Playboy, Inc.

Previous wording

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024 and 2023 and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and the related notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 29, 2024. This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings “Risk Factors”, “Business” and “Cautionary Note Regarding Forward-Looking Statements” contained in our Annual Report on Form 10-K filed with the SEC on March 29, 2024. As used herein, “we”, “us”, “our”, the “Company”, and “PLBY” refer to PLBY Group, Inc. and its subsidiaries.

Current wording

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2025 and 2024 and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023 and the related notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 13, 2025. This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings “Risk Factors”, “Business” and “Cautionary Note Regarding Forward-Looking Statements” contained in our Annual Report on Form 10-K filed with the SEC on March 13, 2025. As used herein, “we”, “us”, “our”, the “Company”, “PLBY” and “Playboy” refer to PLBY Group, Inc. and its subsidiaries.

Previous wording

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting us will be those that we anticipated. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from those discussed in the forward-looking statements. Factors that may cause such differences include, but are not limited to: (1) the inability to maintain the listing of the Company’s shares of common stock on Nasdaq; (2) the risk that the Company’s completed or proposed transactions disrupt the Company’s current plans and/or operations, including the risk that the Company does not complete any such proposed transactions or achieve the expected benefits from any transactions; (3) the ability to recognize the anticipated benefits of corporate transactions, commercial collaborations, commercialization of digital assets, cost reduction initiatives and proposed transactions, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, and the Company’s ability to retain its key employees; (4) costs related to being a public company, corporate transactions, commercial collaborations and proposed transactions; (5) changes in applicable laws or regulations; (6) the possibility that the Company may be adversely affected by global hostilities, supply chain delays, inflation, interest rates, foreign currency exchange rates or other economic, business, and/or competitive factors; (7) risks relating to the uncertainty of the projected financial information of the Company, including changes in the Company’s estimates of cash flows and the fair value of certain of its intangible assets, including goodwill; (8) risks related to the organic and inorganic growth of the Company’s businesses, and the timing of expected business milestones; (9) changing demand or shopping patterns for the Company’s products and services; (10) failure of licensees, suppliers or other third-parties to fulfill their obligations to the Company; (11) the Company’s ability to comply with the terms of its indebtedness and other obligations; (12) changes in financing markets or the inability of the Company to obtain financing on attractive terms; and (13) other risks in this Quarterly Report on Form 10-Q, including those under “Part II—Item 1A. Risk Factors”, and in “Part I—Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We caution that the foregoing list of factors is not exclusive, and readers should not place undue reliance upon any forward-looking statements.

Current wording

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting us will be those that we anticipated. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from those discussed in the forward-looking statements. Factors that may cause such differences include, but are not limited to: (1) the inability to maintain the listing of the Company’s shares of common stock on Nasdaq; (2) the risk that the Company’s completed or proposed transactions disrupt the Company’s current plans and/or operations, including the risk that the Company does not complete any such proposed transactions or achieve the expected benefits from any transactions; (3) the ability to recognize the anticipated benefits of corporate transactions, commercial collaborations, commercialization of digital assets, cost reduction initiatives and proposed transactions, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, and the Company’s ability to retain its key employees; (4) costs related to being a public company, corporate transactions, commercial collaborations and proposed transactions; (5) changes in applicable laws or regulations; (6) the possibility that the Company may be adversely affected by global hostilities, supply chain delays, inflation, interest rates, tariffs, foreign currency exchange rates or other economic, business, and/or competitive factors; (7) risks relating to the uncertainty of the projected financial information of the Company, including changes in the Company’s estimates of cash flows and the fair value of certain of its intangible assets, including goodwill; (8) risks related to the organic and inorganic growth of the Company’s businesses, and the timing of expected business milestones; (9) changing demand or shopping patterns for the Company’s products and services; (10) failure of licensees, suppliers or other third-parties to fulfill their obligations to the Company; (11) the Company’s ability to comply with the terms of its indebtedness and other obligations; (12) changes in financing markets or the inability of the Company to obtain financing on attractive terms; and (13) other risks in this Quarterly Report on Form 10-Q, including those under “Part II—Item 1A. Risk Factors”, and in “Part I—Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We caution that the foregoing list of factors is not exclusive, and readers should not place undue reliance upon any forward-looking stat…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and referenced in the section of this Quarterly Report on Form 10-Q titled “Risk Factors”.

