SEQUENTIAL BRANDS GROUP, INC. - FORM 10-K/A

Attached files

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EX-23.1 - EXHIBIT 23.1 - SEQUENTIAL BRANDS GROUP, INC.	v336019_ex23-1.htm
EX-31.2 - EXHIBIT 32.2 - SEQUENTIAL BRANDS GROUP, INC.	v336019_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - SEQUENTIAL BRANDS GROUP, INC.	v336019_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - SEQUENTIAL BRANDS GROUP, INC.	v336019_ex31-1.htm
EX-23.2 - EXHIBIT 23.2 - SEQUENTIAL BRANDS GROUP, INC.	v336019_ex23-2.htm
EXCEL - IDEA: XBRL DOCUMENT - SEQUENTIAL BRANDS GROUP, INC.	Financial_Report.xls

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2011

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________________ to ______________________.

Commission file number 0-16075

sequential brands group, inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or Other Jurisdiction of

Incorporation or Organization)

86-0449546

(I.R.S. Employer

Identification No.)

1065 Avenue of Americas, Suite 1705
New York, NY 10018

(Address of Principal Executive Offices)(Zip Code)

(646) 564-2577

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨

No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨

No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x

No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

(Do not check if smaller reporting company)

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)

Yes ¨

No x

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant on June 30, 2011, the last business day of the registrant's most recently completed second fiscal quarter was $1,558,308 (based on the closing sales price of the registrant's common stock on that date).

At March 29, 2012, the registrant had 2,400,171 shares of Common Stock, $0.001 par value, issued and outstanding (as adjusted to reflect a 1-for-15 reverse stock split of the registrant’s common stock which took effect on September 11, 2012).

DOCUMENTS INCORPORATED BY REFERENCE

None

Explanatory Note

We are filing this Amended Annual Report on Form 10-K/A (“Form 10-K/A”) to our Annual Report on Form 10-K for the year ended December 31, 2011 (the “Original Filing”), as originally filed with the Securities and Exchange Commission (“SEC”) on March 30, 2012, to include an opinion on the retrospective presentation of certain discontinued operations to the 2010 consolidated financial statements, which opinion was omitted in the Original Filing. In addition, the consolidated financial statements for the years ended December 31, 2011 and 2010 have been adjusted in this Form 10-K/A to reflect an additional discontinued operation announced in our interim consolidated financial statements for the year ended December 31, 2012.

Opinion on the Retrospective Presentation of Certain Discontinued Operations to the 2010 Consolidated Financial Statements

In 2011, we accounted for our sale of our 50% member interest in our subsidiary J. Lindeberg USA, LLC and the decision to close down our retail operations as discontinued operations in accordance with the guidance provided in FASB ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets, which requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations. In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the statements of operations. Assets and liabilities are also reclassified into separate line items on the related balance sheets for the periods presented. The statements of cash flows for the periods presented are also reclassified to reflect the results of discontinued operations as separate line items.

We engaged our former accountants, Crowe Horwath LLP, to audit the information related to the retrospective presentation of the discontinued operations of our retail subsidiary and J. Lindeberg subsidiary for the year ending December 31, 2010. The opinion of Crowe Horwath LLP on the retrospective presentation of the discontinued operations for the year ending December 31, 2010 is included in this Form 10-K/A.

Discontinued Operations of Wholesale Business

In 2012, our Board of Directors also decided to discontinue our wholesale operations. In accordance with guidance provided in ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets and guidance provided by the SEC, this Form 10K/A also gives retrospective treatment to our consolidated financial statements for the years ended December 31, 2011 and 2010 to reflect the discontinued operations of our wholesale business. In the Original Filing, our consolidated financial statements for the years ended December 31, 2011 and 2010 did not reflect the discontinued operations of our wholesale business.

To reflect the foregoing, this Form 10-K/A amends Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 8 of Part II, “Financial Statements and Supplementary Data” and Item 9A of Part II, “Controls and Procedures,” of the Original Filing, in each case, solely as a result of, and to reflect, the adjustment. Pursuant to the rules of the SEC, Item 15 of Part IV of the Original Filing has been amended to contain the currently-dated certifications from our chief executive officer and chief financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of our chief executive officer and chief financial officer are attached to this Form 10-K/A as Exhibits 31.1, 31.2 and 32.1.

For the convenience of the reader, this Amended Annual Report on Form 10-K/A sets forth the Original Filing in its entirety. Other than as described above, to reflect a 1-for-15 reverse stock split of our common stock which took effect on September 11, 2012 and to correct typographical errors contained in the Original Filing, none of the other disclosures in the Original Filing have been amended or updated. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events that occurred or facts that became known to us after the filing of the Original Filing, and such forward-looking statements should be read in their historical context. Accordingly, this Form 10-K/A should be read in conjunction with our filings with the Securities and Exchange Commission filed subsequent to the Original Filing.

SEQUENTIAL BRANDS GROUP, INC.

INDEX TO FORM 10-K/A

		Page
PART I

Item 1.	Business	3

Item 1A.	Risk Factors	8

Item 1B.	Unresolved Staff Comments	15

Item 2.	Properties	15

Item 3.	Legal Proceedings	15

Item 4.	Mine Safety Disclosures	15

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16

Item 6.	Selected Financial Data	16

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 8.	Financial Statements and Supplementary Data	29

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	76

Item 9A.	Controls and Procedures	76

Item 9B.	Other Information	77

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	77

Item 11.	Executive Compensation	81

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	88

Item 13.	Certain Relationships and Related Transactions, and Director Independence	91

Item 14.	Principal Accounting Fees and Services	92

PART IV

Item 15.	Exhibits, Financial Statement Schedules	94

PART I

This 2011 Annual Report on Form 10-K/A, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains “forward-looking statements” that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new business strategies, regulatory developments or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to:

our failure to implement our business plan within the time period we originally planned to accomplish;

the risks of expanding the number of products we license, as well as the number of brands we market and distribute;

our ability to locate licensees who can manufacture and supply branded products;

our ability to enter into license agreements both in the United States and internationally;

the demand for jeans, sportswear and other casual apparel in the United States and internationally;

our ability to acquire new brands;

a decline in the retail sales environment;

a decrease in the availability of financial resources at favorable terms;

industry competition;

general economic conditions; and

other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Item 1.

Business

Corporate Overview

Since our formation in 2005, we have been a designer, marketer and wholesale provider of branded apparel and apparel accessories. Commencing in July 2008, we implemented a retail strategy and opened retail stores to sell our branded products. In the second half of 2011, we decided to change our business model to focus on licensing and brand management. In connection with the change in our business model, we are presently winding down the wholesale distribution of our branded apparel and apparel accessories, liquidating our existing inventory and closing our retail stores. We expect to complete our transition from a wholesale and retail company to a licensing and brand management company during the second or third quarter of 2012. In this report, we refer to our wholesale and retail operations as our Historical Operations.

We are headquartered in Pacific Palisades, California, and our company was incorporated in Delaware in 1982.

Brand Management and Licensing Business

Overview

Our objective is to develop and build a diversified portfolio of iconic consumer brands by organically growing our existing portfolio and by acquiring new brands while leveraging our brand management expertise. We also plan to enter into joint ventures and other partnerships to acquire brands. To achieve this objective, we intend to:

Increase licensing of existing brands by adding additional product categories, expanding the brands’ distribution and retail presence and optimizing sales through innovative marketing that increases consumer awareness and loyalty;

Develop international expansion through additional licenses, partnerships, joint ventures and other arrangements with leading retailers and wholesalers worldwide; and

Acquire consumer brands or the rights to such brands with high consumer awareness, broad appeal, applicability to a range of product categories and an ability to diversify our portfolio. In assessing potential acquisitions or investments, we will primarily evaluate the strength of the targeted brand as well as the expected viability and sustainability of future royalty streams.

In managing our brands, we seek to capitalize on the brands’ histories, while simultaneously working to keep them relevant to today’s consumer market.

Our new business strategy is designed to maximize the value of our brands through the entry into strategic licenses with partners that have the responsibility for designing, manufacturing and distributing our licensed products. We intend to license our brands with respect to a broad range of products, including apparel, eyewear, footwear and fashion accessories, including handbags, watches and luggage. We seek licensees with the ability to produce and sell quality products in their licensed categories and that have demonstrated ability to meet and exceed minimum sales thresholds and royalty payments that we generally require.

As described below, we currently have one direct-to-retail and three traditional wholesale licenses. In our direct-to-retail license, we granted JC Penney, a national retailer, the exclusive right to distribute William Rast branded apparel in a broad range of product categories through its stores in the United States and through its consumer-direct mail and consumer-direct ecommerce distribution channels which are targeted to consumers in the United States. In our traditional wholesale licenses, we grant rights to a single or small group of related product categories to a wholesale supplier, who is permitted to sell licensed products to multiple stores within an approved channel of distribution.

Each of our licensees has a stipulated territory or territories, as well as distribution channels in which the licensed products may be sold. Currently, the majority of our revenues are from U.S. based licenses, but we intend to increase the monetization of our trademarks internationally through additional licenses, partnerships, and other arrangements, such as joint ventures.

Our license agreements typically require the licensee to pay royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach certain specified targets. Our license agreements also typically require the licensees to pay us certain minimum amounts for the design, advertising and marketing of the respective licensed brands. As of December 31, 2011, we have contractual rights to receive over $21.6 million of aggregate minimum royalty revenue through the balance of all of our current licenses, excluding any renewals.

We believe that coordination of brand presentation across product categories is critical to growing the strength and integrity of our brands. Accordingly, we have maintained the right in our licenses to preview and approve products, packaging and other presentations of the licensed mark. Moreover, prior to each season, our representatives supply licensees with trend guidance as to the “look and feel” of the current trends for the season, including colors, fabrics, silhouettes and an overall style sensibility, and then work with licensees to coordinate the licensed products across the categories to maintain the cohesiveness of the brand’s overall presentation in the market place. Thereafter, we obtain and approve (or object and require modification to) products and packaging provided by each licensee on an on-going basis. In addition, we communicate with our licensees throughout the year to obtain and review reporting of sales and the calculation and payment of royalties.

Marketing

We believe that marketing is a critical element in maximizing brand value to our licensees and to our company. Our in-house marketing team tailors marketing for our brands, and we may develop new advertising strategies that incorporate the design aesthetic of each brand.

We believe that our innovative brand building activities and those of our strategic partners will result in increased sales and consumer awareness of our William Rast brand. Because of our established relationships with agents, managers, magazine publishers and the media in general, we intend to leverage those relationships into successful public relations strategies that reach millions of consumers. We also work with our strategic partners with respect to marketing, advertising and trend direction.

Our advertising expenditures for our William Rast brand are dedicated largely to creating and developing creative advertising concepts, reaching appropriate arrangements with our strategic partner, Justin Timberlake, other spokespeople, advertisements in magazines and trade publications, running Internet advertisements, securing product placements and the sponsorship of various motor racing activities. Our relationship with Danica Patrick, who endorses our eyewear and is a brand ambassador, will also help us increase our consumer base. The advertisements for our William Rast brand have appeared in fashion, entertainment and lifestyle magazines, in newspapers and on outdoor billboards. We partner with our licensees to create and air commercials that generate excitement for our William Rast brand with consumers. Further, we market our brands online, through e-mail blasts, banner advertisements and gift with purchase programs. We maintain websites (www.williamrast.com, www.pplbusa.com and coming soon, www.sequentialbrands.com) to further market our brands.

Some of our license agreements require the payment of an advertising fee by the licensee, and in certain cases, our licensees supplement the marketing of our brands by performing additional advertising services.

Description of Our Brands

William Rast ®

We commenced our William Rast clothing line in May 2005. The brand was conceptualized and founded by business partners Justin Timberlake and Trace Ayala. Originally comprised only of denim, the brand has expanded into a complete lifestyle collection, including leathers, outerwear, wovens and knits. William Rast branded products are known for delivering quality, detail, design and comfort. Grounded in the iconography of American denim heritage and biker culture, yet presented in a contemporary context, the William Rast brand has become recognized by denim fans worldwide. The following is a description of license agreements we have entered into pertaining to our William Rast brand:

Exclusive License Agreement with JC Penney. In November 2011, we entered into an exclusive license agreement with JC Penney pursuant to which we granted JC Penney a license to use our William Rast trademark in connection with the manufacture, sale and marketing of men’s apparel and accessories, women’s apparel, handbags, footwear, watches and luggage. The product categories are subject to certain exceptions as outlined in the license agreement. We will provide design, marketing and branding support for William Rast branded apparel and apparel accessories to JC Penney under the terms of the contract.

The license granted to JC Penney is exclusive (subject to certain exceptions) with respect to JC Penney’s right to sell and market William Rast branded products through its stores in the United States and through its consumer-direct mail and consumer-direct ecommerce distribution channels which are targeted to consumers in the United States. During the term of the agreement, we agree to refrain from selling or authorizing any other party to sell, with certain exceptions as outlined in the agreement, any line of William Rast branded products in the United States through any distribution channel; provided, however, that we continue to have the right to sell William Rast branded products without restriction until May 15, 2012.

Unless otherwise terminated earlier pursuant to its terms, the agreement with JC Penney will continue through January 30, 2016. JC Penney may elect to extend the term of the agreement for one additional renewal term of five years.

During each royalty period during the term, JC Penney has agreed to pay us royalties based upon a percentage of JC Penney’s net sales of William Rast branded products and has also agreed to pay us minimum annual royalties and design fees.

VIVA Optique: We have entered into a multi-year licensing agreement with Viva International Group to design, produce and globally distribute William Rast branded Eyewear and William Rast branded Racing Eyewear focusing on styles for both the premium and sportswear categories for men and women. Viva is a worldwide leading eyewear company, representing premium and luxury brands including, GUESS, SKECHERS, Tommy Hilfiger, Escada and Ermenegildo Zegna. The William Rast branded eyewear collections, which include sunglasses and prescription eyewear, debuted in 2011 and are available in upscale department stores and specialty retailers worldwide.

RGA Leatherworks: We have entered into a multi-year licensing agreement with RGA Leatherworks to design, produce and distribute in the United States and Canada William Rast branded leather goods. Product categories include men’s wallets, small leather goods, messenger bags, totes, belts, travel kits and electronic cases.

How Fashions International: We have entered into a multi-year licensing agreement with How Fashions International Inc. to design, produce and distribute in Canada William Rast branded apparel. Product categories include men’s and women’s denim, knit tops, woven shirts and outerwear. The William Rast branded apparel collection is available in upscale department stores and specialty retailers in Canada.

People’s Liberation ®

We commenced our People’s Liberation branded apparel business in July 2004. Our People’s Liberation brand is known for its superior fit and silhouette combined with its unique back pocket details and wash features. The line also includes a collection of fashionable knit T-shirts, tops, dresses and leggings. In connection with the transition of our business model, we intend to license our People’s Liberation brand in a variety of categories to retailers, wholesalers and distributors in the United States and certain international territories. We continue to sell People’s Liberation branded apparel on a limited basis through our wholesale operations.

J Lindeberg ®

We began distributing J. Lindeberg branded men’s high end fashion and golf apparel products in the United States on an exclusive basis beginning July 2008 through our former subsidiary, J. Lindeberg USA, LLC. In April 2011, we sold our interest in J. Lindeberg USA, LLC to our joint venture partner and as a result, we no longer sell J. Lindeberg branded products.

Wholesale and Retail Business

US Wholesale Sales and Distribution

As part of our Historical Operations, we sold our products through our own sales force based in Los Angeles, New York and Atlanta. Additionally, we operated showrooms in Los Angeles, New York and Atlanta with dedicated salaried and commissioned sales staff. We also employed customer service representatives who were assigned to key customers and provided in-house customer service support. We shipped products to and invoiced our United States customers directly from warehouse facilities located in or around Los Angeles, California. Under agreements with third-party warehouses, we outsourced all of our finished good shipping, receiving and warehouse functions.

In the United States, we distributed our William Rast branded merchandise and, through April 26, 2011, our J. Lindeberg branded merchandise to better specialty stores, boutiques and department stores, such as Nordstrom, Saks Fifth Avenue and Neiman Marcus, as well as online at various websites including williamrast.com, jlindebergusa.com and Zappos.com. While we did not depend on any individual customer to sell our products, for the year ended December 31, 2011, approximately 24.1% of our sales were to two customers. For the year ended December 31, 2010, approximately 15.8% of our sales were to one customer. Sales to this customer in 2010 were part of a one-time nonrecurring program. In 2012, as we transition our business model and liquidate our existing inventory, we will continue to sell William Rast and People’s Liberation branded apparel on a limited basis through our wholesale operations.

International Wholesale Sales and Distribution

In our Historical Operations, we sold our William Rast branded apparel products internationally in select countries directly and through agents and distributors to better department stores and boutiques. Our distributors purchased products at wholesale prices for resale in their respective territories and marketed, sold, warehoused and shipped William Rast branded apparel products at their expense. Our agents were paid a commission on net sales of our William Rast products.

Through our subsidiary, William Rast Europe, we sold and marketed William Rast apparel and accessories to European customers and distributors. We ceased operations in our William Rast Europe subsidiary in 2010, and as a result, all sales to European and other international customers and distributors are currently sold through our wholesale division. In 2012, we expect to have an immaterial amount of sales of our William Rast and People’s Liberation branded apparel from our international wholesale operations.

Retail Sales

Our Historical Operations include the sale of William Rast branded apparel and accessories through our William Rast branded retail stores and also through our William Rast branded outlet store. As part of our transition from a wholesale and retail provider of branded apparel and apparel accessories to a brand management and licensing company, we closed our William Rast retail stores located in Miami and San Jose in November 2011. Our two remaining William Rast retail stores are expected to be closed in 2012. We expect to have limited sales from our two remaining retail stores in 2012.

Through April 26, 2011, our J. Lindeberg branded apparel and accessories were sold through our three full-price J. Lindeberg branded retail stores. We sold our interest in our J. Lindeberg business to our joint venture partner in April 2011, including our three retail stores.

Manufacturing and Supply

In our Historical Operations, we sourced the majority of our denim products from domestic third party contract manufacturers located in or around Los Angeles, California. Our denim is made from high quality fabrics milled primarily in the United States, Japan, Italy, Turkey and Mexico. For the majority of our William Rast knits and other non-denim products, we sourced these goods from international suppliers primarily in Asia. We purchased all of our J. Lindeberg branded apparel products from J. Lindeberg AB in Sweden.

Although we did not depend on any one supplier, for the year ended December 31, 2011, two suppliers provided for 68.7% of our total combined purchases for the year. For the year ended December 31, 2010, three suppliers provided for 71.3% of our total combined purchases for the year.

As we transition our business from a wholesale and retail provider of branded apparel and apparel accessories to a brand management and licensing company, our licensees will have the responsibility for sourcing licensed products.

Competition

Our brands are subject to extensive competition from various domestic and foreign brands. Each brand has many competitors within each of its specific distribution channels that span a broad variety of product categories. These competitors have the ability to compete with our licensees in terms of fashion, quality, price and/or advertising.

In addition, we face competition for retail licenses and brand acquisitions. Companies owning established brands may decide to enter into licensing arrangements with retailers similar to the ones we currently have in place, thus creating direct competition. Similarly, the retailers to which we currently, or may otherwise, license our brands, may decide to develop or purchase brands rather than enter into license agreements with us. We also compete with traditional apparel and consumer brand companies and with other brand management companies for acquisitions.

Trademarks

Our wholly-owned trademarks, People’s Liberation and William Rast, are owned by two of our subsidiaries. These trademarks and associated marks are registered or pending registration with the U.S. Patent and Trademark Office in block letter and/or logo formats, as well as in combination with a variety of ancillary marks for use with respect to a variety of product categories, including footwear, eyewear, apparel, fragrance, handbags, watches and various other goods. We intend to renew these registrations as appropriate prior to expiration. In addition, we register our trademarks in other countries and regions around the world.

We monitor on an ongoing basis unauthorized use and filings of our trademarks, and we rely primarily upon a combination of federal, state, and local laws, as well as contractual restrictions to protect our intellectual property rights both domestically and internationally.

Government Regulation and Supervision

Our operations are subject to the effects of international treaties and regulations such as the North American Free Trade Agreement (NAFTA). We are also subject to the effects of international trade agreements and embargoes by entities such as the World Trade Organization. Generally, these international trade agreements benefit our business rather than burden it because they tend to reduce trade quotas, duties, taxes and similar impositions. However, these trade agreements may also impose restrictions that could have an adverse impact on our business, for example by limiting the countries where we might market and sell our products.

Labeling and advertising of our products is subject to regulation by the Federal Trade Commission. We believe that we are in compliance with these regulations.

Employees

As of March 29, 2012, we have a total of 16 full time employees. Our full time employees consist of two officers, Colin Dyne, our Chief Executive Officer and Chief Financial Officer, and Andrea Sobel, President of Licensing. Additionally, we have 14 full time employees who handle retail and wholesale sales, design, marketing, customer service, accounting and administration functions, and 9 part time marketing and retail store employees.

Item 1A.

Risk Factors

Several of the matters discussed in this document contain forward-looking statements that involve risks and uncertainties. Factors associated with the forward-looking statements that could cause actual results to differ materially from those projected or forecast are included in the statements below. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could impact our operations. In addition to other information contained in this report, the following risk factors highlight some of the factors that have affected, and in the future, could affect our operations:

We are dependent on our license agreement with JC Penney for revenue.

We expect that our revenue under our license agreement with JC Penney will represent a significant portion of our total revenues during the term of the agreement. Because the amount of our revenues under the JC Penney agreement are dependent on the sales of William Rast branded products in JC Penney stores, our revenue potential is impacted by the number of JC Penney stores and the patronage at these stores, and JC Penney’s ability and/or commitment to manufacture and market William Rast branded products. In addition, the termination of the JC Penney agreement would likely have a material adverse effect on our business, financial condition, and results of operations.

The failure of our licensees to adequately produce, market and sell products bearing our brand names in their license categories or to pay their obligations under their license agreements could result in a decline in our results of operations.

Our revenues are almost entirely dependent on royalty payments made to us under our licensing agreements. Although the licensing agreements for our brands usually require the advance payment to us of a portion of the licensing fees and in most cases provide for guaranteed minimum royalty payments to us, the failure of our licensees to satisfy their obligations under these agreements or their inability to operate successfully or at all, could result in their breach and/or the early termination of such agreements, their non-renewal of such agreements or our decision to amend such agreements to reduce the guaranteed minimums or sales royalties due thereunder, thereby eliminating some or all of that stream of revenue. Moreover, during the terms of the license agreements, we are substantially dependent upon the abilities of our licensees to maintain the quality and marketability of the products bearing our trademarks, as their failure to do so could materially tarnish our brands, thereby harming our future growth and prospects. In addition, the failure of our licensees to meet their production, manufacturing and distribution requirements could cause a decline in their sales and potentially decrease the amount of royalty payments (over and above the guaranteed minimums) due to us. A weak economy or softness in the apparel and retail sectors could exacerbate this risk. This, in turn, could decrease our potential revenues and harm our stock price.

Our business is dependent on continued market acceptance of our brands and the products of our licensees bearing these brands.

Although most of our licensees guarantee minimum net sales and minimum royalties to us, a failure of our brands or of products bearing our brands to achieve or maintain market acceptance could cause a reduction of our licensing revenues and could further cause existing licensees not to renew their agreements. Such failure could also cause the devaluation of our trademarks, which are our primary assets, making it more difficult for us to renew our current licenses upon their expiration or enter into new or additional licenses for our trademarks. In addition, if such devaluation of our trademarks were to occur, a material impairment in the carrying value of one or more of our trademarks could also occur and be charged as an expense to our operating results. Continued market acceptance of our brands and our licensees’ products, as well as market acceptance of any future products bearing our brands, is subject to a high degree of uncertainty, made more so by constantly changing consumer tastes and preferences. Maintaining market acceptance of our licensees’ products and creating market acceptance of new products and categories of products bearing our marks will require our continuing marketing efforts, which may, from time to time, also include our expenditure of significant additional funds to keep pace with changing consumer demands. Additional marketing efforts and expenditures may not, however, result in either increased market acceptance of, or additional licenses for, our trademarks or increased market acceptance, or sales of our licensees’ products. Furthermore, while we believe that we currently maintain sufficient control over the products our licensees’ produce under our William Rast brand name through the provision of trend and design direction and our right to preview and approve products, including their presentation and packaging, we do not actually design or manufacture products bearing our marks and therefore have more limited control over such products’ quality and design than we had in our historical operations.

If we are unable to identify and successfully acquire additional trademarks, our rate of growth may be reduced, and even if additional trademarks are acquired, we may not realize anticipated benefits due to integration or licensing difficulties.

A key component of our growth strategy is the acquisition of additional trademarks. We are exploring new acquisitions. However, as our competitors continue to pursue our brand management model, acquisitions may become more expensive and suitable acquisition candidates could become more difficult to find. In addition, even if we successfully acquire additional trademarks or the rights to use additional trademarks, we may not be able to achieve or maintain profitability levels that justify our investment in, or realize planned benefits with respect to, those additional brands.

Although we seek to temper our acquisition risks, acquisitions, whether they be of additional intellectual property assets or of the companies that own them, entail numerous risks, any of which could detrimentally affect our results of operations and/or the value of our equity. These risks include, among others:

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unanticipated costs associated with the target acquisition;

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negative effects on reported results of operations from acquisition related charges and amortization of acquired intangibles;

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diversion of management’s attention from other business concerns;

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the challenges of maintaining focus on, and continuing to execute, core strategies and business plans as our brand and license portfolio grows and becomes more diversified;

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adverse effects on existing licensing relationships;

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potential difficulties associated with the retention of key employees, and the assimilation of any other employees, who may be retained by us in connection with or as a result of our acquisitions; and

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risks of entering new domestic and international markets (whether it be with respect to new licensed product categories or new licensed product distribution channels) or markets in which we have limited prior experience.

In the event we acquire intellectual property assets or the companies that own them, our due diligence reviews are subject to inherent uncertainties and may not reveal all potential risks. We may therefore fail to discover or inaccurately assess undisclosed or contingent liabilities, including liabilities for which we may have responsibility as a successor to the seller or the target company. As a successor, we may be responsible for any past or continuing violations of law by the seller or the target company. Although we generally attempt to seek contractual protections through representations, warranties and indemnities, we cannot be sure that we will obtain such provisions in our acquisitions or that such provisions will fully protect us from all unknown, contingent or other liabilities or costs. Finally, claims against us relating to any acquisition may necessitate our seeking claims against the seller for which the seller may not, or may not be able to, indemnify us or that may exceed the scope, duration or amount of the sellers’ indemnification obligations.

Acquiring additional trademarks could also have a significant effect on our financial position and could cause substantial fluctuations in our quarterly and yearly operating results. Acquisitions could result in the recording of significant goodwill and intangible assets on our financial statements, the amortization or impairment of which would reduce our reported earnings in subsequent years. No assurance can be given with respect to the timing, likelihood or financial or business effect of any possible transaction. Moreover, as discussed below, our ability to grow through the acquisition of additional trademarks will also depend on the availability of capital to complete the necessary acquisition arrangements. In the event that we are unable to obtain debt financing on acceptable terms for a particular acquisition, we may elect to pursue the acquisition through the issuance by us of shares of our common stock (and, in certain cases, convertible securities) as equity consideration, which could dilute our common stock because it could reduce our earnings per share, and any such dilution could reduce the market price of our common stock unless and until we were able to achieve revenue growth or cost savings and other business economies sufficient to offset the effect of such an issuance. As a result, there is no guarantee that our stockholders will achieve greater returns as a result of any future acquisitions we complete.

We may require additional capital to finance the acquisition of additional brands and our inability to raise such capital on beneficial terms or at all could restrict our growth.

We may, in the future, require additional capital to help fund all or part of potential acquisitions. If, at the time required, we do not have sufficient cash to finance those additional capital needs, we will need to raise additional funds through equity and/or debt financing. We cannot guarantee that, if and when needed, additional financing will be available to us on acceptable terms or at all. If additional capital is needed and is either unavailable or cost prohibitive, our growth may be limited as we may need to change our business strategy to slow the rate of, or eliminate, our expansion plans. In addition, any additional financing we undertake could impose additional covenants upon us that restrict our operating flexibility, and, if we issue equity securities to raise capital, our existing stockholders may experience dilution or the new securities may have rights senior to those of our common stock.

Because of the intense competition within our licensees’ markets and the strength of some of their competitors, we and our licensees may not be able to continue to compete successfully.

Our trademark licenses are for products in the apparel and fashion accessories markets, in which our licensees face intense competition. In general, competitive factors include quality, price, style, name recognition and service. In addition, various fads and the limited availability of shelf space could affect competition for our licensees’ products. Many of our licensees’ competitors have greater financial, distribution, marketing and other resources than our licensees and have achieved significant name recognition for their brand names. Our licensees may be unable to successfully compete in the markets for their products, and we may not be able to continue to compete successfully with respect to our licensing arrangements.

