Xcel Brands Annual Report 2020
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XCel Brands Annual Report 2020 Form 10-K (NASDAQ:XELB) Published: April 14th, 2020 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2019 Commission File Number: 001‑37527 OR ◻ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 Exchange 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 Securities registered pursuant to Section 12(g) of the Exchange Act: None 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 ☒ 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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ◻ 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 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 computed second fiscal quarter was $16,979,806 based upon the closing price of such common stock on June 30, 2019. The number of shares of the issuer’s common stock issued and outstanding as of March 30, 2020 was 18,866,417 shares. Documents Incorporated By Reference: None TABLE OF CONTENTS Page PART I Item 1 Business 3 Item 1A Risk Factors 12 Item 2 Properties 29 Item 3 Legal Proceedings 29 Item 4 Mine Safety Disclosures 29 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30 Item 6 Selected Financial Data 33 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A Quantitative and Qualitative Disclosures About Market Risk 48 Item 8 Financial Statements and Supplementary Data 49 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 85 Item 9A Controls and Procedures 85 Item 9B Other Information 85 PART III Item 10 Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act 86 Item 11 Executive Compensation 94 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Item 12 Matters 97 Item 13 Certain Relationships and Related Transactions, and Director Independence 100 Item 14 Principal Accounting Fees and Services 102 PART IV Item 15 Exhibits 103 Signatures 106 2 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 "Isaac Mizrahi New York ®," “Isaac Mizrahi®," "IsaacMizrahiLIVE®," "Isaac Mizrahi Jeans ™," "Isaac Mizrahi CRAFT ™," "Judith Ripka LTD™," "Judith Ripka Collection™," "Judith Ripka Legacy™," "Judith Ripka®,” "Judith Ripka Sterling ™," "Halston," "Halston Heritage," "H by Halston®," "H Halston™," "Roy Frowick," "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. Item 1. Business Overview Xcel Brands, Inc. is a media and consumer products company engaged in the design, production, marketing, wholesale distribution, and direct-to-consumer sales of branded apparel, footwear, accessories, jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands. We have developed a design, production, and supply chain capability driven by our proprietary integrated technology platform. Currently, our brand portfolio consists of the Isaac Mizrahi brand (the "Isaac Mizrahi Brand"), the Judith Ripka brand (the "Ripka Brand"), the Halston brand (the "Halston Brand"), and the C Wonder brand (the "C Wonder Brand"). We also own and manage the Longaberger brand (the “Longaberger Brand”) through our controlling interest in Longaberger Licensing, LLC. Our vision is intended to reimagine shopping, entertainment, and social media as one. We design, produce, market, and distribute products and, in certain cases, license our brands to third parties, and generate licensing fees. We and our licensees distribute through a ubiquitous-channel retail sales strategy, which includes distribution through interactive television, the Internet, and traditional brick-and-mortar retail channels. By leveraging 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 and interactive television companies and cable network TV enable us to reach consumers in approximately