Current wording

We believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and referenced in this Quarterly Report on Form 10-Q under “Part II—Item 1A. Risk Factors”, and in “Part I—Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K.

Previous wording

We continue to pursue a commercial strategy that relies on a more capital-light business model focused on revenue streams with higher margin, lower working capital requirements and higher growth potential. We are doing this by leveraging our flagship Playboy brand to scale our digital content businesses and attract best-in-class strategic partners. We are focused on our two key growth pillars: first, investing in the Playboy digital platform as we return to our roots as a place to see and be seen for creators and up and coming cultural influencers; and second, strategically expanding our licensing business in key categories and territories. We will continue to use our licensing business as a marketing tool and brand builder, in particular through our high-end designer collaborations and our large-scale strategic partnerships.

Current wording

We continue to pursue a commercial strategy that relies on a more capital-light business model focused on revenue streams with higher margin, lower working capital requirements and higher growth potential. We are doing this by leveraging our flagship Playboy brand to attract best-in-class operators. In the fourth quarter of 2024, we entered into the LMA with Byborg to license intellectual property and select Playboy digital assets for $300.0 million in minimum guaranteed payments over the initial 15-year term of the license, which began as of January 1, 2025. We are focused on strategically expanding our licensing business into new categories and territories with high quality strategic partners and supporting them with brand marketing in the form of content, experiences and editorial works. We will also continue to use our licensing business as a marketing tool and brand builder, including through high profile collaborations and our large-scale strategic partnerships. For our Honey Birdette business, we intend to focus on the U.S. market, where the brand’s stores, on average, generate more revenue and better margins, and generally have customers who tend to spend more and are less price sensitive.

Previous wording

Our licensing revenues from China (including Hong Kong) as a percentage of our total revenues from continuing operations were 26% and 40% for the three months ended September 30, 2024 and 2023, respectively, and 24% and 41% for the nine months ended September 30, 2024 and 2023, respectively. At the end of the first quarter of 2023, we entered into a joint venture (the “China JV”) with Charactopia Licensing Limited, the brand management unit of Fung Group. The China JV owns and operates the Playboy consumer products business in mainland China, Hong Kong and Macau. In 2023, due to challenging economic conditions in China, collections from certain of our Chinese licensees slowed significantly, and we had to renegotiate terms of, or terminate, certain licenses. Future contract modifications and collectability issues could further impact the revenue recognized against our ongoing contract assets. Nonetheless, we continue to work with our China JV partner to re-invigorate our China-market Playboy direct-to-consumer and licensing businesses, by building on Playboy’s current roster of licensees and online storefronts and developing additional revenue through expanding into new product categories with new licensees.

Current wording

Our licensing revenues from China (including Hong Kong) as a percentage of our total revenues were 11% and 5% for the three months ended March 31, 2025 and 2024, respectively. At the end of the first quarter of 2023, we entered into a joint venture for the Playboy business in China (the “China JV”) with CT Licensing Limited, a brand management unit of Fung Group. The China JV owns and operates the Playboy consumer products business in mainland China, Hong Kong and Macau. In 2024, our China JV stabilized our business in China, and we expect our licensing activity in China to increase slightly in 2025 and continue to represent a modest but meaningful part of our overall business in future periods.

Previous wording

While we receive revenue throughout the year, our licensing business has experienced, and may continue to experience, seasonality. Historical seasonality of revenues may be subject to change as increasing pressure from competition and economic conditions impact our licensees and consumers. The further transition of our business to a capital-light business model may further impact the seasonality of our business in the future.

Current wording

While we receive revenue throughout the year, our Honey Birdette direct-to-consumer business has experienced, and may continue to experience, seasonality. Historical seasonality of revenues may be subject to change as increasing pressure from competition and economic conditions impact our licensees and consumers. The further transition of our business to a capital-light business model may further impact the seasonality of our business in the future.

