UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14C INFORMATION
 
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934

 

Check the appropriate box:

Sequential Brands Group, Inc.

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

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SEQUENTIAL BRANDS GROUP, INC.
1065 Avenue of Americas, 30^th Floor
New York, NY 10018
 
NOTICE OF WRITTEN CONSENT AND INFORMATION STATEMENT
 
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.

This Information Statement is dated July 18, 2014 and is first being mailed to our stockholders on or about July 18, 2014.

To the Stockholders of Sequential Brands Group, Inc. (formerly known as People’s Liberation, Inc.):

This Notice of Written Consent and Information Statement is being furnished to the holders of common stock of Sequential Brands Group, Inc. (the “Company”), in connection with the Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 24, 2014, by and among the Company, SBG Universe Brands, LLC, a Delaware limited liability company and direct wholly owned subsidiary of the Company (“LLC Sub”), Universe Galaxy Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of LLC Sub (“Merger Sub”), Galaxy Brand Holdings, Inc., a Delaware corporation (“Galaxy”), Carlyle Equity Opportunity GP, L.P., a Delaware limited partnership, solely in its capacity as the representative of the Galaxy stockholders and optionholders (the “Stockholder Representative”), and, for limited purposes described therein, Carlyle Galaxy Holdings, L.P., a Delaware limited partnership (“Carlyle”). A copy of the Agreement and Plan of Merger is attached as Annex A to the accompanying Information Statement.

Pursuant to the Merger Agreement, at the closing, Merger Sub is expected to merge with and into Galaxy (the “Initial Merger”), with Galaxy continuing as the surviving corporation and a wholly-owned subsidiary of LLC Sub (the “Initial Surviving Corporation”), and immediately thereafter the Initial Surviving Corporation will merge with and into LLC Sub (the “Subsequent Merger”) with LLC Sub continuing as the surviving entity in the Subsequent Merger. In the Initial Merger, all outstanding equity interests of Galaxy, including outstanding options (whether vested or unvested), will be converted, as described in the accompanying Information Statement, into the right to receive a portion of $100,000,000 in cash, subject to adjustment as set forth in the Merger Agreement, 13,750,000 shares of the Company’s common stock, and warrants to purchase an aggregate of up to 3,000,000 additional shares of the Company’s common stock based upon the performance of the Linens ‘n Things brand following the closing (collectively, the “Merger Consideration”), subject to the terms and conditions set forth in the Merger Agreement. The Initial Merger and the Subsequent Merger are referred to collectively in this Notice of Written Consent and Information Statement as the “mergers.”

Prior to the execution of the Merger Agreement, the board of directors of the Company (i) determined that the Merger Agreement and the transactions contemplated thereby, including the mergers, are in the best interests of the Company and its stockholders, (ii) approved and adopted the Merger Agreement, including the mergers, (iii) approved the execution, delivery and performance by the Company of the Merger Agreement and the consummation of the transactions contemplated thereby, and (iv) recommended approval by the Company’s stockholders of the issuance by the Company of shares of the Company’s common stock as a portion of the Merger Consideration.

Under the General Corporation Law of the State of Delaware (the “DGCL”), the Company’s stockholders are not required to approve the mergers. However, because the Company’s common stock is listed on The NASDAQ Stock Market, it is subject to NASDAQ Listing Rule 5635(a) and the Company is required to obtain stockholder approval in connection with the issuance of 13,750,000 shares of its common stock and warrants to purchase an aggregate of up to 3,000,000 additional shares of its common stock as a portion of the Merger Consideration (the “Stock Issuance”). Pursuant to NASDAQ Listing Rule 5635(a), because the number of shares of common stock of the Company to be issued in the Stock Issuance will have, upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before such issuance, the affirmative vote or written consent of the holders of a majority of the issued and outstanding shares of common stock of the Company is required.

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Prior to the issuance of such shares, certain affiliates of Tengram Capital Partners Gen2 Fund, L.P., certain affiliates of BlackRock, Inc., Berylson Master Fund, LP, FLAG Private Equity V, L.P., Siguler Guff Small Buyout Opportunities Fund II, LP and William Sweedler (collectively, the “Consenting Holders”) beneficially owned, in the aggregate, 13,225,272 shares of the Company’s common stock, or approximately 51.4% of the 25,721,624 shares of the Company’s common stock outstanding and entitled to vote on such matters as of June 24, 2014. Each of the Consenting Holders executed a written consent in lieu of a meeting and, on June 24, 2014, delivered such written consent to the Company, approving the issuance of shares of common stock of the Company as a portion of the Merger Consideration in accordance with NASDAQ Listing Rule 5635(a). As a result, no further action by any other Company stockholder is required to approve the Merger Agreement or the transactions contemplated thereby.

The Company has not solicited and will not be soliciting your authorization or approval of the Merger Agreement and the transactions contemplated thereby, including the Stock Issuance pursuant to NASDAQ Listing Rule 5635(a). We are furnishing this Notice of Written Consent and the accompanying Information Statement to provide you with material information concerning the actions taken in connection with the written consent in accordance with the requirements of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder, including Regulation 14C. This Notice of Written Consent and the accompanying Information Statement also constitute notice to you under Section 228 of the DGCL of the actions taken by written consent.

We encourage you to read the entire Information Statement carefully and thank you for your continued interest in the Company.

July 18, 2014

BY ORDER OF THE BOARD OF DIRECTORS
 
/s/ William Sweedler

William Sweedler
Chairman of the Board of Directors

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ADDITIONAL INFORMATION

Additional business and financial information about Sequential Brands Group, Inc. (which we refer to in this Information Statement as “the Company,” “Parent,” “we” or “us”) can be found in documents previously filed by us with the Securities and Exchange Commission, or the SEC. This information is available to you without charge at the SEC’s website at http://www.sec.gov. You can also obtain additional copies of this Information Statement, as well as other relevant materials, by visiting our website at http://www.sequentialbrandsgroup.com, or by requesting them in writing or by telephone using the following contact information:

Sequential Brands Group, Inc.
1065 Avenue of the Americas, 30^th Floor
New York, NY 10018
Attn: Investor Relations
(646) 564-2577

See “Where You Can Find More Information” beginning on page 64 for more information about the documents previously filed by us with the SEC and incorporated into this Information Statement by reference, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and our Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2014. The information on our website is not part of this Information Statement, nor is it incorporated by reference.

All information contained in this Information Statement regarding Galaxy Brand Holdings, Inc. was provided by Galaxy Brand Holdings, Inc.

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SUMMARY			1
The Parties to the Merger Agreement			1
The Mergers			2
Financing of the Mergers			2
Reasons for the Mergers			3
Approval of the Board			3
NASDAQ Stockholder Approval Requirement			3
Opinion of Consensus			3
Interests of Certain Persons in Matters to be Acted Upon			4
Executive Compensation			4
Other Material Agreements and Relationships			4
Impact of Stock Issuance on Existing Stockholders			4
Material U.S. Federal Income Tax Consequences of the Mergers to the Company and its Stockholders			4
Accounting Treatment of the Mergers			4
Regulatory Approvals and Clearances			5
Expected Timing of the Mergers			5
Conditions to the Mergers			5
Termination of the Merger Agreement			5
Termination Fee			6
Appraisal Rights			6
Description of the Warrants			6
Registration Rights			7
QUESTIONS AND ANSWERS ABOUT THE MERGERS			8
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			11
RISK FACTORS			12
THE MERGERS			17
The Parties to the Merger Agreement			17
General Description of the Mergers			18
NASDAQ Stockholder Approval Requirement			18
Background of the Mergers			18
Reasons for the Mergers; Approval of the Board			21
Opinion of Consensus			24
Executive Compensation			29
Other Material Agreements and Relationships			29
Impact of Stock Issuance on Existing Stockholders			29
Material U.S. Federal Income Tax Consequences of the Mergers to the Company and its Stockholders			30
Accounting Treatment of the Mergers			30
Regulatory Approvals and Clearances			30

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Federal Securities Law Consequences			31
Financing of the Mergers			31
Expected Timing of the Mergers			32
Appraisal Rights			33
THE MERGER AGREEMENT			34
DESCRIPTION OF THE WARRANTS			49
REGISTRATION RIGHTS AGREEMENT			50
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON			51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			52
INFORMATION ABOUT GALAXY			55
DELIVERY OF MATERIALS			63
WHERE YOU CAN FIND MORE INFORMATION			64
INDEX TO FINANCIAL STATEMENTS			F-1
ANNEX A: AGREEMENT AND PLAN OF MERGER
ANNEX B: OPINION OF CONSENSUS

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QUESTIONS AND ANSWERS ABOUT THE MERGERS

The following questions and answers address briefly some questions you may have regarding the Merger Agreement, the mergers and the Stock Issuance. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the more detailed information contained elsewhere in this Information Statement, the annexes to this Information Statement and the documents referred to in this Information Statement.

Please see “The Mergers — Reasons for the Mergers” beginning on page 21 for a detailed discussion of the reasons for and benefits of the mergers.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Information Statement includes “forward-looking statements” about the Company and Galaxy that are subject to risks and uncertainties. All statements other than statements of historical fact included in this document are forward-looking statements. Statements using words such as “anticipate,” “believe,” “intend,” “project,” “plan,” “expect,” “continue,” “estimate,” “goal,” “forecast,” “may,” “should,” “will,” “would,” or other similar expressions help identify forward-looking statements.

Except for their respective obligations to disclose material information under U.S. federal securities laws, neither the Company nor Galaxy undertakes any obligation to release publicly any revisions to any forward-looking statements, to report events or circumstances after the date of this document, or to report the occurrence of unanticipated events.

Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

All written and oral forward-looking statements attributable to the Company or Galaxy or persons acting on behalf of the Company or Galaxy are expressly qualified in their entirety by such factors. For additional information with respect to these factors, please see the section entitled “Where You Can Find More Information.”

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RISK FACTORS

The Company’s stockholders should carefully read and consider the following risk factors, as well as the other information contained and referred to in this Information Statement. In addition, the Company’s stockholders should carefully read and consider the risks associated with the business of the Company as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Risks Relating to the Mergers

The mergers may not be completed, which could adversely affect the Company’s financial condition, results of operations and trading price of its common stock.

The Merger Agreement contains closing conditions, which are described in the section “The Merger Agreement” beginning on page 34. If we are unable to satisfy or obtain a waiver for these conditions, we will be unable to complete the mergers, and the Company will be subject to a number of risks, including the following:

The occurrence of any of these events individually or in combination could have a material adverse effect on the financial condition and results of operations of the Company and the trading price of the Company’s common stock.

The failure to successfully combine the businesses of the Company and Galaxy in the expected time frame may adversely affect the Company’s financial conditions and results of operations.

The success of the mergers will depend, in part, on the ability of the combined company to realize the anticipated benefits from combining the businesses of the Company and Galaxy. To realize these anticipated benefits, the Company’s and Galaxy’s businesses must be successfully combined and if a successful combination of the businesses does not occur, the anticipated benefits of the mergers may not be realized fully or at all or may take longer to realize than expected. In addition, the actual integration may result in additional and unforeseen problems, expenses, liabilities and diversion of management’s attention, each of which could reduce the anticipated benefits of the mergers. The difficulties of combining the operations of the Company and Galaxy include:

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The Company and Galaxy have operated and, until the completion of the mergers, will continue to operate independently. Even if the operations are combined successfully, the combined company may not realize the full benefits of the mergers on the anticipated timeframe, or at all. These integration matters could have an adverse effect on our financial condition and results of operations.

Following the consummation of the mergers, a substantial portion of our licensing revenue will be concentrated with a limited number of licensees and retail partners, such that the loss of any such licensees or retail partners could decrease our revenue and impair our cash flows.

Following the consummation of the mergers, a limited number of licensees and retail partners are anticipated to account for a substantial portion of our licensing revenue. In particular, a substantial majority of the licensed products for brands acquired in the mergers are anticipated to be sold by licensees to Wal-Mart Stores, Inc. and its affiliates (collectively, “Wal-Mart”). Because we will be dependent on these licensees and retail partners for a significant portion of our licensing revenue, if any of them were to have financial difficulties affecting their ability to make payments, or if any of these licensees or retail partners decides not to continue any existing agreements or arrangements relating to these licensed products, or to reduce significantly its sales of these licensed products under any such agreements or arrangements, our revenue and cash flows could be reduced substantially as a result.

If the public markets assign lower values to the Galaxy business than the values used in negotiating the terms of the mergers, the trading price of the Company’s common stock may decline.

The stock of Galaxy is not publicly traded, so there is no current market-based valuation for Galaxy’s business. In negotiating the mergers, we used what we believe to be a reasonable valuation for Galaxy. The public markets may not value the Galaxy business in the same manner as we have valued it for purposes of negotiating the terms of the mergers. If either the Company’s future financial performance is materially better than projected (and Galaxy does not also perform materially better), or if Galaxy’s future financial performance is materially lower than projected (and the Company’s performance is not similarly lower), the market may conclude that the value assigned to Galaxy in the mergers was too high. In any of these situations, the trading price of the Company’s common stock may decline.

The issuance of shares of the Company’s common stock in the mergers will substantially reduce the percentage interests of current Company stockholders in the earnings, voting power and market value of the Company.

The Company will issue 13,750,000 shares of common stock in the mergers. Upon completion of the mergers and the issuance of these shares, based on the 25,721,624 shares of the Company’s common stock outstanding as of June 24, 2014, the Company stockholders prior to the mergers will own approximately 65% of the Company’s outstanding shares of common stock. The issuance of shares of the Company’s common stock in the mergers will cause a significant reduction in the relative percentage interests of current Company stockholders in earnings, voting power and market value of the Company.

The number of shares of the Company’s common stock issued will not be adjusted downward to compensate for increases in the Company’s stock price prior to the closing of the mergers.

The aggregate number of shares of the Company’s common stock to be issued in the mergers is fixed at 13,750,000. As a result, the aggregate number shares of the Company’s common stock to be issued in the mergers will not adjust for any changes in the trading price of the Company’s common stock prior to the closing of the mergers. At the closing of the mergers, the value of the shares of the Company to be issued to the Galaxy stockholders and optionholders could be more or less than the approximately $160,325,000 value of such shares based on the Company’s closing stock price of $11.66 on June 24, 2014, the last day before the public announcement of the entry into the Merger Agreement. If the price of the Company’s common stock increases, the value of the Company shares issued to the Galaxy stockholders and optionholders will increase, but the Company will not receive the benefit of any price adjustment; similarly, any decline in the value of the Company’s common stock will be detrimental to the Galaxy stockholders and optionholders.

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The mergers may be less accretive to current Company stockholders than currently anticipated.

The mergers are expected to be accretive to the Company stockholders in 2014, and the accretive nature of the transaction is expected to result in increased earnings per share over time. The extent and duration of any accretion will depend on several factors, including the amount of merger-related expenses the Company incurs that are charged against its earnings and the results of operations of Galaxy, which will not be known until after the mergers are completed. If expenses charged against earnings are higher than we expect or Galaxy does not achieve the revenue and earnings growth we project, the amount of accretion in 2014 could be less than currently anticipated or the mergers may not be accretive at all. In such event, the trading price of the Company’s common stock may decline.