If our competition for retail licenses and brand acquisitions increases, or our current direct-to-retail licensee elects not to renew their license or renew on terms less favorable than today, our growth plans could be slowed.

We may face increasing competition in the future for direct-to-retail licenses as other companies owning brands may decide to enter into licensing arrangements with retailers similar to the one we currently have in place. Furthermore, our current or potential direct-to-retail licensees may decide to develop or purchase brands rather than renew or enter into license agreements with us. This increased competition could result in lower sales of products offered by our direct-to-retail licensee under our brand. We also compete with traditional apparel and consumer brand companies, other brand management companies and private equity groups for brand acquisitions. If our competition for retail licenses and brand acquisitions increases, it may take us longer to procure additional retail licenses and/or acquire additional brands, which could slow our growth rate.

Our licensees are subject to risks and uncertainties of foreign manufacturing and the price, availability and quality of raw materials that could interrupt their operations or increase their operating costs, thereby affecting their ability to deliver goods to the market, reduce or delay their sales and decrease our potential royalty revenues.

Substantially all of the products sold by our licensees are manufactured overseas. There are substantial risks associated with foreign manufacturing, including changes in laws relating to quotas, and the payment of tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays and international political, regulatory and economic developments. Further, our licensees may experience fluctuations in the price, availability and quality of fabrics and raw materials used by them in their manufactured apparel or purchased finished goods. Any of these risks could increase our licensees’ operating costs. Our licensees also import finished products and assume all risk of loss and damage with respect to these goods once they are shipped by their suppliers. If these goods are destroyed or damaged during shipment, the revenues of our licensees, and thus our royalty revenues over and above the guaranteed minimums, could be reduced as a result of our licensees’ inability to deliver or their delay in delivering their products.

We may not be able to adequately protect our intellectual property rights.

The loss of or inability to enforce the trademarks “William Rast” and “People’s Liberation” and our other proprietary designs, know-how and trade secrets could adversely affect our business. If any third party independently develops similar products to ours or manufactures knock-offs of our products, it may be costly to enforce our rights and we would not be able to compete as effectively. Additionally, the laws of foreign countries may provide inadequate protection of intellectual property rights, making it difficult to enforce such rights in those countries.

We may need to bring legal claims to enforce or protect our intellectual property rights. Any litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources. In addition, notwithstanding the rights we have secured in our intellectual property, third parties may bring claims against us alleging that we have infringed on their intellectual property rights or that our intellectual property rights are not valid. Any claims against us, with or without merit, could be time consuming and costly to defend or litigate and therefore could have an adverse affect on our business.

The loss of our Chief Executive Officer, Colin Dyne, could have an adverse effect on our future development and could significantly impair our ability to achieve our business objectives.

Our success is largely dependent upon the expertise and knowledge of our Chief Executive Officer, Colin Dyne, whom we rely upon to formulate our business strategies. As a result of the unique skill set and responsibilities of Mr. Dyne, the loss of Mr. Dyne could have a material adverse effect on our business, development, financial condition, and operating results. We do not maintain “key person” life insurance on any of our management, including Mr. Dyne.

The company’s obligations under its debentures are secured by substantially all of the assets of the company and its subsidiaries. In the event we default in our obligations under the debentures, TCP may foreclose on all of our assets.

On February 2, 2012, we entered into a Securities Purchase Agreement with TCP WR Acquisition, LLC (“TCP”). Pursuant to the Purchase Agreement we sold $14,500,000 in Variable Rate Senior Secured Convertible Debentures (the “Debentures”), warrants to purchase common stock and Series A Preferred Stock to TCP.

In connection with the financing, our subsidiaries, Versatile Entertainment, Bella Rose, William Rast Sourcing, William Rast Licensing, LLC and William Rast Retail executed a Subsidiary Guarantee in favor of TCP pursuant to which such subsidiaries guarantee our obligations under the Debentures. In addition, the company and the above mentioned subsidiaries entered into a security agreement with TCP pursuant to which such parties granted to TCP a first priority security interest in all of their assets to secure our obligations under the Debentures and such subsidiaries’ obligations under the Subsidiary Guarantee. TCP, in certain circumstances, may foreclose on our assets, including all of our intellectual property, if we make certain limited defaults under the Debentures. If we lose all or a substantial portion of our assets, our shares may significantly decline in value.

Our William Rast business is a collaboration with Tennman WR-T, Inc., an entity owned in part by Justin Timberlake. Should our relationship with our partner deteriorate, our sales and profitability may be negatively impacted.

Certain of our consolidated subsidiaries that we manage have the exclusive rights to manufacture clothing and accessories under the William Rast tradename. We share ownership of these subsidiaries with Tennman WR-T, Inc., an entity controlled by Justin Timberlake. In the event that our relationships with Tennman and Justin Timberlake deteriorate, our sales and profitability may be negatively impacted.

Our operating results may fluctuate significantly.

Management expects that we will experience substantial variations in our revenue and operating results from quarter to quarter. We believe that the factors which influence this variability of quarterly results include:

the timing of the introduction of new licensed products by our licensees;

the level of consumer acceptance of our brands and licensed products;

general economic and industry conditions that affect consumer spending and retailer purchasing;

the availability of viable licensees that meet our brand criteria; and

the timing of our marketing expenditures.

As a result of fluctuations in our revenue and operating expenses that may occur, management believes that period-to-period comparisons of our results of operations are not a good indication of our future performance. It is possible that in some future quarter or quarters, our operating results will be below the expectations of securities analysts or investors. In that case, our stock price could fluctuate significantly.

Our business may be negatively impacted by general economic conditions and the current weakness in the global economy.

Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending that affect not only the ultimate consumer, but also retailers and distributors, who license our brands. Consumer spending has deteriorated significantly and may remain depressed, or be subject to further deterioration for the foreseeable future. The worldwide apparel industry is heavily influenced by general economic cycles. Purchases of high-end fashion apparel and accessories tend to decline in periods of recession or uncertainty regarding future economic prospects, as disposable income declines. Many factors affect the level of consumer spending in the apparel industry, including, among others: prevailing economic conditions, levels of employment, salaries and wage rates, the availability of consumer credit, taxation and consumer confidence in future economic conditions. During periods of recession or economic uncertainty, our licensees may not be able to maintain or increase sales of our branded products to existing customers, make sales to new customers, open or operate new retail stores or maintain sales levels at existing stores. As a result, our operating results may be adversely and materially affected by downward trends in the United States or global economy, including the current downturn in the United States.

The market price of our common stock has been, and may continue to be, volatile, which could reduce the market price of our common stock.

The publicly traded shares of our common stock have experienced, and may continue to experience, significant price and volume fluctuations. This market volatility could reduce the market price of our common stock, regardless of our operating performance. In addition, the trading price of our common stock could change significantly over short periods of time in response to actual or anticipated variations in our quarterly operating results, announcements by us, our licensees or our respective competitors, factors affecting our licensees’ markets generally and/or changes in national or regional economic conditions, making it more difficult for shares of our common stock to be sold at a favorable price or at all. The market price of our common stock could also be reduced by general market price declines or market volatility in the future or future declines or volatility in the prices of stocks for companies in the trademark licensing business or companies in the industries in which our licensees compete.

Future sales of our common stock may cause the prevailing market price of our shares to decrease. In addition, the future issuance of common stock may dilute the holdings of our then existing stockholders.

We have issued a substantial number of shares of common stock that are eligible for resale under Rule 144 of the Securities Act of 1933, as amended, or Securities Act, and that may become freely tradable. We have also already registered a substantial number of shares of common stock that are issuable upon the exercise of options. If the holders of our options choose to exercise their purchase rights and sell the underlying shares of common stock in the public market, or if holders of currently restricted shares of our common stock choose to sell such shares in the public market under Rule 144 or otherwise, the prevailing market price for our common stock may decline.

In addition, the issuance of shares upon the exercise or conversion of our derivative securities, including, without limitations, the exercise of approximately 1.1 million warrants which are currently outstanding and the conversion of $14,500,000 of outstanding debentures into common stock, could also further dilute the holdings of our then existing stockholders.

Since trading on the OTC Bulletin Board may be sporadic, you may have difficulty reselling your shares of our common stock.

In the past, our trading price has fluctuated as the result of many factors that may have little to do with our operations or business prospects. In addition, because the trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on an exchange, you may have difficulty reselling any of our common shares.

We have a limited trading volume and shares eligible for future sale by our current stockholders may adversely affect our stock price.

To date, we have had a very limited trading volume in our common stock. For instance, for the year ended December 31, 2011, approximately 173,000 shares of our common stock were traded and also for the year ended December 31, 2010, approximately 106,000 shares of our common stock were traded. As long as this condition continues, the sale of a significant number of shares of common stock at any particular time could be difficult to achieve at the market prices prevailing immediately before such shares are offered.

We do not foresee paying dividends in the near future.

We have not paid dividends on our common stock and do not anticipate paying such dividends in the foreseeable future.

Our officers and directors and their affiliates own a significant portion of our common stock, which limits our stockholders’ ability to influence the outcome of key transactions.

Our officers and directors and their affiliates beneficially own approximately 79.6% of our outstanding voting shares as of March 17, 2012. As a result, our officers and directors are able to control the outcome of any matters submitted to a vote of the holders of our common stock, including the election of our Board of Directors. The voting power of these stockholders could also discourage others from seeking to acquire control of the company through the purchase of our common stock, which might depress the price of our common stock.

The Purchase Agreement entered into with TCP prevents us from taking certain actions without TCP’s consent.

The Purchase Agreement we entered into with TCP in February 2012 contains negative covenants that prohibit us and our subsidiaries from taking certain actions without TCP’s prior consent until the later of February 3, 2014 and the date that TCP’s beneficial ownership of our common stock is less than 40% of our fully diluted common stock. The negative covenants apply to, with certain exceptions, issuing debt or equity securities; acquiring assets or equity interests of third parties, disposing of assets or equity interests of subsidiaries, entering into joint ventures, or engaging in other types of merger and acquisition transactions; paying or declaring dividends; settling litigation; entering into transactions with affiliates; dissolving or commencing bankruptcy proceedings; or changing our principal lines of business. As a result, TCP has significant control over the operations of our business, which could discourage others from seeking to acquire control of the company through the purchase of our common stock, which could have an adverse impact on our stock price.

Item 1B.

Unresolved Staff Comments

Not applicable.

Item 2.

Properties

We lease our principal executive office space under a temporary lease agreement that expires in May 2012. We have signed a letter of intent to lease new office space in the same building beginning June 2012 through August 2015. The new office space will have approximately 3,000 square feet, and is located in Pacific Palisades, California. It is from this facility that we will conduct all of our design, executive and administrative functions.

We also have a showroom located in New York City under a lease that expires in January 2013 and have two William Rast retail stores located in Los Angeles and Cabazon, California. We plan to close these stores in the second and third quarters of 2012. The lease agreements related to the Cabazon and Los Angeles stores expire in July 2019 and January 2020, respectively.

While we wind down our historical operations, our finished goods continue to be shipped from a third-party warehouse in Los Angeles, California, and our internet products continue to be shipped from a third-party warehouse in Long Beach, California.

We believe that the facilities we utilize are well maintained, in good operating condition, and adequate to meet our current and foreseeable needs.

Item 3.

Legal Proceedings

We are subject to certain legal proceedings and claims arising in connection with the normal course of our business. In the opinion of management, other than as described below, there are currently no claims that could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Shareholder Derivative Complaint

On January 17, 2012, plaintiff RP Capital, LLC filed a shareholders’ derivative complaint in the Superior Court of the State of California, County of Los Angeles, Case Number BC477118 against the company and current and former directors Colin Dyne, Kenneth Wengrod, Susan White and Dean Oakey. The case alleges that the defendants (i) breached their fiduciary duties to the company for failing to properly oversee and manage the company, (ii) were unjustly enriched, (iii) abused their control, (iv) grossly mismanaged the company, (v) wasted corporate assets, (vi) engaged in self-dealing, and (vii) breached their fiduciary duties by disseminating false and misleading information. The plaintiffs seek (i) judgment against the defendants in favor of the company for the amount of damages sustained by the company as a result of the defendants’ alleged breaches of their fiduciary duties; (ii) judgment directing the company to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws; (iii) an award to the company of restitution from the defendants and an order from the court to disgorge all profits, benefits and other compensation obtained by the defendants from their alleged wrongful conduct and alleged fiduciary breaches and (iv) an award of costs and disbursements of the action, including reasonable fees for profession services. We believe these claims are without merit or substance, and intend to vigorously defend against these claims. The derivative complaint is in the early stages of discovery.

Item 4.

Mine Safety Disclosures

Not applicable.

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock

Our common stock is quoted on the OTCQB Over-The-Counter market under the symbol “SQBG.” The following table sets forth, for the periods indicated, the high and low bid information for the common stock, as determined from quotations on the Over-the-Counter market, as well as the total number of shares of common stock traded during the periods indicated. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

	High		Low		Volume
Year Ended December 31, 2011
First Quarter	$	2.10	$	1.05		18,049
Second Quarter	$	2.55	$	1.20		53,424
Third Quarter	$	1.20	$	0.45		8,728
Fourth Quarter	$	1.65	$	0.60		98,207

Year Ended December 31, 2010
First Quarter	$	6.00	$	1.80		27,181
Second Quarter	$	3.45	$	1.65		22,660
Third Quarter	$	2.10	$	0.75		27,090
Fourth Quarter	$	3.75	$	0.75		29,388

On March 28, 2012, the closing sales price of our common stock as reported on the OTCQB was $5.25 per share. As of March 27, 2012, there were approximately 449 record holders of our common stock. Our transfer agent is Stalt, Inc., Menlo Park, CA.

Dividends

Since January 1, 2006, we have not paid or declared cash distributions or dividends on our common stock. We do not intend to pay cash dividends on our common stock in the near future. We currently intend to retain all earnings, if and when generated, to finance our operations. The declaration of cash dividends in the future will be determined by the board of directors based upon our earnings, financial condition, capital requirements, contractual obligations which may prohibit the payment of dividends and other relevant factors.

Item 6.

Selected Financial Data

Not applicable.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read together with the Consolidated Financial Statements of Sequential Brands Group, Inc., formerly People’s Liberation, Inc., and the “Notes to Consolidated Financial Statements” included elsewhere in this report. This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of Sequential Brands Group, Inc. for the fiscal years ended December 31, 2011 and 2010. Except for historical information, the matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond our control.

Overview

Since our formation in 2005, we have been a designer, marketer and wholesale provider of branded apparel and apparel accessories. Commencing in July 2008, we implemented a retail strategy and opened retail stores to sell our branded products. In the second half of 2011, we decided to change our business model to focus on licensing and brand management. In connection with the change in our business model, we are presently winding down the wholesale distribution of our branded apparel and apparel accessories, liquidating our existing inventory and closing our remaining retail stores. We expect to complete our transition from a wholesale and retail company to a licensing and brand management company during the second or third quarter of 2012. To reflect our business transition, in March 2012, we changed our corporate name from People’s Liberation, Inc. to Sequential Brands Group, Inc. In this report, we refer to our wholesale and retail operations as our Historical Operations.

Licensing and Brand Management Business

As a licensing and brand management company, we plan to promote, market, and license a portfolio of consumer brands. Presently, our brands include William Rast® and People’s Liberation® and we intend to grow our portfolio of brands by acquiring rights to additional brands. We have licensed and intend to license our brands in a variety of categories to retailers, wholesalers and distributors in the United States and in certain international territories. In our licensing arrangements, our licensing partners will be responsible for designing, manufacturing and distributing our licensed products, subject to our continued oversight and marketing support. Currently, we have one direct-to-retail and three traditional wholesale licenses. In our direct-to-retail license, we granted JC Penney, a national retailer, the exclusive right to distribute William Rast branded apparel in a broad range of product categories through its stores in the United States and through its consumer-direct mail and consumer-direct ecommerce distribution channels which are targeted to consumers in the United States. In our traditional wholesale licenses, we grant rights to a single or small group of related product categories to a wholesale supplier, who is permitted to sell licensed products to multiple stores within an approved channel of distribution.

Historical Operations

Wholesale Operations

Since our inception in 2005, in the United States, we have distributed our William Rast branded merchandise and, through April 26, 2011, our J. Lindeberg branded merchandise to better specialty stores, boutiques and department stores, such as Nordstrom, Saks Fifth Avenue and Neiman Marcus, as well as online at various websites including williamrast.com, jlindebergusa.com and Zappos.com. In 2012, as we transition our business model and liquidate our existing inventory, we will continue to sell William Rast and People’s Liberation branded apparel on a limited basis through our domestic wholesale operations.

As part of our Historical Operations, we also sold our William Rast branded apparel products internationally in select countries directly and through agents and distributors to better department stores and boutiques. Our distributors purchased products at wholesale prices for resale in their respective territories and marketed, sold, warehoused and shipped William Rast branded apparel products at their expense. Our agents were paid a commission on net sales of our William Rast products. In 2012, we expect to have an immaterial amount of sales of our William Rast and People’s Liberation branded apparel from our international wholesale operations.

Retail Operations

Our Historical Operations also include the sale of William Rast branded apparel and accessories through our William Rast branded retail stores and also through our William Rast branded outlet store. As part of our transition from a wholesale and retail provider of apparel and apparel accessories to a brand management and licensing business, we closed our William Rast retail stores located in Miami and San Jose in November 2011. Our two remaining William Rast retail stores are expected to be closed in 2012. We expect to have limited sales from these locations in 2012.

Corporate Structure

Sequential Brands Group, Inc., formerly People’s Liberation Inc., is the parent holding company of Versatile Entertainment, Inc. (“Versatile”) and Bella Rose, LLC (“Bella Rose”), both of which were consolidated under and became wholly-owned subsidiaries of People’s Liberation on November 22, 2005.

Versatile conducts our People’s Liberation brand business and our William Rast brand business is conducted through Bella Rose.

Structure of William Rast Business

William Rast Sourcing, LLC and William Rast Licensing, LLC are consolidated under Bella Rose, and through September 30, 2011 were each owned 50% by Bella Rose and 50% by Tennman WR-T, Inc. (“Tennman WR-T”), an entity owned in part by Justin Timberlake.

Effective as of October 1, 2011, we recapitalized the ownership of our William Rast branded apparel business. As further described under Note 6 to our consolidated financial statements, the recapitalization increased the ownership of Bella Rose in each of William Rast Sourcing and William Rast Licensing in exchange for certain royalties to be paid to Tennman WR-T as well as other consideration. Both William Rast Sourcing and William Rast Licensing are now owned 82% by Bella Rose and 18% by Tennman WR-T, and Bella Rose is entitled to all of the distributable cash from operations and all of the distributable cash from a sale of William Rast Sourcing or William Rast Licensing that is not paid to Tennman WR-T.

William Rast Retail, LLC, a California limited liability company, was formed on August 26, 2009 and is a wholly-owned subsidiary of William Rast Sourcing. William Rast Retail was formed to operate our William Rast retail stores. The operations of William Rast Retail are shown as discontinued operations in the accompanying consolidated financial statements.

Structure of J. Lindeberg Business

Prior to its sale on April 26, 2011, our J. Lindeberg brand business was conducted through Bella Rose. From July 1, 2008 through April 26, 2011, J. Lindeberg USA, LLC was consolidated under Bella Rose and was owned 50% by Bella Rose and 50% by J. Lindeberg USA Corp. an entity owned by J. Lindeberg AB, a Swedish corporation. J. Lindeberg USA Retail, LLC, a California limited liability company, was formed on August 21, 2009 and is a wholly-owned subsidiary of J. Lindeberg USA. J. Lindeberg Retail was formed to operate our J. Lindeberg retail stores. The operations of J. Lindeberg are shown as discontinued operations in the accompanying consolidated financial statements.

Cash Received from Securities Purchase Agreement

On February 2, 2012, we entered into a Securities Purchase Agreement with TCP WR Acquisition, LLC. Pursuant to the Securities Purchase Agreement, we sold Debentures, Warrants and Series A Preferred Stock to TCP WR Acquisition, LLC, as further described elsewhere in this report. A portion of the proceeds received from this transaction was used to pay amounts due to our factor, Rosenthal & Rosenthal, and terminate our factoring facility, payoff our notes payable to Monto Holdings (pty) Ltd. and Mobility Special Situations I, LLC and pay certain past due payables. Net proceeds from this transaction after the payment of closing, legal and other costs and the repayment of the aforementioned debt amounted to approximately $11.7 million.

Critical Accounting Policies, Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to our valuation of inventories and our allowance for uncollectible house accounts receivable, recourse factored accounts receivable and chargebacks, and contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Inventories. Inventories are evaluated on a continual basis and reserve adjustments, if any, are made based on management’s estimate of future sales value of specific inventory items. Reserve adjustments are made for the difference between the cost of the inventory and the estimated market value, if lower, and charged to operations in the period in which the facts that give rise to the adjustments become known. Inventories, consisting of piece goods and trim, work-in-process and finished goods, are stated at the lower of cost (first-in, first-out method) or market.

Accounts Receivable. Factored accounts receivable balances with recourse, chargeback and other receivables are evaluated on a continual basis and allowances are provided for potentially uncollectible accounts based on management’s estimate of the collectability of customer accounts. Factored accounts receivable without recourse are also evaluated on a continual basis and allowances are provided for anticipated returns, discounts and chargebacks based on management’s estimate of the collectability of customer accounts and historical return, discount and other chargeback rates. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, an additional allowance may be required. Allowance adjustments are charged to operations in the period in which the facts that give rise to the adjustments become known.

Revenue Recognition. We have entered into various trade name license agreements that provide revenues based on minimum royalties and additional revenues based on a percentage of defined sales. Minimum royalty revenue is recognized on a straight-line basis over each period, as defined, in each license agreement. Royalties exceeding the defined minimum amounts are recognized as income during the period corresponding to the licensee's sales. Payments received as consideration of the grant of a license or advanced royalty payments are recognized ratably as revenue over the term of the license agreement and are reflected on the Company’s consolidated balance sheet as deferred license revenue. License revenue is not recognized unless collectability is reasonably assured. Wholesale revenue is recognized when merchandise is shipped to a customer, at which point title transfers to the customer, and when collection is reasonably assured. Customers are not given extended terms or dating or return rights without proper prior authorization. Revenue is recorded net of estimated returns, charge backs and markdowns based upon management’s estimates and historical experience. Website revenue is recognized when merchandise is shipped to a customer and when collection is reasonably assured. Retail revenue is recognized on the date of purchase from our retail stores. Advertising revenue received under sponsorship agreements is recorded in the period in which the event to which the advertising rights were granted occurred. Design revenue received under design and license agreements is recorded in the period in which the design services are provided to the licensee.

Deferred Tax Assets. We may record a valuation allowance to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. We consider estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If we determine that we may not realize all or part of our deferred tax assets in the future, we will make an adjustment to the carrying value of the deferred tax asset, which would be reflected as an income tax expense. Conversely, if we determine that we will realize a deferred tax asset, which currently has a valuation allowance, we would be required to reverse the valuation allowance, which would be reflected as an income tax benefit. Valuation allowance adjustments are made in the period in which the facts that give rise to the adjustments become known.

Stock Based Compensation. Stock-based compensation expense is recognized based on awards ultimately expected to vest on a straight-line prorated basis. The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Stock price volatility was estimated based on a peer group of public companies and the expected term was estimated using the “safe harbor” provisions provided by generally accepted accounting principles.

Noncontrolling Interest. Profit and loss allocations to noncontrolling interest members of our subsidiaries were recorded as increases and decreases in noncontrolling interest in our consolidated financial statements. Cash distributions, if any, made to a noncontrolling interest member of any of our subsidiaries are accounted for as decreases in noncontrolling interest in the consolidated balance sheet of the Company. To the extent the priority distributions are made, it would reduce the income allocable to the controlling interest.

Litigation Contingencies. We are subject to on-going litigation which requires management to make certain assumptions and estimates regarding gain or loss contingencies, if any, related to the outcome of pending litigation. In consultation with legal counsel, we consider the facts and circumstances surrounding the pending litigation and the probability of the outcome of pending litigation, whether favorable or unfavorable, in our estimates of gain or loss contingencies.

Results of Operations

The following table presents consolidated statement of operations data from continuing operations for each of the years indicated as a percentage of net revenue.

	Year Ended December 31, 2011			Year Ended December 31, 2010
Net revenue		100.0	%		-
Operating expenses		31.4			-
Operating income (loss)		68.6	%		-

Comparison of the Years Ended December 31, 2011 and 2010 from Continuing Operations

Net Revenue

	Years Ended December 31,				Percent
	2011		2010		Change

Net revenue	$	546,800	$	-		100.0	%

Net revenue from continuing operations for the year ended December 31, 2011 consists of license revenue earned under our various license agreements related to our William Rast brand. During the year ended December 31, 2011, we earned revenue from one direct-to-retail and two wholesale license agreements. During the year ended December 31, 2010, we entered into one wholesale license agreement and received advances toward future revenue to be earned in 2011. In the second half of 2011, we began to transition our business model from a wholesale and retail apparel company to a brand management and licensing business. We expect to derive the majority of our 2012 revenue from our William Rast brand license agreements and anticipate entering into additional license agreements for our brands in the future. In 2012, we also expect to derive a limited amount of revenue from our historical wholesale and retail operations.

Operating Expenses

	Years Ended December 31,				Percent
	2011		2010		Change

Operating Expenses	$	171,479	$	211,280		(18.3	)%

Operating expenses from continuing operations for the years ended December 31, 2011 and 2010 primarily related to professional fees, and depreciation and amortization. The decrease in operating expenses from continuing operations for the year ended December 31, 2011 compared to the year ended December 31, 2010 was due to a decrease in professional fees incurred during the year ended December 31, 2011.

Interest Expense, Net

	Years Ended December 31,				Percent
	2011		2010		Change

Interest expense, net	$	137,072	$	23,333		487.5	%

Interest expense from continuing operations during the year ended December 31, 2011 resulted primarily from interest due on our promissory notes payable in the aggregate principal amount of $1,750,000. We pay interest payable at a rate of 8% under the terms of a $750,000 promissory note entered into in August 2010, and at a rate of 7% under the terms of a $1,000,000 promissory note entered into in August 2011. The increase in interest expense during the year ended December 2011 compared to the year ended December 2010 is due to an increase in borrowings during the year.

(Benefit) Provision for Income Taxes

	Years Ended December 31,					Percent
	2011			2010		Change

(Benefit) provision for income taxes	$	(800	)	$	800		(200.0	)%

The provision for income taxes from continuing operations for the year ended December 31, 2011 and 2010 represents the minimum tax payments due for state and local purposes, including gross receipts tax on sales generated by our limited liability companies, and estimated Federal and state taxes due at statutory effected tax rates, if any. As of December 31, 2011 and 2010, a valuation allowance has been provided for the entire amount of our deferred income tax asset related to net operating loss carryforwards. At this time, we cannot determine that it is more likely than not that we will realize the future income tax benefits related to our net operating losses. As of December 31, 2011, total net operating losses available to carry forward to future periods amounted to approximately $11.5 million.

Income (Loss) from Continuing Operations

	Years Ended December 31,					Percent
	2011		2010			Change

Income (loss) from continuing operations	$	239,049	$	(235,413	)		201.5	%

The increase in income from continuing operations during the year ended December 31, 2011 compared to net loss from continuing operations for the year ended December 31, 2010 is due primarily to increased license revenue and decreased operating expenses, offset by increased interest expense during the year ended December 31, 2011, as discussed above.

Noncontrolling Interest in Continued Operations

	Years Ended December 31,				Percent
	2011		2010		Change

Noncontrolling interest in continued operations	$	22,180	$	59,809		(62.9	)%

Noncontrolling interest in continuing operations recorded for the years ended December 31, 2011and 2010 represents net income and loss allocations to Tennman WR-T, a member of William Rast Sourcing and William Rast Licensing. Beginning January 1, 2009 through September 30, 2011, losses were allocated to the members of William Rast Sourcing and William Rast Licensing based on their respective percentage interests in such entities and profits were allocated to the members based on their percentage interest to the extent that the member was previously allocated losses.

Effective as of October 1, 2011, we recapitalized the ownership of our William Rast branded apparel business. The recapitalization increased the ownership of Bella Rose in each of William Rast Sourcing and William Rast Licensing in exchange for certain royalties to be paid to Tennman WR-T as well as other consideration. Both William Rast Sourcing and William Rast Licensing are now owned 82% by Bella Rose and 18% by Tennman WR-T and Bella Rose is entitled to all of the distributable cash from operations and all of the distributable cash from a sale of William Rast Sourcing or William Rast Licensing that is not paid to Tennman WR-T.

