Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The statements that are not historical facts contained in this report are forward-looking statements that involve a number of known and unknown risks, uncertainties and other factors, all of which are difficult or impossible to predict and many of which are beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks are detailed in the Risk Factors section of our Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on May 28, 2025. The words "believe," "anticipate," "expect," "continue," "estimate," "appear," "suggest," "goal," "potential," "predicts," "seek," "will," "confident," "project," "provide," "plan," "likely," "future," "ongoing," "intend," "may," "should," "would," "could," "guidance," and similar expressions identify forward-looking statements.

Overview

Xcel Brands, Inc. ("Xcel," the "Company," "we," "us," or "our") is a media and consumer products company engaged in the design, licensing, marketing, live streaming, and social commerce sales of branded apparel, footwear, accessories, home goods and other consumer products, and the development of influencer led brands and the acquisition of dynamic consumer lifestyle brands. Xcel was founded in 2011 with a vision to reimagine shopping, entertainment, and social media as social commerce.

Xcel owns the Halston and C Wonder brands, as well as the co-branded collaboration brands Tower Hill by Christie Brinkley, Trust. Respect. Love by Cesar Millan, GemmaMade by Gemma Stafford, and Off/Duty by Coco Rocha brand, and holds the television rights through a long-term license agreement with Mesa Mia by Jenny Martinez. Xcel also owns and manages the Longaberger by Shannon Doherty brand through its controlling interest in Longaberger Licensing, LLC.

Our brand portfolio also previously included the Judith Ripka brand (through April 27, 2026) and a noncontrolling ownership interest in the Isaac Mizrahi brand (through October 1, 2025).

Xcel is pioneering a modern consumer products sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels to be everywhere its customers shop. The Company's previously owned and current brands have generated more than $5 billion in retail sales via livestreaming in interactive television and digital channels alone and have over 20,000 hours of content production time in live-stream and social commerce. The Company's brand portfolio reaches more than 46 million social media followers with broadcast reaching 200 million households.

Xcel currently operates in a working-capital light model, with our licensees and/or retail partners responsible for the procurement and sale of inventory. As such, our revenues primarily consist of royalty revenues, and we do not have risk of carrying aged inventory. As a result, fluctuations in product costs and tariffs do not have a direct impact on us, but do impact us indirectly as our royalty revenues are typically based on the net sales and success of our licensees.

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:

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

Summary of Operating Results

Three months ended June 30, 2026 (the "current quarter") compared with the three months ended June 30, 2025 (the "prior year quarter")

Revenues

Current quarter net revenue decreased by $0.20 million to $1.12 million from $1.32 million for the prior year quarter. This decrease was primarily driven by the loss of licensing revenue as a result of the sale of the Judith Ripka brand in April 2026.

Direct Operating Costs and Expenses

Our total direct operating costs and expenses declined approximately 2% to $1.86 million in the current quarter compared to $1.90 million in the prior year quarter, as reductions in the Company's payroll and benefits costs were partially offset by a net increase in other selling, general and administrative expenses. The decrease in payroll and benefits costs was due to cost reduction actions taken by management in 2025, while the year-over-year increase in other selling, general and administrative expenses was primarily attributable to the one-time impact of the employee retention credit recognized in the prior year quarter.

Other Operating Costs and Expenses (Income)

Depreciation and amortization expense decreased to $0.81 million in the current quarter from $0.90 million in the prior year quarter; this decline was primarily attributable to the sale of the Judith Ripka brand trademarks in April 2026.

For the prior year quarter, we recognized a $0.18 million loss related to our equity investment in IM Topco. However, as the remaining IM Topco equity interest was transferred to WHP on October 1, 2025, there were no earnings or losses from equity investments for the current quarter.

Interest and Finance Expense

Interest and finance expense was approximately $0.87 million for the current quarter, compared with approximately $2.34 million for the prior year quarter. This decrease was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized in the prior year quarter related to the April 2025 refinancing of our term loan debt, compared with a much smaller comparable loss of $0.15 million recognized in the current quarter related to the April 2026 debt refinancing. This decrease was partially offset by higher interest expense and other finance charges, primarily driven by higher overall outstanding debt balances in the current quarter.