In connection with the mergers, the Company expects to incur a substantial amount of indebtedness, which could adversely affect the Company’s operations and financial condition.

The Company expects to be leveraged as a result of the mergers and to have significant debt service obligations. On June 24, 2014, the Company entered into commitment letters with Bank of America, N.A., for an up to $100,000,000 First Lien Facility, and with GSO Capital Partners LP, for an up to $90,000,000 Second Lien Facility, in each case subject to certain increases as described herein. See “The Mergers — Financing The Mergers” below. The commitments of the lenders under the commitment letters are subject to various conditions, including the negotiation and execution of definitive financing agreements prior to December 31, 2014 and the consummation of the mergers in accordance with the terms and conditions set forth in the Merger Agreement. The Company expects to borrow funds pursuant to the commitment letters on the closing date to refinance and repay in full the Company’s existing indebtedness, to finance the mergers and to pay fees and transaction costs related to the mergers, the First Lien Facility and the Second Lien Facility. After the closing date, the Company expects to use the proceeds of any borrowings of revolving loans under the First Lien Facility for working capital, capital expenditures, and other lawful corporate purposes of the Company and its subsidiaries and any borrowings under any incremental facilities for working capital purposes and/or for permitted acquisitions.

The Company’s expected level of indebtedness increases the possibility that it may be unable to generate cash sufficient to pay when due the principal of, interest on or other amounts due in respect of such indebtedness. In addition, the Company may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents that will be governing our indebtedness. If the Company incurs additional debt, the risks associated with its leverage, including our ability to service debt, would increase.

The Company’s debt could have other important consequences, which include, but are not limited to, the following:

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The Company cannot be certain that its earnings will be sufficient to allow it to pay principal and interest on its debt and meet its other obligations. If we do not have sufficient earnings, we may be required to seek to refinance all or part of our then existing debt, sell assets, borrow more money or sell more securities, none of which we can guarantee that we will be able to do and which, if accomplished, may adversely affect us.

Significant changes in the Company’s or Galaxy’s stockholder composition may jeopardize their ability to use some or all of their respective operating loss carryforwards, following the completion of the mergers.

Both the Company and Galaxy have certain tax net operating loss, or NOL, carryforwards available to reduce taxable income in future years. Upon completion of the mergers, the Company’s or Galaxy’s ability to utilize such NOL carryforwards may become subject to annual limitations, if the mergers are deemed to result in an ownership change as defined under Section 382 of the Internal Revenue Code. Section 382 imposes an annual limitation on the amount of net operating loss carryforwards that a corporation may use to offset future taxable income. Any unused annual limitation may be carried over to later years until the applicable expiration of the respective NOL carryforwards. The mergers may jeopardize the Company’s or Galaxy’s ability to use some or all such NOL carryforwards following the completion of the mergers.

The Company and Galaxy will incur significant transaction, and compliance fees and costs.

The Company and Galaxy expect to incur costs associated with combining the operations of these businesses, as well as transaction fees and other costs related to the mergers. The total cost to consummate the transaction is estimated to be approximately $10,955,000. Additionally, the Company anticipates paying approximately $4,800,000 of debt issuance costs due to the new credit agreement to be entered into in connection with the mergers. The amounts of transaction costs expected to be incurred are preliminary estimates and subject to change. Although the Company expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction costs over time, this net benefit may not be achieved in the near term or at all.

The public resale by former Galaxy stockholders and optionholders of the Company’s common stock received in the mergers could have a negative effect on the trading price of the Company’s common stock following completion of the mergers.

In the mergers, we will issue 13,750,000 shares of the Company’s common stock to the stockholders and optionholders of Galaxy. At the closing, none of these shares will be registered under the Securities Act of 1933, as amended, which we refer to as the Securities Act, and they will only be able to be resold pursuant to a separate registration statement or an applicable exemption from registration (under both federal and state securities laws). In addition, Carlyle has agreed not to sell any shares of the Company’s common stock to be issued to it in the mergers for a period of 90 days following the closing. However, pursuant to the Merger Agreement, the Company has agreed to prepare and file with the SEC as soon as practicable following the closing of the mergers, a registration statement on Form S-3 with respect to the resale of the shares of the Company’s common stock, warrants and warrant shares to be issued as a part of the Merger Consideration. The former Galaxy stockholders and optionholders have certain rights to require the Company to register their shares for public resale under the terms of the Registration Rights Agreement. In addition, if we propose to register any of the Company’s shares in a registered public offering, the former Galaxy stockholders and optionholders have a right to include their shares in such offering through a valid piggyback registration of shares, subject to the right of the underwriters of an offering to limit the number of shares included in such registration. Please see “Registration Rights Agreement” beginning on page 50 for a description of the terms of the Registration Rights Agreement. The sale of shares of the Company’s common stock issued in the mergers into the public markets may cause a decline in the trading price of the Company’s common stock.

The mergers are subject to a number of conditions specified in the Merger Agreement which, if they fail to materialize, may delay the timing of the mergers or cause the mergers not to be completed.

Completion of the mergers is conditioned upon a number of matters specified in the Merger Agreement, including without limitation the absence of a material adverse effect of either Galaxy or the Company, compliance by the parties with their obligations under the Merger Agreement, the absence of breaches of

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representations and warranties, and the expiration or termination of any waiting periods under the HSR Act. If any such conditions fail to materialize, the mergers may not be completed on a timely basis or at all. See “The Merger Agreement — Conditions to the Mergers” below.

The unaudited pro forma financial statements included in this Information Statement are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the mergers.

The unaudited pro forma financial statements contained in this Information Statement are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates, and may not be an indication of the combined company’s financial condition or results of operations following the mergers. The actual financial condition and results of operations of the combined company following the mergers may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect our financial condition and results of operations following the mergers. Any potential decline in the combined company’s financial condition or results of operations may cause significant declines in the price of the Company’s common stock after completion of the mergers.

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THE MERGERS

This discussion of the mergers is qualified in its entirety by reference to the Merger Agreement, which is attached to this Information Statement as Annex A. You should read the entire Merger Agreement carefully as it is the legal document that governs the mergers.

The Parties to the Merger Agreement

The Company

The Company is a publicly traded Delaware corporation, whose shares of common stock, par value $0.001 per share, are traded on The NASDAQ Stock Market under the ticker symbol “SQBG.” The principal offices of the Company are located at 1065 Avenue of Americas, 30^th Floor, New York, NY 10018, and its phone number is (646) 564-2577.

The Company owns a portfolio of consumer brands, including Ellen Tracy, William Rast, Revo, Caribbean Joe, Heelys, DVS, The Franklin Mint and People’s Liberation. The Company promotes, markets and licenses these brands and intends to pursue acquisitions of additional brands or rights to 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 second half of 2011, the Company changed its business model to focus on licensing and brand management. Prior to this, the Company designed, marketed and provided, on a wholesale basis, branded apparel and apparel accessories, as well as operated retail stores to sell the Company’s branded products. In the second half of 2011, the Company discontinued its wholesale distribution of branded apparel and apparel accessories, liquidated its existing inventory and closed its remaining retail stores. To reflect its business transition, in March 2012, the Company changed its corporate name from People’s Liberation, Inc. to Sequential Brands Group, Inc.

The Company’s objective is to build a diversified portfolio of lifestyle consumer brands by growing its existing portfolio and by acquiring new brands. To achieve its objective, the Company intends 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 outside the United States; 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 its portfolio. In assessing potential acquisitions or investments, the Company primarily evaluates the strength of the targeted brand as well as the expected viability and sustainability of future royalty streams.

The Company’s business strategy is designed to maximize the value of its brands through entry into licenses with partners that are responsible for designing, manufacturing and distributing its licensed products. The Company licenses its brands with respect to a broad range of products, including apparel, eyewear, footwear and fashion accessories. The Company currently has more than 50 licensees, almost all of which are wholesale licensees. Each of the Company’s licensees has a stipulated territory or territories, as well as distribution channels in which the licensed products may be sold. Currently, the majority of the Company’s revenues are from U.S. based licenses.

Galaxy

Galaxy owns a diversified portfolio of consumer brands generating over $700 million in annual retail sales based on which Galaxy receives certain royalties. The Company's branding expertise, retail relationships and strategic partnerships create significant value for its licensees who design, source and distribute products to retailers around the globe. With innovative and creative advertising and promotions, Galaxy is an industry leader in promoting and elevating brands in the marketplace through traditional and digital platforms. Galaxy was founded in 2011 and is based in New York City.

Galaxy’s brands include AND1, a leading footwear and apparel brand; AVIA, a progressive training and running brand focused on innovation and technology; Linens ‘n Things, a brand focused on providing fashionable, affordable home goods and Nevados, a hiking brand.

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Galaxy aims to provide retailers with national brands that offer consumers quality products at superior values, and maintain hands-on relationships with its trusted retailers, manufacturers and licensee partners.

LLC Sub

LLC Sub was formed as a Delaware limited liability company by the Company solely for the purpose of completing the transactions contemplated by the Merger Agreement. LLC Sub is a wholly-owned subsidiary of the Company and has not carried on any activities to date, except for activities incidental to its incorporation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.

Merger Sub

Merger Sub was formed as a Delaware corporation by the Company solely for the purpose of completing the transactions contemplated by the Merger Agreement. Merger Sub is a wholly-owned subsidiary of the Company and has not carried on any activities to date, except for activities incidental to its incorporation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.

General Description of the Mergers

Pursuant to the terms of the Merger Agreement and the DGCL, Merger Sub will merge with and into Galaxy, with Galaxy as the surviving entity, and immediately thereafter Galaxy will merge with and into LLC Sub, with LLC Sub as the surviving entity. At the effective time of the merger of Merger Sub with and into Galaxy, as described herein, each share of Galaxy Class A Common Stock and Galaxy Class B Common Stock outstanding immediately prior to the Initial Merger will be converted into the right to receive a portion of the Merger Consideration, and each outstanding option to purchase shares of Galaxy Class A Common Stock (whether vested or unvested) will be deemed fully vested and canceled and will be converted into the right to receive a portion of the Merger Consideration, to the extent in excess of the exercise price per share of Galaxy Class A Common Stock underlying such option.

The Merger Consideration will consist, in the aggregate, of $100,000,000 in cash, subject to adjustment as set forth in the Merger Agreement and described herein, 13,750,000 shares of the Company’s common stock, and warrants to purchase up to an aggregate of 3,000,000 additional shares of the Company’s common stock based on the performance of the Linens ‘n Things brand following the closing. Upon completion of the mergers, based on the number of shares of the Company’s common stock outstanding as of June 24, 2014, the Company stockholders prior to the mergers will own, in the aggregate, approximately 65% of the outstanding shares of the Company’s common stock.

NASDAQ Stockholder Approval Requirement.

The Company’s common stock is listed on The NASDAQ Stock Market LLC. Pursuant to NASDAQ Listing Rule 5635(a), the affirmative vote or written consent of the holders of a majority of the issued and outstanding shares of the Company’s common stock is required to issue shares with voting power equal to or in excess of 20% of the voting power of the shares outstanding before such issuance or equal to or more than 20% of the number of shares outstanding before such issuance. Accordingly, the issuance of 13,750,000 shares of the Company’s common stock and warrants to purchase an aggregate of up to 3,000,000 additional shares of the Company’s common stock as a portion of the Merger Consideration (the “Stock Issuance”) requires stockholder consent.

On June 24, 2014, certain affiliates of Tengram Capital Partners Gen2 Fund, L.P. (“Tengram”), certain affiliates of BlackRock, Inc., Berylson Master Fund, LP, FLAG Private Equity V, L.P., Siguler Guff Small Buyout Opportunities Fund II, LP and William Sweedler (collectively, the “Consenting Holders”) executed a written consent authorizing the Stock Issuance in accordance with NASDAQ Listing Rule 5635(a). Because the Consenting Holders owned approximately 51.4% of the issued and outstanding shares of the Company’s common stock as of that date, no further action by any other stockholder of the Company is required to approve the Stock Issuance. There is no requirement under Delaware law requiring further consent of the stockholders of the Company to the mergers.

Background of the Mergers

The Board and management regularly review and evaluate the Company’s business and operations, long-term strategic goals and alternatives, and prospects for the growth and profitability of its operations.

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Among the Company’s stated goals is to pursue acquisitions of additional brands or brand rights. The Company has completed four strategic acquisitions and other transactions over the past two years.

On February 4, 2014, Yehuda Shmidman, the Company’s Chief Executive Officer, met with Rodney Cohen, a member of Galaxy’s board of directors with whom Mr. Shmidman had been acquainted for several years, at Carlyle’s offices in New York to discuss, among other things, a potential business transaction between the Company and Galaxy.

On February 11, 2014, Mr. Shmidman and Mr. William Sweedler, Chairman of the Board, met with Mr. Cohen to further discuss a potential business combination transaction between the Company and Galaxy. Later that same day, Andrew Tarshis, Chief Operating Officer and General Counsel of Tengram, circulated a draft non-disclosure agreement to Mr. Cohen. On February 12, 2014, the Company and Carlyle entered into a mutual non-disclosure agreement and agreed to share certain confidential information relating to the Company and Galaxy.

On February 18, 2014, Messrs. Shmidman, Sweedler and Tarshis met with Mr. Cohen and David Stonehill, a member of Galaxy’s board of directors, at Carlyle’s offices in New York, to discuss Galaxy’s business and operations and the terms of any proposed business combination. During this and in subsequent conversations, Messrs. Cohen and Stonehill emphasized the importance of Galaxy’s equityholders receiving a significant number of shares of the Company’s common stock as consideration in any potential transaction.

On February 20, 2014, the Board held a regularly scheduled meeting. Among other things, members of the Company’s management provided the directors with an update regarding potential strategic transactions, including the potential transaction with Galaxy. The Company’s management informed the directors that the consideration in a proposed transaction would likely involve cash, a fixed number of shares of the Company’s common stock and warrants.

On February 25, 2014, Messrs. Cohen and Stonehill attended a management presentation at the Company’s offices in New York in order to obtain due diligence information regarding the Company, its management, its brands and certain financial information.

Throughout February, March and April 2014 the parties held multiple teleconferences and met on a number of occasions to discuss, among other things, financial and operational due diligence and the potential terms of a transaction.

During April 2014, the parties negotiated a letter of intent and on April 28, 2014 the parties entered into a non-binding letter of intent which provided the Company with the exclusive right to negotiate an acquisition of Galaxy for a period extending through May 31, 2014. The letter of intent included a proposed purchase price in an acquisition of Galaxy of $100 million in cash, 13,750,000 shares of the Company’s common stock and warrants to acquire up to 3,000,000 additional shares of the Company’s common stock based upon the performance of the Linens ‘n Things brand following the closing. The letter of intent also provided that Carlyle would have the right to nominate a director for election by the Company’s stockholders to the Board.

