Investment Company, LLC, or H Investment, in its capacity as the controlling member of HOH, has
the ability to direct the investment decisions of HOH, including the power to direct the decisions of HOH regarding
the  disposition  of  the  H  Company  Shares;  therefore,  H  Investment  may  be  deemed  to  beneficially  own  the  H
Company Shares. Hilco Brands, LLC, or Hilco Brands, in its capacity as a member of the Board of Managers of H
Investment,  has  the  ability  to  direct  the  management  of  H  Investment’s  business,  including  the  power  to  direct  the
decisions of H Investment regarding the voting and disposition of the H Company Shares; therefore, Hilco Brands
may  be  deemed  to  have  indirect  beneficial  ownership  of  the  H  Company  Shares.  Hilco  Trading,  LLC,  or  Hilco
Trading, is the parent company of Hilco Brands and may be deemed to share beneficial ownership of the H Company
Shares  by  virtue  of  its  ability  to  direct  the  business  and  investment  decisions  of  Hilco  Brands.  Hilco  Trading  also
directly owns 667,767 shares of our outstanding common stock, which we refer to as the Hilco Shares. By virtue of
the  relationship  described  above  and  its  direct  ownership  of  the  Hilco  Shares,  Hilco  Trading  beneficially  owns
1,667,767 shares of our common stock. Jeffrey Bruce Hecktman is the majority owner of Hilco Trading and may be

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deemed to share beneficial ownership of the H Company Shares and the Hilco Shares by virtue of his ability to direct
the business and investment decisions of Hilco Trading. By virtue of this relationship, Mr. Hecktman may be deemed
to have indirect beneficial ownership of 1,667,767 shares of our common stock.

(12) Consists of 1,000,000 shares of common stock.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

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. This employment
agreement remained in effect through May 31, 2022. On May 31, 2022, this agreement was transferred to IM Topco as part
of the transaction in which the Company sold a majority interest in the Isaac Mizrahi Brand trademarks to a third party.

The employment agreement provided Mr. Mizrahi with a base salary of $1.8 million, $2.0 million, and $2.1 million per
annum for 2020, 2021, and 2022, respectively. Mr. Mizrahi was also 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 and 2022. The
Bonus  consisted  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 below:

● “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  Qurate’s  QVC  channel  on  Mondays

(subject to certain expectations) up to a maximum of 40 such appearances in a calendar year.

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 provided services to Mr. Mizrahi necessary for Mr. Mizrahi to perform his services
pursuant to the employment agreement. The Company paid Laugh Club an annual fee of $0.72 million for such services.
This services agreement remained in effect through May 31, 2022. On May 31, 2022, this agreement was transferred to IM
Topco as part of the transaction in which the Company sold a majority interest in the Isaac Mizrahi Brand trademarks to a
third party.

In  addition,  on  May  31,  2022,  all  522,500  unvested  shares  of  restricted  stock  of  the  Company  held  by  Mr.  Mizrahi  (for
which all stock-based compensation expense had been previously recognized in prior periods) were immediately vested,
with 240,000 of such shares being surrendered for cancellation in satisfaction of withholding tax obligations. Also on May
31,  2022,  the  Company  issued  33,557  additional  shares  of  common  stock  of  the  Company  (valued  at  $50,000)  to  Mr.
Mizrahi, which vested immediately, and made a $100,000 cash payment to Mr. Mizrahi.

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Item 14.   Principal Accountant Fees and Services

Audit Fees

The aggregate fees billed for professional services rendered by our prior Independent Registered Public Accounting Firm,
CohnReznick LLP, for the review of our consolidated financial statements included in our quarterly reports for the first two
fiscal quarters of 2021, and other fees that are normally provided by the accounting firm in connection with statutory and
regulatory filings or engagements for the year ended December 31, 2021 (up through the date of their dismissal on October
1, 2021) were approximately $105,000.

The aggregate fees billed or to be billed for professional services rendered by our current Independent Registered Public
Accounting Firm, Marcum LLP, for the audit of our annual consolidated financial statements, review of our consolidated
financial statements included in our quarterly report for the third fiscal quarter of 2021, and other fees that are normally
provided  by  the  accounting  firm  in  connection  with  statutory  and  regulatory  filings  or  engagements  for  the  year  ended
December 31, 2021 were approximately $277,000.

The aggregate fees billed or to be billed for professional services rendered by our current Independent Registered Public
Accounting Firm, Marcum LLP, for the audit of our annual consolidated financial statements, review of our consolidated
financial statements included in our quarterly reports, and other fees that are normally provided by the accounting firm in
connection with statutory and regulatory filings or engagements for the year ended December 31, 2022 were approximately
$353,000.

