Xcel(US:XELB)2024-04-19 01:55PART I Item 1. Business Xcel Brands, Inc. is a media and consumer products company focused on designing, licensing, marketing, live streaming, and social commerce sales of branded apparel, footwear, accessories, fine jewelry, home goods, and other consumer products. - Xcel Brands operates as a media and consumer products company, specializing in design, licensing, marketing, live streaming, and social commerce for various branded products243206 - The company's strategy involves a 'true omni-channel and social commerce sales strategy' across interactive television, digital live-stream shopping, social commerce, traditional brick-and-mortar, and e-commerce channels244189 - In 2023, Xcel transitioned from a capital-intensive wholesale/licensing hybrid model to a capital-light 'licensing plus' model, outsourcing wholesale and direct-to-consumer operations to new licensing partners261639 Overview Xcel Brands, Inc. was founded in 2011 to integrate shopping, entertainment, and social media into social commerce. - Xcel Brands, Inc. was founded in 2011 with a vision to integrate shopping, entertainment, and social media into social commerce243 - The company's brand portfolio includes Lori Goldstein, Halston, Judith Ripka, C Wonder, Longaberger, Isaac Mizrahi, and TowerHill by Christie Brinkley, among others243247 Company History and Corporate Information The company was incorporated in Delaware in 1989 and later changed its name to Xcel Brands, Inc. in 2011, with its principal office in New York, NY. - The company was incorporated in Delaware on August 31, 1989, as Houston Operating Company, later changing its name to Xcel Brands, Inc. on September 29, 2011262 - Xcel Brands' principal office is located at 550 Seventh Avenue, 11th Floor, New York, NY 1001831 Our Brand Portfolio Xcel's brand portfolio includes wholly-owned brands and managed brands through ownership interests and collaborations. - The company's brand portfolio includes wholly-owned brands like Lori Goldstein, Halston, Ripka, and C Wonder4207827 - Xcel manages the Longaberger Brand through a 50% ownership interest in Longaberger Licensing, LLC, consolidating it as a variable interest entity25205803 - The Isaac Mizrahi Brand was majority-sold in May 2022, with Xcel retaining a 30% noncontrolling interest and continuing operational contributions through a service agreement4207828 - TowerHill by Christie Brinkley is a new co-branded collaboration announced in December 2023, scheduled to launch in May 2024 on HSN289807 Growth Strategy Xcel's growth strategy focuses on organic brand expansion, new brand development for social commerce, and strategic acquisitions. - Xcel's growth strategy focuses on organic growth in existing brands, developing new brands for social commerce, and strategically acquiring new brands190290260 - Recent initiatives include master license agreements for Halston and Judith Ripka brands, and the launch of C Wonder on HSN, all expected to increase royalty revenues13 - The company acquired a 30% interest in ORME Live Inc., a short-form video and social commerce marketplace, in December 2023, which launched in Q1 2024268 Licensing Xcel's 'licensing plus' model emphasizes design, marketing, and brand management, generating revenue through brand licensing to retailers and manufacturers. - Xcel's 'licensing plus' business model emphasizes core competencies in design, marketing, and brand management, minimizing inventory investment38 - The company generates revenue primarily through licensing its brands to retailers and manufacturers for promotion and distribution across various channels5637 Collaborations Xcel engages in collaborations with other brands, offering promotional services and co-branded product development. - Xcel collaborates with other brands or companies, offering promotional services that may include using its brands for digital content, print media, celebrity appearances, or co-branded product development23 - Past collaborations have included partnerships with Sesame Street, Crayola, Hewlett Packard, Revlon, Johnson & Johnson, and Kleenex23 Marketing Marketing efforts leverage influencers, entertainment tie-ins, PR, social media, and digital content to drive sales and consumer awareness across omni-channel distribution. - Marketing efforts leverage micro and mega-influencers, entertainment tie-ins, PR, social media campaigns, and digital content to drive sales and consumer awareness across omni-channel distribution48 - The company aims to create an intersection of shopping, entertainment, and social media, promoting brand namesakes and personalities through various media48 Competition Xcel differentiates itself through its operating strategies but faces intense competition from numerous apparel, footwear, accessories, and jewelry manufacturers and retailers. - Xcel differentiates itself through its operating strategies of licensing brands with significant media presence and driving sales via an omni-channel retail strategy across interactive television, live streaming, and e-commerce24 - The company faces intense competition from other domestic and foreign apparel, footwear, accessories, and jewelry manufacturers and retailers, many with greater resources24294 Trademarks Xcel owns and exploits various brands, including Lori Goldstein, Halston, Ripka, and C Wonder, and is responsible for monitoring and protecting its trademarks globally. - Xcel owns and exploits various brands, including Lori Goldstein, Halston, Ripka, and C Wonder, and manages Longaberger and Isaac Mizrahi through ownership interests25 - The company is responsible for monitoring and protecting its trademarks globally, relying on federal, state, and local laws, as well as contractual restrictions27 Government Regulation Xcel Brands is subject to various federal, state, and local laws and regulations, including those related to occupational safety, consumer product safety, and environmental protection. - Xcel Brands is subject to federal, state, and local laws and regulations, including those under the Occupational Safety and Health Act, Consumer Product Safety Act, and various environmental laws283 Human Capital As of December 31, 2023, Xcel Brands had 36 employees and typically enters into multi-year employment agreements with key personnel. - As of December 31, 2023, Xcel Brands had 34 full-time and 2 part-time employees, with a focus on providing a healthy and safe work environment66 - The company typically enters into multi-year employment agreements with key employees, including executives, brand ambassadors, and spokespersons66 Item 1A. Risk Factors The company faces various risks, including significant revenue concentration with a limited number of licensees, intense competition, and dependency on key spokespersons. - A substantial portion of Xcel's revenue is concentrated with a limited number of licensees, with Qurate accounting for approximately 34% and 44% of total net revenue in 2023 and 2022, respectively30071 - The company's success is highly dependent on key executives, particularly CEO Robert W. D'Loren, and spokespersons like Lori Goldstein, whose unavailability could significantly impact brand value and operations325304 - Xcel Brands reported a net loss of $21.1 million in 2023 and $4.0 million in 2022, with cash used in operating activities of $6.5 million and $14.2 million, respectively, raising uncertainties about its ability to continue as a going concern534701 Summary of Risk Factors Key risks include market acceptance of brands, dependency on executives, revenue concentration, intense competition, and investment-related factors like 'penny stock' rules and dividend policy. - Key risks include continued market acceptance of brands, dependency on the CEO and other key executives, concentration of revenue with limited licensees, and intense competition68[52](index=52&