On April 29, 2014, the Board held a regularly scheduled meeting. Members of the senior management team provided an update to the Board regarding the execution of the letter of intent and the next steps regarding entering into a definitive agreement.

On May 6, 2014, Messrs. Shmidman and Sweedler met with Eddie Esses, Chief Executive Officer of Galaxy, and discussed the Galaxy business and certain due diligence matters. Throughout May 2014 and until the execution of the Merger Agreement, Mr. Shmidman and other members of the Company’s senior management team held regular discussions with Mr. Esses and other members of Galaxy’s management team regarding the Galaxy business and the proposed transaction.

During this same period following execution of the letter of intent, the Company’s outside legal counsel attended numerous calls and discussions with Galaxy’s outside legal counsel to discuss the terms of any merger agreement, as well as any regulatory filings that would be required in connection therewith. The Company’s legal counsel agreed to prepare the initial draft of the Merger Agreement incorporating the concepts discussed.

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During the weeks of May 12 and May 19, 2014, each of Galaxy and the Company populated and provided access to a virtual dataroom to provide the parties and their outside advisors the opportunity to conduct additional due diligence.

On May 19, 2014, Messrs. Shmidman, Sweedler, Cohen and Stonehill met to further refine the terms of the transaction and certain Galaxy liabilities which would need to be restructured in connection with the closing of any potential transaction.

On May 21, 2014, the Company’s outside legal counsel distributed a draft Merger Agreement to Galaxy’s outside legal counsel. From May 21, 2014 until June 21, 2014 representatives of the Company, Galaxy and their respective legal counsels negotiated the terms of the definitive Merger Agreement and ancillary agreements, completed their due diligence efforts and finalized the terms and structure of the proposed transaction. During this period, the parties and their counsel negotiated, among other things, the purchase price adjustments, the amount of the termination fee, the terms and scope of the representations, warranties and covenants of the parties, indemnification, the circumstances under which the proposed merger could be terminated, and the terms and conditions of the warrants and the Galaxy stockholders’ registration rights. The parties negotiated each of these provisions on an arms’ length basis, with the advice of their respective outside legal counsel, taking into consideration all of the facts and circumstances surrounding the transaction. In addition, in negotiating these provisions, the parties considered the terms and conditions of similar transactions of this type and the terms of the letter of intent. Throughout this time, the Company’s management team continued to provide updates to the Board regarding the ongoing discussions with Galaxy.

On May 22, 2014, the Company’s Board engaged Consensus to provide a fairness opinion in connection with the proposed transaction.

On May 31, 2014, the parties agreed to extend the term of the exclusivity provision set forth in the letter of intent until June 16, 2014.

On June 2, 2014, at the offices of the Company’s outside legal counsel, representatives of the Company including Messrs. Shmidman, Sweedler, Tarshis and Gary Klein, the Company’s Chief Financial Officer, met with Messrs. Cohen and Stonehill and Adam Glucksman, a member of Galaxy’s board of directors. Members of the parties’ outside legal counsels were also present in person and telephonically. During this meeting the parties discussed various provisions of the draft Merger Agreement including the structure of the transaction and certain purchase price adjustments.

On June 9, 2014, Mr. Stonehill distributed a comprehensive package proposal to settle certain material open issues between the parties and on June 12, 2014, Galaxy’s outside legal counsel distributed a revised draft of the Merger Agreement and related ancillary agreements reflecting the terms of the June 9 proposal, which, among other things (i) incorporated the negotiation for an economic closing as of July 31, 2014 if the mergers had not then been consummated; (ii) provided that if more than 80% of the Galaxy stockholders consented to the transaction then the shares of the Company’s common stock and warrants (and the shares underlying the warrants) to be issued as a portion of the Merger Consideration would be registered on Form S-3, promptly after the closing; (iii) provided that the Company, under specified circumstances, would be required to pay a termination fee equal to $16,000,000, and (iv) allocated the value of certain transaction tax deductions as well as liability for pre-closing tax obligations to the Company. The parties held multiple teleconferences discussing the provisions of the revised draft Merger Agreement and continued to exchange drafts of the documents to be executed in connection with the Merger Agreement.

On June 18, 2014, the parties held a teleconference attended by Messrs. Sweedler, Shmidman and Tarshis and other members of the Company’s management as well as Messrs. Stonehill and Cohen and the outside legal counsels to the Company and Galaxy. During this call and during the day following, the parties resolved substantially all of the then-remaining material open issues relating to the proposed Merger Agreement.

On June 19, 2014, the Board held a telephonic meeting at which all members of the Board were present. Also attending were members of the Company’s management team and representatives of the Company’s outside legal counsel. Representatives of Consensus were also present for a portion of the Meeting. The Board was provided with the draft transaction documentation, including the draft of the Merger Agreement, as well as an executive summary of the draft Merger Agreement prepared by the Company’s outside legal counsel.

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Mr. Sweedler gave a report updating the Board on the proposed transaction with Galaxy including that the negotiations regarding the Merger Agreement had been substantially finalized. A representative of the Company’s outside legal counsel provided the Board with a summary of the substantially final Merger Agreement and reminded the directors of their fiduciary duties in connection with a proposed transaction. Members of the Company management reviewed with the Board the potential benefits of a business combination with Galaxy, including the financial and strategic rationale. Representatives from Consensus then reviewed its financial analyses of the mergers contained in a preliminary presentation previously provided to the members of the Board. Consensus then provided to the Board its oral opinion that based upon and subject to certain factors and assumptions, as of June 19, 2014, the Merger Consideration to be paid by the Company pursuant to the Merger Agreement was fair from a financial point of view to the Company. Following these discussions, the Board authorized the Company’s management to finalize the transaction documentation.

On June 21, 2014, the Board received updated drafts of the Merger Agreement and the related transaction documents, including the form of warrant, form of registration rights agreement and the agreements providing Carlyle the right to nominate one director for election by the Company’s stockholders to the Board and to appoint one observer to the Board. The Board was also provided with the form of employment agreement to be entered into with Mr. Eddie Esses. The Board met telephonically and was further informed that the documentation had been substantially finalized, and there had been no material changes to the transaction documents since the June 19 meeting. Following these discussions, each member of the Board determined that the proposed transaction with Galaxy was advisable and fair to and in the best interests of the Company and its stockholders, and voted to approve the Merger Agreement and the Board adopted the resolutions presented at the meeting including resolutions that (i) the Merger Agreement, the mergers and the other transactions contemplated by the Merger Agreement are advisable and fair to and in the best interests of, the Company and its stockholders, (ii) authorizing and approving the mergers substantially on the terms and conditions set forth in the Merger Agreement (iii) recommending that the stockholders of the Company vote or deliver a written consent in favor of the issuance of Company common stock in connection with the mergers and (iv) authorizing and approving the transactions contemplated by the Merger Agreement including the Eddie Esses employment agreement, the conditional appointment of Rodney Cohen and the amendment of the Consulting Services Agreement with Tengram.

On June 24, 2014, the Board received updated final forms of the Merger Agreement and related transaction documents as well as the updated final financial analysis presentation from Consensus and Consensus confirmed its oral opinion in writing that, based upon and subject to certain factors and assumptions set forth in its written opinion, as of June 24, 2014, the Merger Consideration to be paid by the Company pursuant to the Merger Agreement was fair from a financial point of view to the Company. The Board was informed that the Merger Agreement was ready to be executed and that the Galaxy approvals were expected to be received immediately following execution of the Merger Agreement. Later on June 24, 2014, the Merger Agreement was executed, Galaxy delivered to the Company a written consent executed by certain Galaxy stockholders approving and adopting the Merger Agreement, and the Company delivered to Galaxy a written consent executed by the Consenting Holders approving the stock issuance.

On June 25, 2014, the Company issued a press release announcing the mergers.

Reasons for the Mergers; Approval of the Board

The Board reviewed and considered the terms of the mergers and the Merger Agreement and determined that the mergers, including the issuance of shares of the Company’s common stock contemplated by the Merger Agreement, is fair to and in the best interests of the Company and its stockholders. Accordingly, the Board unanimously adopted the Merger Agreement and approved the transactions contemplated by the Merger Agreement.

In reaching the determinations and recommendations described above, the Board consulted with the Company’s management and its advisors and considered a number of relevant factors. The Board believed that these factors, taken as a whole, affirmatively supported its conclusion that the terms of the Merger Agreement and the transactions contemplated thereby are fair to and also in the best interests of the Company and its stockholders. These factors include, but are not limited to, the following:

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Strategic Considerations.  The Board considered a number of factors pertaining to the strategic rationale for the transaction, including the following:

Merger Consideration.  The Board considered that the Merger Consideration consisted of cash, warrants to purchase shares of the Company’s common stock and shares of the Company’s common stock at a fixed aggregate number, and that the aggregate number of shares of the Company’s common stock to be issued will not adjust upwards to compensate for any declines in the price of the Company’s common stock prior to the closing of the mergers. Specifically, the Board gave consideration to the fact that earnings per share accretion (or an increase in pro forma earnings per share relative to the Company’s projected earnings per share prior to the mergers) was generally enhanced when borrowings are used to finance cash consideration while earnings per share accretion was generally reduced or diminished as an increased number of shares of the Company’s common stock are issued.

Opinion of Consensus.  The Board considered the financial analyses of Consensus, as provided to the Board on June 19, 2014 and June 24, 2014. It also considered the written opinion of Consensus as of June 24, 2014, that, as of the date of the opinion and based upon and subject to the factors and assumptions set forth in such opinion, the Merger Consideration to be paid by the Company pursuant to the Merger Agreement was fair from a financial point of view to the Company. See “— Opinion of Consensus” beginning on page 24. The full text of the written opinion of Consensus, dated June 24, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B and is incorporated by reference in its entirety into this Information Statement.

Financial and Business Information.  The Board considered the current and historical financial condition, results of operations, competitive position, business, prospects and strategic objectives of the Company and Galaxy, including potential risks involved in achieving such prospects and objectives, and the current and expected conditions in the general economy and in the brand licensing industries, including the potential impact of these conditions in achieving such prospects and objectives.

Management Forecasts.  In connection with the Board’s evaluation of the proposed combination, the Board considered certain financial forecasts of Galaxy prepared by the Company’s management. Based on its consideration of management’s financial forecasts and the risks associated with achieving such financial performance, the Board believes that the Merger Consideration appropriately reflects the long-term value creation potential of the combined companies’ forecasted financial performance.

Pro Forma Financial Impact of the Combination.  The Board considered the expected financial impact of the mergers on the Company, including that the combination is anticipated to be accretive to the Company’s Revenue, EBITDA and EPS. The Board also considered the pro forma financial position of the combined companies, including its pro forma net debt to EBITDA.

Negotiation Process and Review by the Board.  The terms of the Merger Agreement were the result of active and intense negotiations conducted by representatives of the Board together with the Company’s management, with the assistance of independent financial, legal and accounting advisors.

Other Terms of the Merger Agreement.  The Board considered the terms of the Merger Agreement, which are described more fully in the section “The Merger Agreement” beginning on page 34 of this Information Statement.

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Potentially Negative Factors.

In reaching the determinations and recommendations described above, the Board also considered the following potentially negative factors:

Business Risks.  The Board considered certain risks associated with Galaxy’s business and operations, including:

Fixed Amount of Common Stock Issued.  The Board considered that the aggregate number of shares of the Company’s common stock to be issued is fixed, and the aggregate number of shares of the Company’s common stock to be issued will not be adjusted downward to compensate for increases in the value of the Company prior to the closing of the mergers. The Board determined that this structure was appropriate and the risk acceptable in light of the relative intrinsic values and financial performance of Galaxy and the Company, the percentage of the combined company to be owned by the Company’s stockholders, and the Board’s ability to terminate the Merger Agreement if Galaxy suffers a material adverse effect.

Increased Indebtedness.  Following the closing of the transaction, the Company will significantly increase its total indebtedness and its leverage ratios. On a pro forma basis, as of March 31, 2014, the Company’s indebtedness would increase to approximately $180 million from approximately $57 million. However, the Company does not expect the increased leverage to impede further growth and the Board considered the pro forma leverage ratios to be appropriate for the combined company.

Termination Fee.  The Board considered the requirement that the Company pay a termination fee to Galaxy in certain circumstances which are described more fully in the section “The Merger Agreement — Effect of Termination”.

Transaction Costs and Integration.  The Board took into account the substantial transaction costs to be incurred in connection with the mergers and the possibility that the potential benefits of the mergers may not be realized within the expected time period, and the risks and challenges of integrating the Company’s and Galaxy’s businesses, operations and workforces.

No Dissenters Rights.  The Board acknowledged that pursuant to the DGCL, which governs the merger of Delaware corporations, the Company stockholders would not have the opportunity to dissent from the transaction and seek an appraisal of the fair value of their shares.

Reasons for the Recommendation by the Board of Directors.

The Board concluded that the potentially negative factors associated with the mergers were outweighed by the potential benefits that it expected the Company and its stockholders would receive as a result of the mergers. The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but summarizes the material information and factors considered by the Board in its consideration of the mergers. The Board reached the decision to recommend and approve the Merger Agreement, the Stock Issuance and the other transactions contemplated by the Merger Agreement in light of the factors described above and other factors the Board felt were appropriate. In view of the variety of factors and the quality and amount of information considered, the Board did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and individual members of the Board may have given different weights to different factors. The Board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, Company management and its advisors, and considered the factors overall to be favorable to, and to support, its determinations. It should be noted that this explanation of the reasoning of the Board and certain information presented in this section

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is forward-looking in nature and should be read in light of the factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 11.

The determinations of the Board, which concluded that the terms of the Merger Agreement and the transactions contemplated thereby are substantively and procedurally fair to and in the best interests of the Company and the Company stockholders, were based on the analysis, factors and reasons described above.

Opinion of Consensus

Consensus rendered its opinion to the Board that, as of June 24, 2014, and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid by the Company pursuant to the Merger Agreement was fair from a financial point of view to the Company.