Discontinued Operations of Wholesale Business

	Year Ended December 31, 2011			Year Ended December 31, 2010			Percent Change

Loss from discontinued operations	$	(6,550,550	)	$	(1,181,342	)		454.5	%
Noncontrolling interest in discontinued operations		3,117,623			1,026,534			203.7	%
	$	(3,432,927	)	$	(154,808	)		2117.5	%

Net loss from discontinued operations of our wholesale business for the year ended December 31, 2011 and 2010 represents the results of operations of our People’s Liberation and William Rast wholesale business. In November 2011, we began to transition from a wholesale and retail focused business to a brand management and licensing business. As a result, our retail operations included in our William Rast Retail subsidiary were discontinued. In 2012, we also decided to discontinue our wholesale operations completely. The increase in loss from discontinued operations of our wholesale business during the year ended December 31, 2011 compared to the year ended December 31, 2010 was due primarily to an overall reduction in revenue of approximately $13.5 million, offset by a reduction in operating expenses, as we began to wind down our wholesale operations in 2011 and non-recurring income received in the settlement of our litigation with Charlotte Russe during the first quarter of 2011.

Discontinued Operations of Retail Subsidiary

	Year Ended December 31, 2011			Year Ended December 31, 2010			Percent Change

Loss from discontinued operations	$	(1,554,672	)	$	(791,222	)		96.5	%
Noncontrolling interest in discontinued operations		439,883			395,612			11.2	%
	$	(1,114,789	)	$	(395,610	)		181.8	%

Net loss from discontinued operations of retail subsidiary for the year ended December 31, 2011 represents the results of operations of our William Rast Retail subsidiary. In November 2011, we began to transition from a wholesale and retail focused business to a brand management and licensing business. As a result, our retail operations included in our William Rast Retail subsidiary, which consisted of four retail stores, were discontinued. As of December 31, 2011, we closed two of our retail stores and the remaining two stores are expected to be closed in the second and third quarters of 2012. The increase in net loss during the year ended December 31, 2011 compared to the year ended December 31, 2010 is due to decreased net revenue and gross profit, and an increase in operating expenses incurred during the year ended December 31, 2011.

Discontinued Operations of J. Lindeberg Subsidiaries

	Year Ended December 31, 2011			Year Ended December 31, 2010			Percent Change

Net loss from discontinued operations	$	(125,771	)	$	(377,955	)		(66.7	)%
Gain on sale of member interest in subsidiary		2,012,323			-			100.0	%
		1,886,552			(377,955	)
Noncontrolling interest in discontinued operations		62,885			188,979			(66.7	)%
	$	1,949,437		$	(188,976	)		1131.6	%

Net loss from discontinued operations of our J. Lindeberg subsidiaries for the year ended December 31, 2011 represents the results of operations of our J. Lindeberg subsidiaries from the beginning of the year through the date of the sale of our 50% member interest in J. Lindeberg, USA on April 26, 2011. Net loss from discontinued operations for the year ended December 31, 2010 represents the results of operations of our J. Lindeberg subsidiaries for the year ended December 31, 2010. The gain on the sale of member interest in subsidiary is further described in Note 14 to the consolidated financial statements included elsewhere in this report.

Net Loss Attributable to Common Stockholders

	Years Ended December 31,						Percent
	2011			2010			Change

Net loss attributable to common stockholders	$	(2,337,050	)	$	(914,998	)		155.4	%

The increase in net loss attributable to common shareholders for the year ended December 31, 2011 compared to the year ended December 31, 2010 is due primarily to increased losses from discontinued operations, offset by the settlement of our litigation with Charlotte Russe during the first quarter of 2011 and the gain on the sale of our 50% member interest in J. Lindeberg, USA during the second quarter of 2011, both discussed elsewhere in this report. The increase in net loss attributable to common stockholders was also offset by an increase in license revenue earned during the year ended December 31, 2011.

Related Party Transactions

For a description of related party transactions, see Note 17 to our financial statements, “Related Party Transactions,” which are included under Item 8 of this report.

Liquidity and Capital Resources

As of December 31, 2011, our continuing operations had cash and cash equivalents of approximately $243,000 and a working capital deficit of approximately $4.4 million. As of December 31, 2010, our continuing operations had cash and cash equivalents of approximately $1.2 million and working capital of approximately $0.9 million.

Subsequent to year end, we raised $14,500,000 in gross proceeds from TCP WR Acquisition, LLC, as discussed in Note 24 to our financial statements. Net proceeds from this transaction after the payment of closing, legal and other costs and the repayment of outstanding obligations related to notes payable and our factoring agreement amounted to approximately $11.7 million.

Cash Flows from Continuing Operations

Cash flows from continuing operations for operating, financing and investing activities for the years ended December 31, 2011 and 2010 are summarized in the following table:

	Years Ended December 31,
	2011		2010

Operating activities	$	3,686,234		(630,583	)
Investing activities		722,156		613,227
Financing activities		1,000,000		750,000
Net increase in cash	$	5,408,390	$	732,644

Operating Activities

Net cash provided by operating activities from continuing operations was approximately $3.7 million for the year ended December 31, 2011. Net cash used in operating activities from continuing operations was approximately $631,000 for the year ended December 31, 2010. Net cash provided by operating activities from continuing operations for the year ended December 31, 2011 was primarily a result of increased accounts payable and accrued expenses and an increase in deferred license revenue during the year. Net cash used in operating activities from continuing operations during the year ended December 31, 2010 was primarily a result of a net loss of approximately $2.6 million.

Investing Activities

Net cash provided by investing activities from continuing operations was approximately $722,000 and $613,000 for the years ended December 31, 2011 and 2010, respectively. Net cash provided by investing activities from continuing operations for the year ended December 31, 2011 consisted primarily of proceeds received from the sale of a receivable resulting from the sale of our membership interest in J. Lindeberg, USA and a decrease in restricted cash, offset by capital expenditures. On June 24, 2011, we entered into an asset purchase agreement with Monto Holding (Pty) Limited (“Monto”). Pursuant to the agreement, we sold to Monto without recourse the $750,000 receivable owed to us under the terms of the unit purchase agreement we entered into for the sale of our membership interest in J. Lindeberg, USA, as described elsewhere in this report. On June 24, 2011, we also issued a fully vested, five year warrant to Monto to purchase 250,000 shares of our Common Stock at an exercise price of $3.00 per share. In exchange for the rights to the receivable and the warrant, Monto paid us a purchase price of $722,916. Net cash provided by investing activities from continuing operations for the year ended December 31, 2010 primarily consisted of $750,000 of cash proceeds received in August 2010 from an asset purchase agreement in which we sold a portion of any future net proceeds of our litigation with Charlotte Russe, offset by an increase in capital expenditures.

Financing Activities

Net cash provided by financing activities from continuing operations for the years ended December 31, 2011 and 2010 amounted to $1,000,000 and $750,000, respectively.

On August 18, 2011, our subsidiary, William Rast Licensing, entered into a note payable in the amount of $1,000,000 with Monto. The note had a rate of interest of 7% and was payable on the maturity date of the note unless the note was earlier repaid. The promissory note was to be repaid as follows: (i) 40.0% of the then outstanding principal amount on December 31, 2011, (ii) 20% of the then outstanding principal amount on February 29, 2012 and (iii) all of the remaining principal amount then outstanding on the maturity date, May 12, 2012. The promissory note was secured by the assets of William Rast Licensing and was guaranteed by our other entities under common control, including People’s Liberation, Inc., William Rast Sourcing, LLC, William Rast Retail, LLC, Bella Rose, LLC and Versatile Entertainment, Inc. The outstanding principal and interest balances of this promissory note were paid in full in February 2012 with the proceeds received from the securities purchase agreement described above.

On August 13, 2010, our subsidiary, William Rast Licensing, entered into a note payable to related parties in the amount of $750,000. The outstanding principal and interest balances of this promissory note were paid in full in February 2012 with the proceeds received from the securities purchase agreement described above.

Cash Received from the Sale of our 50% Membership Interest in J. Lindeberg USA

On April 26, 2011, we completed the sale of Bella Rose’s 50% membership interest in J. Lindeberg USA to J. Lindeberg USA Corp. pursuant to the terms of a Unit Purchase Agreement entered into by the parties on April 7, 2011. In consideration for Bella Rose’s 50% member interest in Lindeberg USA, J. Lindeberg USA Corp. agreed to pay us an aggregate of $1,650,000, of which $900,000 was paid upon the closing of the transaction and $750,000 was paid on the six month anniversary of the closing of the transaction.

Cash Received from our Settlement with Charlotte Russe

On February 3, 2011, we (along with the other parties to the litigation) settled our litigation with Charlotte Russe Holding, Inc. Pursuant to the settlement, we received $3.5 million, after the distribution of amounts owed under the terms of an asset purchase agreement entered into by us with two related parties pursuant to which we sold 50% of the net proceeds, after contingent legal fees and expenses, that may be received by us as a result of the litigation, and the payment of legal fees and expenses. We also received proceeds of $750,000 in the third quarter of 2010 relating to the litigation in connection with the asset purchase agreement, for total proceeds related to the litigation of $4.3 million. The settlement included the dismissal with prejudice of all claims pending between the parties as well as mutual releases, without any admission of liability or wrongdoing by any of the parties to the actions.

Cash Provided from Factoring Agreements

On October 7, 2010, William Rast Sourcing entered into a factoring agreement with Rosenthal & Rosenthal, Inc. and beginning July 28, 2008 through April 26, 2011, our subsidiary, J. Lindeberg USA, entered into various factoring arrangements with FTC Commercial Corp ("FTC"). As a result of the sale of our 50% member interest in J. Lindeberg USA on April 26, 2011, our interest in the factoring facility with FTC was terminated. In February 2012, we also terminated all of our factoring and related agreements with Rosenthal & Rosenthal and all obligations owed to Rosenthal & Rosenthal were paid in full from proceeds received from our transaction with TWR.

While our factoring arrangements were in place, our factors purchased our eligible accounts receivable and assumed the credit risk with respect to those accounts for which the factors had given their prior approval. If the factor did not assume the credit risk for a receivable, the collection risk associated with the receivables remained with us.

As of December 31, 2011, total factored accounts receivable from discontinued operations amounted to approximately $404,000, $352,000 of which are without recourse and included in due to factor and $52,000 are with recourse and included in net accounts receivable. As of December 31, 2010, total factored accounts receivable from discontinued operations amounted to approximately $2.0 million, $1.8 million of which are without recourse and included in due from factor and $161,000 are with recourse and included in net accounts receivable. Outstanding advances, net of matured funds, amounted to approximately $393,000 and $1.6 million as of December 31, 2011 and 2010, respectively, and are included in current assets held for disposition from discontinued operations of wholesale business.

Future Capital Requirements

We believe the cash received from our Securities Purchase Agreement will be sufficient enough to meet our capital requirements for the next twelve months, as they relate to our current operations and our growth strategies in the near term. The extent of our future capital requirements will depend on many factors, including our results of operations and growth through the acquisition of additional brands.

Contractual Obligations and Off-Balance Sheet Arrangements

The following summarizes our contractual obligations at December 31, 2011 and the effects such obligations are expected to have on liquidity and cash flows in future periods:

	Payments Due by Period
			Less than		1-3		4-5		After
Contractual Obligations	Total		1 Year		Years		Years		5 Years
Operating leases	$	5,901,642	$	866,478	$	2,048,046	$	1,467,888	$	1,519,230
Notes payable ⁽¹⁾		1,750,000		1,750,000		-		-		-
Total	$	7,651,642	$	2,616,478	$	2,048,046	$	1,467,888	$	1,519,230

(1) The outstanding principal and interest balances of these promissory notes were paid in full in February 2012 with the proceeds received from the securities purchase agreement described above.

At December 31, 2011, approximately $35,000 of the Company’s cash is held under lease lines as collateral to secure the Company’s lease agreements.

At December 31, 2011 and 2010, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Factored accounts receivable may subject us to off-balance sheet risk. We sold the majority of our trade accounts receivable to our factors and were contingently liable to the factors for merchandise disputes, other customer claims and invoices that were not credit approved by the factors. From time to time, our factors also issues letters of credit and vendor guarantees on our behalf. There were no outstanding letters of credit or vendor guarantees as of December 31, 2011 and 2010. There was no ledger debt (payables to suppliers that use the same factor as the Company) as of December 31, 2011 and 2010.

Recent Accounting Pronouncements

See Note 2 to Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and effects on results of operations and financial condition.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8.

Financial Statements and Supplementary Data

Index to consolidated financial statements

		Page

Audited Financial Statements:

Reports of Independent Registered Public Accounting Firms		30

Consolidated Balance Sheets at December 31, 2011 and 2010 (as amended)		32

Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010 (as amended)		33

Consolidated Statement of Changes in Stockholders’ Equity (Deficiency) from January 1, 2010 to December 31, 2011 (as amended)		34

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010 (as amended)		35

Notes to the Consolidated Financial Statements (as amended)		37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders:

Sequential Brands Group, Inc., formerly People’s Liberation, Inc., and Subsidiaries

We have audited the accompanying consolidated balance sheet of Sequential Brands Group, Inc., formerly People’s Liberation, Inc., and Subsidiaries (the “Company”) as of December 31, 2011 and the related consolidated statements of operations, changes in stockholders’ equity (deficiency) and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sequential Brands Group, Inc. and Subsidiaries as of December 31, 2011, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

/s/ Weinberg and Company

Los Angeles, California

March 30, 2012, except for Note 1 on Discontinued Operations and Reverse Stock Split and Note 12, as to which the date is March 29, 2013

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders:

Sequential Brands Group, Inc., formerly People’s Liberation, Inc., and Subsidiaries

We have audited the accompanying consolidated balance sheet of Sequential Brands Group, Inc., formerly People’s Liberation, Inc., and Subsidiaries (the “Company”) as of December 31, 2010 and the related consolidated statements of operations, changes in stockholders’ equity (deficiency) and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ Crowe Horwath LLP

Sherman Oaks, California

March 31, 2011, except for Note 1, Note 12, Note 13 and Note 14, as to which the date is March 29, 2013

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

CONSOLIDATED BALANCE SHEETS

(As Amended)

	December 31, 2011			December 31, 2010
Assets
Current Assets:
Cash and cash equivalents	$	242,791		$	1,184,743
Restricted cash		35,268			156,248
Prepaid expenses and other current assets		50,000			-
Current assets held for disposition from discontinued operations of wholesales business		339,184			1,773,379
Current assets held for disposition from discontinued operations of retail subsidiary		60,883			594,786
Current assets of discontinued operations of J. Lindeberg subsidiaries		-			1,824,959
Total current assets		728,126			5,534,115

Property and equipment, net of accumulated depreciation and amortization		300,049			243,546
Trademarks, net of accumulated amortization		391,575			407,229
Goodwill		428,572			428,572
Other assets		25,092			-
Long-term assets held for disposition from discontinued operations of wholesale business		54,160			1,085,357
Long-term assets held for disposition from discontinued operations of retail subsidiary		260,825			665,689
Long-term assets of discontinued operations of J. Lindeberg subsidiaries		-			1,075,128
Total assets	$	2,188,399		$	9,439,636

Liabilities and Stockholders’ (Deficiency) Equity
Current Liabilities:
Accounts payable and accrued expenses	$	1,618,374		$	20,742
Deferred license revenue, current portion		1,325,500			250,000
Note payable to related parties		750,000			-
Note payable		1,000,000			-
Current liabilities held for disposition from discontinued operations of wholesale business		1,762,552			4,222,463
Current liabilities held for disposition from discontinued operations of retail subsidiary		403,805			200,041
Current liabilities of discontinued operations of J. Lindeberg subsidiaries		-			895,732
Total current liabilities		6,860,231			5,588,978

Long-Term Liabilities:
Deferred license revenue, long-term portion		455,200			-
Deferred lease obligations held for disposition from discontinued operations of retail subsidiary		288,765			382,814
Note payable to related parties		-			750,000
Long-term liabilities of discontinued operations of J. Lindeberg subsidiaries		-			525,673
Total long-term liabilities		743,965			1,658,487
Total liabilities		7,604,196			7,247,465

Stockholders’(deficiency) equity:
Common stock, $0.001 par value, 150,000,000 shares authorized; 2,400,171 shares issued and outstanding at December 31, 2011 and 2010		2,400			2,400
Additional paid-in capital		2,372,367			8,203,915
Accumulated deficit		(7,790,564	)		(5,453,514	)
Total stockholders’ (deficiency) equity		(5,415,797	)		2,752,801

Noncontrolling interest		-			(71,744	)
Noncontrolling interest in discontinued operations		-			(488,886	)
Total (deficiency) equity		(5,415,797	)		2,192,171
Total liabilities and stockholders’ (deficiency) equity	$	2,188,399		$	9,439,636

See Notes to Consolidated Financial Statements.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(As Amended)

	Year Ended December 31, 2011			Year Ended December 31, 2010

Net revenue	$	546,800			-

Operating expenses		171,479			211,280

Income (loss) from operations		375,321			(211,280	)

Interest expense, net		137,072			23,333

Income (loss) before income taxes		238,249			(234,613	)

Provision (benefit) for income taxes		(800	)		800

Income (loss) from continuing operations		239,049			(235,413	)

(Loss) Income from Discontinued Operations:
Loss from discontinued operations of wholesale business		(6,550,550	)		(1,181,342	)
Loss from discontinued operations of retail subsidiary		(1,554,672	)		(791,222	)
Loss from discontinued operations of J. Lindeberg subsidiaries		(125,771	)		(377,955	)
Gain on sale of member interest in subsidiary		2,012,323			-
Loss from discontinued operations		(6,218,670	)		(2,350,519	)

Net loss		(5,979,621	)		(2,585,932	)

Noncontrolling interest:
Continuing operations		22,180			59,809
Discontinued operations of wholesale business		3,117,623			1,026,534
Discontinued operations of retail subsidiary		439,883			395,612
Discontinued operations of J. Lindeberg subsidiaries		62,885			188,979
		3,642,571			1,670,934

Net loss attributable to common stockholders	$	(2,337,050	)		(914,998	)

Basic loss per share:
Continuing operations	$	0.11		$	(0.07	)
Discontinued operations	$	(1.08	)	$	(0.31	)
Attributable to common shareholders	$	(0.97	)	$	(0.38	)
Basic weighted average common shares outstanding		2,400,171			2,400,171

Diluted loss per share:
Continuing operations	$	0.11		$	(0.07	)
Discontinued operations	$	(1.08	)	$	(0.31	)
Attributable to common shareholders	$	(0.97	)	$	(0.38	)
Diluted weighted average common shares outstanding		2,400,171			2,400,171

See Notes to Consolidated Financial Statements.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS’ EQUITY (DEFICIency)

For the years ended December 31, 2011 and 2010

(As Amended)

											Total
					Additional						Stockholders’						Total
	Common Stock				Paid-in			Accumulated			Equity			Noncontrolling			Equity
	Shares		Amount		Capital			Deficiency			(Deficiency)			Interest			(Deficiency)
Balance at January 1, 2010		2,400,171	$	2,400	$	8,136,620		$	(4,538,516	)	$	3,600,504		$	1,110,304		$	4,710,808

Noncontrolling interest in subsidiaries' earnings		—		—		—			—			—			(1,670,934	)		(1,670,934	)

Stock based compensation		—		—		67,295			—			67,295			—			67,295
Net income attributable to common stockholders		—		—		—			(914,998	)		(914,998	)		—			(914,998	)
Balance at December 31, 2010		2,400,171		2,400		8,203,915			(5,453,514	)		2,752,801			(560,630	)		2,192,171

Fair value of warrants issued in financing transactions		—		—		139,000			—			139,000			—			139,000
Noncontrolling interest in subsidiaries’ earnings		—		—		-			—			—			(3,642,571	)		(3,642,571	)
Recapitalization of member interest in subsidiary		—		—		(6,046,930	)		—			(6,046,930	)		6,046,930			—
Accumulated noncontrolling interest upon sale of discontinued operations		—		—		—			—			—			(1,843,729	)		(1,843,729	)
Stock based compensation		—		—		76,382			—			76,382			—			76,382
Net loss attributable to common stockholders		—		—		—			(2,337,050	)		(2,337,050	)		—			(2,337,050	)
Balance at December 31, 2011		2,400,171	$	2,400	$	2,372,367		$	(7,790,564	)	$	(5,415,797	)	$	—		$	(5,415,797	)

See Notes to Consolidated Financial Statements.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(As Amended)

	Years Ended December 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(5,979,621	)	$	(2,585,932	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss from discontinued operations of J. Lindeberg subsidiaries		125,771			377,955
Gain on sale of discontinued operations of J. Lindeberg subsidiaries		(2,012,323	)		-
Loss from discontinued operations of wholesale business		6,550,550			1,181,342
Loss from discontinued operations of retail subsidiary		1,554,672			791,222
Depreciation and amortization		151,479			145,704
Stock based compensation		76,382			67,295
Fair value of warrant issued in sale of receivable		89,000			-
Fair value of warrant issued with note payable		50,000			-
Income from sale of litigation interest		-			(750,000	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(50,000	)		-
Other assets		(25,092	)		-
Accounts payable and accrued expenses		1,374,716			16,831
Deferred license revenue		1,780,700			125,000
Net cash flows provided by (used in) operating activities from continuing operations		3,686,234			(630,583	)
Net cash flows (used in) provided by operating activities from discontinued operations of J. Lindeberg subsidiaries		(119,282	)		555,306
Net cash flows used in operating activities from discontinued operations of wholesale business		(6,613,459	)		(43,163	)
Net cash flows used in operating activities from discontinued operations of retail subsidiary		(504,520	)		(594,680	)
Net cash flows used in operating activities		(3,551,027	)		(713,120	)

Cash flows from investing activities:
Proceeds from sale of litigation		-			750,000
Proceeds from sale of receivable		722,916			-
Decrease in restricted cash		120,980			10,752
Acquisition of trademarks		(17,496	)		(61,860	)
Acquisition of property and equipment		(104,244	)		(85,665	)
Net cash flows provided by investing activities from continuing operations		722,156			613,227
Cash proceeds received in sale of discontinued operations		900,000			-
Net cash flows used in investing activities from discontinued operations of J. Lindeberg subsidiaries		(9,213	)		(450,425	)
Net cash flows (used in) provided by investing activities from Discontinued operations of wholesale operations		(2,518	)		80,190
Net cash flows used in investing activities from discontinued operations of retail subsidiary		(1,350	)		(302,773	)
Net cash flows provided by (used in) investing activities		1,609,075			(59,781	)

Consolidated Statements of Cash Flows are continued on the following page.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(As Amended)

	Years Ended December 31,
	2011			2010
Cash flows from financing activities:
Advances from related party		230,000			-
Repayment of advances from related party		(230,000	)		-
(Repayment of) proceeds from note payable		1,000,000			-
Proceeds from note payable to related parties		-			750,000
Net cash flows provided by financing activities from continuing operations		1,000,000			750,000

Net decrease in cash and cash equivalents		(941,952	)		(22,901	)
Cash and cash equivalents, beginning of year		1,184,743			1,207,644
Cash and cash equivalents, end of year	$	242,791		$	1,184,743

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	120,371		$	168,767
Income taxes paid		71,472			19,123
Non-cash investing and financing activities:
Recapitalization of member interest in subsidiary		(6,046,930	)		-
Accumulated noncontrolling interest upon sale of discontinued operations		(1,843,729	)		-
Receivable received in sale of member interest in subsidiary		750,000			-

See Notes to Consolidated Financial Statements.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Overview

Since the Company’s formation in 2005, the Company has been a designer, marketer and wholesale provider of branded apparel and apparel accessories. Commencing in July 2008, the Company implemented a retail strategy and opened retail stores to sell its branded products. In the second half of 2011, the Company decided to change its business model to focus on licensing and brand management. In connection with the change in the Company’s business model, the Company is presently winding down the wholesale distribution of its branded apparel and apparel accessories, liquidating its existing inventory and closing its remaining retail stores. The Company expects to complete its transition from a wholesale and retail company to a licensing and brand management company during the second or third quarter of 2012. To reflect the Company’s business transition, in March 2012, the Company’s corporate name was changed from People’s Liberation, Inc. to Sequential Brands Group, Inc. The Company’s wholesale and retail operations are referred to as “Historical Operations” in these notes to the Company’s Consolidated Financial Statements.

Licensing and Brand Management Business

As a licensing and brand management company, the Company plans to promote, market, and license a portfolio of consumer brands. Presently, the Company’s brands include William Rast® and People’s Liberation® and the Company intends to grow its portfolio of brands by acquiring rights to additional brands. The Company has licensed and intends to license its brands in a variety of categories to retailers, wholesalers and distributors in the United States and in certain international territories. In the Company’s licensing arrangements, the Company’s licensing partners will be responsible for designing, manufacturing and distributing the Company’s licensed products, subject to the Company’s continued oversight and marketing support. Currently, the Company has one direct-to-retail and three traditional wholesale licenses. In its direct-to-retail license, the Company granted JC Penney, a national retailer, the exclusive right to distribute William Rast branded apparel in a broad range of product categories through its stores in the United States and through its consumer-direct mail and consumer-direct ecommerce distribution channels which are targeted to consumers in the United States. In the Company’s traditional wholesale licenses, the Company grants rights to a single or small group of related product categories to a wholesale supplier, who is permitted to sell licensed products to multiple stores within an approved channel of distribution.

Historical Operations

Wholesale Operations

Since the Company’s inception in 2005, in the United States, the Company has distributed its William Rast branded merchandise and, through April 26, 2011, its J. Lindeberg branded merchandise to better specialty stores, boutiques and department stores, such as Nordstrom, Saks Fifth Avenue and Neiman Marcus, as well as online at various websites including williamrast.com, jlindebergusa.com and Zappos.com. In 2012, as the Company transitions its business model and liquidates its existing inventory, the Company will continue to sell William Rast and People’s Liberation branded apparel on a limited basis through its domestic wholesale operations.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

As part of the Company’s Historical Operations, the Company also sold its William Rast branded apparel products internationally in select countries directly and through agents and distributors to better department stores and boutiques. The Company’s distributors purchased products at wholesale prices for resale in their respective territories and marketed, sold, warehoused and shipped William Rast branded apparel products at their expense. The Company’s agents were paid a commission on net sales of the Company’s William Rast products. In 2012, the Company expects to have an immaterial amount of sales of its William Rast and People’s Liberation branded apparel from its international wholesale operations.

Retail Operations

The Company’s Historical Operations also include the sale of William Rast branded apparel and accessories through its William Rast branded retail stores and also through its William Rast branded outlet store. As part of the Company’s transition from a wholesale and retail provider of apparel and apparel accessories to a brand management and licensing business, the Company closed its William Rast retail stores located in Miami and San Jose in November 2011. The Company’s two remaining William Rast retail stores are expected to be closed in 2012. The Company expects to have limited sales from these locations in 2012.

Through April 26, 2011, the Company’s J. Lindeberg branded apparel and accessories were sold through its three full-price J. Lindeberg branded retail stores. The Company sold its interest in its J. Lindeberg business to the Company’s joint venture partner in April 2011, including its three retail stores.

Corporate Structure

Versatile conducts the Company’s People’s Liberation brand business and the Company’s William Rast brand business is conducted through Bella Rose, LLC.

Structure of William Rast Business

William Rast Sourcing, LLC (“William Rast Sourcing”) and William Rast Licensing, LLC (“William Rast Licensing”) are consolidated under Bella Rose, and through September 30, 2011 were each owned 50% by Bella Rose and 50% by Tennman WR-T, Inc. (“Tennman WR-T”), an entity owned in part by Justin Timberlake.

Effective as of October 1, 2011, the Company recapitalized the ownership of its William Rast branded apparel business. The recapitalization increased the ownership of Bella Rose in each of William Rast Sourcing and William Rast Licensing in exchange for certain royalties to be paid to Tennman WR-T as well as other consideration. Both William Rast Sourcing and William Rast Licensing are now owned 82% by Bella Rose and 18% by Tennman WR-T, and Bella Rose is entitled to all of the distributable cash from operations and all of the distributable cash from a sale of William Rast Sourcing or William Rast Licensing that is not paid to Tennman WR-T.

William Rast Retail, LLC (“William Rast Retail”), a California limited liability company, was formed on August 26, 2009 and is a wholly-owned subsidiary of William Rast Sourcing. William Rast Retail was formed to operate the Company’s William Rast retail stores. The operations of William Rast Retail are shown as discontinued operations in the accompanying consolidated financial statements.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Structure of J. Lindeberg Business

Prior to its sale on April 26, 2011, the Company’s J. Lindeberg brand business was conducted through Bella Rose. From July 1, 2008 through April 26, 2011, J. Lindeberg USA, LLC (“J. Lindeberg USA”) was consolidated under Bella Rose and was owned 50% by Bella Rose and 50% by J. Lindeberg USA Corp. an entity owned by J. Lindeberg AB, a Swedish corporation. J. Lindeberg USA Retail, LLC, a California limited liability company, was formed on August 21, 2009 and is a wholly-owned subsidiary of J. Lindeberg USA. J. Lindeberg Retail was formed to operate the Company’s J. Lindeberg retail stores. The operations of J. Lindeberg are shown as discontinued operations in the accompanying consolidated financial statements.