Previous wording

We license trademarks under multi-year arrangements to third-party consumer products and online and location-based entertainment businesses. Typically, the initial contract term ranges between one to ten years. Renewals are separately negotiated through amendments. Under these arrangements, we generally receive an annual non-refundable minimum guarantee that is recoupable against a sales-based royalty generated during the license year. Earned royalties received in excess of the minimum guarantee (“Excess Royalties”) are typically payable quarterly. We recognize revenue for the total minimum guarantee specified in the agreement on a straight-line basis over the term of the agreement and recognize Excess Royalties only when the annual minimum guarantee is exceeded. Generally, Excess Royalties are recognized when they are earned. In the event that the collection of any royalty becomes materially uncertain or unlikely, we recognize revenue from our licensees on a cash basis.

Current wording

We license trademarks under multi-year arrangements to consumer products and online and location-based entertainment businesses. Typically, the initial contract term ranges between one to 15 years. Renewals are separately negotiated through amendments. Under these arrangements, we generally receive an annual non-refundable minimum guarantee that is recoupable against a sales-based royalty generated during the license year. Earned royalties received in excess of the minimum guarantee (“Excess Royalties”) are typically payable quarterly. We recognize revenue for the total minimum guarantee specified in the agreement on a straight-line basis over the term of the agreement and recognize Excess Royalties only when the annual minimum guarantee is exceeded. Generally, Excess Royalties are recognized when they are earned. In the event that the collection of any royalty becomes materially uncertain or unlikely, we recognize revenue from our licensees up to the cash we have received.

Previous wording

Digital subscription revenue is derived from subscription sales ofplayboyplus.com andplayboy.tv, which are online content platforms. We receive fixed consideration shortly before the start of the subscription periods from these contracts, which are primarily sold in monthly, annual, or lifetime subscriptions. Revenues from lifetime subscriptions are recognized ratably over a five-year period, representing the estimated period during which the customer accesses the platforms. Revenues from digital subscriptions are recognized ratably over the subscription period.

Current wording

Prior to January 1, 2025, digital subscription revenue was derived from subscription sales ofplayboyplus.com andplayboy.tv, which are online content platforms. We received fixed consideration shortly before the start of the subscription periods from these contracts, which were primarily sold in monthly, annual, or lifetime subscriptions. Revenues from lifetime subscriptions were recognized ratably over a five-year period, representing the estimated period during which the customer accesses the platforms. Revenues from digital subscriptions were recognized ratably over the subscription period. Revenues generated from the sales of creator content offerings and memberships to consumers via our creator platform onplayboy.com were recognized at the point in time when the sale is processed. Revenues generated from subscriptions to our creator platform are recognized ratably over the subscription period.

Previous wording

We license programming content to certain cable television operators and direct-to-home satellite television operators who pay royalties based on monthly subscriber counts and pay-per-view and video-on-demand buys for the right to distribute our programming under the terms of affiliation agreements. Royalties are generally collected monthly and recognized as revenue as earned.

Current wording

Prior to January 1, 2025, we also licensed programming content to certain cable television operators and direct-to-home satellite television operators who paid royalties based on monthly subscriber counts and pay-per-view and video-on-demand buys for the right to distribute our programming under the terms of affiliation agreements. Royalties were generally collected monthly and recognized as revenue as earned.

Previous wording

Cost of sales primarily consist of agency fees, website expenses, digital platform expenses, marketplace traffic acquisition costs, credit card processing fees, personnel and affiliate costs, including stock-based compensation and costs associated with branding events.

Current wording

Cost of sales primarily consist of merchandise costs, warehousing and fulfillment costs, agency fees, website expenses, marketplace traffic acquisition costs, digital platform expenses (prior to January 1, 2025), transition expenses per the TSA (commencing January 1, 2025), credit card processing fees, personnel costs, including stock-based compensation, costs associated with branding events, customer shipping and handling expenses, fulfillment activity costs and freight-in expenses.

Previous wording

Selling and administrative expenses primarily consist of corporate occupancy costs, personnel costs, including stock-based compensation, and contractor fees for accounting/finance, legal, human resources, information technology and other administrative functions, general marketing and promotional activities and insurance.