The full text of the written opinion of Consensus, dated June 24, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B and is incorporated by reference in its entirety into this Information Statement. Consensus provided its opinion for the information and assistance of the Board (in its capacity as such) in connection with its evaluation of the consideration paid pursuant to the Merger Agreement, and did not address any other aspects or implications of the mergers. The opinion did not constitute a recommendation to the Board, to any holder of the Company’s common stock, or to any other person in respect of the mergers. Consensus’s opinion did not address the relative merits of the mergers as compared to other business or financial strategies that may have been available to the Company, nor did it address the underlying business decision of the Company to engage in the mergers. Consensus assumes no responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events, including any fluctuations in the trading price of the Company’s common stock, occurring after the date of its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, Consensus, among other things:

For purposes of rendering its opinion, Consensus, with the Company’s consent, relied upon and assumed the accuracy and completeness of all the financial, accounting, legal, tax, regulatory and other information provided to, discussed with or reviewed by, Consensus and assumed such accuracy and completeness for purposes of rendering its opinion, without assuming any responsibility or liability for independent verification thereof. Consensus further relied upon the assurances of management of the Company that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Projections provided to and examined by Consensus, Consensus noted that projecting future results of any

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company is inherently subject to uncertainty. Consensus was informed by the Company, however, and Consensus assumed, that such Projections were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Galaxy and the Company. Consensus assumed no responsibility for and expressed no opinion as to any such financial forecasts or the assumptions on which they were made. In addition, Consensus did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of the Company, Galaxy or any of their respective subsidiaries, and it was not furnished with any such evaluation or appraisal. Consensus assumed, upon advice of the Company, that all governmental, regulatory or other consents and approvals necessary for the consummation of the mergers will be obtained within the constraints contemplated in the Merger Agreement and without any adverse effect on the Company or Galaxy or on the expected benefits of the mergers in any way meaningful to Consensus’s analysis, and that the mergers will be consummated in accordance with the terms of the Merger Agreement and the Form of Warrant without any waiver, modification or amendment of any material term, condition or agreement thereof, the effect of which would be in any way meaningful to its analysis.

Consensus’s opinion did not address the underlying business decision of the Company to engage in the mergers, or the relative merits of the mergers as compared to any strategic alternatives that may have been available to the Company. Consensus did not express any opinion as to any tax or other consequences that might result from the mergers, nor did its opinion address any legal, regulatory or accounting matters, as to which Consensus understands that the Company obtained such advice as it deemed necessary from qualified professionals. Consensus’s opinion addressed only the fairness from a financial point of view to the Company, as of June 24, 2014, of the Merger Consideration to be paid by the Company pursuant to the Merger Agreement. Consensus did not express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the mergers, including, the fairness of the mergers to, or any consideration received in connection therewith by, the holders of any class of securities, creditors, or other constituencies of the Company or Galaxy; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or Galaxy, or any class of such persons in connection with the mergers, whether relative to the Merger Consideration to be paid by the Company pursuant to the Merger Agreement or otherwise. Consensus did not express any opinion as to the prices at which shares of the Company’s common stock will trade at any time or as to the impact of the mergers on the solvency or viability of the Company or Galaxy or the ability of the Company or Galaxy to pay their respective obligations when they come due.

Consensus’s opinion was necessarily based on information available to it and economic, monetary, market and other conditions as in effect on, and the information made available to Consensus as of June 24, 2014, and Consensus assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events, including any fluctuations in the trading price of the Company’s common stock, occurring after the date of its opinion. Consensus’s advisory services and its opinion were provided for the information and assistance of the Board in its capacity as such in connection with its consideration of the mergers and its opinion did not constitute a recommendation as to how the Board or any holder of shares of the Company’s common stock should act with respect to such Merger or any other matter. Consensus’s opinion was approved by a fairness opinion committee of Consensus.

The following is a summary of the material financial analyses that Consensus provided to the Board on June 24, 2014 and subsequently confirmed by its written opinion dated June 24, 2014. The following summary, however, does not purport to be a complete description of the financial analyses performed by Consensus, nor does the order of analyses described represent relative importance or weight given to those analyses by Consensus. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Consensus’s financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before June 23, 2014, the last trading day before the date of the Merger Agreement and is not necessarily indicative of current or future market conditions.

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Analysis of Merger Consideration

Consensus conducted an analysis of the Merger Consideration to be paid to holders of Galaxy common stock and options pursuant to the Merger Agreement. Such consideration is equal to $100 million in cash, 13.75 million shares of the Company’s common stock (the “Stock Consideration”) and warrants to purchase up to 3 million shares of the Company’s common stock which vest solely upon achievement of certain specified performance-based conditions (the “Warrant Consideration”), to be paid by the Company pursuant to the Merger Agreement. Consensus stated that its analysis did not take into account any of the adjustments to the Stock Consideration or Warrant Consideration to account for any adjustments or valuations that may be made pursuant to the Merger Agreement to ensure appropriate tax treatment of the transaction or approximate the value of the warrants. For analytical purposes, Consensus valued the Stock Consideration using the per share price of the Company’s shares on June 23, 2014, the last trading day before the date of the mergers Agreement which was $11.43. Consensus stated that this assumed per share price was subject to change, as the trading price would fluctuate between the time the analysis was conducted and the Closing. Additionally, Consensus applied a liquidity discount of 5.2% to the Stock Consideration payable to Carlyle, because, pursuant to an ancillary document executed in connection with the mergers, Carlyle would be prohibited from selling the Company’s shares it received in connection with the mergers for 90 days following the Closing. According to the Company’s management, Carlyle will receive 51% of the Stock Consideration and therefore this discount was applied solely to the shares to be received by Carlyle. This resulted in an implied value of the Stock Consideration of approximately $153 million.

The results of this analysis are summarized as follows:

		Carlyle Portion of Stock Consideration				Non-Carlyle Portion of Stock Consideration				Total
Stock Consideration			7,012,500				6,737,500				13,750,000
Stock Consideration Price per Share (as of 6/23/2014)		$	11.43			$	11.43
Implied Value of Stock Consideration before applying Discount for Lock-Up		$	80,152,875			$	77,009,625
Discount for Lock-Up Provision			5.20	%			N/A
Implied Value of Stock Consideration after applying Discount for Lock-Up		$	75,983,972			$	77,009,625			$	152,993,597

With respect to the Warrant Consideration, the Company’s management advised Consensus that it is highly unlikely that the warrant vesting requirements will be achieved within the prescribed time period and that even if such vesting requirements were achieved within the time periods required by the Form of Warrant, the financial benefit to the Company’s would far exceed the implied cost of the warrants. Because of these reasons, no cost value was assigned to the Warrant Consideration. With the implied valuation of the Stock Consideration of $153 million and the cash consideration of $100 million, and taking into account no cost value for the Warrant Consideration, Consensus considered the implied value of the Merger Consideration to be approximately $253 million.

Analysis of Galaxy’s Financial Value

Selected Companies Analysis

In order to calculate an implied value of Galaxy, Consensus calculated the median Total Enterprise Value (“TEV”) as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA,” and such multiple, the “EBITDA Multiple”) and the median TEV as a multiple of revenue (the “Revenue Multiple”) on a last twelve month (“LTM”) and next twelve month (“NTM”) basis for the following selected public companies in the brand management industry:

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The companies included were chosen because they are publicly traded companies in the brand management industry with operations that, for purposes of analysis, may be considered similar to certain aspects of Galaxy’s financial profile, size, operating profile and end market exposure. Financial information for these comparable companies used to calculate the EBITDA Multiple and Revenue Multiple was obtained from S&P Capital IQ.

The EBITDA Multiple and Revenue Multiple of the comparable companies were applied to Galaxy’s pro forma EBITDA and pro forma revenue, respectively, to obtain an implied value of Galaxy. The pro forma EBITDA and pro forma revenue of Galaxy used in this analysis were calculated by the Company’s management on a LTM basis as of March 31, 2014, as adjusted by the Company’s management to account for a license agreement that was not in place during the entire LTM period. After applying the EBITDA Multiple to Galaxy’s pro forma EBITDA and applying the Revenue Multiple to Galaxy’s pro forma revenue, in each case on a LTM and NTM basis, an implied value of Galaxy was calculated on a LTM basis and NTM basis after applying a discount for the lack of marketability of Galaxy stock and an assumed control premium. Consensus assumed a lack of marketability discount of 11.2%, which was calculated based on reviewing a range of restricted stock transactions with comparable purchase prices over the past 34 years using data from the FMV Restricted Stock Study of Business Valuation Resources LLC. Consensus assumed a control premium of 24.7%, which was based on reviewing a range of consumer products public company acquisitions over the past five years.

The results of this analysis are summarized as follows:

LTM and NTM Revenue Multiples (dollar amounts in millions)

		Trailing Revenue Multiple
Galaxy LTM Revenue		$	29.64
Observed Median Public Comp Trailing Revenue Multiple			7.59x
Implied Value on Controlling Interest, Non-Marketable Basis		$	249.29

		Trailing Revenue Multiple
Galaxy NTM Revenue		$	36.34
Observed Median Public Comp Trailing Revenue Multiple			5.86x
Implied Value on Controlling Interest, Non-Marketable Basis		$	235.83

LTM and NTM EBITDA Multiples (dollar amounts in millions)

		Trailing Revenue Multiple
Galaxy LTM EBITDA		$	17.65
Observed Median Public Comp Trailing EBITDA Multiple			12.33x
Implied Value on Controlling Interest, Non-Marketable Basis		$	240.98

		Trailing Revenue Multiple
Galaxy Projected NTM EBITDA		$	21.64
Observed Median Public Comp Trailing EBITDA Multiple			12.71
Implied Value on Controlling Interest, Non-Marketable Basis		$	304.50

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Selected Precedent Transaction Analysis

Consensus researched certain market transactions to identify multiples paid for consumer brand licensing companies. Nearly all of these transactions contained material features that made them incomparable to the current transaction or involved the acquisition of privately held entities and therefore limited public data necessary to perform a comparable transactions analysis was available with respect to such transactions. Consensus identified one relevant transaction for which the necessary data was available, which was the Company’s acquisition of Brand Matter, LLC in March 2013. While acknowledging its relevance to the Board, Consensus determined not to include this transaction in its valuation analysis because a single transaction is not typically a reliable indicator of a market and because the Company was the acquiror in the identified transaction.

Illustrative Discounted Cash Flow Analysis

Consensus performed an illustrative discounted cash flow analysis on Galaxy to determine a range of illustrative present enterprise values of Galaxy. Forecasted financial information used in this analysis was based on the Projections, and the Gordon Growth Model was used to estimate the terminal value of cash flows following the period covered by the Projections. In performing this analysis, Consensus utilized a discount rate of 12.80%, which reflects its judgment of the estimated weighted average cost of capital of Galaxy. A sensitivity analysis was then performed to analyze the effect of changes in the assumed revenue growth and the assumed discount rate which resulted in an illustrative range of enterprise values of $191.3 million to $281.7 million for Galaxy.

General

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Consensus’s opinion. In arriving at its fairness determination, Consensus considered the results of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Consensus made its determination as to fairness on the basis of its experience and professional judgment after considering the results of its analyses.

Consensus prepared these analyses for purposes of providing its opinion to the Board as to the fairness from a financial point of view of the Merger Consideration to be paid by the Company to holders of Galaxy common stock and options pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Galaxy, Consensus or any other person assumes responsibility if future results are materially different from those forecasts.

The Merger Consideration was determined through arm’s-length negotiations between the Company and Galaxy and was approved by both the Board and Galaxy board of directors. Consensus provided advice to the Board (in its capacity as such) during these negotiations. Consensus did not, however, recommend any specific amount of consideration to the Company or the Board or that any specific amount of consideration constituted the only appropriate consideration for the mergers.

As described above, Consensus’s opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Consensus in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Consensus attached as Annex B, which is incorporated by reference in its entirety into this Information Statement.

During the two-year period prior to the date of Consensus’s opinion, no material relationship existed between Consensus and its affiliates, on the one hand, and the Company or Galaxy and their respective affiliates, on the other hand, nor did Consensus or its affiliates enter into an engagement letter with the Company or Galaxy or any of their respective affiliates pursuant to which any fee was paid or payable to

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Consensus. Consensus may in the future seek to provide financial advisory and financing services to the Company, Galaxy or entities that are affiliated with the Company or Galaxy, including Carlyle, or any of its affiliates, for which Consensus may receive customary compensation. Consensus and its affiliates and employees may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, Galaxy, Carlyle and any of their respective affiliates and third parties for the accounts of Consensus and its affiliates and employees and their customers.

The Board engaged Consensus to act as a financial advisor to provide a fairness opinion based on its extensive experience with consumer-facing and branded businesses and general reputation. Consensus is an investment banking and financial advisory firm focusing on the retail and consumer products industries with offices in Boston, New York and London and has broad experience advising retail and consumer products companies undergoing significant transformations to their business models.

Pursuant to a letter agreement dated May 22, 2014, the Company engaged Consensus to act as the financial advisor for the Board to provide an opinion as to the fairness, from a financial point of view, to the Company of the consideration to be paid in connection with the mergers. Pursuant to the terms of this letter agreement, the Company agreed to pay Consensus $150,000, no portion of which is contingent upon consummation of the mergers. In addition, the Company has agreed to reimburse Consensus for its expenses, including attorneys’ fees and disbursements, and to indemnify Consensus and related persons against various liabilities, including certain liabilities under the federal securities laws.

Executive Compensation

None of the Company’s “named executive officers” will receive any compensatory payments or benefits that constitute “golden parachute” payments within the meaning of Item 402(t) of Regulation S-K.

Other Material Agreements and Relationships

In connection with negotiating the mergers and signing the Merger Agreement, the Company entered into certain agreements, and formed certain relationships, with certain of the directors, executive officers and affiliates of Galaxy, as specified below. These agreements and relationships are in addition to the potential interests of certain existing directors of the Company in the mergers, as described under the heading “Interests of Certain Persons in Matters to be Acted Upon.”

Carlyle Board Appointment

The Company and Carlyle have entered into a letter agreement, effective upon the closing of the mergers, granting Carlyle certain director nominee and board observer rights, for so long as Carlyle and its affiliates own at least 33% of the shares of the Company’s common stock acquired by Carlyle at the closing. Such rights include the right to designate one Board representative, to be included in the slate of the Board’s nominees periodically presented to the Company’s stockholders for election, and the right to designate one Board observer to attend all Board meetings.

In connection with the foregoing, Matthew Eby, a Class II director, has agreed effective upon and conditioned upon the consummation of the mergers to resign from the Board, and the Company has, pursuant to the Merger Agreement, agreed to appoint Rodney Cohen as Carlyle’s initial Board representative, to fill the vacancy created by Mr. Eby’s resignation. See “The Merger Agreement — Additional Agreements of the Parties — Governance Matters” below.

Employment Agreements

In connection with the execution of the Merger Agreement, the Company has entered or may enter into an employment agreement with Eddie Esses, Galaxy’s current Chief Executive Officer, and certain other officers or employees of Galaxy.

Impact of Stock Issuance on Existing Stockholders

The issuance of the Company’s common stock as consideration for the mergers will dilute the ownership and voting interests of the Company’s existing stockholders. Upon the issuance of 13,750,000 shares of the Company’s common stock in connection with the mergers and assuming no other issuances of shares prior to

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the date the completion of the mergers, the former Galaxy shareholders and optionholders will own in the aggregate approximately 35% of the Company’s common stock issued and outstanding immediately after the consummation of the mergers. Therefore, the ownership and voting interests of the Company’s existing stockholders will be proportionately reduced. In addition, the Company has issued warrants to purchase up to an additional 3,000,000 shares of the Company’s common stock, subject to certain vesting provisions and other adjustments described therein. See “Description of the Warrants” below.