Discontinued Operations

In 2012, the Company’s Board of Directors decided to discontinue the Company’s wholesale operations and in 2012, the Company accounted for its wholesale operations as discontinued operations in accordance with the guidance provided in FASB ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets, which requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations. In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the periods presented are reclassified into separate line items in the statements of operations. Assets and liabilities are also reclassified into separate line items on the related balance sheets for the periods presented. The statements of cash flows for the periods presented are also reclassified to reflect the results of discontinued operations as separate line items.

In the Original Filing, the Company’s financial statements for the fiscal years ended December 31, 2011 and 2010, did not reflect the discontinued operations of the Company’s wholesale business since the decision to discontinue those operations was not made at the time those financial statements were previously issued. In accordance with guidance provided in FASB ASC 360 and guidance provided by the SEC, the previously filed consolidated financial statements as of and for the years ended December 31, 2011 and 2010 have been retroactively amended to reflect the Company’s wholesale business as discontinued operations. The Company’s Continuing Operations presented in this Form 10-K/A represent the Company’s licensing and brand management business.

Reverse Stock Split

On September 11, 2012, the Company effected a 1-for-15 reverse stock split of its common stock. As a result of the reverse stock split, every fifteen shares of common stock of the Company were combined into one share of common stock. Immediately after the September 11, 2012 effective date, the Company had approximately 2.4 million shares of common stock issued and outstanding.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The consolidated financial statements and the related notes to the consolidated financial statements included in this Amended Annual report on Form 10-K/A to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 have been adjusted to reflect the retroactive effect of the reverse stock split.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accounts of Versatile, Bella Rose, William Rast Sourcing, William Rast Licensing, William Rast Retail, William Rast Europe, and through April 26, 2011 J. Lindeberg USA and J. Lindeberg Retail have been consolidated for financial statement presentation. All significant inter-company accounts and transactions have been eliminated in the consolidation.

Discontinued Operations

The Company accounted for the sale of its 50% member interest in J. Lindeberg, USA and the decision to close down its wholesale and retail operations as discontinued operations in accordance with the guidance provided in FASB ASC 360, Accounting for Impairment or Disposal of Long-Lived Assets.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The significant assets and liabilities that require management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements included inventories, accounts receivable and due to factor, goodwill, deferred taxes, accrued expenses, income taxes, stock based compensation, deferred license revenue and noncontrolling interest. Management is also required to make significant estimates and assumptions related to its disclosure of litigation and the recording of related contingent assets or liabilities, if any.

Revenue Recognition

License Revenue - The Company has entered into various trade name license agreements that provide revenues based on minimum royalties and design fees and additional revenues based on a percentage of defined sales. Minimum royalty and design revenue is recognized on a straight-line basis over each period, as defined, in each license agreement. Royalties exceeding the defined minimum amounts are recognized as income during the period corresponding to the licensee's sales. Payments received as consideration of the grant of a license or advanced royalty payments are recognized ratably as revenue over the term of the license agreement and are reflected on the Company’s consolidated balance sheet under the caption of “Deferred License Revenue.” Revenue is not recognized unless collectability is reasonably assured.

Wholesale Revenue – The Company recognizes wholesale revenue when merchandise is shipped to a customer, at which point title transfers to the customer, and when collection is reasonably assured. Customers are not given extended terms or dating or return rights without proper prior authorization. Revenue is recorded net of estimated returns, charge backs and markdowns based upon management’s estimates and historical experience.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Website Revenue - The Company recognizes website revenue when merchandise is shipped to a customer and when collection is reasonably assured.

Retail Revenue - The Company recognizes retail revenue on the date of purchase from the Company’s retail stores.

Advertising Revenue - The Company records advertising revenue received under its sponsorship agreements in the period in which the event to which the advertising rights were granted occurred.

Design Revenue - The Company records design revenue received under its design and license agreements in the period in which the design services are provided to the licensee.

Comprehensive Income

The Company discloses comprehensive income in accordance with generally accepted principles which establish standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. There were no material other comprehensive income items for the years ended December 31, 2011 and 2010.

Advertising

Advertising costs are charged to expense as of the first date the advertisements take place. Advertising expenses included in discontinued operations of wholesale business approximated $942,000 and $797,000 for the years ended December 31, 2011 and 2010, respectively.

Inventories

Inventories, consisting of piece goods and trim, work-in-process and finished goods, are stated at the lower of cost (first-in, first-out method) or market value. Inventories are evaluated for obsolescence and slow-moving items based on management’s analysis of sales levels, sales projections and inventory levels. The carrying value of inventories is included in current assets held for disposition of wholesale business and retail subsidiary for the years ended December 31, 2011 and 2010.

Stock-Based Compensation

The Company recognizes compensation costs relating to share-based payment transactions in accordance with generally accepted accounting principles. See Note 15 for disclosures regarding stock-based compensation.

Property and Equipment

Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Upon retirement or other disposition of property and equipment, applicable cost and accumulated depreciation and amortization are removed from the accounts and any gains or losses are included in results of operations.

Depreciation of property and equipment is computed using the straight-line method based on estimated useful lives of the assets as follows:

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Furniture and fixtures	5 years

Office equipment	5 to 7 years

Machinery and equipment	5 to 7 years

Leasehold improvements	Term of the lease or the estimated life of the related improvements, whichever is shorter.

Computer Software	5 years

Included in long-term assets held for disposition at December 31, 2011 and 2010 are furniture and fixtures, computer software and leasehold improvements with an aggregate net book value of $259,725 and $934,510, respectively, related to the discontinued operations of the Company’s retail subsidiary and wholesale business.

Impairment of Long-Lived Assets and Goodwill

Long-lived assets, including trademarks, and operational control rights, representing goodwill, related to William Rast Sourcing and William Rast Licensing, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. For the year ended December 31, 2011, the Company recorded an impairment loss of $207,581 related to trade names the Company is no longer using. The impairment loss is included in loss from discontinued operations of wholesale business. There was no impairment loss recorded for the year ended December 31, 2010.

Income Taxes

Bella Rose, William Rast Sourcing, William Rast Licensing, William Rast Europe, William Rast Retail, J. Lindeberg USA and J. Lindeberg USA Retail are limited liability companies and are subject to California minimum tax of $800 and a fee based on total annual revenue. The earnings of a limited liability company are reported individually by its members.

On November 22, 2005, People’s Liberation, Inc. (formerly Century Pacific Financial Corporation) acquired all of the outstanding voting securities of Bella Rose and Versatile, each of which became a wholly-owned subsidiary of the Company. As a result, Versatile and Bella Rose (including its subsidiaries, William Rast Sourcing, William Rast Licensing and J. Lindeberg USA through April 26, 2011) are consolidated and income taxes are reported by the parent, Sequential Brands Group, Inc. (formerly People’s Liberation, Inc.). Taxes are calculated on a consolidated basis at C-Corporation income tax rates.

Deferred income taxes are recognized using the asset and liability method by applying income tax rates to cumulative temporary differences based on when and how they are expected to affect the tax return. Deferred tax assets and liabilities, if any, are adjusted for income tax rate changes.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2011 and 2010, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits.

Generally accepted accounting principles require the Company to account for uncertainty in income taxes recognized in its financial statements, which includes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

The Company files U.S. Federal tax returns, California, New York, Georgia, Florida, New Jersey and Texas franchise tax returns. For the U.S. Federal return, all periods subsequent to December 31, 2007 are subject to tax examination by the U.S. Internal Revenue Service (“IRS”). In February 2011, the Company was notified by the IRS that one of its subsidiaries, William Rast Sourcing, was selected for examination for the 2008 tax year. On February 24, 2012, the Company received notice from the IRS stating that their audit was concluded and there were no adjustments proposed. Therefore, no reserves for uncertain income tax positions have been recorded for the years ended December 31, 2011 and 2010. In addition, the Company does not anticipate that the total amount of unrecognized tax benefit related to any particular tax position will change significantly within the next 12 months.

Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentration of credit risk, consist primarily of cash and cash equivalents, trade accounts receivable, and amounts due to/from factors. Concentration of credit risk with respect to trade accounts receivable is significantly mitigated by the use of factors, which effectively transfers a substantial amount of credit risk to the factors. The Company and its factors perform on-going credit evaluations of its customers and the Company maintains an allowance for doubtful accounts and chargebacks. The Company may extend unsecured credit to its customers in the normal course of business.

For the years ended December 31, 2011 and 2010, the Company’s products were primarily sold to department stores, major and specialty retail stores and international distributors. These customers can be significantly affected by changes in economic, competitive or other factors. The Company, at times, made substantial sales to a relatively few, large customers. In order to minimize the risk of loss, the Company assigned the majority of domestic accounts receivable to its factors without recourse. For non-factored and recourse receivables, account-monitoring procedures are utilized to minimize the risk of loss. Collateral is generally not required.

Accounts Receivable - Allowance for Returns, Discounts and Bad Debts

The Company evaluates the collectability of accounts receivable and charge backs (disputes from customers) based upon a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (such as in the case of bankruptcy filings, litigation or substantial downgrading by credit sources), a specific allowance for bad debts is taken against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other customers, the Company recognizes an allowance for bad debts and uncollectible charge backs based on its historical collection experience. If collection experience deteriorates (for example, due to an unexpected material adverse change in a major customer’s ability to meet its financial obligations to the Company), the estimates of the recoverability of amounts due could be reduced by a material amount.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Shipping and Handling Costs

The Company recorded shipping and handling costs billed to wholesale customers as a component of revenue, and shipping and handling costs incurred by the Company for inbound and outbound freight were recorded as a component of cost of sales. Total shipping and handling costs included as a component of revenue for the years ended December 31, 2011 and 2010 amounted to approximately $53,000 and $120,000, respectively. Total shipping and handling costs included as a component of cost of sales amounted to approximately $635,000 and $1,387,000 for the years ended December 31, 2011 and 2010, respectively. Shipping and handling costs are included in loss from discontinued operations of wholesale business in the statement of operations for the years ended December 31, 2011 and 2010.

Classification of Expenses

Licensing and Brand Management Business

Operating Expenses - Operating expenses primarily include compensation, royalties, professional fees, marketing and promotion, facility costs, travel and entertainment, depreciation and amortization expense, and other general corporate expenses.

Historical Operations

Cost of Goods Sold - Cost of goods sold includes expenses primarily related to inventory purchases and contract labor, freight, duty and overhead expenses. Overhead expenses primarily consist of warehouse and shipping salaries and expenses.

Selling, Design and Production Expense – Selling, design and production expense primarily includes tradeshows, fashion shows, salaries, commissions, royalties, advertising, marketing and promotion, design fees, samples, travel and showroom expenses.

General and Administrative Expenses - General and administrative expenses primarily include salaries, professional fees, facility costs, travel and entertainment, depreciation and amortization expense, and other general corporate expenses.

Noncontrolling Interest

In accordance with the provisions of Statement of Financial Accounting Standard No. 160, Noncontrolling Interest in Consolidated Financial Statements – an amendment of ARB No. 51, superseded by ASC 810-10-65 adopted by the Company on January 1, 2009, the Company allocates profits and losses to each of the members of William Rast Sourcing and William Rast Licensing in accordance with the amended and restated limited liability company operating agreements for such entities, which became effective as of January 1, 2007 (the “Operating Agreements”).

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

William Rast Sourcing, and its wholly-owned subsidiaries William Rast Retail and William Rast Europe B.V., and William Rast Licensing have accumulated losses totaling approximately $15.7 million from inception (October 1, 2006) through September 30, 2011. Beginning January 1, 2009 through September 30, 2011, approximately $6.0 million of these losses has been allocated to Tennman WR-T, Inc., the noncontrolling interest member of William Rast Sourcing and William Rast Licensing.

Effective as of October 1, 2011, the Company recapitalized the ownership of its William Rast branded apparel business. As a result of the recapitalization, both William Rast Sourcing and William Rast Licensing are owned 82% by Bella Rose and 18% by Tennman WR-T, Inc. Beginning October 1, 2011, all operating losses will be allocated to Bella Rose in accordance with the amended and restated operating agreements of William Rast Sourcing and William Rast Licensing. See further discussion in Note 6 to the consolidated financial statements.

Beginning July 1, 2008 through April 26, 2011, the operations of J. Lindeberg USA are included in the consolidated financial statements of the Company. Profit and loss allocations to Lindeberg Sweden were recorded as increases and decreases in noncontrolling interest in the consolidated financial statements of the Company. On April 26, 2011, the Company and its wholly owned subsidiary, Bella Rose, LLC, completed the sale of Bella Rose’s 50% membership interest in J. Lindeberg USA, LLC to J. Lindeberg USA Corp., as further described in Note 14 to the consolidated financial statements.

Recently Issued Accounting Standards

In December 2011, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance in regards to the presentation of netting assets and liabilities as a single amount in the statement of financial position to address the difference between GAAP and international financial reporting standards (“IFRS”). This authoritative guidance is to be applied for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-5, which amends the Comprehensive Income Topic of the ASC. The ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. ASU No. 2011-5 is effective for interim and annual periods beginning after December 15, 2011. The Company will adopt the ASU as required. It will have no affect on the Company’s results of operations, financial condition or liquidity.

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment,” an update to existing guidance on the assessment of goodwill impairment. This update simplifies the assessment of goodwill for impairment by allowing companies to consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount before performing the two step impairment review process. It also amends the examples of events or circumstances that would be considered in a goodwill impairment evaluation. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company is currently evaluating the affects adoption of ASU 2011-08 may have on its goodwill impairment testing, if any.

Other recent accounting pronouncements did not or are not believed to have a material impact on the Company's present or future consolidated financial statements.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Accounts receivable and due from (to) factor: Due to the short-term nature of the receivables, the fair value approximates the carrying value.

Accounts payable, accrued expenses and deferred license revenue: Due to the short-term nature of these liabilities, the fair value approximates the carrying value.

Note Payable and Note Payable to related parties: Estimated to approximate fair value based upon current market borrowing rates for loans with similar terms and maturities.

In accordance with generally accepted accounting principles, the Company measures fair value of financial assets and liabilities by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level I - Quoted prices (unadjusted) in active markets for identical asset or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level I inputs include active exchange-traded securities and exchange-based derivatives.

Level II - Inputs other than quoted prices included within Level I that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level II inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

Level III - Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level III inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models.

The Company determined that as of December 31, 2011 and 2010, there were no significant financial instruments that required fair value measurement.

NOTE 3 - EARNINGS PER SHARE

Basic income (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted income (loss) per share calculation gives effect to all potentially dilutive common shares outstanding during the year using the treasury stock method for warrants and options.

On September 11, 2012, the Company effected a 1-for-15 reverse stock split of its common stock. As a result of the reverse stock split, every fifteen shares of common stock of the Company were combined into one share of common stock. The number of shares and exercise price of outstanding stock options and warrants are presented below after giving retroactive effect to the reverse stock split that occurred on September 11, 2012.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Warrants representing 1,112,666 shares of common stock at exercise prices ranging from $1.20 to $7.50 per share and stock options representing 451,467 shares of common stock at exercise prices ranging from $2.25 to $18.75 per share were outstanding as of December 31, 2011, but were excluded from the average number of common shares outstanding in the calculation of diluted earnings per share for the year ended December 31, 2011 because the effect of including these shares would have been antidilutive.

Warrants representing 29,333 shares of common stock at exercise prices ranging from $6.00 to $7.50 per share and stock options representing 172,333 shares of common stock at exercise prices ranging from $3.00 to $18.75 per share were outstanding as of December 31, 2010, but were excluded from the average number of common shares outstanding in the calculation of earnings per share for the year ended December 31, 2010 because the effect of including these shares would be anti-dilutive.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment from continuing operations is summarized as follows:

	December 31,
	2011			2010

Furniture and fixtures	$	257,304		$	249,864
Office equipment		72,715			66,059
Machinery and equipment		13,901			13,901
Auto		86,518			-
Leasehold improvements		47,623			47,623
Computer software		225,348			221,718
		703,409			599,165
Less accumulated depreciation and amortization		(403,360	)		(355,619	)
	$	300,049		$	243,546

Depreciation and amortization expense from continuing operations amounted to $118,329 and $115,794 for the years ended December 31, 2011 and 2010, respectively.

Included in long-term assets held for disposition at December 31, 2011 are furniture and fixtures, computer software and leasehold improvements with an aggregate net book value of $259,725 related to the discontinued operations of the Company’s wholesale and retail subsidiaries.

NOTE 5 – TRADEMARKS

Trademarks from continuing operations are summarized as follows:

	December 31,
	2011			2010

Trademarks, at cost	$	499,298		$	481,802
Less accumulated amortization		(107,723	)		(74,573	)
	$	391,575		$	407,229

Future annual estimated amortization expense is summarized as follows:

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Years Ending December 31,
2012	$	26,105
2013		26,105
2014		26,105
2015		26,105
2016		26,105
Thereafter		261,050
	$	391,575

Trademark amortization expense from continuing operations amounted to $50,657 and $29,910 for the years ended December 31, 2011 and 2010, respectively. For the year ended December 31, 2011, the Company recorded an impairment loss of $207,581 related to trade names the Company is no longer using. The impairment loss was charged to loss from discontinued operations of wholesale business. There were no impairment losses recorded for the year ended December 31, 2010.

NOTE 6 – WILLIAM RAST OWNERSHIP RECAPITALIZATION AND GOODWILL

William Rast Ownership Recapitalization

Effective as of October 1, 2011, the Company recapitalized the ownership of its William Rast branded apparel business. As further described below, the recapitalization increased the ownership of Bella Rose in each of William Rast Sourcing, LLC (“WRS”) and William Rast Licensing, LLC (“WRL”) in exchange for certain royalties to be paid to Tennman WR-T (“TWR”) as well as other consideration. The recapitalization was implemented through the entry into the following agreements on October 3, 2011:

Second Amended and Restated Limited Liability Company Operating Agreement of William Rast Sourcing, LLC by and among Bella Rose and TWR (the “Sourcing Operating Agreement”);

Second Amended and Restated Limited Liability Company Operating Agreement of William Rast Licensing, LLC by and among Bella Rose and TWR (the “Licensing Operating Agreement” and together with the Sourcing Operating Agreement, the “New Operating Agreements”);

Royalty Agreement by and among WRS, WRL and TWR (the “Royalty Agreement”);

Preemptive Rights and Board Nominee Agreement by and between the Company and TWR (the “Rights Agreement”);

Services Agreement by and between WRL and Tennman Brands, LLC f/s/o Justin Timberlake (“TBL”)(the “Services Agreement”); and

Voting Agreement by and among Colin Dyne, Justin Timberlake and Al Gossett (the “Voting Agreement”).

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The New Operating Agreements amend and restate that certain Amended and Restated Operating Agreement of William Rast Sourcing, LLC effective January 1, 2007, as amended October 2, 2007, and that certain Amended and Restated Operating Agreement of William Rast Licensing, LLC effective January 1, 2007, as amended October 2, 2007. The New Operating Agreements reclassify the membership interests previously issued to the members of each of WRS and WRL, such that Bella Rose now holds 82% of the membership interests of each of WRS and WRL (in the form of Class A membership interests), with the remaining 18% of the membership interests of each of WRS and WRL held by TWR (in the form of Class B membership interests).

The New Operating Agreements provide that the holders of the Class A membership interests of each of WRS and WRL shall be entitled to all of the distributable cash from operations and all of the distributable cash from a Sale Transaction (as defined in the New Operating Agreements) that is not paid to the holders of the Class B membership interests of each of WRS and WRL. In connection with a Sale Transaction of WRS or WRL, in exchange for the repurchase by WRS or WRL, as applicable, of all of its Class B membership interests, WRS or WRL, as applicable, shall pay to the holders of such Class B membership interests a liquidating payment equal to 18% of the aggregate sale proceeds for such Sale Transaction (the “Liquidating Payment”).

In connection with the ownership recapitalization, TWR, WRS and WRL entered into the Royalty Agreement. Pursuant to the Royalty Agreement, WRS is obligated to pay TWR a royalty in the amount of 5.0% of its wholesale net sales, plus 2.5% of its retail net sales and 25.0% of its sublicensee gross consideration during the period commencing July 1, 2011 and continuing until the earlier of (i) the date that WRS pays the Liquidating Payment or (ii) the date that TWR or any of its affiliates no longer owns Class B membership interests in WRS. During each year of the agreement, WRS is obligated to pay TWR a guaranteed minimum royalty of $200,000 for the calendar year ended December 31, 2011 and $400,000 for each calendar year thereafter. The Royalty Agreement also provides that WRL shall pay to TWR an amount equal to 50.0% of all gross receipts of WRL in respect of royalties or other compensation earned with respect to the license by WRL of rights to the William Rast mark, subject to certain offsets, during the period commencing July 1, 2011 and continuing until the earlier of (i) the date that WRL pays the Liquidating Payment or (ii) the date that TWR or any of its affiliates no longer owns Class B membership interests in WRL.

Also in connection with the above-described ownership recapitalization, TWR and the Company entered into the Rights Agreement. Pursuant to the Rights Agreement, the Company granted to TWR, for a period of up to five years, the right to purchase up to 25% of new securities that the Company may sell from time to time on the same terms offered to other investors and the right to designate Al Gossett as a nominee for election to the Board of Directors of the Company.

As part of the above-described transaction, Colin Dyne, Justin Timberlake and Al Gossett entered into the Voting Agreement. Pursuant to the Voting Agreement, such stockholders agree to vote their shares of People’s Liberation’s common stock at any meeting of the Company’s stockholders at which a vote could be taken with respect to the election of Mr. Gosset and Mr. Dyne to People’s Liberation’s Board of Directors or in connection with any written consent of the Company’s stockholders with respect to the election of Mr. Gossett and Mr. Dyne to the Company’s Board of Directors.

The ownership recapitalization also included the entry into the Services Agreement by WRL and TBL. Pursuant to the Services Agreement, TBL agrees to provide certain non-exclusive promotional services of Justin Timberlake to WRL and its licensees in connection with the commercial exploitation of William Rast branded apparel and other consumer products.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

During the year ended December 31, 2011, the Company recorded $200,000 in royalty expense related to minimum royalties due under the Royalty Agreement related to the accounting period July 1, 2011 through December 31, 2011.

The Company has accounted for this transaction in accordance with the provisions of ASC 810 which states that a change in a parent’s ownership interest in a subsidiary while the parent retains its controlling financial interest is to be accounted for as an equity transaction. Therefore, no gain or loss will be recognized in the Company’s consolidated statement of operations as a result of this transaction. On the effective date of this transaction, the Company’s books and records reflected a debit balance in noncontrolling interest related to its William Rast subsidiaries of approximately $6 million, representing the 50% interest owned by TWR. On the effective date of this transaction, the Company adjusted the $6 million debit balance in noncontrolling interest with a corresponding reduction to additional paid-in capital, as the noncontrolling interest related to its William Rast subsidiaries has been eliminated for financial statement purposes as a result of this transaction. TRW will retain an 18% equity interest in the William Rast subsidiaries as a result of this transaction, will not participate in the management of the operations of these entities, and will not participate in the allocation of profits and losses or rights to any future income or losses, with the exception of the Liquidating Payment discussed above.

Goodwill

Goodwill consists of operational control rights related to the William Rast Sourcing and William Rast Licensing entities.

In consideration for Tennman entering into certain Operating Agreements on October 1, 2006 with terms which gave Bella Rose operational control over the WRS and WRS, the Company issued to Tennman 38,095 shares of its common stock, par value $0.001 per share. The common stock issued contains restrictions related to the sale or transfer of the shares, including right of first refusal and annual volume limitations. The market price of the Company’s common stock on the date of issuance of the shares was $11.25. The $428,572 value of the common stock issued to Tennman has been recorded as goodwill on Bella Rose’s financial statements and is is reviewed for impairment on a quarterly basis.

NOTE 7 – CHARLOTTE RUSSE DISTRIBUTION AGREEMENT AND LITIGATION

Distribution Agreement

On December 16, 2008, the Company entered into an agreement (the “Agreement”) with Charlotte Russe, pursuant to which the Company’s wholly-owned subsidiary, Versatile, agreed to exclusively sell to Charlotte Russe, in North America and Central America, People’s Liberation branded apparel, apparel accessories, eyewear, jewelry, watches, cosmetics and fragrances, and to provide Charlotte Russe with marketing and branding support for People’s Liberation branded apparel and apparel accessories.

Litigation

Beginning October of 2009, the Company had been in litigation with Charlotte Russe and its affiliates in relation to the exclusive distribution agreement between the parties. On February 3, 2011, People's Liberation, Versatile Entertainment, Colin Dyne, ECA Holdings II, LLC and New Media Retail Concepts entered into a Settlement Agreement and Mutual Release with Charlotte Russe Holding, Inc. and Charlotte Russe Merchandising, Inc., Advent International Corporation, Advent CR Holdings, Inc., David Mussafer, and Jenny Ming. The agreement was entered into to settle all disputes among the parties relating to:

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

that certain action in the Los Angeles County Superior Court entitled Charlotte Russe Holding, Inc. et al. v. Versatile Entertainment, Inc. et al., Case No. BC 424734; and

that certain action entitled Versatile Entertainment, Inc. et al. v. David Mussafer, et al., originally brought in the Los Angeles County Superior Court, Case No. BC 424675.

Pursuant to the settlement agreement, on February 3, 2011 the Company received approximately $3.5 million, after the distribution of amounts owed under the terms of an asset purchase agreement (described below), and the payment of legal fees and expenses. The settlement included the dismissal with prejudice of all claims pending between the parties as well as mutual releases, without any admission of liability or wrongdoing by any of the parties to the actions.

The Company also received proceeds of $750,000 in the third quarter of 2010 relating to the Charlotte Russe litigation, for total proceeds relating to the litigation of $4.3 million. As further described in Note 13, the $750,000 was received in connection with an asset purchase agreement entered into by the Company with two related parties pursuant to which the Company sold 50% of the net proceeds, after contingent legal fees and expenses, that may be received by the Company as a result of the litigation.

During the year ended December 31, 2010, the Company wrote off approximately $588,000 of accounts receivable due from Charlotte Russe and recorded an inventory reserve of approximately $76,000 for inventory on hand related to purchase orders received from Charlotte Russe.

The Company has included the effects of the Charlotte Russe litigation in discontinued operations of its wholesale business for the years ended December 31, 2011 and 2010.

NOTE 8 –LICENSE AGREEMENTS

The Company has entered into various trade name license agreements that provide revenues based on minimum royalties and design fees and additional revenues based on a percentage of defined sales. Minimum royalty and design fee revenue is recognized on a straight-line basis over each period, as defined, in each license agreement. Royalties exceeding the defined minimum amounts are recognized as income during the period corresponding to the licensee's sales. Payments received as consideration of the grant of a license or advanced royalty payments are recognized ratably as revenue over the term of the license agreement and are reflected on the Company’s consolidated balance sheet under the caption of “Deferred License Revenue.” Revenue is not recognized unless collectability is reasonably assured. For the year ended December 31, 2011, the Company recorded total license revenue related to its license agreements of approximately $548,000. For the year ended December 31, 2010, the Company recorded total license revenue related to its license agreements of approximately $5.0 million, the majority of which related to its nonrecurring license agreement with the Target Corporation described below. Deferred revenue as of December 31, 2011 amounted to $1.8 million, the majority of which related to an advanced payment received by the Company under the terms of its license agreement with JC Penney as described below.

Future annual minimum royalty and design fee revenue is summarized as follows:

Years Ending December 31,
2012	$	2,606,875
2013		5,115,625
2014		5,515,000
2015		5,042,914
2016		1,600,418
Thereafter		1,731,668
	$	21,612,500

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Exclusive License Agreement – JC Penney

In November 2011, the Company entered into an exclusive license agreement with JC Penney pursuant to which the Company granted JC Penney a license to use its William Rast trademark in connection with the manufacture, sale and marketing of men’s apparel and accessories, women’s apparel, handbags, footwear, sunglasses, watches and luggage. The product categories are subject to certain exceptions as outlined in the license agreement. The Company will provide design, marketing and branding support for William Rast branded apparel and apparel accessories to JC Penney under the terms of the contract.