Audit-Related Fees

There  were  no  fees  billed  by  our  Independent  Registered  Public  Accounting  Firm  for  audit-related  services  for  the
fiscal years ended December 31, 2022 and 2021.

Tax Fees

There were no fees billed for professional services rendered by our Independent Registered Public Accounting Firm for tax
compliance, tax advice, and tax planning for the fiscal years ended December 31, 2022 and 2021.

All Other Fees

There were no fees billed for non-audit services by our Independent Registered Public Accounting Firm for the fiscal years
ended December 31, 2022 and 2021.

Audit Committee Determination

The  Audit  Committee  considered  and  determined  that  the  services  performed  are  compatible  with  maintaining  the
independence of the independent registered public accounting firm.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor

The Audit Committee is responsible for pre-approving all audit and permitted non-audit services to be performed for us by
our Independent Registered Public Accounting Firm as outlined in its Audit Committee charter. Prior to engagement of the
Independent Registered Public Accounting Firm for each year’s audit, management or the Independent Registered Public
Accounting Firm submits to the Audit Committee for approval an aggregate request of services expected to be rendered
during the year, which the Audit Committee pre-approves. During the year, circumstances may arise when it may become
necessary  to  engage  the  Independent  Registered  Public  Accounting  Firm  for  additional  services  not  contemplated  in  the
original  pre-approval.  In  those  circumstances,  the  Audit  Committee  requires  specific  pre-approval  before  engaging  the
Independent Registered Public Accounting Firm. The engagements of our Independent Registered Public Accounting Firm
were approved by the Company’s Audit Committee.

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Item 15. Exhibit and Financial Statement Schedules

PART IV

Exhibit
Number

INDEX TO EXHIBITS

Description

3.1

3.2

4.1

4.2

4.3

9.1

9.2

9.3

9.4

10.1

10.2

10.3

10.4

10.5

10.6

21.1

23.1

Amended and Restated Certificate of Incorporation of Xcel Brands, Inc. (7)

Third Restated and Amended Bylaws of Xcel Brands, Inc. (8)

Third Amended and Restated Equity Incentive Plan and Forms of Award Agreements (9)

2021 Equity Incentive Plan (11)

Description of Registrant’s Securities (10)

Amended and Restated Voting Agreement between Xcel Brands, Inc. and IM Ready-Made, LLC, dated as
of December 24, 2013 (2)

Voting Agreement between Xcel Brands, Inc. and Judith Ripka Berk, dated as of April 3, 2014 (4)

Voting Agreement dated as of December 22, 2014 by and between Xcel Brands, Inc. and H Company IP,
LLC (5)

Form of Voting Agreement dated as of February 11, 2019 (1)

Employment Agreement between the Company and Robert D’Loren dated February 27, 2019 (10)

Employment Agreement between the Company and James Haran dated February 27, 2019 (10)

Employment Agreement between the Company and Seth Burroughs dated February 27, 2019 (12)

Amended and Restated Fifth Amendment, entered into as of March 14, 2014 and effective as of
December 24, 2013, to the Asset Purchase Agreement filed as Exhibit 10.1 (3)

Sublease Agreement, dated as of July 8, 2015, by and between Xcel Brands, Inc. and GBG USA Inc. (6)

Membership Interest Purchase Agreement (13)

Subsidiaries of the Registrant (14)

Independent Registered Public Accounting Firm’s Consent (14)

31(i).1

31(i).2

32(i).1

32(i).2

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

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

Section 1350 Certification (CEO) (14)

Section 1350 Certification (CFO) (14)

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99.1

IM Topco, LLC Financial Statements as of December 31, 2022 and for the Period from May 11, 2022
(inception) through December 31, 2022 and Independent Auditor’s Report (14)

101.INS

Inline XBRL Instance Document (14)

101.SCH

Inline XBRL Taxonomy Schema (14)

101.CAL

Inline XBRL Taxonomy Calculation Linkbase (14)

101.DEF

Inline XBRL Taxonomy Definition Linkbase (14)

101.LAB

Inline XBRL Taxonomy Label Linkbase (14)

101.PRE

Inline XBRL Taxonomy Presentation Linkbase (14)

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) (14)

(1) This  Exhibit  is  incorporated  by  reference  to  the  appropriate  exhibit  to  the  Current  Report  on  Form  8-K,  which  was

filed with the SEC on February 15, 2019.

(2) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on December 24, 2013.

(3) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on March 20, 2014.

(4) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on April 9, 2014.

(5) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on December 24, 2014.

(6) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on July 14, 2015.

(7) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on October 24, 2017.

(8) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on December 8, 2017.

(9) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on March 1, 2019.