Material U.S. Federal Income Tax Consequences of the Mergers to the Company and its Stockholders

The following discussion summarizes certain material U.S. federal income tax consequences of the mergers that are generally applicable to the Company and its stockholders, assuming that the mergers are consummated as contemplated by the Merger Agreement. The following discussion does not address the tax consequences, if any, of transactions effectuated prior to or after the mergers (whether or not such transactions are in connection with the mergers) or to Galaxy or its stockholders or optionholders. This discussion is not a complete analysis of all potential U.S. federal income tax consequences and does not address any tax consequences arising under any state, local or foreign tax laws or U.S. federal estate or gift tax laws. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service (the “IRS”), all as in effect on the date of this Information Statement. These authorities are subject to change, possibly retroactively, resulting in tax consequences different from those discussed below.

The parties intend that, for U.S. federal income tax purposes, the mergers will be treated as a single integrated transaction that qualifies as a tax-free reorganization within the meaning of Section 368(a) of the Code and have agreed to report the mergers consistently therewith. Whether or not the mergers qualify as a tax-free reorganization, the following U.S. federal income tax consequences will generally result:

Accounting Treatment of the Mergers

Each of the Company and Galaxy prepares its financial statements in accordance with GAAP. The mergers will be accounted for using the acquisition method of accounting with the Company treated as the acquirer of Galaxy for accounting purposes. This means that the assets, liabilities and commitments of the Company, the accounting acquiree, are adjusted to their estimated fair value at the acquisition date. Under the acquisition method of accounting, intangible assets are amortized over their remaining useful lives and tested for impairment at least annually.

Regulatory Approvals and Clearances

Under the HSR Act, certain transactions, including the mergers between the Company and Galaxy, may not be consummated until required information and materials have been furnished to the Department of Justice, or “DOJ,” and the Federal Trade Commission, or “FTC,” and certain waiting period requirements have expired or been terminated. If the DOJ or the FTC issues a Request for Additional Information and Documentary Material, or a “Second Request,” prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after the DOJ or the FTC, as the case may be, has certified substantial compliance with the Second Request, unless the waiting period is terminated earlier. We do not believe that the mergers will violate federal antitrust laws, but we cannot guarantee that the DOJ or the FTC will not take a different position.

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Federal Securities Law Consequences

In the mergers, the Company will issue 13,750,000 shares of the Company’s common stock to the stockholders and optionholders of Galaxy. None of these shares will be registered under the Securities Act, and they will only be able to be resold pursuant to a separate registration statement or an applicable exemption from registration (under both federal and state securities laws). The former Galaxy stockholders and optionholders have certain rights to require the Company to register their shares for public resale under the terms of the Registration Rights Agreement. In addition, if the Company proposes to register any of the Company’s shares in a registered public offering, the former Galaxy stockholders and optionholders have a right to include their shares in such offering through a valid piggyback registration of shares, subject to the right of the underwriters of an offering to limit the number of shares included in such registration. See “Registration Rights Agreement” below for a description of the terms of the Registration Rights Agreement. In addition, Carlyle has agreed not to sell any of the Company’s common stock to be issued in the mergers for a period of 90 days following the closing.

Pursuant to the Merger Agreement, the Company has agreed to prepare and file with the SEC as soon as practicable following the closing of the mergers, a registration statement on Form S-3 with respect to the resale of the shares of the Company’s common stock, warrants and warrant shares to be issued as a part of the Merger Consideration. See “The Merger Agreement — Additional Agreements of the Parties — Preparation of Securities Filings” below.

Financing of the Mergers

On June 24, 2014, the Company entered into (i) a commitment letter agreement (the “First Lien Commitment Letter”) with Bank of America, N.A. (“Bank of America”), offering to provide for an up to $100,000,000 senior secured first lien facility (of which $90,000,000 will be available at closing) (the “First Lien Facility”), and (ii) a commitment letter agreement (the “Second Lien Commitment Letter” and together with the First Lien Commitment Letter the “Commitment Letters”) with GSO Capital Partners LP (“GSO”), offering to provide for an up to $90,000,000 senior secured second lien facility plus additional amounts as described below (the “Second Lien Facility”), in each case subject to increase as described below. The commitments of the lenders under the Commitment Letters are subject to various conditions, including the negotiation and execution of definitive financing agreements prior to December 31, 2014 and the consummation of the mergers in accordance with the terms and conditions set forth in the Merger Agreement.

The Company expects to borrow funds available at closing as described in the Commitment Letters on the closing date and to use the proceeds therefrom to refinance and repay in full the Company’s existing indebtedness, to finance the mergers and to pay fees and transaction costs related to the mergers, the First Lien Facility and the Second Lien Facility. After the closing date, the Company expects to use the proceeds of any borrowings of revolving loans under the First Lien Facility for working capital, capital expenditures, and other lawful corporate purposes of the Company and its subsidiaries, and any borrowings under any incremental facilities for working capital purposes and/or for permitted acquisitions.

The First Lien Facility will consist of an up to $75,000,000 term loan and an up to $25,000,000 revolving credit facility (plus an additional amount following the closing of up to $60,000,000, allocated pro rata between the term loan and the revolving credit facility, upon request of the Company, subject to the consent of lenders agreeing to provide such amounts and there not having occurred a default or event of default under the First Lien Facility, as well as to other customary conditions). The term loan will be subject to quarterly amortization of principal in equal amounts of $3,000,000. The First Lien Facility will mature on the fifth anniversary of the closing date.

Borrowings under the First Lien Facility will bear interest at LIBOR or a base rate, plus, in each case, an applicable margin that fluctuates from 3.50% to 3.75% for LIBOR loans and from 1.50% to 1.75% for base rate loans, in each case based on the Company’s loan to value ratio (to be defined in the definitive credit agreement for the First Lien Facility).

The First Lien Facility will require the Company to make mandatory prepayments of the borrowings under such facility with:

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The Company will be permitted to voluntarily repay outstanding loans under the First Lien Facility at any time, subject to certain customary “breakage” costs with respect to LIBOR-based borrowings. For any prepayment in whole of the First Lien Facility in connection with a refinancing of the First Lien Facility that is made prior to the first anniversary of the closing date, the Company will be required to pay a prepayment premium equal to 1.0% of the then outstanding amount of the term loan being prepaid, unless Bank of America is the administrative agent in connection with such refinancing.

All obligations under the First Lien Facility will be guaranteed by each existing direct and indirect domestic subsidiary of the Company, other than excluded subsidiaries (to be defined in the First Lien Facility) and the obligations of the Company and such subsidiaries under the First Lien Facility and such guarantees are secured by a first priority security interest, subject to certain exceptions, in substantially all of their assets.

The First Lien Facility will include financial covenants requiring the Company to maintain positive net income and satisfy a loan to value ratio, in each case at levels to be agreed, as well as customary affirmative and negative covenants and events of default.

The Second Lien Facility will consist of an up to $90,000,000 second lien term loan facility (plus an additional amount of up to $70,000,000 for the purpose of consummating permitted acquisitions, subject to certain customary conditions). The Second Lien Facility shall mature on the sixth anniversary of the closing date. Borrowings under the Second Lien Facility will bear interest at LIBOR plus 8.00% and will be subject to a LIBOR floor of 1.00%.

The Second Lien Facility will require the Company to make mandatory prepayments of the borrowings under such facility with:

The Company will not be permitted to voluntarily repay outstanding loans under the Second Lien Facility prior to the first anniversary of the closing date. After the first anniversary of the closing date and prior to the third anniversary of the closing date, the Company will be permitted to prepay outstanding loans, in whole or in part, subject to payment of a prepayment premium equal to 3.0% (after the first anniversary of the closing date and prior to the second anniversary of the closing date) or 1.0% (after the second anniversary of the closing date and prior to the third anniversary of the closing date) of the principal amount so prepaid. After the third anniversary of the closing date, prepayments may be made in whole or in part without any payment of a prepayment premium.

All obligations under the Second Lien Facility will be guaranteed by each existing direct and indirect domestic subsidiary of the Company, other than excluded subsidiaries (to be defined in the Second Lien Facility) and the obligations of the Company and such subsidiaries under the Second Lien Facility and such guarantees are secured by a second priority security interest, subject to certain exceptions, in substantially all of their assets.

The Second Lien Facility will include financial covenants requiring the Company to maintain a total leverage ratio and satisfy a loan to value ratio, in each case at levels to be agreed, as well as customary affirmative and negative covenants and events of default.

Expected Timing of the Mergers

The Company is working to complete the mergers as soon as practicable. The Company expects to complete the mergers in the third quarter 2014, assuming that all of the conditions set forth in the Merger

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Agreement have been satisfied or waived. However, because the mergers are subject to a number of conditions, some of which are beyond the control of the Company, the precise timing for completion of the mergers cannot be predicted with certainty. For a discussion of the conditions to the completion of the mergers and of the risks associated with the failure to satisfy such conditions, please see “The Merger Agreement” beginning on page 34 and “Risk Factors — The mergers may not be completed, which could adversely affect the Company’s financial condition, results of operations and trading price of its common stock on page 12.

Appraisal Rights

Holders of the Company’s common stock will not be entitled to exercise appraisal or dissenters rights under Delaware law in connection with the mergers, the issuance of shares of the Company’s common stock pursuant to the mergers.

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THE MERGER AGREEMENT

The following is a summary of the material provisions of the Merger Agreement, a copy of which is attached as Annex A to this Information Statement. The rights and obligations of the parties are governed by the express terms and conditions of the Merger Agreement and not by this summary or any other information in this Information Statement. This discussion is qualified in its entirety by reference to the complete text of the Merger Agreement. We urge all stockholders to read the Merger Agreement, as well as this Information Statement, carefully and in their entirety.

Explanatory Note Regarding the Merger Agreement

The Merger Agreement and the summary set forth below have been included to provide all stockholders with information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about us in our public reports filed with the SEC. In particular, the Merger Agreement and the following summary of its terms are not intended to be, and should not be relied upon as, disclosures regarding any facts or circumstances relating to us, Galaxy, our or their subsidiaries and affiliates or any other party. The representations and warranties contained in the Merger Agreement have been negotiated only for the purpose of the Merger Agreement and are intended solely for the benefit of the parties thereto. In many cases, these representations, warranties and covenants are subject to limitations agreed upon by the parties and are qualified by certain supplemental disclosures provided by the parties to one another in connection with the execution of the Merger Agreement. Furthermore, many of the representations and warranties in the Merger Agreement are the result of a negotiated allocation of contractual risk among the parties and, taken in isolation, do not necessarily reflect facts about us, Galaxy, our or their subsidiaries and affiliates or any other party. Likewise, any references to materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or stockholders. Finally, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, and these changes may not be fully reflected in our public disclosures.

The Mergers

Pursuant to the terms of the Merger Agreement and the DGCL, at the closing, Merger Sub will merge with and into Galaxy (referred to in this Information Statement as the “Initial Merger”), with Galaxy as the surviving entity (the “Initial Surviving Corporation”), and immediately thereafter the Initial Surviving Corporation will merge with and into LLC Sub (referred to in this Information Statement as the “Subsequent Merger”), with LLC Sub as the surviving entity (sometimes called the “Final Surviving Company”). The Initial Merger and the Subsequent Merger are referred to collectively in this Information Statement as the “mergers.”

Closing and Effects of the Mergers

The closing of the mergers will occur at 10:00 a.m. local time as promptly as practicable (but in no event later than the second business day) following the satisfaction or, to the extent permitted by law, waiver of the conditions to the consummation of the mergers set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or, to the extent permitted by law, waiver of those conditions), or at such other time and date as shall be agreed in writing between the Company and Galaxy. The date on which the closing occurs is referred to in this Information Statement as the “Closing Date.”

The Initial Merger will become effective upon the filing of the first certificate of merger with the Secretary of State of the State of Delaware or at such later time as the Company and Galaxy agree and specify in the first certificate of merger (the “First Effective Time”). At the First Effective Time, as described below, each share of Galaxy Class A Common Stock, Galaxy Class B Common Stock and Galaxy Preferred Stock outstanding immediately prior to the Initial Merger will be converted into the right to receive a portion of the Merger Consideration, and each outstanding option to purchase shares of Galaxy Class A Common Stock (whether vested or unvested) will be deemed fully vested and canceled, and will be converted into the right to receive a portion of the Merger Consideration, to the extent such Merger Consideration is in excess of the exercise price per share of Galaxy Class A Common Stock underlying such option. In addition, each share

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of common stock of Merger Sub, par value $0.01 per share, shall be converted into one validly issued, full paid and nonassessable share of common stock, par value $0.01 per share, of the Initial Surviving Corporation.

The Subsequent Merger will become effective immediately following the First Effective Time upon the filing of the second certificate of merger with the Secretary of State of the State of Delaware, or at such later time as the Initial Surviving Corporation and the Company (with the prior written consent of the Stockholder Representative) agree and specify in the second certificate of merger (the “Second Effective Time”). At the Second Effective Time, each share of Initial Surviving Corporation Common Stock issued and outstanding immediately prior to the Second Effective Time shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

Consideration to be Received in the Mergers

At the First Effective Time, the Merger Agreement provides that all outstanding equity interests of Galaxy, including outstanding options (whether vested or unvested), will be converted into the right to receive a pro rata portion of $100,000,000 in cash, subject to adjustment as set forth in the Merger Agreement and described below, 13,750,000 shares of the Company’s common stock and warrants to purchase an aggregate of up to 3,000,000 shares of the Company’s common stock and (collectively the “Merger Consideration”).

Class A Per Share Merger Consideration and Class B Per Share Merger Consideration

Each share of Galaxy Class A Common Stock, including any such share to be issued upon the exercise of outstanding options to purchase shares of Galaxy Class A Common Stock, is entitled to a liquidation preference of $100 in the mergers (the “Aggregate Class A Liquidation Preference”). As such, the per share portion of the Merger Consideration attributable to each share of Galaxy Class B Common Stock is an amount equal to the quotient obtained by dividing (1) the Merger Consideration plus the aggregate exercise prices for all in-the-money options to be accelerated and cashed out in connection with the mergers less the Aggregate Class A Liquidation Preference by (2) the fully diluted share count (the “Class B Per Share Merger Consideration”). Each share of Galaxy Class A Common Stock will be entitled to receive the Class B Per Share Merger Consideration plus $100.

Calculation of Cash Portion of the Merger Consideration

The cash portion of the Merger Consideration payable to the holders of Galaxy equity interests shall be calculated, as of the business day prior to the Closing Date or (with respect to cash, indebtedness and net working capital), if earlier, as of July 31, 2014, as $100,000,000 in cash, plus or minus the following amounts:

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Because the calculations of cash, indebtedness and net working capital will be performed as of a date no later than July 31, 2014, in the event that the closing of the mergers has not occurred on or prior to July 31, 2014, then any positive or negative changes to such amounts thereafter will be for the Company’s account and not for the account of the Galaxy stockholders and optionholders.