The license granted to JC Penney is exclusive (subject to certain exceptions) with respect to JC Penney’s right to sell and market William Rast branded products through its stores in the United States and through its consumer-direct mail and consumer-direct ecommerce distribution channels which are targeted to consumers in the United States. During the term of the agreement, the Company agrees to refrain from selling or authorizing any other party to sell, with certain exception as outlined in the agreement, any line of William Rast branded apparel products in the United States through any distribution channel; provided, however, that the Company continues to have the right to sell William Rast branded products without restriction until May 15, 2012.

The agreement with JC Penney will continue through January 30, 2016 and JC Penney may elect to extend the term of the agreement for one additional renewal term of five years.

During each royalty period during the term, JC Penney has agreed to pay the Company royalties based upon a percentage of JC Penney’s net sales of William Rast branded products and has also agreed to pay the Company minimum annual royalties and design fees.

Product License Agreements

The Company has entered into four agreements for the license of its William Rast products as follows:

VIVA Optique: Effective December 3, 2009, the Company entered into a license agreement with Viva Optique, Inc. for the worldwide license of William Rast branded eyewear for men and women. The initial term of the license agreement ends on December 31, 2013 and includes an option to renew for an additional three-year term through December 2016. The license agreement provides for the payment of royalties based on net sales at a negotiated rate and minimum royalty amounts for each contract year.

RGA Leatherworks: Effective April 14, 2011, the Company entered into a multi-year licensing agreement with RGA Leatherworks to design, produce and distribute in the United States and Canada William Rast branded leather goods. Product categories include men’s wallets, small leather goods, messenger bags, totes, belts, travel kits and electronic cases. The license agreement expires on December 31, 2016. The license agreement provides for the payment of royalties based on net sales at a negotiated rate and minimum royalty amounts for each contract year.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

How Fashions International: Effective September 9, 2011, the Company entered into a multi-year licensing agreement with How Fashions International Inc. to design, produce and distribute in Canada William Rast branded apparel. Product categories include men’s and women’s denim, knit tops, woven shirts and outerwear. The William Rast branded apparel collection is available in upscale department stores and specialty retailers in Canada. The initial term of the license agreement ends on September 30, 2026 and includes an option to renew for an additional five-year term through September 2031. The license agreement provides for the payment of royalties based on net sales at a negotiated rate and minimum royalty amounts for each contract year.

Target Corporation: In May 2010, the Company entered into a design and licensing agreement with Target Corporation and in December 2010, the Company launched an exclusive collection of William Rast products for a limited time in Target stores throughout the United States. The exclusive collection included William Rast branded men’s and women’s denim and knits designed specifically for Target. During the year ended December 31, 2010, the Company received design and product revenues over the term of the agreement. In addition to product revenue, Target released commercials and other advertising media during the launch of the exclusive collection.

NOTE 9 – ENDORSEMENT AGREEMENT

In March 2011, the Company entered into an exclusive endorsement agreement with Danica Patrick. The endorsement agreement provides that Danica Patrick will endorse the Company’s William Rast branded eyewear and William Rast Racing branded eyewear over a term expiring on May 1, 2014.

Future annual endorsement payments under the Danica Patrick agreement are summarized as follows:

Years Ending December 31,
2012	$	250,000
2013		300,000
2014		350,000
	$	900,000

NOTE 10 - NOTE PAYABLE TO RELATED PARTIES AND ASSET PURCHASE AGREEMENT

On August 13, 2010, the Company’s subsidiary, William Rast Licensing, entered into a promissory note in the amount of $750,000 with Mobility Special Situations I, LLC (“Mobility”), an entity owned in part by Mark Dyne, the brother of the Company’s Chief Executive Officer, Colin Dyne, and New Media Retail Concepts, LLC, an entity owned by Gerard Guez, a significant beneficial owner of the Company’s common stock. The promissory note had an interest rate of 8%, payable monthly in arrears, and was due February 13, 2012. The promissory note was secured by the assets of William Rast Licensing and was guaranteed by the Company’s other entities under common control, including People’s Liberation, Inc., William Rast Sourcing, LLC, William Rast Retail, LLC, Bella Rose, LLC and Versatile Entertainment, Inc. The outstanding principal and interest balances of this promissory note were paid in full in February 2012 with the proceeds received from the securities purchase agreement as further described in Note 24.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

In connection with the promissory note discussed above, the Company also entered into an asset purchase agreement with New Media Retail Concepts, LLC and ECA Holdings II, LLC on August 13, 2010. In exchange for $750,000 cash, the Company sold 50% of the net proceeds, after legal fees and expenses, that may be received by the Company as a result of its on-going litigation with Charlotte Russe, as further described in Note 7. The Company was not required to repay the $750,000 cash proceeds received from the asset purchase agreement regardless of a favorable or unfavorable outcome of the Charlotte Russe litigation. The $750,000 cash proceeds received from the asset purchase agreement were recorded as other income in the Company’s consolidated statement of operations for the year ended December 31, 2010. New Media Retail Concepts, LLC and ECA Holdings II, LLC received from Charlotte Russe, in respect to the interest they acquired in the litigation, a combined amount of $2.9 million of the settlement amount paid by Charlotte Russe pursuant to the settlement agreement entered into by all parties to the litigation on February 3, 2011.

The Company entered into the above mentioned promissory note and asset purchase agreement in order to fund a shortfall in cash flow from operations resulting from its litigation with Charlotte Russe. The Company experienced a significant decrease in net sales and cash flows from operations of its People’s Liberation business, and also incurred significant legal and other expenses related to the litigation. The $750,000 purchase price of the asset purchase agreement was determined to be the fair value of the transactions, which included the $750,000 promissory note, based on management’s evaluation of alternative financing arrangements and current market conditions. At the time the Company entered into these transactions, management in consultation with legal counsel, was unable to determine if the Company would prevail or, if in the event the Company did prevail, what the range of potential settlement could be.

NOTE 11 - NOTE PAYABLE

On August 18, 2011, the Company, through its subsidiary, William Rast Licensing, LLC, entered into a promissory note with Monto Holdings (Pty) Ltd. (“Monto”). The promissory note in the amount of $1,000,000 was to be repaid as follows: (i) 40.0% of the then outstanding principal amount on December 31, 2011, (ii) 20% of the then outstanding principal amount on February 29, 2012 and (iii) all of the remaining principal amount then outstanding on the maturity date, May 12, 2012. The promissory note had an interest rate of 7% per annum, which was payable on the maturity date of the note unless the note is earlier repaid. The promissory note was secured by the assets of William Rast Licensing and was guaranteed by the Company’s other entities under common control, including People’s Liberation, Inc., William Rast Sourcing, LLC, William Rast Retail, LLC, Bella Rose, LLC and Versatile Entertainment, Inc. The outstanding principal and interest balances of this promissory note were paid in full in February 2012 with the proceeds received from the securities purchase agreement as further described in Note 24.

In connection with the promissory note, People’s Liberation issued a fully-vested, five-year warrant to Monto to purchase 833,333 shares of the Company’s common stock at an exercise price of $1.20 per share. The Warrant was valued at $50,000 using the Black-Scholes option pricing model and was recorded as interest expense in the third quarter of 2011.

NOTE 12 – DISCONTINUED OPERATIONS OF WHOLESALE BUSINESS

In 2012, the Company’s Board of Directors decided to discontinue the Company’s wholesale business completely and as a result, the Company no longer sells its People’s Liberation and William Rast branded products to wholesale and retail customers through its historical distribution channels.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The discontinuation of the Company’s wholesale business has been accounted for as a discontinued operation and, accordingly, all prior periods presented in the accompanying consolidated balance sheets, statements of operations and cash flows have been adjusted to conform to this presentation.

The following table summarizes certain selected components of the discontinued operations of the Company’s wholesale business for the years ended December 31, 2011 and 2010:

	Year Ended December 31,
	2011			2010

Net Revenue	$	6,330,129		$	19,873,109

Net loss	$	(6,550,550	)	$	(1,181,342	)
Noncontrolling interest	$	3,117,623		$	1,026,534

Net loss attributable to discontinued operations	$	(3,432,927	)	$	(154,808	)

Basic and diluted loss per share from discontinued operations	$	(1.43	)	$	(0.06	)

The following table summarizes certain selected components of the discontinued operations of the Company’s wholesale business as of December 31, 2011 and 2010, the periods covered by this report:

	December 31, 2011		December 31, 2010
Current assets	$	339,184	$	1,773,379
Long-term assets	$	54,160	$	1,085,357
Current liabilities	$	1,762,552	$	4,222,463

NOTE 13 – DISCONTINUED OPERATIONS OF RETAIL SUBSIDIARY

In the second half of 2011, the Company’s Board of Directors decided to transition the Company’s business from a wholesale and retail provider of branded apparel and apparel accessories to a brand management and licensing business. As a result, the Company’s retail operations included in the Company’s subsidiary, William Rast Retail, LLC, which consisted of four retail stores were discontinued. As of December 31, 2011, the Company had closed two of its retail stores and the remaining two stores are expected to be closed in the second and third quarters of 2012.

The closing of the Company’s retail stores has been accounted for as a discontinued operation and, accordingly, all prior periods presented in the accompanying consolidated balance sheets, statements of operations and cash flows have been adjusted to conform to this presentation.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The following table summarizes certain selected components of the discontinued operations of William Rast Retail for the years ended December 31, 2011 and 2010:

	Year Ended December 31,
	2011			2010

Net Revenue	$	1,850,723		$	2,044,324

Net loss	$	(1,554,672	)	$	(791,222	)
Noncontrolling interest	$	439,883		$	395,612

Net loss attributable to discontinued operations	$	(1,114,789	)	$	(395,610	)

Basic and diluted loss per share from discontinued operations	$	(0.46	)	$	(0.16	)

The following table summarizes certain selected components of the discontinued operations of William Rast Retail as of December 31, 2011 and 2010, the periods covered by this report:

	December 31, 2011		December 31, 2010
Current assets	$	60,883	$	594,786
Long-term assets	$	260,825	$	665,689
Current liabilities	$	403,805	$	200,041
Long-term liabilities	$	288,765	$	382,814

As a result of the expected closure of the Company’s two remaining retail stores and other costs to be incurred in future periods related to the winding down of William Rast Retail’s operations, the Company expects to incur additional expenses ranging from $500,000 to $600,000 in 2012. The expected losses include costs to close the Company’s stores, store rent, lease termination settlements and fees, fixed asset write-offs, employee severance costs, litigation costs, if any, and related professional fees. The Company recognizes costs incurred to close its retail stores in the period in which each retail store is closed.

NOTE 14 – DISCONTINUED OPERATIONS OF J. LINDEBERG USA, LLC SUBSIDIARIES

On April 26, 2011, the Company and its wholly owned subsidiary, Bella Rose, LLC, completed the sale of Bella Rose’s 50% membership interest in J. Lindeberg USA, LLC (“Lindeberg USA”) to J. Lindeberg USA Corp. (“Buyer”) pursuant to the terms of a Unit Purchase Agreement entered into by the parties on April 7, 2011. Prior to the closing of the transaction and since July 1, 2008, Lindeberg USA was owned 50% by Bella Rose and 50% by Buyer.

In consideration for Bella Rose’s 50% membership interest in Lindeberg USA, Buyer agreed to pay to the Company an aggregate of $1,650,000, of which $900,000 was paid upon the closing of the transaction and $750,000 was received in the form of a receivable that was non-interest bearing and to be paid on the six month anniversary of the closing of the transaction.

As of the closing, Bella Rose’s interest in that certain factoring agreement, dated August 6, 2008, by and between Lindeberg USA and FTC Commercial Corp., as amended from time to time, and related agreements (collectively, the “Factoring Agreement”) pursuant to which FTC provided certain factoring services to Lindeberg USA, was assigned to Buyer. Also as of the closing, the guarantees of the Company, Bella Rose, and Versatile Entertainment, Inc. (a wholly-owned subsidiary of the Company) in favor of FTC which guaranteed the obligations of Lindeberg USA to FTC under the Factoring Agreement were terminated, along with the termination of a personal validity guarantee of Colin Dyne, the Company’s Chief Executive Officer and the manager of J. Lindeberg USA, in favor of FTC.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

In connection with the sale of Bella Rose’s membership interest in Lindeberg USA to Buyer, certain customer lists, other intangibles, and lease agreements and lease deposits of J. Lindeberg USA were transferred to J. Lindeberg USA Corp. on the closing date.

The divestiture of the Company’s membership interest in Lindeberg USA has been accounted for as a discontinued operation and, accordingly, all prior periods presented in the accompanying consolidated balance sheets, statements of operations and cash flows have been adjusted to conform to this presentation.

The Company recorded a gain in the second quarter of 2011 related to this divestiture as follows:


Carrying value of net assets of J. Lindeberg USA	$	(1,501,404	)
Noncontrolling interest on date of divestiture		1,863,727
Carrying value of net assets attributable to J. Lindeberg USA		362,323
Cash proceeds received at closing		900,000
Receivable from Buyer		750,000
Gain on sale of member interest in subsidiary	$	2,012,323

The following table summarizes certain selected components of the discontinued operations of J. Lindeberg USA for the year ended December 31, 2011 through the effective date of the divestiture on April 26, 2011, and the year ended December 31, 2010:

	Year Ended December 31,
	2011			2010

Net Revenue	$	3,374,624		$	9,035,075

Net loss	$	(125,771	)	$	(377,955	)
Noncontrolling interest	$	62,885		$	188,979

Net loss attributable to discontinued operations	$	(62,886	)	$	(188,976	)

Basic and diluted loss per share from discontinued operations	$	(0.81	)	$	(0.08	)

The following table summarizes certain selected components of the discontinued operations of J. Lindeberg USA as of December 31, 2011 and December 31, 2010, the periods covered by this report:

	December 31, 2011		December 31, 2010
Current assets	$	-	$	1,824,959
Long-term assets	$	-	$	1,075,128
Current liabilities	$	-	$	895,732
Long-term liabilities	$	-	$	525,673

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

On June 24, 2011, the Company and its wholly-owned subsidiary, Bella Rose, LLC, entered into an asset purchase agreement with Monto Holding (Pty) Limited (“Monto”). Pursuant to the agreement, the Company sold to Monto without recourse the $750,000 receivable owed to the Company under the terms of the Unit Purchase Agreement discussed above. The receivable balance was paid by the buyer to Monto in October 2011.

On June 24, 2011, the Company also issued a fully vested, five year warrant to Monto to purchase 250,000 shares of its Common Stock at an exercise price of $3.00 per share. In exchange for the rights to the receivable and the warrant, Monto paid to the Company a purchase price of $722,916. The Warrant was valued at $89,000 using the Black-Scholes option pricing model and was recorded in general and administrative expenses in the second quarter of 2011.

NOTE 15 - STOCK INCENTIVE PLAN, OPTIONS AND WARRANTS

On January 5, 2006, the Company adopted its 2005 Stock Incentive Plan (the “Plan”), which authorized the granting of stock-based incentive awards. The Plan is administered by the Board of Directors, or a committee appointed by the Board of Directors, which determines the recipients and terms of the awards granted. The Plan reserves a total of 366,667 shares of common stock for issuance.

On September 11, 2012, the Company effected a 1-for-15 reverse stock split of its common stock. As a result of the reverse stock split, every fifteen shares of common stock of the Company were combined into one share of common stock. The number of shares and exercise price of outstanding stock options and warrants are presented below after giving retroactive effect to the reverse stock split that occurred on September 11, 2012.

The Company recognizes stock-based compensation costs on a straight-line basis over the vesting period of each award, which is generally between one to four years.

During the year ended December 31, 2011, the Company granted 152,000 options to employees and officers within the Plan at exercise prices of $2.25 and $3.00, and 333,333 options to two employees and an officer outside the Plan, at an exercise price of $2.25. During the year ended December 31, 2010, the Company did not issue options to its employees, officers or directors. Plan options to purchase 166,328 and 163,339 shares were exercisable as of December 31, 2011 and 2010, respectively. Options granted outside the Plan to purchase 200,000 shares were exercisable as of December 31, 2011. Total stock based compensation expense for options vesting during the years ended December 31, 2011 and December 31, 2010 were approximately $76,000 and $67,000, respectively. There were no stock options or warrants exercised during the years ended December 31, 2011 and 2010.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Stock price volatility is estimated based on a peer group of public companies and expected term is estimated using the “safe harbor” provisions provided in accordance with generally accepted accounting principles. The safe harbor provisions were extended beyond December 31, 2007 for companies that did not have sufficient historical data to calculate the expected term of their related options. The Company does not have sufficient historical data to calculate expected term and the safe harbor provisions were used to calculate expected term for options granted during the periods. The weighted-average assumptions the Company used as inputs to the Black-Scholes pricing model for options granted in the Plan during the year ended December 31, 2011 included a dividend yield of zero, a risk-free interest rate of 1.8%, expected term of 6.25 years and an expected volatility of 64%. The weighted-average assumptions the Company used as inputs to the Black-Scholes pricing model for options granted outside of the Plan during the year ended December 31, 2011 included a dividend yield of zero, a risk-free interest rate of 2.2%, expected term of 5.7 years and an expected volatility of 64%.

For stock-based awards issued to employees, directors and officers, stock-based compensation is attributed to expense using the straight-line single option method. Stock-based compensation expense recognized in the statements of operations for the years ended December 31, 2011 and 2010 is included in selling, design and production expense and general and administrative expense, and is based on awards ultimately expected to vest. ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For the year ended December 31, 2011, the Company used historical data to calculate the expected forfeiture rate.

Options awarded to non-employees are charged to expense when the services are performed and benefit is received as provided by FASB ASC Topic 505-50.

For the year ended December 31, 2011 and 2010, total stock-based compensation expense included in the consolidated statements of operations was charged to the following discontinued operating expense categories:

	Year ended December 31, 2011		Year ended December 31, 2010
Selling, design and production expense	$	1,743	$	10,445
General and administrative		74,639		56,850
Total stock-based compensation	$	76,382	$	67,295

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The following table summarizes the activity in the Plan:

	Number of Shares			Weighted Average Exercise Price

Options outstanding – January 1, 2010		193,000		$	8.40
Granted		-			-
Exercised		-			-
Forfeited		(20,667	)		7.35

Options outstanding – December 31, 2010		172,333			8.55
Granted		152,000			2.55
Exercised		-			-
Forfeited		(72,866	)		3.60

Options outstanding – December 31, 2011		251,467		$	6.30

A summary of the changes in the Company’s unvested stock options within the Plan is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested stock options – January 1, 2010		44,524		$	2.10
Granted		-			-
Vested		(14,862	)		(1.95	)
Forfeited		(20,667	)		(2.70	)

Unvested stock options – December 31, 2010		8,995			0.90
Granted		152,000			0.15
Vested		(2,989	)		(13.80	)
Forfeited		(72,867	)		(0.75	)

Unvested stock options – December 31, 2011		85,139		$	0.15

The following table summarizes the activity outside of the Plan:

	Number of Shares			Weighted Average Exercise Price

Options outstanding – January 1, 2011		-			-
Granted		333,333		$	2.25
Exercised		-			-
Forfeited		(133,333	)		(2.25	)

Options outstanding – December 31, 2011		200,000		$	2.25

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

A summary of the changes in the Company’s unvested stock options outside of the Plan is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested stock options – January 1, 2011		-		$	-
Granted		333,333			0.30
Vested		(200,000	)		(0.30	)
Forfeited		(133,333	)		(0.30	)

Unvested stock options – December 31, 2011		-		$	-

Additional information relating to all stock options and warrants outstanding and exercisable at December 31, 2011, summarized by exercise price, is as follows:

			Outstanding Weighted Average					Exercisable Weighted Average
					Life	Exercise				Exercise
Exercise Price Per Share			Shares		(years)	Price		Shares		Price
$	1.20	(warrants)		833,333	4.6	$	1.20		833,333	$	1.20
$	2.25	(options)		252,000	9.1	$	2.25		218,333	$	2.25
$	3.00	(options)		56,867	9.7	$	3.00		5,492	$	3.00
$	3.00	(warrants)		250,000	4.5	$	3.00		250,000	$	3.00
$	4.50	(options)		2,000	6.5	$	4.50		2,000	$	4.50
$	4.65	(options)		1,600	5.5	$	4.65		1,600	$	4.65
$	5.70	(options)		16,000	5.6	$	5.70		16,000	$	5.70
$	6.00	(options)		30,000	6.5	$	6.00		30,000	$	6.00
$	6.00	(warrants)		10,000	.9	$	6.00		10,000	$	6.00
$	6.90	(options)		25,667	5.5	$	6.90		25,667	$	6.90
$	7.50	(options)		38,000	5.9	$	7.50		37,903	$	7.50
$	7.50	(warrants)		19,333	.9	$	7.50		19,333	$	7.50
$	18.75	(options)		29,333	4.5	$	18.75		29,333	$	18.75

				1,564,133	5.5	$	2.55		1,478,944	$	2.54

As of December 31, 2011, there were 166,328 vested stock options within the Plan and 200,000 vested options outside the Plan. As of December 31, 2011, there was approximately $7,000 of total unrecognized compensation expense related to share-based compensation arrangements granted within the Plan. The cost is expected to be recognized on a weighted-average basis over the next three years. There was no unrecognized related to share-based compensation arrangements granted outside the Plan as of December 31, 2011. The aggregate intrinsic value of stock options outstanding was zero at December 31, 2011 and 2010 as the market value of the options was lower than the exercise value.

The Company has recorded a valuation allowance for all of its deferred tax asset related to net operating loss carryforwards as of December 31, 2011. As a result, the stock-based compensation has not been tax effected on the consolidated statement of operations. For the years ended December 31, 2011 and 2010, the deferred tax effect related to nonqualified stock options was not material.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

On August 18, 2011, the Company issued a warrant to purchase 833,333 shares of its common stock to Monto Holdings (Pty) Limited in conjunction with a note payable as further described in Note 14 to the consolidated financial statements. The warrant has an exercise price of $1.20, a term of five years and is exercisable immediately. The warrant was valued at approximately $50,000 using the Black-Scholes pricing model and the weighted-average assumptions discussed above.

On June 24, 2011, the Company issued a warrant to purchase 250,000 shares of its common stock to Monto Holdings (Pty) Limited in accordance with an asset purchase agreement as further described in Note 16 to the consolidated financial statements. The warrant has an exercise price of $3.00, a term of five years and is exercisable immediately. The warrant was valued at approximately $89,000 using the Black-Scholes pricing model and the weighted-average assumptions discussed above.

NOTE 16 - INCOME TAXES

On November 22, 2005, the Company acquired all of the outstanding voting securities of Bella Rose and Versatile, each of which became a wholly-owned subsidiary of the Company. As a result, Versatile and Bella Rose, including its 50% owned subsidiaries, William Rast Sourcing, William Rast Licensing and J. Lindeberg USA (through April 26, 2011) are consolidated and taxes are reported by the parent, Sequential Brands Group, Inc. Taxes are calculated on a consolidated basis at C-Corporation tax rates.

Deferred income taxes arise principally from temporary differences in the method of depreciating property and equipment for income tax reporting purposes and the recognition of expense related to the allowance for doubtful accounts, factor open credits and inventory reserves for income tax reporting purposes, and net operating loss carryforwards. The Company has Federal net operating losses available to carryforward to future periods of approximately $11.5 million as of December 31, 2011 which expire beginning 2027. As of December 31, 2010, the Company provided a valuation allowance for a portion of the deferred income tax asset related to its Federal net operating loss carryforwards. As of December 31, 2010, the Company determined that it was more likely than not that it would realize the future income tax benefits related to a portion of its Federal net operating losses. During the year ended December 31, 2011, the Company increased the valuation allowance related to its net operating loss carryforwards to reserve the entire asset balance, as the Company was unable to determine if it was more likely than not that it would realize the future income tax benefits related to its net operating losses. This resulted in a deferred provision for income taxes from discontinued operations of $908,000 recorded during the year ended December 31, 2011.

The Company has net operating losses available to carryforward to future periods from California of approximately $11.7 million as of December 31, 2011 which expire beginning 2017. For the years ending December 31, 2011 and 2010, the use of California state operating losses has been suspended for companies with taxable annual income greater than $300,000. As the Company is unable to determine whether it will be able to utilize its California net operating losses against future income, the Company has provided a valuation allowance for all of its deferred income tax asset related to its California net operating loss carryforwards as of December 31, 2011 and 2010.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The (benefit) provision for income taxes from continuing operations for the years ended December 31, 2011 and 2010 consists of the following:

	2011			2010
Federal:
Current provision	$	-		$	-
Deferred benefit		-			-
		-			-
State:
Current (benefit) provision		(800	)		800
Deferred benefit		-			-
		(800	)		800
	$	(800	)	$	800

The difference between the (benefit) provision for income taxes and the expected income tax (benefit) provision determined by applying the statutory Federal and state income tax rates to pre-tax accounting loss from continuing operations for the years ended December 31, 2011 and 2010 are as follows:

	2011			2010

Federal statutory rate		34.0	%		(34.0	)%
State taxes net of Federal benefit		6.0			(6.0	)
Net operating loss valuation allowance		(40.0	)		40.0
LLC gross receipts tax and minimum statutory state income taxes		(0.3	)		0.7

		(0.3	)%		0.7	%

The components of the Company’s consolidated deferred income tax balances from continuing operations as of December 31, 2011 and 2010 are as follows:

	December 31, 2011			December 31, 2010
Deferred income tax asset – long-term:
Net operating loss carryforwards	$	3,888,000			2,395,000

Deferred income tax liability – long-term:
Property and equipment		(195,000	)		(125,000	)
		3,693,000			2,270,000
Less: Valuation allowance		(3,693,000	)		(2,270,000	)
Net deferred income tax asset – long-term	$	-		$	-

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

NOTE 17 - RELATED PARTY TRANSACTIONS

Colin Dyne became Chief Executive Officer and a director of the Company on May 21, 2007 and the Company’s Chief Financial Officer effective December 30, 2010. Mr. Dyne is a significant stockholder of the Company. Mr. Dyne also served as Vice Chairman of the Board of Directors of Talon International, Inc. (OTCBB: TALN), owner of Talon zippers, until July 2010. Mr. Dyne founded Tag-It, Inc., a subsidiary of Talon, in 1991. Mr. Dyne served as Talon’s President from inception and as its Chief Executive Officer from 1997 to 2005. During the years ended December 31, 2011 and 2010, the Company purchased trim products from Talon amounting to approximately $226,000 and $123,000, respectively. During the year ended December 31, 2011, Mr. Dyne loaned the Company $230,000 in the form of unsecured, non-interest bearing advances. There were no formal terms of repayment, however, the entire balance was repaid to Mr. Dyne in 2011.

In connection with the promissory note discussed above, the Company also entered into an asset purchase agreement with New Media Retail Concepts, LLC and ECA Holdings II, LLC on August 13, 2010. In exchange for $750,000 cash, the Company sold 50% of the net proceeds, after legal fees and expenses, that may be received by the Company as a result of its on-going litigation with Charlotte Russe, as further described in Note 7. The Company was not required to repay the $750,000 cash proceeds received from the asset purchase agreement regardless of a favorable or unfavorable outcome of the Charlotte Russe litigation. The $750,000 cash proceeds received from the asset purchase agreement were recorded in loss from discontinued operations of wholesale business in the Company’s consolidated statement of operations for the year ended December 31, 2010. New Media Retail Concepts, LLC and ECA Holdings II, LLC received from Charlotte Russe, in respect to the interest they acquired in the litigation, a combined amount of $2.9 million of the settlement amount paid by Charlotte Russe pursuant to the settlement agreement entered into by all parties to the litigation on February 3, 2011.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

In May 2010, the Company’s subsidiary, William Rast Sourcing, LLC, entered into a design and licensing agreement with the Target Corporation, as further described in Note 8. During the year ended December 31, 2010, Target made a direct payment of $250,000 to Justin Timberlake, a minority interest holder of William Rast Sourcing, on behalf of the Company for his services related to the Target agreement.

Kenneth Wengrod, a former member of the Company’s Board of Directors, currently serves as President of FTC Commercial Corp. (“FTC”), a company which he founded in 2002 and in which he holds a minority equity position. FTC is a global finance commercial service company primarily focused in the apparel industry. The Company was party to various factoring agreements with FTC. In connection with Mr. Wengrod’s appointment as a director, on September 21, 2007, the Company granted to Mr. Wengrod a ten-year option to purchase 1,600 shares of the Company’s common stock at an exercise price of $7.50 per share pursuant to the Company’s 2005 Stock Incentive Plan. On June 26, 2008 and June 12, 2009, Mr. Wengrod received an additional 2,000 options at an exercise price of $4.50 per share and 3,200 options at an exercise price of $3.00 per share, respectively, to purchase shares of the Company’s common stock as compensation for director services provided to the Company. Mr. Wengrod resigned from our Board of Directors on July 12, 2010 and his stock options were forfeited. The Company terminated its factoring agreements with FTC on various dates ending in April 2011.

