Xcel(XELB) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This part presents the company's unaudited interim financial statements, management's analysis, and disclosures on market risk and internal controls Item 1. Financial Statements Contains the unaudited condensed consolidated financial statements and accompanying notes for the period ended June 30, 2025 Unaudited Condensed Consolidated Financial Statements The company's financial position weakened with decreased assets and revenue, resulting in a significant net loss for Q2 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $3,209 | $4,043 | | Total Assets | $47,189 | $53,756 | | Total Current Liabilities | $5,466 | $10,394 | | Total Liabilities | $24,693 | $25,358 | | Total Stockholders' Equity | $22,496 | $28,398 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $1,321 | $2,954 | $2,653 | $5,138 | | Operating (Loss) Income | $(1,654) | $307 | $(3,841) | $(5,888) | | Net (Loss) Income | $(3,991) | $161 | $(6,788) | $(6,184) | | Basic (Loss) EPS | $(1.66) | $0.08 | $(2.84) | $(2.78) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,798) | $(2,883) | | Net cash used in investing activities | $(10) | $(104) | | Net cash provided by financing activities | $4,524 | $1,652 | Notes to Unaudited Condensed Consolidated Financial Statements Details significant events including a reverse stock split, debt refinancing, a reduction in an equity investment, and a going concern warning - The company's brand portfolio includes wholly-owned brands like Halston and C Wonder, as well as noncontrolling interests in brands like Isaac Mizrahi[23] - A 1-for-10 reverse stock split was effected on March 24, 2025, with all share and per-share amounts retroactively adjusted[26][79][80] - Management has determined there is substantial doubt about the Company's ability to continue as a going concern due to recurring losses and a history of cash used in operations[33][35] - On April 15, 2025, Xcel's interest in IM Topco was reduced from 30% to 17.5%, and the company discontinued using the equity method of accounting for this investment[39][40] - In April 2025, the company refinanced its term loan debt, resulting in total outstanding term loans of $13.62 million and a recognized loss on early extinguishment of debt of approximately $1.85 million[63][78] - Subsequent to the quarter end, on August 4, 2025, the company raised approximately $2.0 million in net proceeds from a public offering and private placement of common stock[137][139] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the significant revenue decrease, cost-cutting measures, and the substantial doubt regarding the company's going concern status Q2 Operating Results Comparison (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $1.32 | $2.95 | $(1.63) | | Direct Operating Costs | $1.90 | $3.12 | $(1.22) | | Net (Loss) Income | $(3.99) | $0.20 | $(4.19) | H1 Operating Results Comparison (in millions) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $2.65 | $5.14 | $(2.49) | | Direct Operating Costs | $4.18 | $7.08 | $(2.90) | | Net Loss | $(6.79) | $(6.10) | $(0.69) | - The company has implemented cost-cutting measures, reducing direct operating expenses to an expected run rate of less than $10 million per annum, a saving of over $22 million annually compared to 2022[154][207] - A 'Going Concern' warning was issued, stating that recurring losses and cash outflows raise substantial doubt about the company's ability to meet its financial obligations within the next twelve months[188][190] - The company is focused on a 'licensing plus' business model and plans to launch four new brands over the next 12 to 15 months, including collaborations with Cesar Millan and Coco Rocha[204][205] Item 3. Quantitative and Qualitative Disclosures About Market Risk Disclosure is not required as the company qualifies as a smaller reporting company - Disclosure is not required for smaller reporting companies[215] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to a material weakness in financial reporting - Disclosure controls and procedures were deemed ineffective as of June 30, 2025[216] - A material weakness was identified related to the untimely receipt of financial information from a third party for an unconsolidated affiliate, causing delays in SEC filings[217] PART II - OTHER INFORMATION Covers legal proceedings, risk factors, and other required disclosures for the reporting period Item 1. Legal Proceedings Current legal proceedings are not expected to have a material adverse effect on the company's financial condition - Management does not expect current legal proceedings to have a material adverse effect on the company's business or financial condition[221] Item 1A. Risk Factors No material changes to risk factors have been reported since the last Annual Report on Form 10-K - The company refers to the risk factors disclosed in its most recent Form 10-K and notes no material changes[222] Other Items (Items 2, 3, 4, 5, 6) Confirms no reportable events under various items and lists the exhibits filed with the report - No unregistered sales of equity securities, defaults upon senior securities, or other material information were reported under Items 2, 3, 4, and 5[223][224][225][226] - Item 6 lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files[227]