Purchase Price Adjustment

The foregoing calculation of the cash portion of the Merger Consideration will be subsequently adjusted based upon the amounts by which Closing Date estimates of cash, indebtedness, net working capital and Galaxy transaction expenses exceed or fall short of actual amounts. For purposes of calculating such adjustments, the parties have agreed that, no later than three business days prior to the Closing Date, Galaxy will deliver an estimated closing statement setting forth its good faith estimates of cash, indebtedness, net working capital and Galaxy transaction expenses. The estimated closing statement will include an estimate of the Closing Date Merger Consideration calculated by reference to such amounts. After the closing of the mergers, the Company will deliver a final closing statement setting forth the actual amounts of cash, indebtedness, net working capital and Galaxy transaction expenses, and a calculation of any adjustment to the final Merger Consideration based thereon, as compared against the estimates delivered prior to closing. If the closing occurs on or before November 1, 2014, then the Company must deliver the closing statement by November 15, 2014. If the closing occurs after November 1, 2014 then the Company must deliver the closing statement within 10 business days of the Closing Date. The purchase price adjustment will be payable in cash following the final determination thereof, provided that all or a portion of any additional amount payable by the Company may be paid as shares of the Company’s common stock to the extent necessary to achieve the intended tax treatment for the mergers.

Holdback Amounts

In order to support the obligation of the former Galaxy stockholders and optionholders to pay the purchase price adjustment, the Company will hold back $1,000,000 from the Merger Consideration on the Closing Date, pending resolution of the purchase price adjustment as described above.

In addition, the Company will also hold back 1,375,000 of shares of the Company’s common stock from the Merger Consideration on the Closing Date, pending the expiration of the 18 month survival period for the representations and warranties for which the former Galaxy stockholders and optionholders will have indemnification obligations following the Closing Date. See “— Indemnification” below. Such holdback amount is intended to be the first source of recovery for any payment obligations of the former Galaxy stockholders and optionholders to a Company indemnified party pursuant to such indemnification obligations; provided that such amounts may be payable by the former Galaxy stockholders and optionholders in cash instead, to the extent necessary to achieve the intended tax treatment for the mergers. Any shares of the Company’s common stock remaining in the holdback will be released to the former Galaxy stockholders and optionholders on the 18 month anniversary of the Closing Date.

Exchange of Certificates; Closing Payments

Pursuant to the Merger Agreement, each Galaxy stockholder or optionholder whose Galaxy equity interests are converted into the right to receive any Merger Consideration shall be required to deliver an option release form (in the case of optionholders) or a letter of transmittal (in the case of stockholders, which letter of transmittal shall specify that delivery shall be effected, and that risk of loss and title to any certificates representing Galaxy Shares shall pass, only upon proper delivery of such share certificates (or affidavits of loss in form and substance satisfactory to the Company related thereto)) to the Company, in each case, in the form attached to the Merger Agreement prior to receiving any portion of the Merger Consideration.

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On or promptly following the Closing Date, the Company will deliver, or cause to be delivered, the following:

The Company will not issue or deliver any fractional shares of its common stock upon the conversion of Galaxy equity interests pursuant the Merger Agreement. Each holder of Galaxy equity interests converted in the Initial Merger who would otherwise have been entitled to receive a fraction of a share of the Company’s common stock shall receive cash instead.

Each of Galaxy, the Company, the Initial Surviving Corporation, the Final Surviving Company and the Stockholder Representative (without duplication) shall be entitled to withhold from any amounts otherwise payable to any person or entity pursuant to the Merger Agreement such amounts as may be required under applicable tax laws. Any amounts so withheld shall be timely paid over to the appropriate governmental entity and shall be treated as having been paid to the person or entity in respect of which such withholding was made.

Representations and Warranties

Galaxy Representations

In the Merger Agreement, Galaxy made a number of representations and warranties to the Company, including representations and warranties relating to, among other things:

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Company Representations

In the Merger Agreement, the Company and Merger Sub made a number of representations and warranties to Galaxy, including representations and warranties relating to, among other things:

Certain of the representations and warranties contained in the Merger Agreement are qualified as to materiality or “Galaxy Material Adverse Effect,” in the case of Galaxy and its subsidiaries, or “Parent Material Adverse Effect,” in the case of the Company and its subsidiaries.

Galaxy Material Adverse Effect

A “Galaxy Material Adverse Effect” means any change, circumstance, occurrence or development that has a material adverse effect on the financial condition, businesses or results of operations of Galaxy and its subsidiaries, taken as a whole, and/or the ability of Galaxy to perform its obligations under the Merger

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Agreement. However, any change, state of facts, circumstance, event or effect to the extent caused by or resulting from any of the following, will not be considered when determining whether a Galaxy Material Adverse Effect has occurred:

Parent Material Adverse Effect

A “Parent Material Adverse Effect” means any change, circumstance, occurrence or development that, individually or in the aggregate, has a material adverse effect on the financial condition, businesses or results of operations of the Company and the Company’s subsidiaries, taken as a whole, and/or the ability of the Company to perform its obligations under the Merger Agreement. However, any change, state of facts, circumstance, event or effect to the extent caused by or resulting from any of the following, will not be considered when determining whether a Parent Material Adverse Effect has occurred:

Conduct of Business

Conduct of Business Prior to the First Effective Time

Each of the Company and Galaxy have agreed to certain covenants in the Merger Agreement restricting the conduct of its business between the date of the Merger Agreement and the First Effective Time. In general,

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each of Galaxy and the Company has agreed to (i) conduct its business in the ordinary course consistent with past practice in all material respects, (ii) use commercially reasonable efforts to maintain and preserve intact its business organization and advantageous business relationships and retain the services of its officers and key employees, and (iii) take no action that would prohibit or materially impair or delay the ability of either Galaxy or the Company to obtain any necessary approvals of any regulatory agency or other governmental entity required for the transactions contemplated by the Merger Agreement or to consummate the transactions contemplated by the Merger Agreement.

Galaxy Forbearances

In addition, Galaxy has agreed that (subject to exceptions specified below and in the Merger Agreement or previously disclosed in writing to the other party as provided in the Merger Agreement), between the date of the Merger Agreement and the First Effective Time, it will not, and will not permit any of its subsidiaries to:

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In addition, Galaxy has agreed that, if the closing of the mergers occurs at any time from and after July 31, 2014, the latest date as of which the calculation of the cash portion of the Merger Consideration is permitted to be made, then (subject to exceptions specified below and in the Merger Agreement) it will not and it will cause each of its subsidiaries not to:

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Company Forbearances

In addition, the Company has agreed that (subject to exceptions specified below and in the Merger Agreement or previously disclosed in writing to the other party as provided in the Merger Agreement), between the date of the Merger Agreement and the First Effective Time, it will not, and will not permit any of its subsidiaries to:

Additional Agreements of the Parties

No Solicitation

Galaxy and its subsidiaries have agreed, until the earlier of the termination of the Merger Agreement or the Closing Date, not to directly or indirectly solicit, initiate, or encourage any inquiries or proposals (or engage in negotiations concerning any such proposals or provide any non-public information relating to any such proposals) for a merger, consolidation, share exchange, business combination, sale or license of all or any part of its assets (other than (i) immaterial assets that are not intellectual property or (ii) licenses in the ordinary course of business consistent with past practice), sale of shares of capital stock or similar transactions involving Galaxy or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement. Galaxy has agreed to notify the Company as promptly as possible (and no later than 24 hours) after receipt by Galaxy or its advisors of any such proposals or request for nonpublic information.

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The Company and its subsidiaries have also agreed, until the earlier of the termination of the Merger Agreement or the Closing Date, not to directly or indirectly solicit, initiate, or encourage any inquiries or proposals (or engage in negotiations concerning any such proposals or provide any non-public information relating to any such proposals) for a merger, consolidation, share exchange, business combination, sale or license of all or substantially all of its assets taken as a whole (other than licenses in the ordinary course of business consistent with past practice), or any direct or indirect acquisition of beneficial ownership of 20% or more of the equity securities of the Company, other than the transactions contemplated by the Merger Agreement; provided, that the foregoing shall not prohibit or restrict the Company from undertaking any acquisition (including an acquisition pursuant to which consideration is paid using the Company’s common stock) that would not otherwise be prohibited by the Merger Agreement. The Company has agreed to notify Galaxy as promptly as possible (and no later than 24 hours) after receipt of any such proposal or request for nonpublic information.

Financing

The Company has agreed to use its reasonable best efforts to arrange and obtain financing on the Closing Date on the terms and conditions set forth in the financing commitment letters described under the heading “The Mergers — Financing of the Mergers” above, or on such other terms as would not impose new or additional material conditions to the receipt of the financing, reasonably be expected to prevent, materially delay or impair the availability of the financing, or adversely impact the ability of the Company, LLC Sub or Merger Sub to timely consummate the mergers. Galaxy has agreed to use reasonable best efforts to provide to the Company and to Merger Sub, at the Company’s sole cost and expense, all cooperation reasonably requested in connection with the financing. In the event that financing for the transactions contemplated by the Merger Agreement is not able to be obtained, Galaxy’s sole remedy pursuant to the Merger Agreement is payment of the $16,000,000 termination fee described below See “— Effect of Termination” and “— Specific Enforcement” below.

Tax Matters

All transfer or similar taxes incurred in connection with the mergers will be shared one-half by the Company and one-half by the Galaxy stockholders and optionholders. The Company shall, at its own expense, file all necessary tax returns with respect to such taxes and, if required by applicable law, the Galaxy stockholders and optionholders will join in the execution thereof.

Termination of Certain Agreements

At or prior to the First Effective Time, Galaxy has agreed to take all actions necessary to cause any tax sharing agreement or any stockholders agreement, voting agreement, investor rights agreement or similar agreements to which it is a party with any Galaxy stockholders or optionholders or with respect to the Galaxy equity interests, and to terminate any management, advisory or consulting agreement with any Galaxy stockholder without any further liability or obligation on the part of Galaxy or any of its subsidiaries.

Governance Matters

Matthew Eby, a Class II director of the Company, has agreed effective upon and conditioned upon the consummation of the mergers to resign from the Company Board. The Merger Agreement provides that, effective at the Second Effective Time, the Board shall appoint Rodney Cohen to fill the vacancy created by Mr. Eby’s resignation.

Preparation of Securities Filings

The Merger Agreement provides that the Company shall use it reasonable best efforts to file with the SEC, within five business days (but in no event before the Closing Date) of receipt of the requisite Galaxy financial statements and information, a registration statement on Form S-3 or such other form under the Securities Act then available to the Company, with respect to the resale of the shares of the Company’s common stock and the warrants issued as a portion of the Merger Consideration. The terms and conditions of the Registration Rights Agreement will apply to such Form S-3 as though it were prepared and filed as a “demand registration” thereunder. See “Registration Rights Agreement” below.

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Access to Information; Confidentiality

The Merger Agreement provides for mutual access by each party to the other party’s facilities, books, records and facilities during the period prior to the closing of the mergers on the Closing Date. Galaxy and the Company are bound by a confidentiality agreement, dated as of May 16, 2014, to which any information furnished pursuant to this provision shall be subject.

Required Actions

Each of the parties to the Merger Agreement has agreed to use its reasonable best efforts to take, or cause to be taken, all actions necessary to consummate as soon as reasonably possible, the mergers and other transactions contemplated by the Merger Agreement, including (i) to obtain all required consents from, or participation in other negotiations with, third parties, (ii) to obtain all required approvals orders and authorizations from governmental entities, and (iii) to make all necessary registrations and filings with any governmental entity, including filings required under the HSR Act.

Each party shall give prompt notice to the other of any representation or warranty contained in the Merger Agreement becoming untrue or inaccurate in any material respect, or of the failure to comply with in any material respect any covenant, condition or agreement under the Merger Agreement.

Indemnification of Directors and Officers

The Company has agreed to cause the Final Surviving Company following the mergers to indemnify former directors and officers of Galaxy to the fullest extent that such persons would have been entitled to indemnification prior to the date of the Merger Agreement. Galaxy has agreed to purchase a “tail” directors’ and officers’ liability insurance policy for its former directors and officers. The “tail” policy will have a claims period of at least six years after the Closing Date with at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of Galaxy than the terms of such insurance coverage at signing.

Stockholder Releases

The Merger Agreement provides for a release by the Company, the Final Surviving Company and each subsidiary thereof in favor of the Galaxy stockholders and optionholders (including their respective direct and indirect equityholders, directors, managers, officers, employees, assigns, successors and affiliates) with respect to any claims held against them solely in their capacity as a Galaxy stockholder, subject to certain limited exceptions set forth in the Merger Agreement.

Conditions to the Mergers

The obligations of each of the parties to effect the mergers are subject to the satisfaction, or waiver by each of the parties, of the following conditions:

In addition, Galaxy’s obligations to effect the mergers are subject to the satisfaction or waiver of the following additional conditions:

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Furthermore, the obligations of the Company to consummate the mergers are subject to the satisfaction of the following conditions:

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Indemnification

Each of Galaxy’s and the Company’s representations and warranties related to organization, authorization, capitalization and brokers’ or finders’ fees survive the closing of the mergers for a period of 18 months after the Closing Date. Claims in the case of fraud shall survive against the part committing such fraud for a period of 36 months after the Closing Date, as specified in the Merger Agreement. Covenants do not survive the closing of the mergers, except for those matters to be performed following such closing, which survive in accordance with their respective terms for a period not to exceed 18 months following the Closing Date.

Each party has agreed to indemnify the other party, and the other party’s affiliates, officers, directors, employees, agents, successor and assigns, for losses resulting from a breach of those representations that survive the closing of the mergers on the Closing Date, or from any breach of any covenant or agreement requiring action after such closing.

No party is entitled to indemnification for any special, punitive, lost profits, consequential or exemplary damages, except to the extent actually awarded in connection with a third party claim giving rise to the claim for indemnification. An indemnified party must use commercially reasonable efforts to mitigate any losses for which it is entitled to indemnification and shall afford the opportunity to the indemnifying party, to the extent reasonably possible, to minimize such loses.

The Company has agreed that it will first seek recovery against any former Galaxy stockholder or optionholder for any losses from the portion of the holdback of Company shares attributable to such former Galaxy stockholder or optionholder and thereafter from such former Galaxy stockholder or optionholder, with a limitation that no Galaxy stockholder or optionholder will individually be liable for more than his or her share of the consideration actually received. See “— Holdback Amounts” above.

Termination of the Merger Agreement

The Merger Agreement provides for its termination and the mergers and the other transactions contemplated thereby may be abandoned at any time prior to the First Effective Time, by action taken or authorized by the board of directors of the terminating party or parties:

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Effect of Termination

In the event of termination of the Merger Agreement, the Merger Agreement will become void and have no effect, and no party shall have any liability of any nature whatsoever thereunder or in connection with the transactions contemplated thereby, except with respect to certain limited provisions which survive termination and with respect to any liability for the willful breach of the terms of the Merger Agreement by another party, or any liability of the Company to pay a $16,000,000 termination fee (plus any interest on such fee, and certain costs and expenses to be reimbursed in seeking payment of such fee), as described below.

