UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023

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

ACT OF 1934

For the transition period from ___ to ___

Commission File Number: 001-37527

XCEL BRANDS, INC.

(Exact name of registrant as specified in its charter)

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

	1333 Broadway, 10th Floor, New York, NY 10018
	(Address of Principal Executive Offices)

(347) 727-2474

(Issuer’s Telephone Number, Including Area Code)

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


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

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

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

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


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

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

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

As of May 15, 2023, there were 19,683,194 shares of common stock, $.001 par value per share, of the issuer outstanding.

Table of Contents

XCEL BRANDS, INC.

INDEX

	a
		Page

PART I - FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets	3

	Unaudited Condensed Consolidated Statements of Operations	4

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	5

	Unaudited Condensed Consolidated Statements of Cash Flows	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

PART II - OTHER INFORMATION		27

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

	Signatures	28

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	March 31, 2023		December 31, 2022
	(Unaudited)		(Note 1)
Assets
Current Assets:
Cash and cash equivalents	$	1,612	$	4,608
Accounts receivable, net		5,969		5,110
Inventory		3,099		2,845
Prepaid expenses and other current assets		1,032		1,457
Total current assets		11,712		14,020
Non-current Assets:
Property and equipment, net		1,237		1,418
Operating lease right-of-use assets		5,185		5,420
Trademarks and other intangibles, net		46,130		47,665
Equity method investment		18,680		19,195
Deferred tax assets, net		1,107		1,107
Other assets		110		110
Total non-current assets		72,449		74,915

Total Assets	$	84,161	$	88,935

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	5,549	$	3,958
Accrued income taxes payable		555		568
Accrued payroll		477		416
Current portion of operating lease obligations		1,395		1,376
Current portion of contingent obligations		—		243
Total current liabilities		7,976		6,561
Long-Term Liabilities:
Long-term portion of operating lease obligations		5,531		5,839
Long-term portion of contingent obligations		6,396		6,396
Total long-term liabilities		11,927		12,235
Total Liabilities		19,903		18,796

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 19,633,194 and 19,624,860 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		20		20
Paid-in capital		103,649		103,592
Accumulated deficit		(38,440)		(32,797)
Total Xcel Brands, Inc. stockholders' equity		65,229		70,815
Noncontrolling interest		(971)		(676)
Total Stockholders' Equity		64,258		70,139

Total Liabilities and Stockholders' Equity	$	84,161	$	88,935

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


	For the Three Months Ended
	March 31,
	2023		2022
Revenues
Net licensing revenue	$	2,222	$	5,961
Net sales		3,828		2,786
Net revenue		6,050		8,747
Cost of goods sold		2,693		1,680
Gross profit		3,357		7,067

Operating costs and expenses
Salaries, benefits and employment taxes		3,465		4,861
Other selling, general and administrative expenses		3,493		3,416
Total operating costs and expenses		6,958		8,277

Operating loss before other expense (income), including non-cash expenses		(3,601)		(1,210)

Other expense (income), including non-cash expenses
Depreciation and amortization		1,797		1,820
Loss from equity method investment		515		—
Total other expense (income), including non-cash expenses		2,312		1,820

Operating loss		(5,913)		(3,030)

Interest and finance expense
Interest expense - term loan debt		—		708
Other interest and finance charges, net		25		1
Total interest and finance expense		25		709

Loss before income taxes		(5,938)		(3,739)

Income tax benefit		—		—

Net loss		(5,938)		(3,739)
Net loss attributable to noncontrolling interest		(295)		(252)
Net loss attributable to Xcel Brands, Inc. stockholders	$	(5,643)	$	(3,487)

Loss per common share attributable to Xcel Brands, Inc. stockholders:
Basic and diluted net loss per share	$	(0.29)	$	(0.18)
Weighted average number of common shares outstanding:
Basic and diluted weighted average common shares outstanding		19,633,194		19,571,119

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

Xcel Brands, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)


	Xcel Brands, Inc. Stockholders
	Common Stock
	Number of			Paid-In		Accumulated		Noncontrolling		Total
	Shares	Amount		Capital		Deficit		Interest		Equity
Balance as of December 31, 2021	19,571,119	$	20	$	103,039	$	(28,779)	$	662	$	74,942

Compensation expense related to stock options and restricted stock	—		—		30		—		—		30

Net loss	—		—		—		(3,487)