Current wording

Selling and administrative expenses primarily consist of corporate office and retail store occupancy costs, personnel costs, including stock-based compensation, transition expenses per the TSA (commencing January 1, 2025), brand marketing costs, and contractor fees for accounting/finance, legal, human resources, information technology and other administrative functions, general marketing and promotional activities and insurance.

Previous wording

Impairments consist of the impairments of our artwork held for sale, internally developed software, certain licensing contracts, right-of-use assets, Playboy-branded trademarks, trade names and goodwill.

Current wording

Impairments consist of the impairments of our artwork held for sale.

Previous wording

Other operating (expense) income, net consists primarily of gains recognized from the sale of crypto assets and other miscellaneous items.

Current wording

Other operating expense, net consists primarily of losses on disposal of assets and other miscellaneous items.

Previous wording

Interest expense consists of interest on our long-term debt and the amortization of deferred financing costs and debt discount.

Current wording

Interest expense consists of interest on our long-term debt and the amortization of deferred financing costs and debt premium/discount.

Previous wording

Other income, net consists primarily of other miscellaneous nonoperating items, such as foreign exchange gains or losses, bank charges as well as non-recurring transaction fees.

Current wording

Other income (expense), net consists primarily of other miscellaneous nonoperating items, such as nonrecurring transaction fees, foreign exchange realized and unrealized transaction gains or losses, bank charges and interest income.

Previous wording

(Expense) benefit from income taxes consists of an estimate for U.S. federal, state, and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against our U.S. federal and state deferred tax assets, as well as our Australia, U.K. and China deferred tax assets.

Current wording

Expense from income taxes consists of an estimate for U.S. federal, state, and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against our definite-lived U.S. federal and state deferred tax assets, as well as Australia, U.K. and China deferred tax assets.

Previous wording

The change from benefit from income taxes to expense for the three months ended September 30, 2024, as compared to the prior year comparative period, was primarily driven by the change in valuation allowance due to the reduction in net indefinite-lived deferred tax liabilities, offset by increased foreign income taxes in the three months ended September 30, 2024.

Current wording

The change in provision for income taxes for the three months ended March 31, 2025, as compared to the prior year comparative period, was primarily due to lower impairment charges on artwork held for sale in the first quarter of 2025, the decrease in foreign taxes and change in valuation allowance due to the reduction in net indefinite-lived deferred tax liabilities in the three months ended March 31, 2025.

Previous wording

“EBITDA” is defined as net income or loss before results from discontinued operations, interest, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation and other special items determined by management. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, investors should be aware that when evaluating EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because not all companies may calculate Adjusted EBITDA in the same fashion.

Current wording

“EBITDA” is defined as net income or loss before interest, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation and other special items determined by management. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, investors should be aware that when evaluating EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because not all companies may calculate Adjusted EBITDA in the same fashion.

Previous wording

In addition to adjusting for non-cash stock-based compensation, non-cash charges for the fair value remeasurements of certain liabilities and non-recurring non-cash impairments, asset write-downs and inventory reserve charges, we typically adjust for non-operating expenses and income, such as non-recurring special projects, including the implementation of internal controls, non-recurring gain or loss on the sale of assets, expenses associated with financing activities, and reorganization and severance expenses that result from the elimination or rightsizing of specific business activities or operations.

Current wording

In addition to adjusting for non-cash stock-based compensation, non-cash charges for the fair value remeasurements of certain liabilities, non-recurring non-cash impairments and asset write-downs, we typically adjust for non-operating expenses and income, such as nonrecurring special projects, including related consulting expenses, transition expenses, nonrecurring gain or loss on the sale of assets, expenses associated with financing activities, and reorganization and severance expenses that result from the elimination or rightsizing of specific business activities or operations.

Previous wording

•Impairments for the nine months ended September 30, 2024 related to impairment charges on our artwork held for sale, corporate leases and assets related to our Digital Subscriptions and Content business.

Current wording

•Impairments for the three months ended March 31, 2025 and 2024 related to impairment charges on our artwork held for sale.