In the event the Merger Agreement is terminated by Galaxy when all conditions to the obligation of the Company to complete the closing of the mergers have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing of the mergers on the Closing Date), and the Company fails to consummate the transactions contemplated by the Merger Agreement within two business days following the date the closing should have occurred, and Galaxy delivers an irrevocable notice that it is ready, willing and able to consummate the transactions, the Company has agreed to pay to Galaxy a termination fee of $16,000,000, in no event more than once, by wire transfer of immediately available funds to the accounts designated by Galaxy.

Amendment and Waiver

The Merger Agreement may be amended, modified or supplemented by the parties by action taken or authorized by their respective boards of directors at any time, whether before or after the Company stockholder approval or the Galaxy stockholder approval has been obtained; provided, however, that after either such approval is obtained, no amendment may be made that by applicable law requires further approval by the stockholders of the Company or Galaxy without such further approvals. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties (including the Stockholder Representative).

Prior to the First Effective Time, Galaxy and the Company, and, following closing of the mergers on the Closing Date, the Stockholder Representative (on behalf of itself and the other Galaxy stockholders and optionholders) and the Company (on behalf of the Final Surviving Company), may:

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Specific Enforcement

The parties are entitled to an injunction, specific performance and other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms of the Merger Agreement in addition to any other remedy to which they are entitled at law or in equity. Notwithstanding the foregoing, in the case where the Company is unable to close due to a failure of the Company’s financing for the transactions contemplated by the Merger Agreement to be funded, Galaxy is not entitled to enforce specifically the Company’s obligation to consummate such transactions, and Galaxy’s sole remedy will be the $16,000,000 termination fee. See “— Effect of Termination” above.

Third-Party Beneficiaries

The Merger Agreement is not intended to, and does not, confer upon you or any other person any rights or remedies, except to the extent expressly specified otherwise therein.

Publicity

Each party agrees not to issue any press release or make any public statement with respect to the transactions contemplated by the Merger Agreement, including the mergers, without the prior written consent of the other party (including, as of the closing of the mergers, the Stockholder Representative), except as required by applicable law.

Governing Law

The Merger Agreement is governed by and will be construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles of Delaware. The parties to the Merger Agreement have each submitted to the jurisdiction of the Court of Chancery in the State of Delaware and have further waived all rights to a trial by jury in any action or proceeding relating to the Merger Agreement or the transactions contemplated thereby.

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DESCRIPTION OF THE WARRANTS

As part of the Merger Consideration, upon the closing of the mergers on the Closing Date, the Company will issue to Galaxy stockholders and optionholders warrants to purchase an aggregate of up to 3,000,000 additional shares of the Company’s common stock, which are referred to as the “warrant shares.” The warrant shares will be issued at a purchase price of $11.20 per share, and will vest based upon the performance in the 2016 and 2017 calendar years of the Linens ‘n Things brand acquired from Galaxy, as follows:

For purposes of the foregoing, net royalties is calculated as the gross aggregate royalties and other similar revenue earned by the Company and its subsidiaries during the applicable calendar year and received within 90 days after the date that such royalties have become due and payable, less the commissions and other amounts payable pursuant to a services agreement with Earthbound LLC or another broker relating to licensing of Linens ‘n Things brand during the applicable calendar year. The vesting amounts for each year will be determined by the Company and the Stockholder Representative based upon a statement delivered by the Company to the Stockholder Representative on or before April 30 (or June 30, in certain circumstances) of the year following the applicable calendar year, and in accordance with the agreed procedures to resolve any disagreement with respect to the amounts set forth on such statement. The Company has agreed to take certain actions with respect to the operations of the Linens ‘n Things brand during the 2016 and 2017 calendar years, including with respect to the collection of royalties.

In the event of a change of control of the Company before April 30, 2017, any unvested warrant shares will immediately vest, and the warrants shall become exercisable for such vested warrant shares. If the Company sells the Linens ‘n Things brand for in excess of $50,000,000 before the end of calendar year 2017, any unvested warrant shares will immediately vest, and the warrants will become exercisable for such vested warrant shares. In the event of a sale of the brand for loss than $50,000,000, the warrant shares will vest proportionally, based upon the value of the sale as a percentage of $50,000,000.

The numbers and purchase price of warrant shares for which the warrant is exercisable is subject to certain antidilution adjustments specified in the form of warrant agreement, including adjustments upon any (i) subdivision, combination, reclassification or other change relating to the Company’s common stock, (ii) reorganization, consolidation or merger of the Company with or into another entity, and (iii) dividends or other distributions of assets (or rights to acquire assets) of the Company to holders of shares of the Company’s common stock.

No fractional shares of the Company’s common stock will be issued in connection with the exercise of the warrant, and the company will pay cash in lieu of any such fractional interests. The warrant shares are subject to withholding upon issuance to the extent required by applicable law. No holder of warrants, as such, will be entitled to vote, receive dividends or be deemed to be a stockholder of the Company for any purpose, until the issuance of warrant shares pursuant to the terms of the warrant.

The warrants expire on December 31, 2019.

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REGISTRATION RIGHTS AGREEMENT

Pursuant to the Merger Agreement, the Company and the Stockholder Representative (on behalf of the former Galaxy stockholders and optionholders) will enter into a Registration Rights Agreement. The Registration Rights Agreement will provide that the Stockholder Representative, on behalf of former Galaxy stockholders and optionholders or a group of Galaxy stockholders and optionholders owning at least 50% of the securities then registrable thereunder, may make up to three requests that all or part of the unregistered shares of the Company’s common stock issued in the mergers, warrants to purchase the Company’s common stock or shares of the Company’s common stock underlying such warrants held by them (other than securities sold pursuant to an effective registration statement under the Securities Act, securities eligible for resale pursuant to Rule 144 of the Securities Act and securities that are no longer outstanding) be registered on a registration statement under the Securities Act (a so-called “demand registration”). However, no such registration may be requested for an offering with an anticipated aggregate offering price of less than $10 million.

In addition to the foregoing, pursuant to the Registration Rights Agreement, whenever the Company proposes to register any of its securities under the Securities Act (other than in a registration in connection with any employee benefit plan or dividend reinvestment plan, any business combination transaction or any demand registration), it will give prompt notice to each former Galaxy stockholder and optionholder and will use reasonable best efforts to cause to be included in the registration statement all registrable securities requested by such holders within 10 business days of receipt of such notice of receipt of such notice (a so-called “piggyback registration”).

All reasonable expenses incident to any demand or piggyback registration effected pursuant to the Registration Rights Agreement and the Company’s performance of or compliance with the Registration Rights Agreement will be borne by the Company.

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INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

Each of William Sweedler, the chairman of the Company Board, and Matthew Eby, a Company director, may be deemed to have financial interests in the mergers that are different from, or in addition to, the interests of the Company’s equity holders generally, as a result of certain relationships to Tengram Capital Management, L.P. (“TCM”), an affiliate of Tengram, as described below. The Board was aware of and considered these potential interests, among other matters, in evaluating and negotiating the Merger Agreement and approving the mergers and the Stock Issuance.

The Company is currently party to a consulting services agreement, effective as of January 1, 2013, with TCM. Pursuant to the consulting services agreement, TCM provides certain services to the Company relating to mergers and acquisitions, debt and equity financing, and such other related areas as the Company may reasonably request from time to time, in exchange for certain compensation, including annual fees, transaction fees, and reimbursement of certain out-of-pocket expenses. In particular, a $3,500,000 transaction fee is payable to TCM upon the consummation of the mergers contemplated by the Merger Agreement. Each of William Sweedler, the chairman of the Company Board, and Matthew Eby, a Company director, are principals of Tengram. As a result, Mr. Sweedler and Mr. Eby may each be deemed to control TCM and to have benefitted indirectly from the payment of such transaction fee to TCM.

In connection with the Merger Agreement, the Company and TCM have agreed to enter into an amendment to the consulting services agreement, such that the annual fees payable to TCM thereunder will be $900,000 per year.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table presents information regarding the beneficial ownership of the Company’s common stock as of July 1, 2014 by:

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 the Company’s 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 the Company’s common stock subject to options, warrants and other derivative securities that are currently exercisable or convertible, or exercisable or convertible within 60 days of July 1, 2014 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 25,766,874 shares of the Company’s common stock outstanding on July 1, 2014. Unless otherwise indicated, the address of each of the executive officers and directors and 5% or more stockholders named below is c/o Sequential Brands Group, Inc., 1065 Avenue of the Americas, 30^th Floor, New York, NY 10018.

Name of Beneficial Owner		Number of Shares Beneficially Owned				Percentage of Shares Outstanding
Executive Officers and Directors:
Yehuda Shmidman(1) Director, Chief Executive Officer and Secretary			105,852				*
William Sweedler(2) Chairman of the Board of Directors			8,111,362				30.2	%
Matthew Eby(2) Director			7,619,178				28.4	%
Al Gossett(3) Director			116,843				*
Gary Johnson(4) Director			115,251				*
Stewart Leonard, Jr.(5) Director			7,813				*
Aaron Hollander Director			—				*
Gary Klein(6) Chief Financial Officer			21,128				*
Named Directors and officers as a group (8 persons)			8,478,249				31.5	%
5% Stockholders:
Tengram Capital Partners Gen2 Fund, L.P.(2)			7,619,178				28.4	%
BlackRock, Inc.(7)			2,824,733				11.0	%
Buckingham Capital Management, Inc.(8)			2,666,666				10.3	%
Siguler Guff Small Buyout Opportunities Fund II, LP(9)			1,757,575				6.8	%

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INFORMATION ABOUT GALAXY

Description of Galaxy’s Business

Galaxy owns a diversified portfolio of consumer brands generating over $700 million in annual retail sales based on which Galaxy receives certain royalties. The Company's branding expertise, retail relationships and strategic partnerships create significant value for its best-in-class licensees who design, source and distribute products to retailers around the globe. With innovative and creative advertising and promotions, Galaxy is an industry leader in promoting and elevating brands in the marketplace through traditional and digital platforms. Galaxy aims to provide retailers with national brands that offer consumers quality products at superior values, and maintain hands-on relationships with its trusted retailers, manufacturers and licensee partners.

Galaxy was founded in 2011 and is based in New York City. Until May 13, 2013, Galaxy operated as a limited liability company under the name of Galaxy Brands LLC (“Galaxy Brands”). Galaxy Brands was organized as a limited liability company in the State of Delaware on August 18, 2011, commenced operations on October 24, 2011 and thereafter acquired 100% of the common stock of The Basketball Marketing Company, Inc., which marketed fashionable athletic apparel through the AND1 brand.

Galaxy Brands Holdings, Inc., or Galaxy, was incorporated in the State of Delaware on May 13, 2013, and was formed to acquire all of the membership interests of Galaxy Brands. Contemporaneously with the acquisition of Galaxy Brands, Galaxy acquired American Sporting Goods Corporation (“ASG”), which included the Avia and Nevados brands. On December 6, 2013, Galaxy acquired the intellectual property portfolio of registered trademarks and domain names that encompass the Linens ‘n Things brand.

Galaxy is in the business of marketing and licensing brands and related trademarks it owns or represents. Galaxy’s portfolio currently contains AND1, Avia, Nevados and Linens ‘n Things. AND1 is a global men’s performance basketball and lifestyle brand that caters to basketball participants and enthusiasts. The brand’s universal appeal is driven by its authentic heritage in the sport and advanced technology features to enhance players’ game. Avia is a full active lifestyle brand with a more than 30-year history of offering technical running, walking and fitness footwear and apparel featuring innovative technology at a value. Its offerings appeal to hard-core runners and casual walkers alike. Nevados is an authentic outdoor lifestyle brand known for its hiking and outdoor footwear. The brand boasts a devoted customer base of active families who seek the style, comfort and durability of their products. Linens ‘n Things was a major retailer of home goods that once had 571 stores and $2.7 billion of annual sales. The Linens ‘n Things brand was recently re-launched as an online retailer of home goods, providing a wide array of home merchandise at value-oriented prices directly to consumers.

Market for Galaxy’s Common Stock, Related Stockholder Matters

Market Information and Dividend Policy

There is no established public trading market for Galaxy’s common stock. Galaxy paid a cash dividend in the amount of $1,750,000 in December 2013. Other than such dividend, neither Galaxy nor its predecessor company paid any cash dividends in the fiscal years ended December 31, 2012 or 2013, or in the three months ended March 31, 2014.

Holders

As of July 1, 2014, there were 13 holders of shares of Galaxy Class A Common Stock and one holder of shares of Galaxy Class B Common Stock.

The following table sets forth an estimate of the number of shares of the Company’s common stock that will be issued upon completion of the mergers to holders of Galaxy common stock that will, at such time, become beneficial owners of more than 5% of the Company’s common stock, based upon the 25,721,624 shares of the Company’s common stock outstanding as of June 24, 2014 and the Company’s closing stock price on July 1, 2014. The actual number of shares of the Company’s common stock issued to any former Galaxy stockholder or optionholder at the closing will depend upon the average price of the Company’s common stock during the five trading days immediately preceding the date immediately prior to the Closing

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Date, but the aggregate number of shares of Company common stock issued to such former Galaxy stockholders and optionholders at the closing will remain unchanged at 13,750,000 shares.

Name of Beneficial Owner		Number of Shares of Company Common Stock to be Beneficially Owned				Percentage of Shares of Company Common Stock Outstanding Upon Completion of the Mergers
Carlyle Galaxy Holdings, L.P.(1)			6,366,394				16.1	%

Equity Compensation Plan Information

The following table provides information as of July 1, 2014 regarding shares of Galaxy Class A Common Stock subject to options and additional shares of Galaxy Class A Common Stock available for issuance, in each case, pursuant to the Galaxy Brand Holdings, Inc. 2013 Equity Incentive Plan (the “Galaxy Incentive Plan”):

Plan Category		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			—			$	—				—
Equity compensation plans not approved by security holders			52,404			$	100				25,909
Total			52,404			$	100				25,909

The purpose of the Galaxy Incentive Plan is to advance the interests of Galaxy’s stockholders by enhancing Galaxy’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to Galaxy by providing such persons with equity ownership opportunities and thereby better aligning the interests of such persons with those of Galaxy’s stockholders. The Company expects to terminate the Galaxy Incentive Plan in connection with the consummation of the mergers and may offer certain Galaxy employees the ability to participate in the existing Company equity incentive plan post-closing.

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 Galaxy Brand Holdings, Inc. and subsidiaries and the “Notes to Consolidated Financial Statements” included elsewhere in this Information Statement. This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of Galaxy. 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 Galaxy’s control. Amounts described in this section are in thousands, except share and per share data.