(10) This Exhibit is incorporated by reference to the appropriate Exhibit to the Annual Report on Form 10-K for the year

ended December 31, 2020, which was filed with the SEC on April 23, 2021.

(11) This Exhibit is incorporated by reference to the appropriate Exhibit to the revised Definitive Proxy Statement on Form

DEF 14-A, which was filed with the SEC on October 20, 2021.

(12) This Exhibit is incorporated by reference to the appropriate Exhibit to the Annual Report on Form 10-K for the year

ended December 31, 2021, which was filed with the SEC on April 15, 2022.

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(13) This Exhibit is incorporated by reference to the appropriate Exhibit to the Current Report on Form 8-K, which was

filed with the SEC on June 3, 2022.

(14) Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 17, 2023

     /s/ Robert W. D’Loren

Robert W. D’Loren, Chairman, President,
Chief Executive Officer and Director
(Principal Executive Officer)

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

Name
/s/ Robert W. D’Loren
Robert W. D’Loren

/s/ James F. Haran
James F. Haran

Michael R. Francis

/s/ Mark DiSanto
Mark DiSanto

/s/ James Fielding
James Fielding

/s/ Howard Liebman
Howard Liebman

/s/ Deborah Weinswig 
Deborah Weinswig

  Chief Executive Officer and Chairman

  April 17, 2023

Title

(Principal Executive Officer)

  Chief Financial Officer

(Principal Financial Officer and
Principal Accounting Officer)

  Director

  Director

  Director

  Director

  Director

105

  April 17, 2023

  April 17, 2023

  April 17, 2023

  April 17, 2023

  April 17, 2023

 
 
 
    
      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subsidiaries of Xcel Brands, Inc.

Exhibit 21.1

Name and Jurisdiction of Incorporation

·    IM Brands, LLC, a Delaware limited liability company

·    JR Licensing, LLC, a Delaware limited liability company

·    Judith Ripka Fine Jewelry, LLC, a Delaware limited liability company

·    Judith Ripka Fine Jewelry Digital, LLC, a Delaware limited liability company

·    H Licensing, LLC, a Delaware limited liability company

·    H Heritage Licensing, LLC, a Delaware limited liability company

·    C Wonder Licensing, LLC, a Delaware limited liability company

·    Longaberger Licensing, LLC, a Delaware limited liability company

·    Gold Licensing, LLC, a Delaware limited liability company

·    Xcel Design Group, LLC, a Delaware limited liability company

·    XCEL-CT MFG, LLC, a Delaware limited liability company

·    AHX Beauty, LLC, a Delaware limited liability company

·    The Beauty Solution, LLC, a Delaware limited liability company

·    Tribe Cosmetics, LLC, a Delaware limited liability company

·    Xcel Acquisition Co., LLC, a Delaware limited liability company

·    Q Optix, LLC, a Delaware limited liability company

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in the Registration Statements of Xcel Brands, Inc. and Subsidiaries on Form S-8 File No.
333-188985; File No. 333-201252; File No. 333-214150; and File No. 333-264382 of our report dated April 17, 2023, with respect to our
audits of the consolidated financial statements of Xcel Brands, Inc. and Subsidiaries as of December 31, 2022 and 2021 and for the years
then ended, which report is included in this Annual Report on Form 10-K of Xcel Brands, Inc. for the year ended December 31, 2022.

Exhibit 23.1

/s/ Marcum LLP

Marcum LLP
New York, New York
April 17, 2023

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Form S-3 (333-216009) and in Form S-8 (File
Nos. 333-188985, 333-201252, and 333-214150) of Xcel Brands, Inc. and Subsidiaries of our
report dated April 22, 2021 on our audit of the consolidated financial statements of Xcel Brands,
Inc. and Subsidiaries as of and for the year ended December 31, 2020, included in this Annual
Report on Form 10-K of Xcel Brands, Inc. and Subsidiaries for the year ended December 31, 2021.
We also consent to the reference to our firm under the caption “Experts” in Form S-3 (333-
216009).

/s/ CohnReznick LLP
New York, New York
April 14, 2022

EXHIBIT 31(i).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 annual report on Form 10-K of Xcel Brands, Inc. (the "registrant") for the year ended December 31, 2022.

2.    Based on my knowledge, this 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 report;

3.    Based on my knowledge, the financial statements, and other financial information included in this 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 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 control 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.

April 17, 2023

/s/  Robert W. D’Loren
Name: Robert W. D’Loren
Title: Chairman, President, Chief Executive Officer and Director
(Principal Executive Officer)

EXHIBIT 31(i).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 F. Haran certify that:

1.    I have reviewed this annual report on Form 10-K of Xcel Brands, Inc. (the "registrant") for the year ended December 31, 2022.

