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Acquisitions | 12 Months Ended
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Dec. 31, 2019
Asset Acquisitions [Abstract] |
Acquisitions | 3. Acquisitions Acquisition of Halston Heritage Trademarks On February 11, 2019 (the “Closing Date”), the Company and its wholly owned subsidiary, H Heritage Licensing, LLC, entered into an asset purchase agreement (the "Heritage Asset Purchase Agreement") with the H Company IP, LLC (the "Seller" or "HIP") and its parent, House of Halston LLC ("HOH"), pursuant to which the Company acquired certain assets of HIP, including the "Halston", "Halston Heritage", and "Roy Frowick" trademarks (collectively, the "Halston Heritage Trademarks") and other intellectual property rights relating thereto. Benjamin Malka, who was a director of the Company, is a 25% equity holder of HOH and former Chief Executive Officer of HOH. Pursuant to the Heritage Asset Purchase Agreement, at closing, the Company delivered in escrow for HIP or its designees (collectively, the “Sellers”) an aggregate of $8.4 million in cash and 777,778 shares of the Company’s common stock valued at $1.1 million (the “Xcel Shares”), subject to a voting agreement and a lock-up agreement relating to the Xcel Shares and a consent and waiver agreement each in form satisfactory to Xcel within three months from the date of the Heritage Asset Purchase Agreement. Such agreements were executed and delivered to Xcel, and the Xcel Shares were issued and delivered to the Sellers. In addition to the closing considerations, HIP is eligible to earn up to an aggregate of $6.0 million (the “Earn-Out Value”) through December 31, 2022 based on Excess Net Royalties. “Excess Net Royalties” during any calendar year for 2019 through 2022 (each, a “Royalty Target Year”) is equal to (a) the positive amount, if any, of the Net Royalties as calculated for such Royalty Target Year, less the greater of (i) One Million Five Hundred Thousand Dollars ($1.5 million), or (ii) the maximum Net Royalties for any previous Royalty Target Year. “Applicable Percentage” means (a) 50% of the first $10.0 million of Excess Net Royalties during the Earn-Out Period, (b) 20% of aggregate Excess Net Royalties during the Earn-Out Period greater than $10.0 million and up to $15.0 million and (c) 0% of aggregate Excess Net Royalties during the Earn-Out Period in excess of $15.0 million. The Earn-Out Consideration shall be payable in common stock of Xcel (the “Earn-Out Shares”); provided, however, that if the number of Earn-Out Shares, when combined with the number of Xcel Shares issued at the Closing Date, will exceed 4.99% of the aggregate number of shares of Xcel common stock outstanding as of the Closing Date (calculated in accordance with Nasdaq Rule 5635(a)) (the “Xcel Share Limit”), then Xcel may, in its sole and unfettered discretion, elect to (x) pay cash for the Earn-Out Value attributable to the Earn-Out Shares that would exceed the Xcel Share Limit; (y) solicit stockholder approval for the issuance of Earn-Out Shares in excess of the Xcel Share Limit in accordance with Nasdaq Rule 5635(a)(2) and, if such stockholder approval is obtained, issue such Earn-Out Shares to HIP; or (z) solicit stockholder approval for the issuance of Shares in excess of the Xcel Share Limit in accordance with Nasdaq Rule 5635(a)(2) and, if such stockholder approval is obtained, pay the applicable Earn-Out Consideration with a combination of cash and Earn-Out Shares. The Halston Heritage Trademark acquisition was accounted for as an asset purchase. The aggregate purchase price has been allocated to the following assets based on the fair value of the assets on the date of acquisition:
($ in thousands) |  |  |
Allocated to: |  |  |
Trademarks |  | $ | 10,588
Halston archives |  |  | 200
Total acquisition price |  | $ | 10,788
The Halston Heritage Trademarks have been determined by management to have a finite useful life, and accordingly, amortization is recorded in the Company’s consolidated statements of operations. The Halston Heritage Trademarks and archives are amortized on a straight-line basis over their expected useful lives of eighteen and seven years, respectively. The following represents the aggregate purchase price of $10.8 million:
($ in thousands, except share amounts) |  |  |
Cash |  | $ | 8,350
Fair value of Common Stock issued (777,778 shares) |  |  | 1,058
Total direct initial consideration |  |  | 9,408
Direct transaction expenses |  |  | 480
Contingent obligation |  |  | 900
Total consideration |  | $ | 10,788
Consolidation of Longaberger Licensing, LLC Variable Interest Entity and Acquisition of Longaberger Trademarks On November 12, 2019, the Company entered into a limited liability company agreement (the “LLC Agreement”) with a subsidiary of Hilco Global for Longaberger Licensing, LLC (“LL”). Hilco Global became the sole Class A Member of LL, and Xcel became the sole Class B Member of LL. Each member committed to an initial capital contribution of $425,000 in return for a 50% equity ownership interest in LL, with each member actually contributing $375,000 upon execution of the LLC Agreement. Simultaneously on November 12, 2019, Longaberger Licensing, LLC completed the acquisition of the Longaberger trademarks and other intellectual property rights relating thereto from the trustee for the Longaberger Company. The total purchase price for such assets was $750,000. No other assets or liabilities were acquired as part of this transaction, and the acquisition was accounted for as an asset purchase. Based on an analysis of the contractual terms and rights contained in the related agreements, the Company determined that under the applicable accounting standards, LL is a variable interest entity and the Company has effective control over the entity. Therefore, as the primary beneficiary, the Company has consolidated LL as of November 12, 2019. Upon consolidation, the Company recognized $750,000 of intangible assets and a noncontrolling interest of $375,000. The Longaberger trademarks have been determined by management to have a finite useful life, and accordingly, amortization is recorded in the Company’s consolidated statements of operations. The Longaberger trademarks are amortized on a straight-line basis over their expected useful life of fifteen (15) years.

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