1. Nature of
Operations, Background, and Basis of Presentation
The accompanying condensed consolidated balance sheet as of
December 31, 2021 (which has been derived from audited
financial statements) and the unaudited interim condensed
consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”) for interim financial information and pursuant to the
instructions to Form 10-Q and Article 8 of Regulation S-X
promulgated by the United States Securities and Exchange Commission
(“SEC”). Certain information or footnote disclosures normally
included in financial statements prepared in accordance with GAAP
have been condensed or omitted, pursuant to the rules and
regulations of the SEC for interim financial reporting.
Accordingly, they do not include all the information and footnotes
necessary for a comprehensive presentation of financial position,
results of operations, or cash flows.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements were prepared following the same
policies and procedures used in the preparation of the audited
consolidated financial statements and reflect all adjustments
(consisting of normal recurring adjustments) necessary to present
fairly the results of operations, financial position, and cash
flows of Xcel Brands, Inc. and its subsidiaries (the “Company”
or "Xcel"). The results of operations for the interim periods
presented herein are not necessarily indicative of the results for
the entire fiscal year or for any future interim
periods. These unaudited condensed consolidated financial
statements should be read in conjunction with the Company’s Annual
Report on Form 10-K for the year ended December 31,
2021, as filed with the SEC on April 15, 2022.
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
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
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
ownership interest in Longaberger Licensing, LLC; the Company
consolidates Longaberger Licensing, LLC and recognizes
noncontrolling interest for the remaining ownership interest held
by a third party.
The Company 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
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 2 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 Condensed
Consolidated Statements of Operations, separately from the
Company’s net licensing revenue.