2.    Based on my knowledge, this 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 report;

3.    Based on my knowledge, the financial statements, and other financial information included in this 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 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 control 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.

April 17, 2023

/s/  James F. Haran
Name: James F. Haran
Title:   Chief Financial Officer (Principal Financial and Accounting
Officer)

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

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32(i).1

Robert  W.  D’Loren,  the  Chairman,  President,  Chief  Executive  Officer,  and  Director  of  Xcel  Brands,  Inc.  (the  “Registrant”),  certifies,
under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act  of  2002,  that,  to  his  knowledge,  the  Annual  Report  on  Form  10-K  of  the  Registrant  for  the  year  ended  December  31,  2022  fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form
10-K fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

April 17, 2023

/s/  Robert W. D’Loren
Name: Robert W. D’Loren
Title: Chairman, President, Chief Executive Officer and Director
(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Xcel Brands, Inc. and will be retained by Xcel
Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32(i).2

James F. Haran, Chief Financial Officer of Xcel Brands, Inc (the “Registrant”), certifies, under the standards set forth and solely for the
purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Annual
Report on Form 10-K of the Registrant for the year ended December 31, 2022 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Registrant.

April 17, 2023

/s/ James F. Haran
Name: James F. Haran
Title: Chief Financial Officer (Principal Financial and Accounting
Officer)

A signed original of this written statement required by Section 906 has been provided to Xcel Brands, Inc. and will be retained by Xcel
Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 99.1

IM TOPCO, LLC
(A Limited Liability Company)

 Financial Statements as of December 31, 2022 and for the Period from May 11, 2022 (inception)
through December 31, 2022 and Independent Auditor’s Report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
IM TOPCO, LLC
(A Limited Liability Company)

Index

Independent Auditor’s Report

Balance Sheet as of December 31, 2022

Statement of Income for the Period May 11, 2022 (inception) through December 31, 2022

Statement of Members’ Equity for the Period May 11, 2022 (inception) through December 31, 2022

Statement of Cash Flows for the Period May 11, 2022 (inception) through December 31, 2022

Notes to Financial Statements

Page(s)

1-2

3

4

5

6

7-12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INDEPENDENT AUDITOR’S REPORT

To the Members and Managers
of IM Topco, LLC

Opinion

We have audited the accompanying financial statements of IM Topco, LLC (a Delaware corporation), which
comprise  the  balance  sheet  as  of  December  31,  2022,  and  the  related  statements  of  income,  member’s
equity, and cash flows for the period from May 11, 2022 (inception) to December 31, 2022, and the related
notes to the financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of IM Topco, LLC as of December 31, 2022, and the results of its operations and its cash flows for
the  initial  period  then  ended  in  accordance  with  accounting  principles  generally  accepted  in  the  United
States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities
for  the  Audit  of  the  Financial  Statements  section  of  our  report.  We  are  required  to  be  independent  of  IM
Topco,  LLC  and  to  meet  our  other  ethical  responsibilities  in  accordance  with  the  relevant  ethical
requirements  relating  to  our  audit.  We  believe  that  the  audit  evidence  we  have  obtained  is  sufficient  and
appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management  is  responsible  for  the  preparation  and  fair  presentation  of  the  financial  statements  in
accordance  with  accounting  principles  generally  accepted  in  the  United  States  of  America,  and  for  the
design,  implementation,  and  maintenance  of  internal  control  relevant  to  the  preparation  and  fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt about IM Topco, LLC’s ability to continue
as a going concern within one year after the date that the financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free  from  material  misstatement,  whether  due  to  fraud  or  error,  and  to  issue  an  auditor’s  report  that
includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and
therefore  is  not  a  guarantee  that  an  audit  conducted  in  accordance  with  generally  accepted  auditing
standards  will  always  detect  a  material  misstatement  when  it  exists.  The  risk  of  not  detecting  a  material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery,  intentional  omissions,  misrepresentations,  or  the  override  of  internal  control.  Misstatements  are
considered  material  if  there  is  a  substantial  likelihood  that,  individually  or  in  the  aggregate,  they  would
influence the judgment made by a reasonable user based on the financial statements.

1

 
In performing an audit in accordance with generally accepted auditing standards, we:

● Exercise professional judgment and maintain professional skepticism throughout the audit.

● Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud  or  error,  and  design  and  perform  audit  procedures  responsive  to  those  risks.  Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements.

● Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of IM Topco, LLC’s internal control. Accordingly, no such opinion is expressed.

● Evaluate  the  appropriateness  of  accounting  policies  used  and  the  reasonableness  of  significant
accounting  estimates  made  by  management,  as  well  as  evaluate  the  overall  presentation  of  the
financial statements.