We were party to a consulting arrangement with Susan White, a member of the Company’s Board of Directors, pursuant to which Ms. White provided image and marketing consulting services to the Company. During the year ended December 31, 2010, the Company paid Ms. White approximately $20,000 for such consulting services. There were no amounts paid to Ms. White during the year ended December 31, 2011.

NOTE 18 – OFFICER COMPENSATION

Colin Dyne

On May 21, 2007, the Company’s Board of Directors appointed Colin Dyne as its Chief Executive Officer and Co-Chairman of the Board of Directors, and Mr. Dyne became our Chief Financial Officer effective December 30, 2010. During 2010 and 2011, Mr. Dyne received an annual salary of $395,000. Mr. Dyne also received medical insurance reimbursements and an auto allowance of $2,000 per month. During 2010 and 2011, annual bonuses were determined at the discretion of the Board of Directors. Mr. Dyne did not receive annual bonuses for the years ended December 31, 2011 and 2010. However, on February 3, 2011, a cash bonus of $275,000 was paid to Colin Dyne in connection with the successful resolution of the Company’s litigation with Charlotte Russe, as discussed in Note 7. On February 3, 2011, Mr. Dyne was also awarded an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.25 per share. The option has a term of ten years, vested immediately, and was granted outside the Company’s 2005 Stock Incentive Plan. The option was granted to Mr. Dyne as compensation for personal guaranties Mr. Dyne provided in connection with the Company’s factoring arrangements. The option was valued at $71,000 based on a Black Scholes valuation model and is included in operating expenses on the accompanying statement of operations for the year ended December 31, 2011.

On December 14, 2011, the Company entered into an employment agreement with Colin Dyne pursuant to which Mr. Dyne will continue to serve as our Chief Executive Officer for a term of five years, which term will automatically renew for successive one year periods unless the Company or Mr. Dyne elects not to extend the term of the agreement. During the term of the Agreement, Mr. Dyne will receive a base salary of $650,000 per annum which is subject to increase and will be eligible to receive an annual cash performance bonus.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

In the event Mr. Dyne’s employment is terminated without cause or by Mr. Dyne for good reason, Mr. Dyne will receive all earned but unpaid base salary and accrued but unpaid vacation through the date of termination as well as earned bonuses that have not been paid for prior fiscal years (collectively, the “accrued obligations”). Mr. Dyne will also receive a severance amount equal to the greater of (i) 1.5 times his base salary then in effect and (ii) an amount equal to the base salary that Mr. Dyne would have received for the remainder of the term of the agreement had Mr. Dyne’s employment continued until the end of the employment period. In addition, Mr. Dyne will receive a pro-rated annual bonus for the year in which he was terminated (the “pro-rated bonus”) and all outstanding equity awards previously granted to Mr. Dyne will accelerate and become fully vested on the date of his termination.

If Mr. Dyne’s employment is terminated as a result of his death or disability, the Company will pay to Mr. Dyne or his estate all accrued obligations, a lump sum equal to 100% of his then effective base salary and the pro-rated bonus. In addition, all outstanding equity awards previously granted to Mr. Dyne will accelerate and become fully vested on the date of his termination. In the event Mr. Dyne is terminated for cause or Mr. Dyne terminates his employment without good reason, the Company will have no further obligations to Mr. Dyne except to pay Mr. Dyne all accrued obligations.

Andrea Sobel

On May 22, 2008, Andrea Sobel was appointed our Executive Vice President of Branding and Licensing. On January 31, 2012, Ms. Sobel was appointed the Company’s President of Licensing. Ms. Sobel entered into an employment agreement with the Company on May 16, 2008. Pursuant to the agreement, Ms. Sobel is employed on an "at-will" basis, and received an initial base salary of $200,000 per annum. Ms. Sobel also received medical insurance reimbursements and an auto allowance of $500 per month. Ms. Sobel did not receive annual bonuses for the years ended December 31, 2011 and 2010. However, on February 3, 2011, a cash bonus of $25,000 was paid to Ms. Sobel in connection with the successful resolution of the Company’s litigation with Charlotte Russe. On February 3, 2011, the Company’s Board of Directors approved an award to Ms. Sobel of options to purchase 33,333 shares of common stock at an exercise price of $2.25 per share. The options have a term of ten years and vest in thirty equal monthly installments beginning February 1, 2011 through August 1, 2013.

On December 14, 2011, the Company entered into an employment agreement with Andrea Sobel pursuant to which Ms. Sobel will serve as our President of Licensing for a term of three years, which term will automatically renew for successive one year periods unless the Company or Ms. Sobel elects not to extend the term of the agreement. During the term of the agreement, Ms. Sobel will receive a base salary of $250,000 per year, which is subject to increase and will be eligible to receive an annual cash performance bonus. Pursuant to the agreement, Ms. Sobel was also granted a ten year option to purchase 50,000 shares of common stock at an exercise price of $3.00 per share. The options vest in equal quarterly installments over a period of three years beginning on March 14, 2012.

In the event Ms. Sobel’s employment is terminated without cause, Ms. Sobel will receive all earned but unpaid base salary and accrued but unpaid vacation through the date of termination as well as earned bonuses that have not been paid for prior fiscal years. Ms. Sobel will also receive a severance amount equal to 2.0 times her base salary then in effect if she is terminated without cause in the first year of her agreement and if she is terminated without cause after the first year of her agreement, Ms. Sobel will receive a severance amount equal to the base salary that Ms. Sobel would have received for the remainder of the term of the agreement had Ms. Sobel’s employment continued until the end of the employment period. In addition, if Ms. Sobel is terminated without cause, all outstanding equity awards previously granted to Ms. Sobel will accelerate and become fully vested on the date of her termination.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Darryn Barber

Mr. Barber became the Company’s Chief Financial Officer on November 22, 2005 and our President on May 8, 2008. On December 30, 2010, Mr. Barber resigned from his positions with the Company. Prior to his resignation, in 2010 Mr. Barber received a base salary of $275,000, medical insurance reimbursements and an auto allowance of $1,500 per month. Mr. Barber did not receive a bonus for the year ended December 31, 2010. In connection with Mr. Barber’s resignation, the Company entered into a Separation Agreement and a Consulting Agreement with Mr. Barber. The Consulting Agreement provides that Mr. Barber will provide finance and other services to the Company through December 30, 2011 and receive a payment of $15,000 per month. Subsequent to December 30, 2011, the Consulting Agreement provides that Mr. Barber will be paid for his services at a rate of $150 per hour. During the term of the Consulting Agreement, the Company continued to pay Mr. Barber’s medical insurance premiums and provided coverage to Mr. Barber under the Company’s director and officer insurance policy. The terms of Mr. Barber’s Settlement Agreement provides for the continued right to exercise outstanding stock options for a period of twelve months following the termination of Mr. Barber’s Consulting Agreement.

Thomas Nields

On November 8, 2006, Mr. Nields was appointed as the Company’s Chief Operating Officer. On February 3, 2011, Mr. Nields resigned from his position with the Company. Prior to his resignation as the Company’s Chief Operating Officer, Mr. Nields received a base salary of $235,000 during 2010 and also received medical insurance reimbursements and an auto allowance of $1,200 per month. Mr. Nields did not receive a bonus for the years ended December 31, 2011 and 2010. In connection with Mr. Nields’ resignation, the Company entered into a Separation Agreement and a Consulting Agreement with Mr. Nields. The Consulting Agreement provided that Mr. Nields provide supply chain development and other management services to the Company through December 31, 2011 and receive a payment of $15,000 per month as compensation for such services. The Company also continued to pay Mr. Nields’ medical insurance premiums through February 3, 2012 and continued coverage under its director and officer insurance policy during the term of the Consulting Agreement. The terms of Mr. Nields’ Settlement Agreement provides for the continued right to exercise outstanding stock options for a period of twelve months following the termination of Mr. Nield’s Consulting Agreement.

NOTE 19 – LEASES

The Company leases its principal executive office space under a temporary lease agreement that expires in May 2012. The Company has signed a letter of intent to lease new office space in the same building beginning June 2012 through August 2015. The new office space will have approximately 3,000 square feet, and is located in Pacific Palisades, California. It is from this facility that the Company will conduct all of its design, executive and administrative functions. Finished goods are shipped from a third-party warehouse in Los Angeles, California. Internet products are shipped from a third-party warehouse in Long Beach, California. The Company has a showroom located in New York City under a lease that expires in January 2013. The Company also has two William Rast retail stores located in Los Angeles and Cabazon, California. The Company plans to close these stores in the second and third quarters of 2012. The lease agreements related to the Cabazon and Los Angeles stores expire in July 2019 and January 2020.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The Company accounts for its leases in accordance generally accepted accounting principles, whereby step provisions, escalation clauses, tenant improvement allowances, increases based on an existing index or rate, and other lease concessions are accounted for in the minimum lease payments and are charged to operations on a straight line basis over the related lease term. Total rent expense for the years ended December 31, 2011 and 2010 amounted to approximately $1.7 million and $2.3 million, respectively, the majority of which is included in discontinued operations of the Company’s wholesale business and retail subsidiary.

Future annual minimum payments due under the leases are summarized as follows:

Years Ending December 31,
2012	$	866,478
2013		665,392
2014		681,045
2015		701,609
2016		722,910
Thereafter		2,264,208
	$	5,901,642

NOTE 20 - CUSTOMER CONCENTRATION

During the year ended December 31, 2011, two customers comprised greater than 10% of the Company’s net revenue from continuing operations. Revenue derived from these customers amounted to 52.2% and 40.7% of net revenue from continuing operations for the year ended December 31, 2011. At December 31, 2011, there was approximately $1.8 million due from these major customers pursuant to the terms of the related license agreements. The Company did not have any revenue from continuing operations during the year ended December 31, 2010.

NOTE 21 - OFF-BALANCE SHEET RISK AND CONTINGENCIES

Financial instruments that potentially subject the Company to off-balance sheet risk consist of factored accounts receivable. The Company sells the majority of its trade accounts receivable to its factor and is contingently liable to the factor for merchandise disputes and other customer claims. At December 31, 2011, total factor receivables approximated $404,000, $352,000 of which are without recourse and $52,000 are with recourse and both are included in current assets held for disposition from discontinued operations of wholesale business. From time to time, the Company’s factor also issued letters of credit and vendor guarantees on the Company’s behalf. There were no outstanding letters of credit or vendor guarantees as of December 31, 2011. There was no outstanding ledger debt (payables to suppliers that use the same factor as the Company) as of December 31, 2011.

The Company is subject to certain legal proceedings and claims arising in connection with its business. In the opinion of management, except as described in Note 23 to the consolidated financial statements and as provided for in the consolidated financial statements, there are currently no additional claims that could have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

In accordance with the bylaws of the Company, officers and directors are indemnified for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the lifetime of the officer or director. The maximum potential amount of future payments the Company could be required to make under the indemnification provisions of its bylaws is unlimited. At this time, the Company believes the estimated fair value of the indemnification provisions of its bylaws is minimal and therefore, the Company has not recorded any related liabilities.

In addition to the indemnification required by the Company’s Amended and Restated Certificate of Incorporation and bylaws, the Company has entered into indemnity agreements with each of its current officers, former officers Darryn Barber and Thomas Nields, directors and key employees. These agreements provide for the indemnification of the Company’s directors, officers, former officers and key employees for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were the Company’s agents. The Company believes these indemnification provisions and agreements are necessary to attract and retain qualified directors, officers and employees.

The Company enters into indemnification provisions under its agreements in the normal course of business, typically with suppliers, customers, distributors and landlords. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities or, in some cases, as a result of the indemnified party’s activities under the agreement. These indemnification provisions often include indemnifications relating to representations made by the Company with regard to intellectual property rights. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has not recorded any related liabilities.

NOTE 22 – PROFIT SHARING PLAN

The Company has established a 401(k) profit-sharing plan for the benefit of eligible employees. The Company may make contributions to the plan as determined by the Board of Directors. There were no contributions made during the years ended December 31, 2011 and 2010.

NOTE 23 – SHAREHOLDER DERRIVATIVE COMPLAINT (SUBSEQUENT EVENT)

On January 17, 2012, plaintiff RP Capital, LLC filed a shareholders’ derivative complaint in the Superior Court of the State of California, County of Los Angeles, Case Number BC477118 against Colin Dyne, Kenneth Wengrod, Susan White, Dean Oakey and the Company. The case alleges that the defendants (i) breached their fiduciary duties to the Company for failing to properly oversee and manage the Company, (ii) were unjustly enriched, (iii) abused their control, (iv) grossly mismanaged the Company, (v) wasted corporate assets, (vi) engaged in self-dealing, and (vii) breached their fiduciary duties by disseminating false and misleading information. The plaintiffs seek (i) judgment against the defendants in favor of the Company for the amount of damages sustained by the Company as a result of the defendants’ alleged breaches of their fiduciary duties; (ii) judgment directing the Company to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws; (iii) an award to the Company of restitution from the defendants and an order from the court to disgorge all profits, benefits and other compensation obtained by the defendants from their alleged wrongful conduct and alleged fiduciary breaches and (iv) an award of costs and disbursements of the action, including reasonable fees for profession services. The Company believes, in consultation with legal counsel, that these claims are without merit or substance, and intends to vigorously defend against these claims. The derivative complaint is in the early stages of discovery and the Company, in consultation with legal counsel, is unable to determine the outcome, whether favorable or unfavorable, or a range of possible loss, if any, to Company.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

NOTE 24 – SECURITIES PURCHASE AGREEMENT AND REPAYMENT OF INDEBTEDNESS (SUBSEQUENT EVENTS)

Entry into Securities Purchase Agreement

On February 2, 2012, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with TCP WR Acquisition, LLC (“TCP”). Pursuant to the Purchase Agreement, the Company agreed to sell Debentures, Warrants and Series A Preferred Stock to TCP, as further described below.

The first of two closings of the financing occurred on February 3, 2012. At the first closing, the Company sold to TCP $3,000,000 in principal amount of Debentures, issued to TCP a Warrant to purchase 228,571 shares of common stock and issued to TCP 3,000 shares of Series A Preferred Stock. The Debentures issued in the first closing are convertible into 1,142,857 shares of common stock.

The second and final closing of the financing occurred on February 22, 2012. At the second closing, the Company sold to TCP $11,500,000 in principal amount of Debentures, issued to TCP a Warrant to purchase 876,191 shares of common stock and issued to TCP 11,500 shares of Series A Preferred Stock. The Debentures issued in the second closing are convertible into 4,380,952 shares of common stock.

At the first and second closings combined, the Company sold to TCP a total of $14,500,000 in principal amount of Debentures, issued to TCP Warrants to purchase 1,104,762 shares of common stock and issued to TCP 14,500 shares of Series A Preferred Stock. Total Debentures issued in the first and second closings are convertible into 5,523,809 shares of common stock. Aggregate net proceeds from this transaction amounted to approximately $13.7 million after the payment of legal and other fees.

The Purchase Agreement provides TCP with piggyback registration rights with respect to TCP’s shares of common stock, requires the Company to seek approval from its stockholders to amend the Company’s certificate of incorporation to increase the authorized number of shares of the Company’s Common Stock to at least 300 million, requires the Company to pay TCP at the second closing a fee of $362,500 plus all legal and other fees and expenses incurred by TCP in connection with the Purchase Agreement, and requires the Company to pay TCP an annual monitoring fee of $250,000 at the second closing and on each one year anniversary of such date so long as TCP has the right under the Stockholders Agreement to nominate one or more directors to the Company’s Board.

In addition, the Purchase Agreement contains negative covenants that prohibit the Company and its subsidiaries from taking certain actions without TCP’s prior consent until the later of February 3, 2014 and the date that TCP’s beneficial ownership of Common Stock is less than 40% of the Company’s fully diluted Common Stock. The negative covenants apply to, with certain exceptions, issuing debt or equity securities; acquiring assets or equity interests of third parties, disposing of assets or equity interests of subsidiaries, entering into joint ventures, or engaging in other types of mergers and acquisitions transactions; paying or declaring dividends; settling litigation; entering into transactions with affiliates; dissolving or commencing bankruptcy proceedings; or changing the Company’s principal lines of business.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

As a condition to TCP’s obligations under the Purchase Agreement, Colin Dyne, the Company’s chief Executive Officer and Chief Financial Officer, entered into a lock-up agreement precluding Mr. Dyne from disposing of any of his shares of Common Stock or other equity securities of the Company until July 31, 2012.

Description of Debentures

Pursuant to the terms of the Purchase Agreement, the Company sold $14,500,000 in principal amount of Variable Rate Senior Secured Convertible Debentures (the “Debentures”), convertible into shares of common stock of the Company, $0.001 par value per share (“Common Stock”), at an initial conversion price of $2.63 per share (the “Conversion Price”). The Debentures have an interest rate of LIBOR, and in the event payment on the Debentures is accelerated as a result of an event of default, the rate of interest will increase to the lesser of 18% per annum or the maximum amount permitted under applicable law. Interest on the Debentures is payable, at the Company’s option, in cash or in Common Stock upon conversion of a Debenture (with respect to the principal amount then being converted) and on their maturity date. The Debentures are payable on or before January 31, 2015 and a Debenture may not be prepaid without the consent of the holder of the Debenture.

At any time after their issuance, the Debentures are convertible at the Conversion Price into shares of Common Stock at the option of a Debenture holder. On the maturity date, the Company may, in whole or in part, convert the then outstanding principal amount of each Debenture into shares of Common Stock at the Conversion Price. The Conversion Price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The Conversion Price is also subject to adjustment based on the occurrence of certain events as further described in the Purchase Agreement.

Description of Subsidiary Guarantee and Security Agreement

At the first closing of the financing, the Company’s subsidiaries, Versatile Entertainment, Bella Rose, William Rast Sourcing, William Rast Licensing and William Rast Retail executed a Subsidiary Guarantee in favor of TCP pursuant to which such subsidiaries guarantee the Company’s obligations under the Debentures (the “Subsidiary Guarantee”). In addition, the Company and the above mentioned subsidiaries entered into a security agreement (the “Security Agreement”) with TCP pursuant to which such parties granted to TCP a first priority security interest in all of their assets to secure the Company’s obligations under the Debentures and such subsidiaries’ obligations under the Subsidiary Guarantee.

Description of Warrants

In connection with the sale of the Debentures, the Company agreed to issue to TCP warrants to purchase 1,104,762 shares of the Company’s Common Stock (the “Warrants”). The Warrants are exercisable immediately after issuance and have a term of five years. The Warrants may be exercised at an initial exercise price per share of $2.63, which is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The warrants were valued at approximately $4.2 million using the Black-Scholes pricing model.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Description of Series A Preferred Stock

Also in connection with the sale of the Debentures, the Company agreed to issue one share of Series A Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), for every $1,000 of principal amount of Debentures purchased by TCP. The Series A Preferred Stock is designed to give holders of the Debentures certain voting rights while the Debentures remain outstanding and each share of Series A Preferred Stock is entitle to vote 381 votes, as further described below.

Description of Stockholders Agreement

In connection with the Purchase Agreement, the Company, TCP and Colin Dyne, the Company’s Chief Executive Officer and a director, entered into a Stockholders Agreement (the “Stockholders Agreement”). As contemplated by the Stockholders Agreement, at the second closing the Company increased the size of its Board of Directors (the “Board”) from three members to six members and appointed William Sweedler, Matthew D. Eby and Richard Gersten, each a Partner at Tengram Capital Partners, an affiliate of TCP, to serve as directors. Mr. Sweedler, Mr. Eby and Mr. Gersten will serve as Class I, Class II and Class III directors, respectively, for terms expiring at the 2012, 2013 and 2014 annual meeting of stockholders, respectively, and/or until their respective successors have been elected and qualified. At the second closing, William Sweedler was also appointed to serve as Chairman of the Board. Also pursuant to the Stockholders Agreement:

The maximum size of the Board shall not be increased to greater than seven (7) directors except with the consent of Mr. Dyne and TCP.

In connection with any director nominees to be submitted to holders of Common Stock for election at a stockholders’ meeting, TCP shall have the right to nominate a number of nominees for director such that the number of directors that will be serving on the Board (determined immediately following the election of directors and assuming that the director nominees designated by TCP are elected to the Board) that have been appointed or nominated by TCP equals three.

In connection with any director nominees to be submitted to holders of Common stock for election at a stockholders’ meeting, a committee of the Company’s Board comprised solely of directors then serving on the Board who were not nominated or appointed by TCP (the “Special Committee”), acting by majority vote, shall have the right to nominate a number of nominees for director such that the number of directors that will be serving on the Board (determined immediately following the election of directors and assuming that the director nominees designated by the Special Committee are elected to the Board) that have been nominated by the Special Committee or who were serving on the Board prior to the closing of the financing equals three.

All board nominees other than those described above, if any, to be presented to the Company’s stockholders for election will be designated by the full Board, acting by majority vote.

TCP and Dyne agree to vote all of their Common Stock and voting Preferred Stock, and to take all other necessary or desirable actions within such stockholder’s control, and the Company agrees to take all necessary and desirable actions within its control, to cause the election, removal and replacement of directors and members of committees as described in the Stockholders Agreement, including by voting all of such stockholder’s shares of Common Stock and voting Preferred Stock for the election of the Board’s nominees for director.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Mr. Dyne will provide TCP with a right of first refusal with respect to any shares of the Company’s voting securities that Mr. Dyne proposes to sell in a negotiated transaction.

TCP will provide Mr. Dyne with a tag-along right, providing Mr. Dyne with the right to sell his shares of the Company’s voting securities in a transaction where TCP is selling its shares of the Company’s voting securities.

The Company agrees to provide TCP with a preemptive right, pursuant to which TCP will have the right, subject to certain exceptions set forth in the Stockholders Agreement, to acquire in a subsequent issuance of securities by the Company a number of offered securities that will allow TCP to maintain its percentage ownership of the Company’s voting securities.

Termination of a Material Definitive Agreements

The proceeds received from the first closing of the financing were used in part to repay the following indebtedness of the Company and its subsidiaries:

Rosenthal Indebtedness

All indebtedness owed by William Rast Sourcing under its factoring facility with Rosenthal & Rosenthal. In connection with the repayment, the following agreements were terminated: (i) Factoring Agreement effective as of October 7, 2010 by and between Rosenthal & Rosenthal, Inc. and William Rast Sourcing; (ii) Inventory Security Agreement effective as of October 7, 2010 by William Rast Sourcing in favor of Rosenthal & Rosenthal, Inc.; (iii) Assignment Agreement effective as of October 7, 2010 by and between William Rast Licensing and Rosenthal & Rosenthal, Inc.; and (iv) guarantees of the Company, Bella Rose, Versatile and Colin Dyne in favor of Rosenthal.

Mobility Indebtedness

All indebtedness owed by William Rast Licensing to Mobility Special Situations I, LLC (“Mobility”), pursuant to that certain promissory note in the original aggregate principal amount of $750,000 issued to Mobility. Prior to its repayment, the promissory note was secured by the assets of William Rast Licensing and was guaranteed by the Company, William Rast Sourcing, William Rast Retail, Bella Rose and Versatile. In connection with the repayment, the following agreements were terminated (other than with respect to obligations that survive the termination of such agreements): (i) the Promissory Note entered into on August 13, 2010 by William Rast Licensing in favor of Mobility; (ii) Borrower Security Agreement entered into on August 13, 2010 by William Rast Licensing in favor of Mobility; (iii) Guarantor Security Agreement entered into on August 13, 2010 by People’s Liberation, Versatile, Bella Rose, William Rast Sourcing and William Rast Retail in favor of Mobility; (iv) Guaranty dated August 13, 2010 granted in favor of Mobility by People’s Liberation, Versatile, Bella Rose, William Rast Sourcing and William Rast Retail. Mobility is an entity owned in part by Mark Dyne, the brother of the Company’s Chief Executive Officer, Colin Dyne, and New Media Retail Concepts, LLC, an entity owned by Gerard Guez, a significant beneficial owner of the Company’s Common Stock.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

Monto Indebtedness

All indebtedness owed by William Rast Licensing to Monto Holdings (Pty) Ltd. (“Monto”), pursuant to that certain promissory note in the original aggregate principal amount of $1,000,000 as further described in Note 11. Prior to its repayment, the promissory note was secured by the assets of William Rast Licensing and was guaranteed by the Company, William Rast Sourcing, William Rast Retail, Bella Rose, and Versatile. In connection with the repayment, the following agreements were terminated (other than with respect to obligations that survive the termination of such agreements): (i) the Promissory Note entered into on August 18, 2011 by William Rast Licensing in favor of Monto; (ii) Borrower Security Agreement entered into on August 18, 2011 by William Rast Licensing in favor of Monto; (iii) Guarantor Security Agreement entered into on August 18, 2011 by People’s Liberation, Versatile, Bella Rose, William Rast Sourcing and William Rast Retail in favor of Monto; (iv) Guaranty dated August 18, 2011 granted in favor of Monto by People’s Liberation, Versatile, Bella Rose, William Rast Sourcing and William Rast Retail.

Changes in Control

Pursuant to the Purchase Agreement, at the first closing the Company issued to TCP a Warrant to purchase 228,571 shares of Common Stock and 3,000 shares of Series A Preferred Stock. At the second closing, the Company issued an additional 11,500 shares of Series A Preferred Stock to TCP and Warrants to purchase up to 876,191 shares of Common Stock.

As further described below, the holders of Series A Preferred Stock vote together as a single class with the holders of Common Stock on all matters requiring approval of the holders of Common Stock, except that each share of Preferred Stock is entitled to 381 votes. Therefore, TCP has the right to vote 5,523,809 shares of the Company’s Common Stock (which excludes any shares obtained upon exercise of the warrants). This represents 69.7% of the Company’s outstanding voting securities. The issuance of the securities to TCP in the financing allows TCP to control all matters submitted for approval to the holders of Common Stock. However, pursuant to the Stockholders Agreement and notwithstanding TCP’s ownership of a majority of the Company’s voting securities, TCP does not have the right to elect a majority of the directors serving on the Company’s Board.

Amendment to Certificate of Incorporation

On February 3, 2012, the Company amended its certificate of incorporation by creating a new series of preferred stock designated Series A Preferred Stock, by filing with the Delaware Secretary of State a Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock. The Certificate of Designation sets forth the rights, preferences, privileges and restrictions of the Series A Preferred Stock, which include the following:

The authorized number of shares of Series A Preferred Stock is 19,400, having a par value $0.001 per share and a stated value of $1,000 per share (“Stated Value”).

Holders of Series A Preferred Stock are not entitled to dividends or any liquidation preference.

Series A Preferred Stock may only be transferred by a holder of such stock to a transferee if such transfer also includes a transfer to the transferee of $1,000 in principal amount of Debentures for each one share of transferred Series A Preferred Stock.

SEQUENTIAL BRANDS GROUP, INC.

(FORMERLY PEOPLE’S LIBERATION, INC.)

FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(As Amended)

The holders of Series A Preferred Stock vote together as a single class with the holders of Common Stock on all matters requiring approval of the holders of Common Stock, except that each share of Preferred Stock is entitled to 381 votes per share (which is the number of shares of Common Stock a Debenture holder would receive if it converted $1,000 in principal amount of Debentures into Common Stock at a conversion price of $2.63), which number of votes per share is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions relating to the Company’s Common Stock.

As long as any shares of Series A Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects any rights of such holders, (c) increase the number of authorized shares of Series A Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

Upon conversion of the principal amount of a Debenture, in whole or in part, into shares of Common Stock or upon the repayment of the principal amount of a Debenture, in whole or in part, by the Company, the Company has the right to and will redeem from the Debenture holder at a price of $0.001 per share, a number of shares of Series A Preferred Stock determined by dividing (i) the outstanding principal amount of the Debenture that has been repaid or converted into Common Stock, as applicable by (ii) the Stated Value.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.

Controls and Procedures

Evaluation of Controls and Procedures

Members of the our management, including our Chief Executive Officer, Yehuda Shmidman, and Chief Financial Officer, Gary Klein, have evaluated the effectiveness of our disclosure controls and procedures, as defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of December 31, 2011, the end of the period covered by this report. Based upon that evaluation, Mr. Shmidman and Mr. Klein have concluded that our disclosure controls and procedures were effective as of December 31, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition our assets that could have a material effect on our financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we concluded that our internal control over financial reporting was effective as of December 31, 2011.

Item 9B.

Other Information

None

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Our Board of Directors is divided into three classes designated Class I, Class II and Class III. Directors hold office for staggered terms of three years. One of the three classes is elected each year to succeed the directors whose terms are expiring. The Class I, Class II and Class III directors serve terms that expire in 2012, 2013 and 2014, respectively.

The following table provides the name, age and position of each of our executive officers and directors as of March 30, 2012. There are no family relationships between our executive officers and directors.

Name	Age	Position with Sequential Brands Group, Inc.