Income Taxes

The estimated annual effective income tax rate for the current quarter and the prior year quarter was approximately -0.8% and 0.0%, respectively, resulting in an income tax provision (benefit) of $0.02 million and $0, respectively. For both periods, the federal statutory rate differed from the effective tax rate primarily due to the recording of a valuation allowance against the benefit that would have otherwise been recognized, as it was considered not more likely than not that the net operating losses generated during each period will be utilized in future periods

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Net Loss Attributable to Xcel Brands, Inc. Stockholders

We had a net loss of $2.48 million for the current quarter, compared with a net loss of $3.99 million for the prior year quarter, due to the combination of the factors outlined above.

Non-GAAP Net Income (Loss), Non-GAAP Diluted EPS, and Adjusted EBITDA

We had a non-GAAP net loss of approximately $1.29 million, or $(0.21) per diluted share ("non-GAAP diluted EPS"), for the current quarter and a non-GAAP net loss of $0.90 million, or $(0.37) per diluted share, for the prior year quarter. Non-GAAP net income (loss) is a non-GAAP unaudited term, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders, exclusive of amortization of trademarks, income (loss) from equity investments, stock-based compensation and cost of licensee warrants, loss on early extinguishment of debt (if any), charges related to the sale of the Judith Ripka brand, and income taxes (if any). Non-GAAP net income (loss) 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 $(0.48) million for the current quarter, compared with approximately $(0.30) million for the prior year quarter. Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders before interest and finance expense (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity investments, charges related to the sale of the Judith Ripka brand, stock-based compensation and cost of licensee warrants, and costs associated with restructuring of operations.

Management uses non-GAAP net income (loss), 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 (loss), 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 (loss), 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 (loss), non-GAAP diluted EPS, and Adjusted EBITDA are financial measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate non-GAAP net income (loss), non-GAAP diluted EPS, and Adjusted EBITDA in a different manner than we calculate these measures.

In evaluating non-GAAP net income (loss), 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 (loss), non-GAAP diluted EPS, and Adjusted EBITDA does not imply that our future results will be unaffected by these expenses or any other unusual or non-recurring items. When evaluating our performance, you should consider non-GAAP net income (loss), 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.

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The following table is a reconciliation of net loss attributable to Xcel Brands, Inc. stockholders (our most directly comparable financial measure presented in accordance with GAAP) to non-GAAP net loss:

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

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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:

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Six months ended June 30, 2026 (the "current six months") compared with the six months ended June 30, 2025 (the "prior year six months")

Revenues

Current six months net revenue decreased by approximately $0.39 million to $2.27 million from $2.65 million for the prior year six months. This decrease was primarily driven by the combination of (i) Qurate's transition to a new apparel supplier for the C Wonder brand in December 2025, which negatively impacted Qurate sales for this brand and our associated licensing revenues during the first quarter of 2026, and (ii) the loss of licensing revenues related to the Judith Ripka brand as a result of the sale of this brand in April 2026.

Direct Operating Costs and Expenses

Overall direct operating costs and expenses declined approximately 5% to $3.93 million in the current six months compared to $4.18 million in the prior year six months, as reductions in the Company's payroll and benefits costs were partially offset by a net increase in other selling, general and administrative expenses. The decrease in payroll and benefits costs was due to cost reduction actions taken by management in 2025, while the year-over-year increase in other selling, general and administrative expenses was primarily attributable to the one-time impact of the employee retention credit recognized in the prior year six months.

Other Operating Costs and Expenses (Income)

Depreciation and amortization expense decreased to $1.71 million in the current six months from $1.80 million in the prior year six months; this decline was primarily attributable to the sale of the Judith Ripka brand trademarks in April 2026.

During the current year six months, we also recognized approximately $0.10 million of charges related to the sale of the Judith Ripak trademarks.

For the prior year six months, we recognized a $0.52 million loss related to our equity investment in IM Topco. However, as the remaining IM Topco equity interest was transferred to WHP on October 1, 2025, there were no earnings or losses from equity investments for the current six months.

Interest and Finance Expense

Interest and finance expense was approximately $1.47 million for the current six months, compared with approximately $2.90 million for the prior year quarter. This $1.43 million decrease was primarily attributable to the $1.85 million loss on early extinguishment of debt recognized in the prior year six months related to the April 2025 refinancing of our term loan debt, compared with a much smaller comparable loss of $0.15 million recognized in the current six months related to the April 2026 debt refinancing. This decrease was partially offset by higher interest expense and other finance charges, primarily driven by higher average overall outstanding debt balances in the current year period.