● Conclude  whether,  in  our  judgment,  there  are  conditions  or  events,  considered  in  the  aggregate,
that  raise  substantial  doubt  about  IM  Topco,  LLC’s  ability  to  continue  as  a  going  concern  for  a
reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit, significant audit findings, and certain internal control related
matters that we identified during the audit.

/s/ Adeptus Partners, LLC

Ocean, NJ

March 29, 2023

2

 IM TOPCO, LLC
(A Limited Liability Company)
Balance Sheet as of December 31, 2022
($ thousands)

See accompanying notes to financial statements.

3

 
 
IM TOPCO, LLC
(A Limited Liability Company)
Statement of Income
For the Period May 11, 2022 (inception) through December 31, 2022
($ thousands)

See accompanying notes to financial statements.
4

IM TOPCO, LLC
(A Limited Liability Company)
Statement of Members’ Equity
For the Period May 11, 2022 (inception) through December 31, 2022
($ thousands)

See accompanying notes to financial statements.
5

 
 
 
 
 
IM TOPCO, LLC
(A Limited Liability Company)
Statement of Cash Flows
For the Period May 11, 2022 (inception) through December 31, 2022
($ thousands)

See accompanying notes to financial statements.
6

 
IM Topco, LLC
(A Limited Liability Company)
Notes to Financial Statements
December 31, 2022

Note 1 – Organization and Nature of Operations

IM Topco, LLC (the “Company”) engages in the design, licensing, and marketing of the Isaac Mizrahi family of brands
(the  “Isaac  Mizrahi  Brands”)  with  a  focus  on  a  variety  of  product  categories  featuring  the  Isaac  Mizrahi  Brands.  The
Company operates in a “working capital light” business model, licensing the Isaac Mizrahi Brand to generate royalties and
other revenues through licensing and other agreements with sourcing and design companies, wholesale manufacturers, and
retailers, including direct response television retailers. IM Topco, LLC, a Delaware limited liability company, was formed
on May 11, 2022 and acquired the Isaac Mizrahi trademarks and other intellectual property rights relating thereto through
the Membership Interest Purchase Agreement (“MIPA”) dated May 27, 2022 on May 31, 2022.

Note 2 - Summary of Significant Accounting Policies

Basis of Accounting

The financial statements are prepared on an accrual basis in accordance with accounting principles generally accepted in
the United States (“GAAP”) and are presented in U.S. dollars.

Use of Estimates

The  preparation  of  financial  statements  in  conformity  with  GAAP  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is possible that the estimate of the effect of a
condition,  situation,  or  set  of  circumstances  that  existed  at  the  date  of  the  financial  statements,  which  management
considered  in  formulating  its  estimate,  could  change  in  the  near  term  due  to  one  or  more  future  confirming  events.
Accordingly, actual results could differ significantly from estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits and investments with an original maturity of three months or less at the
time of initial deposit. The objectives of the Company's cash management policy are to safeguard and preserve funds, to
maintain liquidity sufficient to meet the Company's cash flow requirements, and to attain a market rate of return. The
Company places its cash and cash equivalents in institutions and funds of high credit quality.

Accounts Receivable

Accounts receivable are recorded net of allowances for doubtful accounts, based on the Company’s ongoing discussions
with  its  licensees  and  other  customers  and  its  evaluation  of  their  creditworthiness,  payment  history,  and  account  aging.
Accounts receivable balances deemed to be uncollectible are charged to the allowance for doubtful accounts after all means
of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts
was zero for December 31, 2022.

Intangible Assets

Intangible assets represent trademarks and license agreements relating to the Isaac Mizrahi brand. The trademarks, which
have  been  determined  to  be  indefinite-lived  intangible  assets  are  not  amortized,  but  instead  are  subject  to  impairment
evaluation. The license agreements, which have been determined to have a finite life, are evaluated for the possibility of
impairment  when  certain  indicators  are  present  and  are  otherwise  amortized  on  a  straight-line  basis  over  their  estimated
useful life. Testing for impairment occurs annually on October 1. The Company accounts for intangible assets and goodwill
as  required  by  FASB  ASC  Topic  350,  Intangibles  –  Goodwill  and  Other  (“ASC  350”).  No  impairment  charges  were
recorded during the period from May 11 (inception) through December 31, 2022. The Company capitalizes costs for its

7

IM Topco, LLC
(A Limited Liability Company)
Notes to Financial Statements
December 31, 2022

successful defense of proprietary trademarks.