Class I Director: (Term Expiring in 2012)
Colin Dyne	47	Class I Director, Chief Executive Officer, Chief Financial Officer and Secretary
William Sweedler	45	Class I Director, Chairman of the Board of Directors

Class II Director: (Term Expiring in 2013)
Susan White	60	Class II Director
Matthew Eby	40	Class II Director

Class III Director Nominee: (Term Expiring in 2014)
Al Gossett	59	Class III Director
Richard Gersten	46	Class III Director

Other Executive Officers:
Andrea Sobel	44	President of Marketing

Board of Directors

Colin Dyne became our Chief Executive Officer and a director of the company on May 21, 2007 and our Chief Financial Officer effective December 30, 2010. Colin Dyne also became our Secretary on January 31, 2012. Colin Dyne is a significant stockholder of the company, and served as a consultant to the company from December 2005 until May 2007, advising on strategic sales initiatives. Mr. Dyne also served as Vice Chairman of the Board of Directors of Talon International, Inc. (OTCBB: TALN), owner of Talon zippers, until July 2010. Mr. Dyne founded Tag-It, Inc., a subsidiary of Talon, in 1991. Mr. Dyne served as Talon’s President from inception and as its Chief Executive Officer from 1997 to 2005. Mr. Dyne was selected to become a director of the company due to his knowledge of the apparel industry.

William Sweedler has served as Chairman of the Board since February 22, 2012 and was selected to become the chairman of the company due to his knowledge of the apparel industry and because of his experience in managing and developing brands. Mr. Sweedler was appointed to our Board in connection with our financing transaction with TCP WR Acquisition, LLC in February 2012 (see Note 24 to our Consolidated Financial Statements for further details). Mr. Sweedler is presently Co-Founder and Partner of Tengram Capital Partners, a consumer private equity firm formed to invest in the consumer and retail sectors. He was formerly Chairman & CEO of Windsong Brands, a diversified brand development and investment company that specialized in the acquisition, growth, licensing, and comprehensive management of consumer branded intellectual property and businesses. Mr. Sweedler has over 20 years of experience in the consumer sector as an operator and strategic investor. Current portfolio companies and investments include Ellen Tracy, Joe's Jeans, Field & Stream, Caribbean Joe, Atlantis Weathergear, Carlos Falchi, Sharper Image, and Design Within Reach. Prior to founding Windsong Brands, he was President & CEO of Joe Boxer, a wholly owned division of the Iconix Brand Group (NASDAQ: ICON) of which he was Executive Vice President and Director. Prior to Mr. Sweedler joining Iconix Brand Group, he was a founder of Windsong Allegiance Group (“WAG”), a diverse apparel marketer and brand manager. While CEO of WAG, he led the acquisition and restructuring of Joe Boxer, Hathaway Shirt Company, Como Sport, and New Frontier. He was responsible for licensing the Joe Boxer brand to Kmart, now Sears Holding Corporation, and Hathaway to Costco. Mr. Sweedler also led the merger, re-structure, and sale of the Joe Boxer, Hathaway, and New Frontier divisions of WAG. Mr. Sweedler has served as a director to Iconix Brand Group and Bank of Westport (NASDAQ: BWST). He is currently Co-Chairman of Ellen Tracy, Caribbean Joe and Carlos Falchi. He is also a director at Field & Stream, Skip Barber Racing, and Design Within Reach (OTC: DWRI). Mr. Sweedler graduated from Babson College with a BS in Finance and Investments and joined Polo Ralph Lauren for four years prior to co-founding WAG.

Susan White joined our Board of Directors on May 21, 2007 and was selected to become a director of the company due to her experience in apparel branding and marketing. Ms. White has served as Chief Executive Officer and President of Brand Identity Solutions, LLC, a branding, marketing and licensing consulting company, since 1987. Ms. White also is the CEO and president of Whitespeed, LLC, an internet design, branding and marketing company. Ms. White previously served as Director of Marketing and Advertising Worldwide for Warnaco from November 1997 through August 1999.

Matthew Eby joined our Board of Directors on February 22, 2012 and was selected to become a director of the company due to his knowledge of the apparel industry and because of his experience in managing and developing brands. Mr. Eby was appointed to our Board in connection with our financing transaction with TCP WR Acquisition, LLC in February 2012 (see Note 24 to our Consolidated Financial Statements for further details). Mr. Eby is presently Co-Founder and Partner of Tengram Capital Partners. From 2003 to 2010, prior to founding Tengram, Mr. Eby was the founder and Chief Investment Officer of JAWS Estates Capital, the private investment office of Barry Sternlicht and the Sternlicht family. In his capacity as CIO, he was responsible for investment and asset allocation decisions and recommendations across a broad spectrum of asset classes and investment strategies. His responsibilities included leading investments in hedge funds, private equity funds, direct transactions in a broad array of public markets and direct transactions in private companies. During his tenure at JAWS, Mr. Eby invested in and led numerous private equity transactions. Mr. Eby developed an investment strategy that focused on branded consumer goods and intellectual property. In this space, Mr. Eby led investments in Field & Stream, Ellen Tracy, Joe’s Jeans, Caribbean Joe, and Carlos Falchi. Mr. Eby currently serves on the Boards of Directors of Brand Matter, Field & Stream, and Carlos Falchi. Prior to founding JAWS, Mr. Eby was an associate at Morgan Stanley from 2002-2003 and prior to entering the investment industry, he served five years as an officer in the U.S. Navy. Mr. Eby is a graduate of the United States Naval Academy and Harvard Business School.

Al Gossett joined our Board of Directors on December 14, 2011. Mr. Gossett was appointed to our Board of Directors in connection with the restructuring of the ownership of our William Rast branded apparel business (see Note 6 to our Consolidated Financial Statements for further information). Mr. Gossett is President, CEO and owner of Gossett Automotive Group, which he founded in 1988. Gossett Automotive Group consists of 17 automotive dealerships located in Memphis, TN and Atlanta, GA. The various brands under this umbrella of dealerships include Volkswagen, Porsche, Audi, Bentley, Kia, Hyundai, Chrysler, Jeep, Dodge, Ram, Mazda, Mitsubishi and FIAT. Mr. Gossett has been involved in the auto dealership industry since 1975. In 1988, he acquired his first dealership. During the course of his career, Mr. Gossett has chaired or served on a number of district, regional and national dealer boards within the industry, including Chrysler, Jeep, Dodge, Chrysler Financial, Volkswagen and Volkswagen Financial. Since June 2009, Mr. Gossett has served on the board of directors of Landmark Community Bank in Collierville, TN, a suburb of Memphis, TN. Since 2005, Mr. Gossett has also served as the managing partner of JALP, LLC (d/b/a ful), a wholesale business engaged in the global distribution of backpacks, luggage and apparel. Mr. Gossett attended Northwestern University.

Richard Gersten joined our Board of Directors on February 22, 2012 and was selected to become a director of the company due to his experience in managing and developing brands. Mr. Gersten was appointed to our Board in connection with our financing transaction with TCP WR Acquisition, LLC in February 2012 (see Note 24 to our Consolidated Financial Statements for further details). Mr. Gersten is presently a Partner of Tengram Capital Partners. Mr. Gersten has over 18 years of experience in the private equity industry and has spent the last 13 years focused exclusively on the consumer sector. Prior to joining Tengram, he was a Partner at Catterton Partners, a leading private equity firm with an exclusive focus on providing equity capital to small to middle market consumer companies. During his time at Catterton, he was responsible for sourcing, evaluating and executing transactions in the consumer industry and post investment monitoring for companies. Mr. Gersten served on the board of directors of Strivectin, Sun Water Sysems (d/b/a Aquasana), Van's Natural Foods, Monosol, and Dr. Miracle’s. Prior to joining Catterton, Mr. Gersten was a Partner at North Castle Partners, a private equity firm focused on consumer investments that benefit from healthy living and aging trends. During his time at North Castle, he originated, executed and monitored investments primarily in the personal care, fitness and recreation and nutrition industries. He successfully completed investments in and served on the board of directors of Enzymatic Therapy, Avalon Natural Products, HDS Cosmetics (d/b/a DDF Skincare) and GloMinerals. Prior to joining North Castle, Mr. Gersten was a Principal at NMS Capital, the merchant banking arm of NationsBanc Montgomery Securities. Prior to joining NMS Capital, he spent five years at BT Capital Partners, the private equity arm of Bankers Trust, where he helped originate, evaluate and monitor both control and minority investments in middle market companies. Prior to joining BT Capital, Mr. Gersten was an Associate at Chemical Bank. Mr. Gersten received a B.S. in Economics from Union College (N.Y.) and an M.B.A. from the Wharton School at the University of Pennsylvania.

Other Executive Officers

Andrea Sobel has served as our President of Licensing since January 31, 2012 and as our Executive Vice President of Branding and Licensing from May 2008 to January 2012. Ms. Sobel has over 15 years of experience in licensing, marketing and brand development. Since 2007, she was Vice President of Marketing with SANRIO, where she was responsible for market development and brand positioning of that company's Hello Kitty and other character brands. Between 2004 and 2007 and between 1999 and 2002, she was also a principal and licensing, merchandising and marketing consultant with ALS Consulting, a firm specializing in marketing and brand development. Between 2002 and 2004, Ms. Sobel was Director of Licensing and Business Development for Murad, Inc. From 1990 to 1999, she was with Guess?, Inc. in a series of progressively responsible positions culminating with Vice President of Licensing and Product Development from 1995 to 1999. She holds a Bachelor of Arts in History and Spanish from the University of California at Berkeley and an MBA from UCLA's Anderson School of Business.

Director Independence

We do not have a separately designated audit, compensation or nominating committee of our board of directors and the functions customarily delegated to these committees are performed by our full board of directors. We are not a “listed company” under SEC rules and are therefore not required to have separate committees comprised of independent directors. We have, however, determined that of our four directors who served during our last completed fiscal year, Susan White, Dean Oakey and Al Gossett were “independent” as that term is defined in Section 5605 of the NASDAQ Listing Rules as required by the NASDAQ Stock Market. As we do not maintain an audit committee, we do not have an audit committee "financial expert" within the meaning of Item 407(d) of Regulation S-K.

Following the addition of Mr. Sweedler, Mr. Eby and Mr. Gersten to the Board, the company is contemplating the formation of an audit committee, compensation committee, and nominating and corporate governance committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2011, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements, except for the filing of one late report on Form 4 reporting late one transaction by Andrea Sobel and one late report on Form 3 reporting one late transaction by Monto Holdings (Pty) Ltd.

Code of Ethics

We have adopted a Code of Ethics applicable to all of our Board members and to all of our employees and executive officers, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics constitutes a “code of ethics” as defined by applicable SEC rules and a “code of conduct” as defined by applicable NASDAQ rules. The Code of Ethics has been publicly filed with the SEC as an exhibit to this Annual Report on Form 10-K. Our code of ethics is posted on our Internet website located at www.pplbusa.com in the section titled “Investor Relations—Corporate Governance.” You may also request a copy of the Code of Ethics by writing or calling us at:

SEQUENTIAL BRANDS GROUP, INC.

Attn: Investor Relations

17383 Sunset Boulevard, Suite A210

Pacific Palisades, CA 90272

(213) 745-2123

Any waiver of the Code of Ethics pertaining to a member of our Board or one of our executive officers will be disclosed in a report on Form 8-K filed with the SEC.

Item 11.

Executive Compensation

Summary Compensation Table

The following table sets forth information concerning all compensation paid for services provided to us in all capacities for each of the two fiscal years ended December 31, 2011 and 2010 as to Colin Dyne, the only person serving as our Chief Executive Officer during 2011 and Andrea Sobel, the only other executive officer who was serving as an executive officer at the end of the 2011 fiscal year whose compensation exceeded $100,000 (referred to as named executive officers).

Name and Principal Position	Year		Salary ($)		Bonus ($)		Option Awards ⁽¹⁾ ($)		All Other Compensation ⁽²⁾ ($)		Total ($)
Colin Dyne
Chief Executive		2011		395,004		275,000		71,000		61,407		802,411
Officer and Chief		2010		395,004		-		-		63,688		458,692
Financial Officer
Andrea Sobel
President of		2011		200,016		25,000		6,128		16,446		247,590
Licensing		2010		200,016		-		-		17,688		217,704

(1)

The amounts in this column represent the grant date fair value with respect to stock options granted in the applicable fiscal year. For additional information on the valuation assumptions with respect to option grants, including the options granted in 2011, please see Note 15 to our financial statements for the years ended December 31, 2011 and 2010. The amount does not reflect the actual value that may be realized by the named executive officer which depends on the value of our shares in the future.

(2)

Other compensation indicated in the above table consists of medical and disability insurance and car allowances and expenses. Included in other compensation for Mr. Dyne for the year ended December 31, 2011 and 2010 are approximately $29,000 and $27,000 of medical insurance expenses, respectively and a car allowance of $2,000 per month.

Narrative Disclosure to Summary Compensation Table

We do not have a separate compensation committee and therefore, our executive compensation program is administered by our Board of Directors. The Board is responsible for, among other functions, administering our stock incentive plan, and negotiating, reviewing and awarding the annual salary, bonus, stock options and other benefits of our executive officers.

Compensation Philosophy

The objectives of our executive compensation program include the following:

Alignment – to align the interests of executives and shareholders through equity-based compensation awards;

Retention – to attract, retain and motivate highly qualified, high performing executives to lead our growth; and

Performance – to provide rewards that are dependent upon the executive’s achievements and company performance.

Compensation Elements

We compensate senior executives through a variety of components, including base salary, annual incentives, equity incentives, and benefits and perquisites, in order to provide our executives with an overall compensation package which we believe is competitive. The mix and value of these components are impacted by a variety of factors, such as negotiations of an executive with us, the executive’s position within the company, and the overall performance of the company and the individual. The purpose and key characteristics for each component are described below.

Base Salary

Base salary provides executives with a steady income stream and is based upon the executive’s level of responsibility, experience, individual performance and contributions to our overall success.

Annual Incentive Bonuses

Annual incentive bonuses are a variable performance-based component of compensation. The primary objective of an annual incentive bonus is to align a portion of total pay opportunities for executives to the attainment of our company’s performance goals, as well as performance goals of the individual.

Equity Incentives

Equity incentives are intended to align senior executive and shareholder interests by linking a portion of executive pay to long-term shareholder value creation and financial success over a multi-year period. Equity incentives are also provided to our executives to attract and enhance the retention of executives and other key employees and to facilitate stock ownership by our senior executives. The Board considers individual and company performance when determining long-term incentive opportunities.

Health & Welfare Benefits

The named executive officers participate in a variety of retirement, health and welfare, and paid time-off benefits designed to enable us to attract and retain our workforce in a competitive marketplace. Health and welfare and paid time-off benefits help ensure that we have a productive and focused workforce.

Severance and Change of Control Arrangements

We do not have a formal plan for severance or separation pay for our employees and officers, with the exception of Colin Dyne and Andrea Sobel (as further described below). In the future, we may include severance provisions in employment agreements of our employees or other officers that could be triggered in the event of involuntary termination without cause or in the event of a change in control.

Other Benefits

In order to attract and retain highly qualified executives, we provide our named executive officers with automobile allowances that we believe are consistent with current market practices. Our executives also may participate in our 401(k) plan.

Process for Setting Executive Compensation

When making pay determinations for named executive officers, the Board may consider factors including: (1) actual company performance as compared to pre-established goals, (2) individual executive performance and expected contribution to our future success, (3) changes in economic conditions and the external marketplace and (4) the recommendation of our Chief Executive Officer. The Board may also consider compensation information from data gathered from annual reports and proxy statements from companies that the Board generally considers comparable to our company. Ultimately, our Board uses its judgment when determining how much to pay our executive officers and attempts to set the pay for our executive officers at levels that it believes are competitive and necessary to attract and retain talented executives capable of achieving our long-term objectives.

Compensation for Fiscal Year Ended December 31, 2011

In the fiscal year ended December 31, 2011, we compensated our executive officers through base salary, bonuses and perquisites, which consisted of medical and disability insurance and car allowances and expenses. The following is a description of the material terms of each of our named executive officer’s employment arrangements with us:

Colin Dyne

On May 21, 2007, our Board of Directors appointed Colin Dyne as our Chief Executive Officer and Co-Chairman of the Board of Directors, and Mr. Dyne became our Chief Financial Officer effective December 30, 2010. Mr. Dyne received a base salary of $395,000 during 2010 and 2011 and also received medical insurance reimbursements and an auto allowance of $2,000 per month. As determined by the Company’s Board of Directors based on the company’s performance, Mr. Dyne did not receive annual bonuses for the years ended December 31, 2011 and 2010. However, on February 3, 2011, a cash bonus of $275,000 was paid to Mr. Dyne in connection with the successful resolution of our litigation with Charlotte Russe. On February 3, 2011, Mr. Dyne was also awarded an option to purchase 200,000 shares of our common stock at an exercise price of $2.25 per share. The option has a term of ten years, vested immediately, and was granted outside our 2005 Stock Incentive Plan. The option was granted to Mr. Dyne as compensation for personal guaranties Mr. Dyne provided in connection with the company’s factoring arrangements.

On December 14, 2011, we entered into an employment agreement with Colin Dyne pursuant to which Mr. Dyne will continue to serve as our Chief Executive Officer for a term of five years, which term will automatically renew for successive one year periods unless we or Mr. Dyne elect not to extend the term of the agreement. During the term of the Agreement, Mr. Dyne will receive a base salary of $650,000 per annum which is subject to increase and will be eligible to receive an annual cash performance bonus.

If Mr. Dyne’s employment is terminated as a result of his death or disability, we will pay to Mr. Dyne or his estate all accrued obligations, a lump sum equal to 100% of his then effective base salary and the pro-rated bonus. In addition, all outstanding equity awards previously granted to Mr. Dyne will accelerate and become fully vested on the date of his termination. In the event Mr. Dyne is terminated for cause or Mr. Dyne terminates his employment without good reason, we will have no further obligations to Mr. Dyne except to pay Mr. Dyne all accrued obligations.

Andrea Sobel

On May 22, 2008, Andrea Sobel was appointed our Executive Vice President of Branding and Licensing. On January 31, 2012, Ms. Sobel was appointed our President of Licensing. Ms. Sobel entered into an employment agreement with us on May 16, 2008. Pursuant to the agreement, Ms. Sobel is employed on an "at-will" basis, and received an initial base salary of $200,000 per annum. Ms. Sobel also received medical insurance reimbursements and an auto allowance of $500 per month. Ms. Sobel did not receive annual bonuses for the years ended December 31, 2011 and 2010. However, on February 3, 2011, a cash bonus of $25,000 was paid to Ms. Sobel in connection with the successful resolution of the Company’s litigation with Charlotte Russe, as discussed in Note 7. On February 3, 2011, our Board of Directors approved an award to Ms. Sobel of options to purchase 33,333 shares of common stock at an exercise price of $2.25 per share. The options have a term of ten years and vest in thirty equal monthly installments beginning February 1, 2011 through August 1, 2013.

On December 14, 2011, we entered into an employment agreement with Ms. Sobel pursuant to which Ms. Sobel will serve as our President of Licensing for a term of three years, which term will automatically renew for successive one year periods unless the company or Ms. Sobel elects not to extend the term of the agreement. During the term of the agreement, Ms. Sobel will receive a base salary of $250,000 per year, which is subject to increase and will be eligible to receive an annual cash performance bonus. Pursuant to the agreement, Ms. Sobel was also granted a ten year option to purchase 50,000 shares of common stock at an exercise price of $3.00 per share. The options vest in equal quarterly installments over a period of three years beginning on March 14, 2012.

Outstanding Equity Awards at Fiscal Year-End 2011

The following table presents information regarding outstanding options held by our named executive officers as of the end of our fiscal year ended December 31, 2011. None of the named executive officers exercised options during the fiscal year ended December 31, 2011.

		Number of Securities Underlying Unexercised Options (#)				Option Exercise		Option Expiration
Name	Grant Date	Exercisable		Unexercisable		Price ($)		Date
Colin Dyne	February 3, 2011 ⁽¹⁾		66,667		—		2.25	February 3, 2021

Andrea Sobel	May 16, 2008 ⁽²⁾		13,333		—		6.00	May 16, 2018
	June 12, 2009 ⁽³⁾		1,875		1,125		3.00	June 12, 2019
	February 3, 2011 ⁽⁴⁾		12,222		21,111		2.25	February 3, 2021
	December 14, 2011 ⁽⁵⁾		—		50,000		3.00	December 14, 2021

(1)

These options vested immediately on the date of grant.

(2)

These stock options vested 50% on May 1, 2009, and the remaining 50% vested in equal monthly installments thereafter through October 1, 2010.

(3)

These stock options vest 25% on June 12, 2010 and the remaining 75% vest in equal monthly installments thereafter through July 12, 2013.

(4)

These stock options vest in thirty equal monthly installments beginning February 1, 2011 through August 1, 2013.

(5)

These stock options vest in equal quarterly installments over three years beginning March 14, 2012 through December 14, 2014.

Director Compensation

The following table details the total compensation earned by the company’s non-employee directors in 2011:

Name	Fees Earned or Paid in Cash ($)		Option Awards ($)		All Other Compensation ($)		Total ($)
Dean Oakey ⁽¹⁾		10,000		-		-		10,000

Susan White		10,000		-		-		10,000

Al Gossett ⁽²⁾		-		-		-		-

Total		20,000		-		-		20,000

(1)

Mr. Oakey resigned from our Board of Directors on November 21, 2011.

(2)

Mr. Gossett was appointed to our Board of Directors on December 14, 2011.

The general policy of our Board is that compensation for non-employee directors should be a mix of cash and equity based compensation. We do not pay management directors for Board service in addition to their regular employee compensation. Currently, we pay our non-employee directors an annual fee of $10,000. Our directors are also reimbursed for travel expenses associated with attendance at Board meetings. There were no reimbursements for travel expenses for the fiscal year ended December 31, 2011.

We do not have a formal policy with regard to option grants to our Board of Directors. However, when a director is elected or appointed to our Board, we generally follow a practice of granting an options to such director to purchase up to 2,000 shares of our common stock, with the size of the option grant being determined based on the number of months the new director will serve as a director in the fiscal year in which the option grant is awarded. Thereafter, we generally issue annual option grants to all non-employee directors to purchase up to 3,200 shares. In June 2011 and 2010, there were no option grants to our non-employee directors.

2005 Stock Incentive Plan

Our 2005 Stock Incentive Plan was adopted on November 23, 2005 and became effective on January 5, 2006. A total of 366,667 shares of common stock have been reserved for issuance upon exercise of awards granted under the 2005 Stock Incentive Plan. Any shares of common stock subject to an award, which for any reason expires or terminates unexercised, are again available for issuance under the 2005 Stock Incentive Plan.

Our 2005 Stock Incentive Plan will terminate after 10 years from the date on which our board approved the plan, unless it is terminated earlier by our board. The plan authorizes the award of stock options and stock purchase grants.

Our 2005 Stock Incentive Plan is administered by our full board of directors. To the extent we expand our board of directors, we intend to form a compensation committee, all of the members of which will be independent directors under applicable federal securities laws and outside directors as defined under applicable federal tax laws. Following its formation, the compensation committee will have the authority to construe and interpret the plan, grant awards and make all other determinations necessary or advisable for the administration of the plan.

Our 2005 Stock Incentive Plan provides for the grant of both incentive stock options that qualify under Section 422 of the Internal Revenue Code and nonqualified stock options. Incentive stock options may be granted only to employees of ours or any parent or subsidiary of ours. All awards other than incentive stock options may be granted to our employees, officers, directors, consultants, independent contractors and advisors of ours or any parent or subsidiary of ours. The exercise price of incentive stock options must be at least equal to the fair market value of our common stock on the date of grant. The exercise price of incentive stock options granted to 10% shareholders must be at least equal to 110% of that value. The exercise price of nonqualified stock options will be determined by our board of directors when the options are granted.

In general, options will vest over various periods ranging from immediate vesting to vesting over four years. The vesting period is generally determined by the number of past years employed with the company. The term of options granted under our 2005 Stock Incentive Plan may not exceed 10 years.

Awards granted under our 2005 Stock Incentive Plan may not be transferred in any manner other than by will or by the laws of descent and distribution or as determined by our board of directors. Unless otherwise restricted by our board of directors, nonqualified stock options may be exercised during the lifetime of the optionee only by the optionee, the optionee’s guardian or legal representative or a family member of the optionee who has acquired the option by a permitted transfer. Incentive stock options may be exercised during the lifetime of the optionee only by the optionee or the optionee’s guardian or legal representative. Options granted under our 2005 Stock Incentive Plan generally may be exercised for a period of three months after the termination of the optionee’s service with us or any parent or subsidiary of ours. Options will generally terminate immediately upon termination of employment for cause.

The purchase price for restricted stock will be determined by our board of directors or compensation committee, as applicable, at the time of grant. Stock bonuses may be issued for past services or may be awarded upon the completion of services or performance goals.

If we are subject to a sale, merger, consolidation, reorganization, liquidation or change in control, our Board of Directors may take actions which include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on rights so as to provide for earlier, later, extended or additional time for exercise and other modifications. In addition, the Board of Directors may take such actions with respect to all participants, to certain categories of participants or only to individual participants in the plan. Moreover, the Board of Directors may take such action before or after granting rights to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action.

Indemnification of Directors and Executive Officers and Limitation of Liability

Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for:

any breach of their duty of loyalty to the corporation or its stockholders;

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

unlawful payments of dividends or unlawful stock repurchases or redemptions; or

any transaction from which the director derived an improper personal benefit.

Article Fifth, paragraph D of our Amended and Restated Certificate of Incorporation states that no director shall have personal liability to us or our stockholders for monetary damages for breach of fiduciary duty as a director. However, the provision does not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the Delaware General Corporations law, or (iv) for any transaction from which the director derived an improper personal benefit.

Article IX, Section 1 of our bylaws states that we shall indemnify any person who was, or is threatened to be, made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a Director, officer, employee or agent of the company, or is or was serving at the request of the company as a Director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the extent and under the circumstances permitted by the General Corporation Law of the State of Delaware. Such indemnification (unless ordered by a court) shall be made as authorized in a specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in the General Corporation Law of the State of Delaware. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by our stockholders.

In addition to the indemnification required in our Amended and Restated Certificate of Incorporation and bylaws, we have entered into indemnity agreements with each of our officers, former officers Darryn Barber and Thomas Nields, directors and key employees. These agreements provide for the indemnification of our directors, officers and key employees for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were our agents. We believe these indemnification provisions and agreements are necessary to attract and retain qualified directors, officers and key employees.

A stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification by us is sought, nor are we aware of any threatened litigation that may result in claims for indemnification, other than as described elsewhere in this report.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, key employees or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table presents information regarding the beneficial ownership of our common stock as of March 30, 2012 by:

each of the executive officers listed in the summary compensation table;

each of our directors;

all of our directors and executive officers as a group; and

each shareholder known to us to be the beneficial owner of more than 5% of our common stock.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to options, warrants and other derivative securities from the Company that are currently exercisable or convertible, or exercisable or convertible within 60 days of March 30, 2012 are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or other convertible security for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

The information presented in this table is based on 2,400,171 shares of our common stock outstanding on March 30, 2012. Unless otherwise indicated, the address of each of the executive officers and directors and 5% or more shareholders named below is c/o Sequential Brands Group, Inc., 17383 Sunset Boulevard, Pacific Palisades, CA 90272.

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percentage of Shares Outstanding

Executive Officers and Directors:
Colin Dyne (1) Director, Chief Executive Officer, Chief Financial Officer and Secretary		702,104		27.0	%
William Sweedler (2) Chairman of the Board of Directors		6,628,571		73.4	%
Matthew Eby (2) Director		6,628,571		73.4	%
Richard Gersten (2) Director		6,628,571		73.4	%
Al Gossett		-		-
Susan White (3) Director		6,800		*
Andrea Sobel (4) President of Licensing		62,201		*

Named Directors and officers as a group (7 persons) (5)		7,399,676		79.6	%

5% Shareholders:
Gerard Guez (6)		713,226		29.7	%
Monto Holdings (Pty) Ltd. (7)		1,083,333		31.1	%
TCP WR Acquisition LLC (2)		6,428,571		73.4	%

Less than 1%

(1)

Consists of 502,104 shares of common stock and options to purchase 200,000 shares of common stock.

(2)

Consists of debentures convertible into 5,523,809 shares of our common stock and 1,104,762 warrants to purchase shares of our common stock at an exercise price of $2.63 per share issued to TCP WR Acquisition LLC. Our directors, William Sweedler, Matthew Eby and Richard Gersten, as co-managing members of Tengram Capital Associates, LLC, which is the managing member of TCP WR Acquisition, LLC, exercise voting and investment authority over the shares issuable upon conversion of the debentures and the shares issuable upon exercise of the warrants held by this company. The address of TCP WR Acquisition LLC is 15 Riverside Avenue, Floor 1, Westport, CT 06880.

