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Equity Method Investment

3 Months Ended

Mar. 31, 2023

Equity Method Investment, Summarized Financial Information [Abstract]

Equity Method Investment

2.      Equity Method Investment

IM Topco, LLC

On May 27, 2022, Xcel (along with IM Topco, LLC (“IM Topco”) and IM Brands, LLC (“IMB”), both wholly owned subsidiaries of the Company) and IM WHP, LLC (“WHP”), a subsidiary of WHP Global, a private equity-backed brand management and licensing company, entered into a membership purchase agreement. Pursuant to this agreement, on May 31, 2022, (i) the Company contributed assets owned by IMB, including the Isaac Mizrahi Brand trademarks and other intellectual property rights relating thereto into IM Topco, and (ii) the Company sold 70% of the membership interests of IM Topco to WHP.

The purchase price paid by WHP to the Company at the closing of the transaction consisted of $46.2 million in cash. The Company incurred approximately $0.9 million of expenses directly related to this transaction, including legal fees and agent fees, of which $0.1 million of the agent fees were paid through the issuance of 65,275 shares of the Company’s common stock, which were recognized as a reduction to the gain from the transaction. The Company recognized a net pre-tax gain from the transaction of $20.6 million, which is classified within “other expense (income), including non-cash expenses” in the condensed consolidated statements of operations for the three and six months ended June 30, 2022.

The Company accounts for its 30% interest in the ongoing operations of IM Topco as other expense (income) under the equity method of accounting. Pursuant to the business venture agreement between the Company and WHP governing the operation of IM Topco, IM Topco’s net cash flow (as defined in the agreement) shall be distributed to the members during each fiscal year no less than once per fiscal quarter, as follows:

(i) first, 100% to WHP, until WHP has received an aggregate amount during such fiscal year equal to $8,852,000 (subject to adjustment in certain circumstances as set forth in the agreement);

(ii) second, 100% to Xcel, until Xcel has received an aggregate amount during such fiscal year equal to $1,316,200 (subject to adjustment in certain circumstances as set forth in the agreement); and

(iii) thereafter, in proportion to the members’ respective percentage interests.

Based on these distribution provisions, the Company recognized an equity method loss of $0.52 million and $1.03 million related to its investment for the three and six months ended June 30, 2023, respectively. The Company did not recognize any equity income or loss related to its investment for the three and six months ended June 30, 2022.

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Summarized financial information for IM Topco for the three and six months ended June 30, 2023 is as follows:

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​	​	​	​	​	​	​
​		For the three			For the six
​	​	months ended		​	months ended
​	​	June 30,		​	June 30,
($ in thousands)	​	2023		​	​	2023
Revenues	​	$	3,573	​	$	6,919
Gross profit	​	​	3,573	​	​	6,919
Income from continuing operations	​	​	206	​	​	113
Net income	​	​	206	​	​	113

​

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- References

No definition available.

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- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 323
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (a)(3)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481687/323-10-50-3

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 323
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481687/323-10-50-3

Reference 3: http://www.xbrl.org/2003/role/recommendedDisclosureRef
-Topic 323
-SubTopic 740
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481543/323-740-50-2

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 323
-Publisher FASB
-URI https://asc.fasb.org//323/tableOfContent

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