Previous wording

•Adjustments for the three and nine months ended September 30, 2023 are related to non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of September 30, 2023, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities, as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

Current wording

•Adjustments for the three months ended March 31, 2025 are primarily related to a non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for our 2021 acquisition of GlowUp Digital Inc. that remained unsettled as of March 31, 2025, loss on the sale of artwork, consulting, advisory and other costs relating to corporate transactions, as well as reorganization costs resulting from the elimination or rightsizing of specific business activities or operations.

Previous wording

•Adjustments for the three and nine months ended September 30, 2024 are primarily related to non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of September 30, 2024, loss on the sale of artwork, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

Current wording

•Adjustments for the three months ended March 31, 2024 are primarily related to a non-cash fair value change related to contingent liabilities fair value remeasurement with respect to potential shares issuable for the acquisition of GlowUp that remained unsettled as of March 31, 2024, loss on the sale of artwork, consulting, advisory and other costs relating to corporate transactions and other strategic opportunities, as well as reorganization costs resulting from the elimination or rightsizing of specific business activities or operations.

Previous wording

The decrease in corporate expenses for the three months ended September 30, 2024, compared to the comparable prior year period, was primarily due to a $1.1 million decrease in payroll expenses due to headcount reductions and a $0.8 million decrease in audit and consulting services, partly offset by a $1.0 million increase in stock-based compensation expense.

Current wording

The decrease in corporate expenses, compared to the prior year comparative period, was primarily due to an increase in severance and employee benefits expense of $1.2 million related to headcount reductions as a result of the licensing of the operations of our digital businesses, a $1.1 million increase in payroll expenses, partly offset by a $2.1 million decrease in impairment charges on our artwork held for sale and a $0.5 million decrease in stock-based compensation expense.

Previous wording

Our sources of liquidity are cash generated from operating activities, which primarily includes cash derived from revenue generating activities, from financing activities, including proceeds from our issuance of debt, and proceeds from stock offerings (as described further below), and from investing activities, which includes the sale of assets (as described further below). As of September 30, 2024, our principal source of liquidity was cash in the amount of $9.5 million, which is primarily held in operating and deposit accounts.

Current wording

Our sources of liquidity are cash generated from operating activities, which primarily includes cash derived from revenue generating activities, from financing activities, including proceeds from our issuance of debt, and proceeds from stock offerings (as described further below), and from investing activities, which includes the sale of assets (as described further below). As of March 31, 2025, our principal source of liquidity was cash in the amount of $23.7 million, which is primarily held in operating and deposit accounts.

Previous wording

On November 5, 2024, we issued 14,900,000 unregistered shares of our common stock in a private placement to a third-party investor, at a price of $1.50 per share, for total proceeds to us of $22.35 million.

Current wording

On November 5, 2024, we issued 14,900,000 unregistered shares of our common stock in a private placement to the Purchaser (defined below), at a price of $1.50 per share, for total proceeds to us of $22.4 million.

Previous wording

In November 2023, we also sold a small amount of our art assets, and we have continued the sale of our art assets in 2024.

Current wording

In the fourth quarter of 2023, we began the sale of our art assets, and we have continued the sale of our art assets in 2024 and 2025.

Previous wording

Since going public in 2021, we have yet to generate operating income from our core business operations and have incurred significant operating losses. Our operating losses for the nine months ended September 30, 2024 were $44.3 million. We expect to continue to incur operating losses for the foreseeable future.

Current wording

Since going public in 2021, we have yet to generate operating income from our core business operations and have incurred significant operating losses, including $6.3 million of operating losses for the quarter ended March 31, 2025. We expect our capital expenditures and working capital requirements in 2025 to be largely consistent with 2024.

Previous wording

We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern over the next twelve months from the date of filing this Quarterly Report on Form 10-Q. Although consequences of ongoing macroeconomic uncertainty could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors, such as those discussed above, we believe our existing sources of liquidity, along with proceeds from asset dispositions and savings from cost reductions initiatives, will be sufficient to meet our obligations as they become due under the A&R Credit Agreement and our other obligations for at least one year following the date of the filing of this Quarterly Report on Form 10-Q. We may seek additional equity or debt financing in the future to satisfy capital requirements, respond to adverse developments such as changes in our circumstances or unforeseen events or conditions, or fund organic or inorganic growth opportunities. However, in the event that additional financing is required from third-party sources, we may not be able to raise it on acceptable terms or at all.