(3)

Consists of 6,800 options to purchase common stock.

(4)

Consists of 62,201 options to purchase common stock.

(5)

Consists of 502,104 shares of common stock, options to purchase 269,001 shares of common stock, debentures convertible into 5,523,809 shares of our common stock and 1,104,762 of warrants to purchase shares of our common stock at an exercise price of $2.63 per share.

(6)

Consists of 713,226 shares of common stock. The address of Gerard Guez is 9000 Sunset Boulevard, Penthouse West Hollywood, CA 90069.

(7)

Consists of 250,000 warrants to purchase shares of common stock at an exercise price of $3.00 per share and 833,333 warrants to purchase our common stock at an exercise price of $1.20 per share. Ronald Dyne exercises voting and investment authority over the shares issuable upon exercise of the warrants held by this company. The address of Monto Holdings (Pty), Ltd. is Level 3, 100 New South Head Road, Edgecliff NSW 2027.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information regarding our equity compensation plans as of December 31, 2011.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans

Equity compensation plans approved by security holders (1)		251,467	$	6.30		115,200
Equity compensation plans not approved by security holders		1,312,666	$	1.80		—
Total		1,564,133				115,200

(1)

Consists of shares underlying our 2005 Stock Incentive Plan, of which an aggregate of 366,667 shares have been reserved for issuance. All outstanding awards under the 2005 option plan consist of stock options.

Material Features of Individual Equity Compensation Plans not Approved by Stockholders

On August 18, 2011, we issued a warrant to purchase 833,333 shares of our common stock to Monto Holdings (Pty) Limited in conjunction with a note payable as further described elsewhere in this report. The warrant has an exercise price of $1.20, a term of five years and is exercisable immediately. No proceeds were received by us as a result of the warrant issuance.

On June 24, 2011, the Company issued a warrant to purchase 250,000 shares of its common stock to Monto Holdings (Pty) Limited in connection with an asset purchase agreement as further described in Note 14 to the consolidated financial statements. The warrant has an exercise price of $3.00, a term of five years and is exercisable immediately. No proceeds were received by us as a result of the warrant issuance.

On February 3, 2011, Colin Dyne, our Chief Executive Officer, was awarded an option to purchase 200,000 shares of our common stock at an exercise price of $2.25 per share. The option has a term of ten years, vested immediately, and was granted outside our 2005 Stock Incentive Plan. The option was granted to Mr. Dyne as compensation for personal guaranties Mr. Dyne provided in connection with the company’s factoring arrangements.

Effective October 1, 2007, we entered into a consulting agreement with Europlay Capital Advisors, LLC. Under the terms of the consulting agreement, Europlay Capital Advisors acted as our exclusive financial advisor to raise capital and provide other financial advisory and investment banking services to us for a term of one year. In conjunction with the consulting agreement, we issued to Europlay Capital Advisors a warrant to purchase 16,667 shares of our common stock at an exercise price of $7.50 per share. The warrant is fully vested and has a term of five years. No proceeds were received by us as a result of the warrant issuance.

On November 13, 2007, we issued a warrant to purchase 10,000 shares of our common stock to Tennman WR-T, Inc. The warrant has an exercise price of $6.00, vested immediately and has a term of five years. No proceeds were received by us as a result of the warrant issuance.

On March 19, 2008, we issued a warrant to purchase 2,667 shares of our common stock to CCG Investor Relations for consulting services. The warrant has an exercise price of $7.50, a five-year term and vested over the 9-month term of the service contract. No proceeds were received by us as a result of the warrant issuance.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Other than the employment arrangements described above in “Executive Compensation” and the transactions described below, since January 1, 2010, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:

in which the amount involved exceeds $120,000; and

in which any director, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

Transactions with Officers and Directors and 5% Shareholders

William Sweedler, Matthew Eby and Richard Gersten are each directors of the company, and are the controlling members of Tengram Capital Associates, LLC which has the sole voting control over TCP WR Acquisition, LLC. As further described in Footnote 24 to the company’s Consolidated Financial Statements, which disclosure is incorporated herein by reference, on February 2, 2012, the company entered into a Securities Purchase Agreement with TCP WR Acquisition, LLC pursuant to which the company sold debentures, warrants and Series A Preferred Stock to TCP.

Colin Dyne became our Chief Executive Officer and a director of the company on May 21, 2007 and our Chief Financial Officer effective as of December 31, 2010. Mr. Dyne served as Vice Chairman of the Board of Directors of Talon International, Inc. (OTCBB: TALN), owner of Talon zippers, until July 2010. Mr. Dyne founded Tag-It, Inc., a subsidiary of Talon, in 1991. Mr. Dyne served as Talon’s President from inception and as its Chief Executive Officer from 1997 to 2005. During the years ended December 31, 2011 and 2010, we purchased trim products from Talon amounting to approximately $226,000 and $123,000, respectively.

During the year ended December 31, 2011, Mr. Dyne loaned the company $230,000 in the form of unsecured, non-interest bearing advances. There were no formal terms of repayment, however, the entire balance was repaid to Mr. Dyne in 2011.

On August 13, 2010, our subsidiary, William Rast Licensing, entered into a promissory note in the amount of $750,000 with Mobility Special Situations I, LLC (“Mobility”), an entity owned in part by Mark Dyne, the brother of our Chief Executive Officer, Colin Dyne, and New Media Retail Concepts, LLC, an entity owned by Gerard Guez, a significant beneficial owner of our common stock. The promissory note had an interest rate of 8%, payable monthly in arrears, and was due February 13, 2012. The promissory note was secured by the assets of William Rast Licensing and was guaranteed by our other entities under common control, including Sequential Brands Group, William Rast Sourcing, William Rast Retail, Bella Rose and Versatile Entertainment. The outstanding principal and interest balances of this promissory note were paid in full in February 2012 with the proceeds received from the securities purchase agreement as further described elsewhere in this report.

In connection with the promissory note discussed above, we also entered into an asset purchase agreement with New Media Retail Concepts, LLC and ECA Holdings II, LLC, an entity affiliated with Mark Dyne, on August 13, 2010. In exchange for $750,000 cash, we sold 50% of any future net proceeds, after legal fees and expenses, that we may receive as a result of our litigation with Charlotte Russe, as further described elsewhere in this report. We were not required to repay the $750,000 cash proceeds received from the asset purchase agreement regardless of a favorable or unfavorable outcome of the Charlotte Russe litigation. New Media Retail Concepts, LLC and ECA Holdings II, LLC received from Charlotte Russe, in respect to the interest they acquired in the litigation, a combined amount of $2.9 million of the settlement amount paid by Charlotte Russe pursuant to the settlement agreement entered into by all parties to the litigation on February 3, 2011.

We entered into the above mentioned promissory note and asset purchase agreement in order to fund a shortfall in cash flow from operations resulting from our litigation with Charlotte Russe. We experienced a significant decreased in net sales and cash flows from operations of our People’s Liberation business, and also incurred significant legal and other expenses related to the litigation. The $750,000 purchase price of the asset purchase agreement was determined to be the fair value of the transactions, which included the $750,000 promissory note, based on management’s evaluation of alternative financing arrangements and current market conditions. At the time we entered into these transactions, management in consultation with legal counsel, was unable to determine if we would prevail or, if in the event we did prevail, what the range of potential settlement could be.

In May 2010, our subsidiary, William Rast Sourcing, LLC, entered into a design and licensing agreement with the Target Corporation, as further described elsewhere in this report. During the year ended December 31, 2011, Target made a direct payment of $250,000 to Justin Timberlake, a minority interest holder of William Rast Sourcing, on our behalf for his services related to the Target agreement.

Kenneth Wengrod, a former member of our Board of Directors, currently serves as President of FTC Commercial Corp., a company which he founded in 2002 and in which he continues to hold a minority equity position. We were party to a factoring agreement with FTC as further described elsewhere in this report. As of December 31, 2010, total factored accounts receivable with FTC included in due from (to) factor amounted to approximately $92,000. Net outstanding advances amounted to approximately $43,000 as of December 31, 2010, and are included in the due to factor balance. Mr. Wengrod resigned from our Board of Directors on July 12, 2010. Our factoring agreement with FTC was terminated in 2010.

Item 14.

Principal Accounting Fees and Services

Our Board of Directors does not have an Audit Committee. The functions customarily delegated to an Audit Committee are performed by our full Board of Directors. Effective February 20, 2009, Crowe Horwath LLP became the Company’s principal independent accounting firm. All audit work for the fiscal year ended December 31, 2010 was performed by the full time employees of Crowe Horwath LLP.

Change in Independent Auditor

On April 21, 2011, our Board of Directors approved the engagement of Weinberg and Company as our new independent registered public accounting firm and on April 22, 2011, Crowe Horwath LLP was dismissed as our independent registered public accounting firm.

During our fiscal years ended December 31, 2010 and 2009 and through April 21, 2011, we did not consult with Weinberg and Company on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on our financial statements, and Weinberg and Company did not provide either a written report or oral advice to us that Weinberg and Company concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K. At our annual meeting of stockholders held on June 17, 2011, our stockholders ratified the appointment of Weinberg and Company as our independent registered public accounting firm for the fiscal year ending December 31, 2011.

Information Pertaining to Crowe Horwath LLP

The audit reports of Crowe Horwath LLP on the financial statements of the Company as of and for the fiscal years ended December 31, 2010 and 2009 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

In connection with the audits of our financial statements for the fiscal years ended December 31, 2010 and 2009 and through April 21, 2011, there were: (i) no disagreements between the Company and Crowe Horwath LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Crowe Horwath LLP, would have caused Crowe Horwath LLP to make reference to the subject matter of the disagreement in their reports on our financial statements for such fiscal years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

We provided Crowe Horwath LLP a copy of the disclosures in our Current Report on Form 8-K filed on April 27, 2011 reporting the change in our independent registered public accounting firm and requested that Crowe Horwath LLP furnish us with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with our statements under Item 4.01 of the Current Report on Form 8-K. A copy of the letter dated April 27, 2011, furnished by Crowe in response to that request is filed as Exhibit 16.1 to the 8-K.

Fees Paid to Independent Accountants

Audit Fees

Fees for audit and review services provided by Weinberg and Company totaled approximately $62,000 during the year ended December 31, 2011, including fees associated with the December 31, 2011 audit, and the reviews of our quarterly financial statements for the periods ended March 31, 2011, June 30, 2011 and September 30, 2011.

Fees for audit services provided by Crowe Horwath LLP totaled approximately $90,000 during the year ended December 31, 2011 for fees associated with our December 31, 2010 audit. Fees for audit and review services provided by Crowe Horwath LLP totaled approximately $149,000 during the year ended December 31, 2010, including fees associated with the December 31, 2010 audit, the reviews of our quarterly financial statements for the periods ended March 31, 2010, June 30, 2010 and September 30, 2010, and the restatement of our financial statements for the annual and quarterly periods beginning January 1, 2008 through March 31, 2010.

Audit-Related Fees

There were no fees billed in each of the last two fiscal years for assurance and related services by our principal accountant that reasonably relate to the performance of the audit or review of our financial statements.

Tax Fees

There were no fees billed in each of the last two fiscal years for professional services by our principal accountant for tax compliance, tax advice, and tax planning.

All Other Fees

No other fees were incurred during the years ended December 31, 2011 and 2010 for services provided by Crowe Horwath LLP.

Generally, the Board approves in advance audit and non-audit services to be provided by our independent accounting firms. In other cases, in accordance with Rule 2-01(c)(7) of Securities and Exchange Commission Regulation S-X, the Board has delegated pre-approval authority to the Chairman of the Board for matters which arise or otherwise require approval between regularly scheduled meetings of the Board of Directors, provided that the Chairman reports such approvals to the Board at the next regularly scheduled meeting of the Board of Directors. No audit-related services were approved by the Board of Directors in accordance with Item 2-01(c)(7)(i)(C) of Regulation S-X during the fiscal years ended December 31, 2011 and December 31, 2010.

PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a)

Documents filed as part of this report

Financial Statements.

See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K/A, which is incorporated herein by reference.

Financial Statement Schedules.

All financial statement schedules are omitted because the information is inapplicable or presented in the Notes to Financial Statements.

Exhibits. See Item 15(b) below.

(b)

Exhibits. We have filed, or incorporated into this Form 10-K by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K/A.

(c)

Financial Statement Schedule. See Item 15(a) above.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SEQUENTIAL BRANDS GROUP, INC.

Date: March 29, 2013	/s/ Gary Klein
	By: Gary Klein
	Its: Chief Financial Officer (Principal Financial and Accounting Officer)

POWER OF ATTORNEY

The undersigned directors and officers of Sequential Brands Group, Inc. do hereby constitute and appoint Yehuda Shmidman with full power of substitution and resubstitution, as their true and lawful attorney and agent, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent, may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K/A, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto, and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date

/s/ Yehuda Shmidman	Chief Executive Officer and Director	March 29, 2013
Yehuda Shmidman	(Principal Executive Officer)

/s/ Gary Klein	Chief Financial Officer (Principal	March 29, 2013
Gary Klein	Financial and Accounting Officer)

/s/ Al Gossett	Director	March 29, 2013
Al Gossett

/s/ William Sweedler	Chairman of the Board of Directors	March 29, 2013
William Sweedler

/s/ Mathew D. Eby	Director	March 29, 2013
Mathew D. Eby

/s/ Richard Gersten	Director	March 29, 2013
Richard Gersten

S-1

INDEX TO EXHIBITS

Exhibit Number	Exhibit Title

2.1	Unit Purchase Agreement entered into as of April 7, 2011 by and among J. Lindeberg USA Corp., as buyer, and People’s Liberation, Inc. and Bella Rose, LLC, as sellers.* Incorporated by referenced to Exhibit 2.1 to our Current Report on Form 10-Q filed on May 16, 2011.

3.1	Amended and Restated Certificate of Incorporation of Sequential Brands Group, Inc. Incorporated by referenced to Exhibit 3.1 to our Current Report on Form 8-K (dated July 14, 2008), filed on July 18, 2008.

3.2	Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock. Incorporated by referenced to Exhibit 3.1 to our Current Report on Form 8-K (dated February 2, 2012), filed on February 8, 2012.

3.3	Certificate of Ownership and Merger merging Sequential Brands Group, Inc. with and into People’s Liberation, Inc. Incorporated by referenced to Exhibit 3.1 to our Current Report on Form 8-K (dated March 23, 2012), filed on March 29, 2012.

3.4	Bylaws of Sequential Brands Group, Inc. Incorporated by reference to Exhibit 3.10 to our Registration Statement on Form SB-2 (File No. 333-130930), filed on January 9, 2006.

4.1	2005 Sequential Brands Group, Inc. Option Plan. Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form SB-2 (File No. 333-130930), filed on January 9, 2006.**

10.1	Form of Indemnity Agreement. Incorporated by reference to Exhibit 10.12 to our Registration Statement on Form SB-2 (File No. 333-130930), filed on January 9, 2006.

10.2	Amended and Restated Limited Liability Company Operating Agreement of William Rast Licensing, LLC, dated as of January 1, 2007 by and between Bella Rose, LLC and Tennman WR-T, Inc. Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (dated May 8, 2007), filed with the Securities and Exchange Commission on May 14, 2007.

10.3	Amended and Restated Limited Liability Company Operating Agreement of William Rast Sourcing, LLC, dated as of January 1, 2007 by and between Bella Rose, LLC and Tennman WR-T, Inc. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (dated May 8, 2007), filed with the Securities and Exchange Commission on May 14, 2007.

10.4	Registration Rights Agreement dated September 28, 2007, by and among People’s Liberation and the investors identified on the signature pages thereof. Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2007.

10.5	Form of Warrant issued to Europlay Capital Advisors, LLC, dated October 1, 2007. Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2007.

E-1

10.6	Form of Warrant issued to Tennman WR-T, Inc., dated November 13, 2007. Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2007.

10.7	First Amendment to Amended and Restated Operating Agreement of William Rast Sourcing, LLC dated as of November 9, 2007, and effective as of April 1, 2007, by and between Bella Rose, LLC and Tennman WR-T, Inc. Incorporated by reference to Exhibit 10.30 to our Registration Statement on Form SB-2 (File No. 333-147684) filed on November 28, 2007.

10.8	First Amendment to Amended and Restated Operating Agreement of William Rast Licensing, LLC dated as of November 9, 2007, and effective as of April 1, 2007, by and between Bella Rose, LLC and Tennman WR-T, Inc. Incorporated by reference to Exhibit 10.31 to our Registration Statement on Form SB-2 (File No. 333-147684) filed on November 28, 2007.

10.9	Employment Agreement by and between Sequential Brands Group, Inc. and Andrea Sobel dated May 16, 2008. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (dated May 16, 2008), filed with the Securities and Exchange Commission on May 22, 2008.**

10.10	Operating Agreement of J. Lindeberg USA, LLC, effective as of July 1, 2008, by and among J. Lindeberg USA, LLC, Bella Rose, LLC and J. Lindeberg USA Corp. Incorporated by referenced to Exhibit 10.1 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

10.11	JL Sweden Services Agreement, effective as of July 1, 2008, by and between J. Lindeberg AB and J. Lindeberg USA, LLC. Incorporated by referenced to Exhibit 10.2 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

10.12	Management Services Agreement, effective as of July 1, 2008, by and between Sequential Brands Group, Inc. and J. Lindeberg USA, LLC. Incorporated by referenced to Exhibit 10.3 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

10.13	Trademark License Agreement, effective as of July 1, 2008, by and between J. Lindeberg AB and J. Lindeberg USA, LLC. Incorporated by referenced to Exhibit 10.4 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

10.14	Factoring Agreement, dated August 6, 2008, by and between J. Lindeberg USA, LLC and FTC Commercial Corp. Incorporated by referenced to Exhibit 10.5 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

10.15	Inventory Loan Facility Agreement, dated August 6, 2008, by and between J. Lindeberg USA, LLC and FTC Commercial Corp. Incorporated by referenced to Exhibit 10.6 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

E-2

10.16	Form of Guaranty entered into in favor of FTC Commercial Corp. Incorporated by referenced to Exhibit 10.7 to our Current Report on Form 8-K (dated August 6, 2008), filed on August 12, 2008.

10.17	Standard Office Lease, dated January 22, 2009, by and between 1212 Flower Real Estate, LLC and Sequential Brands Group, Inc. Incorporated by reference to Exhibit 10.37 to our Current Report on Form 10-K filed March 31, 2009.

10.18	Standard Industrial/Commercial Multi-Tenant Lease- Gross, dated January 22, 2009, by and between 1212 Flower Real Estate, LLC and Sequential Brands Group, Inc. Incorporated by reference to Exhibit 10.38 to our Current Report on Form 10-K filed March 31, 2009.

10.19	Addendum to Standard Industrial/Commercial Multi-Tenant Lease- Gross, dated January 22, 2009, by and between 1212 Flower Real Estate, LLC and Sequential Brands Group, Inc. Incorporated by reference to Exhibit 10.39 to our Current Report on Form 10-K filed March 31, 2009.

10.20	Amendment No. 1 to Factoring Agreement dated January 1, 2010 by and between FTC Commercial Corp. and William Rast Sourcing, LLC. Incorporated by reference to Exhibit 10.35 to our Current Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.

10.21	Amendment No. 2 to Factoring Agreement dated January 1, 2010 by and between FTC Commercial Corp. and William Rast Sourcing, LLC. Incorporated by reference to Exhibit 10.36 to our Current Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.

10.22	Asset Purchase Agreement entered into on August 13, 2010 by and among ECA Holdings II, LLC and New Media Retail Concepts, LLC and Sequential Brands Group, Inc. and its wholly-owned subsidiary Versatile Entertainment, Inc. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 10-Q filed November 12, 2010.

10.23	Form of Promissory Note entered into on August 13, 2010 by William Rast Licensing, LLC in favor of Mobility Special Situations I, LLC. Incorporated by reference to Exhibit 10.2 to our Current Report on Form 10-Q filed November 12, 2010.

10.24	Borrower Security Agreement entered into on August 13, 2010 by William Rast Licensing, LLC in favor of Mobility Special Situations I, LLC. Incorporated by reference to Exhibit 10.3 to our Current Report on Form 10-Q filed November 12, 2010.

10.25	Guarantor Security Agreement entered into on August 13, 2010 by Sequential Brands Group, Inc., Versatile Entertainment, Inc., Bella Rose, LLC, William Rast Sourcing, LLC, and William Rast Retail, LLC in favor of Mobility Special Situations I, LLC. Incorporated by reference to Exhibit 10.4 to our Current Report on Form 10-Q filed November 12, 2010.

10.26	Guaranty entered into on August 13, 2010 by Sequential Brands Group, Inc., Versatile Entertainment, Inc., Bella Rose, LLC, William Rast Sourcing, LLC, and William Rast Retail, LLC in favor of Mobility Special Situations I, LLC. Incorporated by reference to Exhibit 10.5 to our Current Report on Form 10-Q filed November 12, 2010.

E-3

10.27	APA Security Agreement entered into on August 13, 2010 by Sequential Brands Group, Inc., Versatile Entertainment, Inc., Bella Rose, LLC, William Rast Licensing, LLC, William Rast Sourcing, LLC, and William Rast Retail, LLC in favor of ECA Holdings II, LLC. Incorporated by reference to Exhibit 10.6 to our Current Report on Form 10-Q filed November 12, 2010.

10.28	Factoring Agreement effective as of October 7, 2010 by and between Rosenthal & Rosenthal, Inc. and William Rast Sourcing, LLC. Incorporated by reference to Exhibit 10.30 to our Annual Report on Form 10-K filed March 31, 2011.

10.29	Inventory Security Agreement effective as of October 7, 2010 by William Rast Sourcing, LLC in favor of Rosenthal & Rosenthal, Inc. Incorporated by reference to Exhibit 10.31 to our Annual Report on Form 10-K filed March 31, 2011.

10.30	Assignment Agreement effective as of October 7, 2010 by and between William Rast Licensing, LLC and Rosenthal & Rosenthal, Inc. Incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K filed March 31, 2011.

10.31	Form of Guarantee in favor of Rosenthal & Rosenthal. Incorporated by reference to Exhibit 10.33 to our Annual Report on Form 10-K filed March 31, 2011.

10.32	Consulting Agreement entered into on December 30, 2010 by and between Sequential Brands Group, Inc. and Darryn Barber. Incorporated by reference to Exhibit 10.34 to our Annual Report on Form 10-K filed March 31, 2011.

10.33	Separation Agreement entered into as of December 30, 2010 by and between Darryn Barber, Sequential Brands Group, Inc. and its subsidiaries. Incorporated by reference to Exhibit 10.35 to our Annual Report on Form 10-K filed March 31, 2011.

10.34	Amendment to Factoring Agreement entered into on February 2, 2011 by and between J. Lindeberg USA, LLC and FTC Commercial Corp. Incorporated by reference to Exhibit 10.36 to our Annual Report on Form 10-K filed March 31, 2011.

10.35	Consulting Agreement entered into on February 3, 2011 by and between Sequential Brands Group, Inc. and Thomas Nields. Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed May 16, 2011.

10.36	Separation Agreement entered into as of February 3, 2011 by and between Thomas Nields, Sequential Brands Group, Inc. and its subsidiaries. Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed May 16, 2011.

10.37	Asset Purchase Agreement dated June 24, 2011 by and between Monto Holdings (Pty) Ltd and People’s Liberation, Inc. and its wholly-owned subsidiary, Bella Rosa, LLC. Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed August 18, 2011.

10.38	Form of Common Stock Purchase Warrant issued to Monto Holdings (Pty) Ltd. dated June 24, 2011. Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed August 18, 2011.

E-4

10.39	Form of Promissory Note entered into on August 18, 2011 by William Rast Licensing, LLC in favor of Monto Holdings (Pty) Ltd. Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.40	Borrower Security Agreement entered into on August 18, 2011 by William Rast Licensing, LLC in favor of Monto Holdings (Pty) Ltd. Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.41	Guarantor Security Agreement entered into on August 18, 2011 by People’s Liberation, Inc., Versatile Entertainment, Inc., Bella Rose, LLC, William Rast Sourcing, LLC, and William Rast Retail, LLC in favor of Monto Holdings (Pty) Ltd. Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.42	Guaranty entered into on August 18, 2011 by People’s Liberation, Inc., Versatile Entertainment, Inc., Bella Rose, LLC, William Rast Sourcing, LLC, and William Rast Retail, LLC in favor of Monto Holdings (Pty) Ltd. Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.43	Form of Common Stock Purchase Warrant issued to Monto Holdings (Pty) Ltd. on August 18, 2011 by People’s Liberation, Inc. Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.44	Second Amended and Restated Limited Liability Company Operating Agreement of William Rast Sourcing, LLC, effective as of October 1, 2011. Incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.45	Second Amended and Restated Limited Liability Company Operating Agreement of William Rast Licensing, LLC, effective as of October 1, 2011. Incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.46	Royalty Agreement by and among William Rast Sourcing, LLC, William Rast Licensing, LLC and Tennman WR-T, Inc. effective as of October 1, 2011. Incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.47	Preemptive Rights and Board Nominee Agreement by and between People’s Liberation, Inc. and Tennman WR-T, Inc. effective as of October 1, 2011. Incorporated by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.48	Services Agreement by and between William Rast Licensing, LLC and Tennman Brands, LLC f/s/o Justin Timberlake effective as of October 1, 2011. Incorporated by reference to Exhibit 10.10 to our Quarterly Report on Form 10-Q filed November 21, 2011.

10.49	License Agreement by and between William Rast Sourcing, LLC and William Rast Licensing, LLC and JC Penney dated November 21, 2011. Incorporated by reference to Exhibit 10.49 to our Annual Report on Form 10-K filed March 30, 2012.***

10.50	Employment Agreement by and between Andrea Sobel and Sequential Brands Group, Inc. dated December 14, 2011. Incorporated by reference to Exhibit 10.50 to our Annual Report on Form 10-K filed March 30, 2012.**

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10.51	Employment Agreement by and between Colin Dyne and Sequential Brands Group, Inc. dated December 14, 2011. Incorporated by reference to Exhibit 10.51 to our Annual Report on Form 10-K filed March 30, 2012.**

10.52	Securities Purchase Agreement, dated February 2, 2012, between the Company and each purchaser identified on the signature page thereto. Incorporated by referenced to Exhibit 10.1 to our Current Report on Form 8-K (dated February 22, 2012), filed on February 28, 2012.

10.53	Form of Debenture. Incorporated by referenced to Exhibit 10.2 to our Current Report on Form 8-K (dated February 22, 2012), filed on February 28, 2012.

10.54	Form of Warrant. Incorporated by referenced to Exhibit 10.3 to our Current Report on Form 8-K (dated February 22, 2012), filed on February 28, 2012.

10.55	Stockholders Agreement dated February 22, 2012, by and among the Company, Colin Dyne, TCP WR Acquisition, LLC, and the other stockholders party thereto. Incorporated by referenced to Exhibit 10.4 to our Current Report on Form 8-K (dated February 22, 2012), filed on February 28, 2012.

10.56	Security Agreement, dated February 3, 2012, by and among the Company, certain subsidiaries of the Company and the holders of the Company’s Variable Rate Senior Secured Convertible Debentures signatory thereto. Incorporated by referenced to Exhibit 10.5 to our Current Report on Form 8-K (dated February 22, 2012), filed on February 28, 2012.

10.57	Subsidiary Guarantee, dated February 3, 2012, by and among certain subsidiaries of the Company in favor of the purchasers signatory to that certain Securities Purchase Agreement, dated February 2, 2012, between the Company and such purchasers. Incorporated by referenced to Exhibit 10.6 to our Current Report on Form 8-K (dated February 22, 2012), filed on February 28, 2012.

14.1	Sequential Brands Group, Inc. Code of Ethical Conduct. Incorporated by reference to Exhibit 14.1 to our Current Report on Form 10-KSB filed March 7, 2006.

21.1	Subsidiaries of Sequential Brands Group, Inc. Incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K filed March 30, 2012.

23.1	Consent of Independent Registered Public Accounting Firm.

23.2	Consent of Independent Registered Public Accounting Firm.

24.1	Power of Attorney (included on signature page).

31.1	Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

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32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document****

101.SCH	XBRL Taxonomy Extension Schema Document****

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document****

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document****

101.LAB	XBRL Taxonomy Extension Label Linkbase Document****

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document****

* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this agreement have been omitted. The Registrant undertakes to supplementally furnish a copy of the omitted schedules to the Securities and Exchange Commission upon request.

** Each a management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report on Form 10-K.

*** Certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for an order granting confidential treatment pursuant to Rule 24b-2 of the Rules and Regulations under the Securities and Exchange Act of 1934, as amended.

**** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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Attached files

SEQUENTIAL BRANDS GROUP, INC. Reports

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