Income Taxes

The estimated annual effective income tax rate for the current six months and the prior year six months was approximately -0.6% and -0.7%, respectively, resulting in an income tax provision (benefit) of $0.03 million and $0.05 million, respectively. For both periods, the federal statutory rate differed from the effective tax rate primarily due to the recording of a valuation allowance against the benefit that would have otherwise been recognized, as it was considered not more likely than not that the net operating losses generated during each period will be utilized in future periods

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Net Loss Attributable to Xcel Brands, Inc. Stockholders

We had a net loss of $4.97 million for the current six months, compared with a net loss of $6.79 million for the prior year six months, due to the combination of the factors outlined above.

Non-GAAP Net Income (Loss), Non-GAAP Diluted EPS, and Adjusted EBITDA

We had a non-GAAP net loss of approximately $2.68 million, or $(0.44) per diluted share ("non-GAAP diluted EPS"), for the current six months and a non-GAAP net loss of $2.27 million, or $(0.95) per diluted share, for the prior year six months. We had Adjusted EBITDA of approximately $(1.18) million for the current six months, compared with approximately $(1.00) million for the prior year six months.

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:

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

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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:

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Liquidity and Capital Resources

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General

As of June 30, 2026 and December 31, 2025, our unrestricted cash and cash equivalents were approximately $0.40 million and $1.15 million, respectively.

Restricted cash at June 30, 2026 consisted of $0.62 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease. Restricted cash at December 31, 2025 consisted of $0.74 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $1.00 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company's term loan debt agreement.

Our principal capital requirements have generally been to fund working capital needs and acquire new brands. Our current "licensing plus" operating model is a working capital light business model, and generally does not require material capital expenditures. As of June 30, 2026, we had no significant commitments for future capital expenditures.

Working Capital

Our working capital (which we calculate in a non-GAAP manner as current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) deficit was approximately $(1.28) million and $(0.80) million as of June 30, 2026 and December 31, 2025, respectively. Our working capital deficit as of June 30, 2026 notably includes $1.87 million of liabilities for our Senior Secured Notes, which were recently issued in April 2026 and have a maturity date of in April 2027 (see below for additional details related to this refinancing transaction).

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2026 we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit. While we have undertaken significant restructuring and cost reduction efforts, obtained additional funding through a combination of equity issuances and debt financing, and continue to explore strategic financing alternatives and operational efficiencies to improve liquidity, management has determined that there is nonetheless substantial doubt about the Company's ability to meet its financial obligations as they become due within twelve months from the date these financial statements are issued.

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In April 2026, we refinanced a portion of our term loan debt, and also sold intangible assets related to one of our brands in exchange for cash. While these transactions have significantly improved our liquidity position, the proceeds received may still be insufficient to fully address our liquidity needs.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management intends to continue exploring strategic financing alternatives and operational efficiencies to improve liquidity. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Commentary on the components of our cash flows for the current quarter as compared with the prior year quarter is set forth below.

Operating Activities

Net cash used in operating activities was approximately $2.73 million in the current six months, compared with approximately $3.80 million in the prior year six months.

The current six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(4.97) million plus non-cash items of approximately $3.14 million and the net change in operating assets and liabilities of approximately $(0.90) million. Non-cash items were primarily comprised of $1.71 million of depreciation and amortization expense, and $1.01 million of aggregate non-cash interest expenses. The net change in operating assets and liabilities was primarily driven by changes in deferred revenue balances of $(0.80) million.

The prior year six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.79) million plus non-cash items of approximately $4.77 million and the net change in operating assets and liabilities of approximately $(1.78) million. Non-cash items were primarily comprised of $0.52 million of losses related to our equity method investments, $1.85 million from the loss on early extinguishment of debt, $1.80 million of depreciation and amortization expense, and $0.37 million of various non-cash interest expenses. The net change in operating assets and liabilities was primarily comprised of (i) approximately $(1.56) million of payments of accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities, plus (ii) a decrease in deferred revenue of $(0.50) million.

Investing Activities

The current six months cash provided by investing activities of $2.00 million was attributable to net proceeds received from the sale of the Judith Ripka brand trademarks in April 2026.

Net cash used in investing activities in the prior year six months was comprised of purchases of equipment totaling approximately $0.01 million.

Financing Activities

Net cash used in financing activities in the current six months was predominantly related to the debt financing and refinancing transactions executed in April 2026 (as described further below), including (i) repayment of $(3.25) million of principal under our Term Loan A debt, (ii) $3.01 million of gross proceeds received from the issuance of our new Senior Secured Notes, (iii) total payments made under the Senior Secured Notes (inclusive of original issue discount) of $(0.86) million, and (iv) payment of deferred finance costs of $(0.35) million related to the issuance of the Senior Secured Notes. In addition, we received proceeds of approximately $0.42 million (net of related fees and expenses) during the current six months from the issuance of shares of common stock under our equity line of credit facility (as described further below).