Revenue Recognition

The  Company  recognizes  revenue  in  accordance  with  ASC  606,  Revenue  from  Contracts  with  Customers.  ASC  606
requires a five-step approach to determine the appropriate method of revenue recognition for each contractual arrangement:

Step 1: Identify the Contract(s) with a Customer 
Step 2: Identify the Performance Obligation(s) in the Contract 
Step 3: Determine the Transaction Price 
Step 4: Allocate the Transaction Price to the Performance Obligation(s) in the Contract 
Step 5: Recognize Revenue when (or as) the Entity Satisfies a Performance Obligation 

The Company has entered into various license agreements for its owned trademarks.  Under ASC 606, the Company’s
agreements are generally considered symbolic licenses, which contain the characteristics of a right-to-access license since
the  customer  is  simultaneously  receiving  the  intellectual  property  (“IP”)  and  benefiting  from  it  throughout  the  license
period.    The  Company  assesses  each  license  agreement  at  inception  and  determines  the  performance  obligation(s)  and
appropriate  revenue  recognition  method.  As  part  of  this  process,  the  Company  applies  judgments  based  on  historical
trends when estimating future revenues and the period over which to recognize revenue.
The Company generally recognizes revenue for license agreements under the following methods:

1.

2.

Licenses  with  guaranteed  minimum  royalties  (“GMRs”):    Generally,  GMR  payments  comprising  the
transaction  price  are  recognized  on  a  straight-line  basis  over  the  term  of  the  contract,  as  defined  in  each
license agreement. 
Licenses with both GMRs (fixed revenue) and earned royalties (variable revenue):  Earned royalties in excess
of  GMRs  are  only  recognized  when  the  Company  is  reasonably  certain  that  the  guaranteed  minimum
payments for the period, as defined in each license agreement, will be exceeded. Additionally, the Company
has  categorized  certain  contracts  as  variable  when  there  is  a  history  and  future  expectation  of  exceeding
GMRs.    The  Company  recognizes  income  for  these  contracts  during  the  period  corresponding  to  the
licensee’s sales.

3.

Licenses that are sales-based only or earned royalties: Earned royalties (variable revenue) are recognized as
income during the period corresponding to the licensee’s sales. 

Payments  received  as  consideration  for  the  grant  of  a  license  or  advanced  royalty  payments  are  recorded  as  deferred
revenue at the time payment is received and recognized into revenue under the methods described above.

Contract  assets  represent  unbilled  receivables  and  are  presented  within  accounts  receivable,  net  in  the  balance  sheet.
Contract  liabilities  represent  unearned  revenues  and  are  presented  within  the  current  portion  of  deferred  revenue  in  the
balance sheet.

Advertising Costs

All  costs  associated  with  production  for  the  Company’s  advertising,  marketing,  and  promotion  are  expensed  during  the
periods when the activities take place. All other advertising costs, such as print and online media, are expensed when the
advertisement  occurs.  The  Company  incurred  approximately  $62,000  in  advertising  and  marketing  costs  for  the  period
ended December 31, 2022.  

8

 
 
 
 
 
 
 
 
 
IM Topco, LLC
(A Limited Liability Company)
Notes to Financial Statements
December 31, 2022

Income Taxes

The Company is not a taxable entity for federal income tax purposes, and as such, does not directly pay federal income tax.
The Company’s taxable income or loss, which may vary substantially from the net income or loss reported in the Statement
of Operations, is included in the federal income tax returns of each member.

The  Company  follows  required  accounting  guidance  for  uncertainty  in  income  taxes.  The  Company  evaluates  its  tax
positions  on  an  ongoing  basis  and  if  considered  necessary  establishes  liabilities  for  uncertain  tax  positions  that  may  be
challenged by tax authorities. Management evaluated the Company’s tax positions and concluded that the Company had no
uncertain tax positions as of December 31, 2022.

Fair Value

ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value and establishes a framework for measuring
fair value under U.S. GAAP. The fair value of the Company’s financial assets and liabilities reflects management’s estimate
of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the
transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with
measuring  the  fair  value  of  the  Company’s  assets  and  liabilities,  the  Company  seeks  to  maximize  the  use  of  observable
inputs  (market  data  obtained  from  independent  sources)  and  to  minimize  the  use  of  unobservable  inputs  (internal
assumptions about how market participants would price assets and liabilities).

Fair Value of Financial Instruments

For the Company’s financial instruments, including cash, accounts receivable, and accounts payable, the carrying amounts
approximate fair value due to the short-term maturities of these instruments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and
accounts receivable.

● The Company limits its credit risk with respect to cash by maintaining cash balances with high quality financial

institutions. At times, the Company’s cash balances may exceed federally insured limits of $250,000.

● Concentrations of credit risk with respect to accounts receivable are minimal due to the collection history and the
outstanding  amounts  are  immaterial  compared  with  total  current  assets  and  revenue  amounts.  Generally,  the
Company does not require collateral or other security to support accounts receivable.