Current wording

Although consequences of ongoing macroeconomic uncertainty could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors, such as those discussed above, we believe our existing sources of liquidity will be sufficient to meet our obligations as they become due under the A&R Credit Agreement and our other obligations for at least one year following the date of the filing of this Quarterly Report on Form 10-Q. We may seek additional equity or debt financing in the future to satisfy capital requirements, respond to adverse changes in our circumstances or unforeseen events, or fund growth opportunities. However, in the event that additional financing is required from third-party sources, we may not be able to raise it on acceptable terms or at all.

Previous wording

On March 27, 2024, we entered into Amendment No. 2 to the A&R Credit Agreement, which provided for, among other things:

Current wording

On March 27, 2024, we entered into Amendment No. 2 to the A&R Credit Agreement (the “A&R Second Amendment), which provided for, among other things:

Previous wording

The stated interest rate of Tranche A and Tranche B term loans as of September 30, 2024 was 11.46% and 9.46%, respectively. The stated interest rate of Tranche A and Tranche B term loans as of December 31, 2023 was 11.41% and 9.41%, respectively. The effective interest rate of Tranche A and Tranche B A&R Term Loans as of September 30, 2024 was 12.08% and 13.32%, respectively. The effective interest rate of Tranche A and Tranche B A&R Term Loans as of December 31, 2023 was 12.03% and 13.27%, respectively. The difference between the stated interest rate and effective interest rate for Tranche B as of September 30, 2024 and December 31, 2023 is driven primarily by the amortization of $21.3 million of debt discount which is included in the calculation of the effective interest rate.

Current wording

The stated interest rate of each Tranche A and Tranche B as of March 31, 2025 was 10.65%. The stated interest rate of each Tranche A and Tranche B as of December 31, 2024 was 11.01%. The effective interest rate of Tranche A and Tranche B as of March 31, 2025 was 0.74% and 4.60%, respectively. The effective interest rate of Tranche A and Tranche B as of December 31, 2024 was 1.05% and 4.93%, respectively.

Previous wording

Our principal lease commitments are for office space and operations under several noncancelable operating leases with contractual terms expiring through 2033. Some of these leases contain renewal options and rent escalations. As of September 30, 2024 and December 31, 2023, our fixed leases were $10.8 million and $13.4 million, respectively, with $3.2 million and $3.3 million due in the next 12 months. For further information on our lease obligations, refer to Note 13, Commitments and Contingencies within the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Our principal lease commitments are for office space and operations under several noncancellable operating leases with contractual terms expiring through 2033. Some of these leases contain renewal options and rent escalations. As of March 31, 2025 and December 31, 2024, our fixed leases were $24.0 million and $25.5 million, respectively, with $6.7 million and $6.6 million due in the next 12 months, respectively. For further information on our lease obligations, refer to Note 12, Commitments and Contingencies, of the Notes to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

The following table summarizes our cash flows from continuing operations for the periods indicated (in thousands):

Current wording

The following table summarizes our cash flows for the periods indicated (in thousands):

Previous wording

The decrease in net cash used in operating activities from continuing operations for nine months ended September 30, 2024, compared to the prior year comparable period, was primarily due to a reduction in net loss from continuing operations of $33.4 million, partly offset by changes in assets and liabilities that had a current period cash flow impact, such as $5.0 million of net changes in working capital and $24.6 million of changes in non-cash charges. The change in assets and liabilities, as compared to the prior year comparable period, was primarily driven by a $12.5 million increase in deferred revenues due to the termination of certain Chinese licensing agreements in the prior year comparative period, a $6.5 million increase in accrued agency fees and commissions primarily due to a nonrecurring reversal of commission accrual in the prior year comparative period related to the termination of certain Chinese licensing agreements, a $1.8 million decrease in prepaid expenses and other current assets, and a $0.6 million decrease in contract assets due to the impairment, modification or termination of certain trademark licensing contracts, partly offset by a $8.8 million decrease in other liabilities and accrued expenses, $4.9 million change in accounts receivable due to the timing of royalties collections and modifications of certain trademark licensing contracts, a $1.7 million decrease in accounts payable due to the timing of payments, a $0.6 million decrease in other liabilities, net, and a $0.4 million decrease in operating lease liabilities. The change in non-cash charges, compared to the change in the prior year comparable period, was primarily driven by a $49.3 million decrease in non-cash impairment charges, a $3.6 million decrease in stock-based compensation expense, and a decrease in inventory reserve charges of $3.4 million, partly offset by a $6.1 million net gain on the extinguishment of debt in 2023, a $6.9 million change in fair value remeasurement charges, a $11.0 million increase in deferred income taxes, and $6.3 million of capitalized paid-in-kind interest.