Net cash provided by financing activities in the prior year six months was primarily attributable to $2.05 million of proceeds received from the delayed draw portion of the Company's December 2024 term loan agreement, and $3.62 million of proceeds received from the Company's April 2025 refinancing of its term loan debt. This was partially offset by $(0.53) million of deferred finance costs paid in connection with the April 2025 refinancing, and $(0.50) million of principal payments made on the Company's term loan debt.

Equity Line Facility

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On January 21, 2026, the Company entered into a common stock purchase agreement with White Lion Capital, LLC ("White Lion"), pursuant to which White Lion has committed to purchase up to $15.0 million of the Company's common stock. Under the terms and conditions of this agreement, the Company has the right, but not the obligation, to sell to White Lion, and White Lion is obligated to purchase, up to $15.0 million of the Company's common stock. The actual amount and timing of any sales of Common Stock will be determined by the Company at its discretion.

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The aggregate number of shares that the Company can sell White Lion under this agreement is limited to and may not exceed 1,178,173 shares (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or other similar transaction), which is equal to 19.99% of the total shares of the Company's common stock outstanding immediately prior to the execution of the agreement, unless (i) the Company obtains stockholder approval to issue additional shares in excess of this amount, or (ii) the average price paid for all shares of Common Stock issued under the agreement equals or exceeds certain levels as specified in the agreement. Through July 31, 2026, we issued 382,500 shares under the equity line.

In consideration for White Lion's execution and entry into such arrangement, the Company agreed to issue White Lion $37,500 worth of common stock, with the number of shares issued determined based on the closing price of the Company's stock on the business day immediately preceding the day on which the related registration statement is declared effective by the SEC; accordingly, the Company issued 16,094 shares to White Lion on May 6, 2026. Additionally, pursuant to the terms of an advisory agreement between the Company and Maxim Group LLC, the Company agreed to pay Maxim Group LLC a cash fee equal to 4.0% of the gross proceeds received from any sales of securities to White Lion under this arrangement.

For the three and six months ended June 30, 2026, the Company issued an aggregate of 348,000 shares under the equity line facility arrangement and received aggregate net proceeds of approximately $0.67 million. Through July 31, 2026, the Company issued 382,500 shares under the equity line facility arrangement and received aggregate net proceeds of approximately $0.71 million.

Also, during the current six months, the Company incurred approximately $0.26 million of fees and expenses (consisting of legal and accounting fees) associated with the equity line arrangement and related registration statement, which were recorded as a reduction to additional paid-in capital.

Debt Transactions and Refinancings

On December 12, 2024, the Company and certain of its subsidiaries entered into a loan and security agreement with FEAC Agent, LLC ("FEAC"), as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC ("Restore"), as agent for certain lenders, pursuant to which the lenders made term loans to the Company and agreed to make additional term loans to the Company upon the satisfaction of a condition precedent described in the loan agreement. The term loans under the loan agreement are as follows: (1) a term loan in the amount of $3.95 million ("Term Loan A") was made on the closing date, (2) a term loan in the amount of $4.0 million ("Term Loan B") was made on the closing date, and (3) a term loan in the amount of $2.05 million ("Delayed Draw Term Loan"; Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as "Term Loans") was subsequently made in March 2025. A portion of the proceeds from the Delayed Draw Term Loan were deposited in a bank account to satisfy a liquidity covenant in the loan agreement.

On April 21, 2025, the Company and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for $1.5 million repayment of the $3.95 million Term Loan A and an additional Term Loan B in the amount of $5.12 million. The term loans outstanding after giving effect to the April 21, 2025 amendment and the application of the proceeds of the additional Term Loan B are as follows: (1) Term Loan A in the amount of $4.50 million, and (2) Term Loan B in the amount of $9.12 million. The proceeds from the additional Term Loan B were used to repay a portion of Term Loan A, as well as to pay fees, costs, and expenses incurred in connection with entering into the April 21, 2025 amendment, and the balance will be used for working capital purposes.

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In connection with the April 21, 2025 amendment and refinancing transaction, UTG Capital, Inc., a Delaware corporation ("UTG"), purchased a 100% undivided, participation interest in Term Loan B for a purchase price of $9.12 million. Also in connection with this refinancing transaction, IPX's participation in Term Loan B was repaid and IPX purchased a $0.50 million undivided, last-out, subordinated participation interest in Term Loan A.