Recently Issued Accounting Pronouncements

In  June  2016,  the  FASB  issued  Accounting  Standards  Update  (“ASU”)  No.  2016-13,  "Financial  Instruments  –  Credit
Losses  (Topic  326):  Measurement  of  Credit  Losses  on  Financial  Instruments,"  which  was  subsequently  amended  in
November 2018 through ASU No. 2018-19. This ASU will require entities to estimate lifetime expected credit losses for
financial  instruments,  including  trade  and  other  receivables,  which  will  result  in  earlier  recognition  of  credit  losses.  In
November  2019,  the  FASB  issued  ASU  No.  2019-10,  which,  among  other  things,  deferred  the  application  of  the  new
guidance  on  credit  losses  for  smaller  reporting  companies  to  fiscal  years  beginning  after  December  15,  2022,  including
interim periods within those fiscal years. The Company is currently evaluating the new guidance to determine the impact
the adoption of this guidance will have on the Company’s results of operations, cash flows, and financial condition.

9

IM Topco, LLC
(A Limited Liability Company)
Notes to Financial Statements
December 31, 2022

Note 3 - Purchase of the Isaac Mizrahi Intangible Assets

On  May  31,  2022,  the  Company  acquired  the  Isaac  Mizrahi  trademarks  and  other  intellectual  property  rights  from  Xcel
Brands,  Inc.  (“Xcel”)  and  IM  Brands,  LLC,  a  wholly  owned  subsidiary  of  Xcel,  for  a  purchase  price  of  $66.0  million
through the MIPA dated May 27, 2022. Pursuant to the terms of the transaction, Xcel received $46.2 million in cash from
IMWHP,  LLC  (“WHP”)  and  retained  a  30%  membership  interest  in  the  Company.  WHP  received  a  70%  membership
interest in the Company.

The Company determined that the set of assets and activities acquired met the definition of a “business”; therefore, the
transaction was accounted as a business combination. As a result, the assets and liabilities of IM Topco, LLC were
recorded at fair market value as of the date of the transaction, May 31, 2022 in the balance sheet of the Company.

The total valuation of $66.0 million was allocated to trademarks and license agreements. Trademarks were determined to
have  an  indefinite  life  and  initial  value  of  $29.4  million.  License  Agreements  have  been  determined  by  management  to
have a useful life of five years and four months and initial value of $36.6 million. WHP contributed cash contributions of
$1.4  million  and  Xcel  contributed  $0.6  million.  We  recorded  $4.0  million  of  amortization  expense  related  to  the  license
agreements for the period from May 11, 2022 (inception) through December 31, 2022.

In  connection  with  the  Mizrahi  Acquisition,  the  Company  signed  a  long-term  licensing  agreement  for  the  Isaac  Mizrahi
brand, which became effective upon closing. WHP also entered into a management services agreement to facilitate the day-
to-day operation of IM Topco, LLC by WHP’s management. A cash distribution was made of $2.7 million to WHP from
IM  Topco,  LLC  in  December  2022.  Pursuant  to  the  purchase  agreement,  the  Company  has  an  obligation  to  pay  Xcel
Brands,  Inc.  an  earnout  payment  of  $2.0  million  (the  “IM  Earnout)  in  2024  if,  during  the  2023  fiscal  year,  IM  Topco
generates royalty revenue and EBITDA over a specific threshold (the “Thresholds”).

Total  revenue  from  the  Isaac  Mizrahi  Brands  included  in  the  statement  of  operations  for  the  year  ended  December  31,
2022, is $7.8 million.

Note 4 - Intangible Assets

Intangible assets, net consist of the following:

($ in thousands)
Trademarks (indefinite-lived)
License Agreements (finite-lived)
Total

     Weighted     
Average

December 31, 2022

Period
NA

  Amortization Gross Carrying Accumulated
Amortization
Amount
 -
$ 
 4,006
 4,006

29,381
 36,623
66,004

  5.33 years

$ 

$

$

Net Carrying
Amount

$ 

$

 29,381
32,617
61,998

Amortization expense for the finite-lived intangible assets for the period May 11, 2022 (inception) through December 31,
2022 was approximately $4.0 million.