Current wording

The decrease in net cash used in operating activities from continuing operations for the three months ended March 31, 2025, compared to the prior year comparable period, was primarily due to a reduction in net loss of $7.4 million, partly offset by changes in assets and liabilities that had a current period cash flow impact, such as changes in working capital of $3.6 million, and changes in non-cash charges of $8.8 million. The change in assets and liabilities as, compared to the prior year comparable period, was primarily driven by a $5.4 million increase in other liabilities and accrued expenses and a $3.4 million increase in accounts payable due to the timing of payments, a $1.3 million decrease in accounts receivable due to the timing of royalty collections and a $1.2 million increase in operating lease liabilities, partly offset by a $3.9 million decrease in deferred revenues due to the timing of direct-to-consumer order shipments and a $3.1 million change in inventories, net due to higher inventory turnover in the prior year comparative period as a result of a large sale in March 2024 that did not recur in March 2025. The change in non-cash charges, compared to the change in the prior year comparable period, was primarily driven by a $3.3 million decrease in the amortization of debt premium/discount and issuance costs due to the A&R Third Amendment, the $2.1 million decrease in the impairment of our artwork held for sale, a $1.1 million decrease in stock-based compensation expense, a $1.2 million decrease in the amortization of right-of-use assets, and a $1.0 million decrease in depreciation and amortization, primarily due to the write-off of our internally developed software in 2024.

Previous wording

The decrease in net cash provided by investing activities for the nine months ended September 30, 2024 over the prior year comparable period was primarily due to $1.0 million of proceeds from the Yandy Sale and $1.3 million of proceeds from the repayment of a promissory note related to the Yandy Sale in the prior year comparable period, partly offset by proceeds from the sale of certain of our artwork of $1.6 million and a $0.2 million decrease in purchases of property and equipment.

Current wording

The decrease in net cash used in investing activities for the three months ended March 31, 2025, compared to the prior year comparable period, was primarily due to a $0.6 million decrease in purchases of property and equipment.

Previous wording

The change in net cash (used in) provided by financing activities for the nine months ended September 30, 2024, compared to the prior year comparable period, was primarily due to net proceeds of $13.9 million from our registered direct offering in January of 2023, net proceeds of $47.6 million from the issuance of common stock in our rights offering in February of 2023, and gross proceeds of $11.8 million from the amendment and restatement of our senior secured debt in the second quarter of 2023, partly offset by a $45.3 million decrease in the repayment of long-term debt from the proceeds of our equity offerings.

Current wording

The decrease in net cash used in financing activities for the three months ended March 31, 2025, compared to the prior year comparable period, was immaterial.

Previous wording

For the nine months ended September 30, 2024, there were no material changes to our contractual obligations from December 31, 2023, as disclosed in our audited consolidated financial statements included in our Annual Report on Form 10-K filed on March 29, 2024.

Current wording

For the quarter ended March 31, 2025, there were no material changes to our contractual obligations from December 31, 2024, as disclosed in our audited consolidated financial statements included in our Annual Report on Form 10-K filed on March 13, 2025.

Previous wording

During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on March 29, 2024.

Current wording

During the three months ended March 31, 2025, there were no material changes to our critical accounting estimates or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on March 13, 2025.

Previous wording

Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, within the notes to the to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.

Current wording

Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to our Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.