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On May 15, 2025, the Company repaid $0.50 million of the outstanding principal amount of Term Loan A.

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On October 7, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into a further amendment of the December 12, 2024 loan and security agreement, pursuant to which the (i) the agents and lenders (as defined in the loan and security agreement) consented to the transfer and the release of the termination of the pledge agreement and the release of the agents' liens on the equity interests of IM Topco, LLC; (ii) the liquid asset covenant requirement was reduced to $1.00 million; and (iii) Xcel made a prepayment of $0.25 million against the outstanding principal amount of Term Loan A, of which $0.14 million was paid from the blocked account.

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On November 18, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into the fourth amendment of the December 12, 2024 loan and security agreement, pursuant to which (i) the agents and lenders

(as defined in the loan and security agreement) provided the Company with a limited waiver with respect to certain specified events of default, and also amended certain financial covenants related to the term loan agreement; (ii) the Company committed to make a prepayment of $3.25 million on Term Loan A by February 20, 2026, along with the payment of an amendment fee of $0.45 million (of which $0.125 million was payable on December 5, 2025 and the remaining $0.325 million would be due only if the $3.25 million principal amount of Term Loan A was not repaid on or prior to February 20, 2026); and (iii) the payment of the remaining principal balance on Term Loan A of $0.50 million was changed to be due on December 31, 2026 which shall be held by a related party. In addition, upon the repayment of the $3.25 million of Term Loan A, the Company would have revised financial covenants.

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On February 20, 2026 and March 20, 2026, the Company entered into the fifth and sixth amendments to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC. Pursuant to such amendments, (i) the Company prepaid $0.50 million on Term Loan A (paid from the blocked account, as defined in the loan and security agreement) in connection with the fifth amendment and irrevocably authorized FAEC Agent, LLC, as the administrative agent to transfer up to $0.50 million (the "Sixth Amendment Cash Collateral") from the blocked account to an account maintained by the Administrative Agent to be held as cash collateral securing the Obligations (as defined in the loan and security agreement); (ii) the Company irrevocably authorized the administrative agent to: (a) apply all or any portion of the Sixth Amendment Cash Collateral to repay the Term Loan A, or (b) return all or any portion of the Sixth Amendment Cash Collateral to the Company, in each case at the lenders' sole discretion; (iii) the liquid asset covenant requirement was reduced to: (a) at all times prior to the repayment in full of the First Out Obligations (as defined in the loan and security agreement), $0.50 million minus that amount of Sixth Amendment Cash Collateral used to repay Term Loan A, and (b) at all times after the repayment in full of the First Out Obligations, $0; and (iv) the transaction closing date was extended to March 24, 2026.

On April 13, 2026, the Company entered into the seventh amendment to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC, which provided for, among other things: the ability of the Company to consummate the issuance of certain senior secured notes (as described below); the ability for IPX to convert its $0.50 million Term Loan A to common shares of the Company at the price per share equal to $1.35, subject to adjustment; modifications to certain payment terms; modifications to certain financial covenants; modifications to certain financial reporting requirements; and the amendment of the FEAC Agent, LLC's role to include certain limitations. In connection with the seventh amendment, FEAC Agent LLC's affiliated lenders entered into agreements whereby a $0.50 million portion of Term Loan A was sold and assigned to IPX, and the entirety of Term Loan B was sold and assigned to UTG. Additionally, the Company was relieved of its obligation to pay the remaining $325,000 amendment fee as specified in the fourth amendment.

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Also on April 13, 2026, the Company entered into certain agreements with Smithline Family Trust II ("SFT"), Quick Capital, LLC ("Quick"), and IPX (collectively, the "Purchasers"), pursuant to which the Company issued and sold to the Purchasers 12.5% Senior Secured Notes due April 13, 2027 in the original principal amount of $3,005,780 (the "Secured Notes") and 100,579 shares of the Company's common stock. The Secured Notes were issued with an original issue discount, such that the cash proceeds received by the Company were $2,600,000. The Company is required to make $100,000 monthly payments on the Secured Notes commencing October 13, 2026, with the balance due at maturity. The Company's obligations under the Secured Notes are guaranteed by certain direct and indirect subsidiaries of the Company pursuant to a subsidiary guarantee, and are secured by the assets of the Company and the subsidiary guarantors pursuant to a security agreement.