10

    
    
 
 
 
 
 
 
IM Topco, LLC
(A Limited Liability Company)
Notes to Financial Statements
December 31, 2022

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

($ in thousands)
Year Ending December 31, 
2023
2024
2025
2026
2027
Thereafter
Total

Note 5 - Concentration

Amortization
Expense

$

$

6,867
6,867
6,867
 6,866
 5,150
-
 32,617

The Company has a direct-to-retail license agreement with QVC, Inc (“QVC”), pursuant to which the Company designs,
and QVC sources and sells, various products under the Isaac Mizrahi brand (the “QVC Agreement”). QVC owns the rights
to all designs produced under the aforementioned agreement and the QVC Agreement includes the sale of products across
various categories through QVC’s television media (including QVC and HSN) and related internet sites. Pursuant to the
agreement,  the  Company  granted  to  QVC  and  its  affiliates  the  exclusive,  worldwide  right  to  promote  the  Company’s
branded products, and the right to use and publish the related trademarks, service marks, copyrights, designs, logos, and
other intellectual property rights owned, used, licensed, and/or developed by the Company.

Net licensing revenue from QVC represented a substantial portion of the Company's revenue recorded from the period May
11, 2022 (inception) through December 31, 2022. As of December 31, 2022, the Company had receivables from QVC that
represented approximately 90% of the Company’s accounts receivable.

Note 6 - Capital

The  Company  is  owned  by  two  members:  WHP  and  Xcel.  The  Company  has  1,000  Units  authorized,  issued,  and
outstanding; 700 Units are held by WHP and 300 Units are held by Xcel. In accordance with the terms of the governing
Limited Liability Company Agreement, each Member shall vote in proportion to its percentage interest of Units held.

Capital Contributions

On  May  31,  2022,  WHP  and  Xcel  made  capital  contributions  to  the  Company  of  $47.6  million  and  $20.4  million,
respectively. WHP’s capital contribution consisted of $1.4 million in cash and $46.2 million in intellectual property.  Xcel’s
capital contribution consisted of $0.6 million in cash and $19.8 million in intellectual property.  

Distributions

During the period May 11, 2022 (inception) through December 31, 2022, the Company made cash distributions to WHP in
the amount of $2.7 million. There were no distributions made to Xcel.

11

    
 
 
 
 
 
IM Topco, LLC
(A Limited Liability Company)
Notes to Financial Statements
December 31, 2022

Note 7 - Commitments and Contingencies

Legal Proceedings

From time to time, the Company is involved in legal matters arising in the ordinary course of business. While the Company
believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of
business  for  which  the  Company  is,  or  could  be,  involved  in  litigation  will  not  have  a  material  adverse  effect  on  its
business, financial condition, results of operations, or cash flows. Contingent liabilities arising from potential litigation are
assessed  by  management  based  on  the  individual  analysis  of  these  proceedings  and  on  the  opinion  of  the  Company’s
lawyers and legal consultants. There have been no provisions recorded for the period ended December 31, 2022.

Loss Contingencies

The  Company  recognizes  contingent  losses  that  are  both  probable  and  estimable.  In  this  context,  probable  means
circumstances  under  which  events  are  likely  to  occur.  The  Company  records  legal  costs  pertaining  to  contingencies  as
incurred. There were no contingent losses recognized as of December 31, 2022.

Note 8 - Related Party Transactions

WHP

On  May  31,  2022,  the  Company  entered  into  a  services  agreement  with  WHP  pursuant  to  which  WHP  provides  certain
services  to  the  Company.  During  the  period  May  11,  2022  (inception)  through  December  31,  2022,  the  Company  paid
WHP a fee of $0.4 million for such services.

Xcel

On  May  31,  2022,  the  Company  entered  into  a  services  agreement  with  Xcel  pursuant  to  which  Xcel  provides  certain
services to the Company. During the period May 11, 2022 (inception) through December 31, 2022, the Company paid Xcel
a fee of $0.2 million for such services.

On May 31, 2022, the Company entered into a license agreement with XL CT MFG, LLC (“XL CT”),  a wholly-owned
subsidiary of Xcel, pursuant to which the Company granted XL CT a license to use certain Isaac Mizrahi trademarks on
and in connection with the design, manufacture, distribution, sale, and promotion of women’s sportswear products in the
United  States  and  Canada  during  the  term  of  the  agreement,  in  exchange  for  the  payment  of  royalties  in  connection
therewith. The initial term of this agreement ends December 31, 2026, and provides for guaranteed royalties of $0.4 million
per year from XL CT. The agreement was terminated in December and replaced by an agreement with Jump Design Group,
Inc  (“Jump”).  Xcel  is  responsible  for  any  differential  payments  made  between  Jump  and  the  guaranteed  royalties  of  the
Xcel license agreement.  During the period May 11, 2022 (inception) through December 31, 2022, Xcel paid the Company
royalties of approximately $0.2 million.

Note 9 - Subsequent Events

The Company has evaluated subsequent events through March 29, 2023, which is the date the financial statements were
available to be issued and has concluded that other than the event disclosed above, no such events or transactions took
place with would require disclosure herein.

12