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At any time after the occurrence of an event of default under the Secured Notes and for so long as such event of default is continuing, the Secured Notes are convertible into shares of common stock of the Company (i) initially at a fixed conversion price equal to $1.165 per share in the case of SFT and Quick or $1.435 per share in the case of IPX and (ii) after May 17, 2026, at a price equal to the lesser of (a) 85% multiplied by the lowest volume weighted average price of the common stock during the 10-trading day period prior to conversion and (b) $1.165 in the case of SFT and Quick or $1.435 per share in the case of IPX. In addition, to the extent that Company is listed on the Nasdaq Capital Market, the aggregate number of shares of common stock issuable to the Purchasers and any subsequent holder of the Secured Note shall not exceed 19.9% of the total number of shares of common stock outstanding or of the voting power of the common stock as of April 13, 2026 less the shares issued pursuant to the securities purchase agreement unless the Company has obtained stockholder approval in compliance with Nasdaq Listing Rule 5635(d) to authorize the issuance of shares of common stock in connection with the conversion or exchange of all Secured Notes.

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As part of the transactions described above, IPX purchased $57,803 original principal amount of the Secured Notes and purchased 1,742 shares of common stock, on the same terms as the other Purchasers, except that the shares of common stock purchased by IPX were priced at current market value.

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The net proceeds received from the April 13, 2026 issuance of the Secured Notes and shares as described above were used to repay $2.25 million of the Term Loan A debt, and an additional $0.50 million of the Term Loan A debt was paid with the Company's restricted cash. As such, immediately following the funding and completion of the transactions described above, the Company's debt obligations were as follows: (1) Senior Secured Notes in the principal amount of $2.6 million, with payments commencing October 13, 2026 and a maturity date of April 13, 2027, (2) Term Loan A in the principal amount of $0.50 million, payable on the maturity date of September 20, 2027, and (3) Term Loan B in the amount of $9.9 million, payable on the maturity date of December 12, 2028.

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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 Halston brand, C Wonder brand, and TowerHill by Christie Brinkley brand, which together currently represent a majority of our revenues, have a core business in fashion apparel and accessories, as will the Off/Duty by Coco Rocha brand when it launches later this year. Our other brands - including the Longaberger by Shannon Doherty brand, which focuses on home good products; GemmaMade by Gemma Stafford and Mesa Mia by Jenny Martinez, which focus on cooking and baking related products; and Trust.Respect.Love by Cesar Millan brand, which focuses on pet-related products - help to diversify our industry focus while at the same time complement our business operations and relationships.

While the 2022 sale of a majority interest in the Isaac Mizrahi brand and the 2024 divestiture of the LOGO by Lori Goldstein brand (and, to a lesser extent, the April 2026 sale of the Judith Ripka brand) resulted in significant decreases in our licensing revenues, we have taken and continue to take actions to replace those revenues with new strategic business initiatives, as we concentrate our resources on growing our brands, launching new brands, and entering into new business partnerships. We continue to seek new opportunities, including expansion through interactive television, live streaming, and additional domestic and international licensing arrangements, and acquiring and collaborating with additional brands. The successful launch of the TowerHill by Christie Brinkley brand in 2024 is an example of this. We recently launched two new cobranded collaborations in April 2026, and plan to launch two more before the end of the year.

Additionally, during 2023 and 2024, we restructured our business by shifting from a wholesale/licensing hybrid model to a "licensing plus" business model, divesting certain brands, and undertaking various cost-cutting measures to more efficiently operate our business and reduce and better manage our exposure to operating risks. During 2025, we continued to implement additional measures to further optimize our cost structure. As a result, we have reduced our direct operating expenses to an expected run rate of less than $10 million per annum, which represents approximately $21 million of cost savings on an annualized basis compared to our cost structure in 2022.

Nonetheless, we continue to face a number of headwinds in the current macroeconomic environment. Poor economic and market conditions, including the cumulative impacts of inflation and rising consumer debt levels, along with the impact of tariffs on goods imported into the U.S., may negatively impact consumer sentiment, decreasing the demand for apparel, footwear, accessories, 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 these conditions and/or 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 attract customers, and contract with and retain key licensees and 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, and other factors noted in Item

1A of our most recent 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.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires management to exercise judgment. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates and judgments on a variety of factors, including our historical experience, knowledge of our business and industry, and current and expected economic conditions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Because the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 15, 2026, for a discussion of our critical accounting policies and estimates. During the three months ended June 30, 2026, there were no material changes to our critical accounting policies or estimates.

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