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Critical Accounting Policies, Judgments and Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to exercise its judgment. Galaxy exercises considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of assets and liabilities, recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the financial statements. On an on-going basis, Galaxy evaluates its estimates and judgments. Galaxy bases its estimates and judgments 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. While Galaxy believes that the factors it evaluates provide it with a meaningful basis for establishing and applying sound accounting policies, it cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

A description of significant accounting policies that require Galaxy to make estimates and assumptions in the preparation of its consolidated financial statements are as follows:

Revenue Recognition.  Galaxy has 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 the term of each contract year, 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. With respect to manufacturing operations, Galaxy recognized revenue upon shipment of its products to customers.

Impairment of Long-Lived Assets and Intangibles.  Long-lived assets, representing trademarks and customer relationships, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite lived intangible assets are tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that indicate that the carrying amount of the indefinite lived intangible asset may not be recoverable. When conducting its annual indefinite lived intangible asset impairment assessment, Galaxy management initially performs a qualitative evaluation of whether it is more likely than not that the asset is impaired. If it is determined by a qualitative evaluation that it is more likely than not that the asset is impaired, Galaxy then tests the asset for recoverability. 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.

Goodwill.  Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Management considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, Galaxy initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, Galaxy then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company's reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and Galaxy is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, Galaxy determines the implied fair value of the reporting unit's goodwill and if the carrying value of the reporting unit's goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statement of operations.

Income Taxes.  Until May 13, 2013, Galaxy Brands was a limited liability company that elected to be taxed as a partnership. As such, Galaxy Brands income or loss was required to be reported by each respective member on their separate income tax returns. Effective May 13, 2013, as a result of the formation and incorporation of Galaxy as a taxable entity, Galaxy is now taxed as a “C” Corporation. Management provides for income taxes using an asset and liability approach, under which deferred income taxes are provided based

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upon enacted tax laws and rates applicable to periods in which the taxes become payable. As of March 31, 2014 and December 31, 2013, Galaxy is in a net deferred tax liability position.

In accounting for uncertainty in income taxes, Galaxy recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. Galaxy recognizes interest and penalties on any unrecognized tax benefits as a component of income tax expense. Based on an evaluation of its tax positions, management believes all positions taken would be upheld under an examination.

Galaxy is required to determine the aggregate amount of income tax expense or loss based upon tax statutes in jurisdictions in which it conducts business. In making these estimates, Galaxy adjusts its results determined in accordance with generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a result of these differences, are reflected on the consolidated balance sheet for temporary differences in loss and credit carryforwards that will reverse in subsequent years. Galaxy also establishes a valuation allowance against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. Valuation allowances are based, in part, on predictions that management must make as to the results in future periods. The outcome of events could differ over time which would require that Galaxy make changes in the valuation allowance.

Galaxy follows the guidance under Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, as it relates to uncertain tax positions. Galaxy does not believe there are any uncertain tax positions that need to be reserved for as of December 31, 2013. Interest and penalties related to uncertain tax positions, if any, are reported in income tax expense. Tax years that remain open for assessment for federal and state tax purposes include the year ended December 31, 2013.

Stock-Based Compensation.  Galaxy accounts for stock-based compensation under ASC Topic 718, Compensation — Stock Compensation, which requires companies to measure and recognize compensation expense for all stock-based payments at fair value.

Galaxy is also required to apply complex accounting principles with respect to accounting for financing transactions that it has consummated in order to finance the growth of the business. These transactions require Galaxy to use significant judgment in order to assess the fair values of these instruments at their dates of issuance, which is critical to making a reasonable presentation of its financing costs and how Galaxy finances its business.

Results of Operations

Comparison of the Three Months Ended March 31, 2014 to the Three Months Ended March 31, 2013

The following table sets forth, for the periods indicated, unaudited consolidated statements of operations information for Galaxy for the three months ended March 31, 2014, compared to unaudited consolidated statements of operations information for Galaxy Brands for the three months ended March 31, 2013 (certain items may not foot due to rounding). The results of operations presented for the three months ended March 31, 2013, are those solely of Galaxy Brands, since Galaxy did not exist, nor have operations, until May 14, 2013, whereas the results of operations presented for the three months ended March 31, 2014 are those of Galaxy:

		Three Months Ended March 31,								Change (Dollars)				Change (Percentage)
		2014 (Galaxy)				2013 (Galaxy Brands)
Royalty income		$	7,639			$	3,475				4,164				119.8	%
Operating expenses			3,893				753				3,140				416.9	%
Income from operations			3,746				2,722				1,024				37.6	%
Interest expense, net			306				423				(117	)			-27.6	%
Income before income taxes			3,440				2,299				1,141				49.6	%
Provision for income taxes			1,414				8				1,406				NM
Consolidated net income		$	2,026			$	2,291			$	(266	)			-11.6	%

NM: Not Meaningful.

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The increase in royalty income for the three months ended March 31, 2014, compared to the three months ended March 31, 2013, is primarily attributable to the acquisition of several new brands in May 2013 and a significant increase in the number of licensees as a result of these acquisitions. Royalty income for the three months ended March 31, 2014 consists of income earned from license agreements related to the AND1, Avia, and Nevados brands. Royalty income for the three months ended March 31, 2013 consists of income earned from license agreements related to the AND1 brand.

Operating expenses increased from $753 for the three months ended March 31, 2013 to $3,795 for the three months ended March 31, 2014, an increase of $3,042 or 403.9%. The increase is primarily attributable to compensation expense of $1,025, advertising and marketing expenses of $820, professional fees of $438, lease expense of $257, office expenses of $223 and management fees of $313. Mainly offsetting this increase was a decrease in members’ guaranteed payments of $375.

Compensation expense increased as a result of additional professional staff retained to support the acquired brands. The increase in advertising and marketing expense is mainly attributable to the higher costs incurred during 2014 with licensees to promote the new brands and brand related products. The increase in professional fees is mainly attributable to higher legal, accounting and business development costs incurred as a result of the acquisitions of new brands during 2013. Included in the three months ended March 31, 2014 is net lease income of $107 related to the warehouse lease acquired from ASG in May 2013. The three months ended March 31, 2013 reflects the recognition of approximately $346 of income due to the reversal of previously recorded liabilities related to the legacy manufacturing business. Also included in the three months ended March 31, 2014 are office expenses of $230, mainly related to the rental expense incurred on new offices. During the three months ended March 31, 2014, Galaxy incurred $313 of management fees for advisory and consulting services provided by Carlyle Investment Management, L.L.C., an affiliate of Carlyle, during the period. Since Galaxy did not enter into this agreement until May 2013, Galaxy did not have these expenses during the three months ended March 31, 2013. Members’ guaranteed payments represent amounts paid to the members of Galaxy Brands prior to its acquisition by Galaxy in May 2013. As a result of the acquisition by Galaxy in May 2013, the payments made to members are now classified as employee compensation.

Interest expense during the three months ended March 31, 2014 resulted primarily from interest incurred on the term loans with Israel Discount Bank (“IDB”) of approximately $207 and interest incurred on a note payable to Gordon Brothers Commercial and Industrial, L.L.C. of approximately $101.

Interest expense for the three months ended March 31, 2013 resulted primarily from interest incurred on notes payable of approximately $300 and interest incurred on the term loans with IDB of $123.

Until May 13, 2013, Galaxy Brands operations were taxed as a limited liability company, whereby Galaxy Brands elected to be taxed as a partnership and the income or loss was required to be reported by each respective member on their separate income tax returns. As a result of the formation and incorporation of Galaxy on May 13, 2013, the results of operations are taxed as a C Corporation. Accordingly, Galaxy’s tax status as a taxable entity resulted in the recognition of deferred tax assets and liabilities based on the expected tax consequences of temporary differences between the book and tax basis of the assets and liabilities. This resulted in a net deferred tax expense of $1,414 being recognized and included in the tax provision for the three months ended March 31, 2014.

Comparison of the Year Ended December 31, 2013 to the Year Ended December 31, 2012

To provide a more meaningful discussion regarding the comparison of the results of operations from 2013 to 2012, Galaxy has provided the following pro forma information. The discussion below combines the results of operations of Galaxy Brands from January 1, 2013 through May 13, 2013 with the results of operations of Galaxy for the period from May 14, 2013 (inception) through December 31, 2013. The results of operations presented for the year ended December 31, 2012 are those solely of Galaxy Brands, since Galaxy did not exist, nor have operations, in 2012.

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The following table sets forth, for the periods indicated, pro forma consolidated combined statement of operations information for Galaxy for the year ended December 31, 2013, compared to the consolidated combined statement of operations information of Galaxy Brands for the year ended December31, 2012 (certain items may not foot due to rounding):

		Years Ended December 31,								Change (Dollars)				Change (Percentage)
		2013 (Galaxy)				2012 (Galaxy Brands)
Net sales		$	0			$	7,309			$	(7,309	)			-100.0	%
Royalty income			23,860				6,425				17,435				271.4	%
Net revenues			23,860				13,734				10,126				73.7	%
Cost of goods sold			0				7,580				(7,580	)			-100.0	%
Gross profit			23,860				6,154				17,706				287.7	%
Operating expenses			11,532				5,290				6,242				118.0	%
Income from operations			12,328				864				11,463				NM
Interest expense, net			1,656				2,530				(874	)			-34.5	%
Income (loss) before income taxes			10,671				(1,666	)			12,337				NM
Provision for income taxes			3,402				2				3,399				NM
Consolidated net income (loss)		$	7,270			$	(1,668	)		$	8,938				NM

NM: Not Meaningful.

The decrease in net sales, and corresponding decrease in cost of goods sold, for the year ended December 31, 2013, compared to the year ended December 31, 2012, is primarily attributable to the winding down of the legacy manufacturing operations related to the AND1 brand, in support of the licensing business model. The increase in royalty income for the year ended December 31, 2013, compared to the year ended December 31, 2012 is primarily attributable to the acquisition of several new brands during 2013 and a significant increase in the number of licensees as a result of these acquisitions. Royalty income for the year ended December 31, 2013 consists of income earned from license agreements related to the AND1, Avia, and Nevados brands. Royalty income for the year ended December 31, 2012 consists of income earned only from license agreements related to the AND1 brand.

Operating expenses increased from $5,290 for the year ended December 31, 2012 to $11,532 for the year ended December 31, 2013, an increase of $6,242 or 118.0%. The increase is primarily attributable to compensation expense of $2,995, advertising and marketing expenses of $2,453, professional fees of $817, non-recurring expenses of $683, and management fees of $666. Mainly offsetting this increase was a decrease in members’ guaranteed payments of $875 and shipping and handling costs of $718.

Compensation expense increased as a result of additional professional staff retained to support the acquired brands. The increase in advertising and marketing expense is mainly attributable to the higher costs incurred during 2013 with licensees to promote the new brands and brand related products. Non-recurring expenses consist of one-time expenses incurred in connection with the transition of business from a manufacturing operation to a licensing model. Galaxy incurred implementation, start-up and other transaction costs in connection with the transition, as well as wind down costs on the legacy manufacturing operations. The increase in professional fees is mainly attributable to higher legal, accounting and business development costs incurred as a result of the acquisitions of new brands during 2013, as well as costs incurred for other potential business acquisitions. During 2013, Galaxy incurred $666 of management fees payable to Carlyle Investment Management, L.L.C. for advisory and consulting services provided during the period from May 13, 2013 through December 31, 2013. Since Galaxy did not enter into this agreement until 2013, it did not have these expenses during 2012. Members’ guaranteed payments represent amounts paid to the members of Galaxy Brands prior to its acquisition by Galaxy in May 2013. As a result of the acquisition by Galaxy in May 2013, payments to members are now classified as employee compensation. Shipping and handling costs

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decreased as a result of the wind down of the legacy manufacturing operations related to the AND1 brand during 2012. As such, Galaxy no longer incurs shipping and handling costs related to the delivery of merchandise to customers.

Interest expense during the year ended December 31, 2013 resulted primarily from interest incurred on the notes payable of approximately $1,093 and interest incurred on the term loans with IDB of approximately $635.

Interest expense for the year ended December 31, 2012 resulted primarily from interest incurred the notes payable approximately $2,254 and interest incurred on the term loans with IDB of $276.

Until May 13, 2013, Galaxy Brands operations were taxed as a limited liability company, whereby Galaxy Brands elected to be taxed as a partnership and the income or loss was required to be reported by each respective member on their separate income tax returns. As a result of the formation and incorporation of Galaxy on May 13, 2013, the results of operations are taxed as a C Corporation. Accordingly, Galaxy’s tax status as a taxable entity resulted in the recognition of deferred tax assets and liabilities based on the expected tax consequences of temporary differences between the book and tax basis of the assets and liabilities. This resulted in a net deferred tax expense of $3,387 being recognized and included in the tax provision for the year ended December 31, 2013.

Liquidity and Capital Resources

As of March 31, 2014, Galaxy had cash of approximately $3,727, a working capital balance of approximately $6,923, outstanding debt obligations under the term loans of $22,125 and notes payable of $3,904. As of December 31, 2013, Galaxy had cash of approximately $6,099, a working capital balance of approximately $5,675, outstanding debt obligations under the term loans of $23,000 and notes payable of $6,904. Galaxy believes that cash from future operations and currently available cash will be sufficient to satisfy the anticipated working capital requirements for the foreseeable future.

Cash flows from operating, investing and financing activities for the three months ended March 31, 2014 and 2013 are summarized in the following table. The cash flows presented for the three months ended March 31, 2013, are those solely of Galaxy Brands, since Galaxy did not exist, nor have operations, until May 14, 2013, whereas the cash flows for the three months ended March 31, 2014 are those of Galaxy. Cash flow information for the year ended December 31, 2013, compared to the year ended December 31, 2012, is not presented, as it would not be meaningful nor practicable to combine the cash flows for Galaxy and Galaxy Brands for 2013 for comparison to the year ended December 31, 2012.

		Three Months Ended March 31,
		2014 (Galaxy)				2013 (Galaxy Brands)
Operating activities		$	1,307			$	1,415
Investing activites			(804	)			—
Financing activities			(2,875	)			(500	)
Net increase (decrease) in cash and cash equivalents		$	(2,372	)		$	915

Operating Activities

Net cash provided by operating activities was $1,307 for the three months ended March 31, 2014, compared to $1,415 for the three months ended March 31, 2013. Changes in working capital of $904 offset the consolidated net income of $2,026 during the three months ended March 31, 2014. Changes in working capital of $876 offset the consolidated net income of $2,291 during the three months ended March 31, 2013.

Investing Activities

Net cash used in investing activities was $804 for the three months ended March 31, 2014, consisting of $604 of cash paid for the purchase of property and equipment and $200 of cash paid for the purchase of intellectual property. Galaxy did not use cash for investing activities during the three months ended March 31, 2013.

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Financing Activities

Net cash used in financing activities for the three months ended March 31, 2014 amounted to $2,875, compared to $500 for the three months ended March 31, 2013. Galaxy made $875 of repayments under the term loan with IDB and $3,000 of repayments under the note payable. Additionally, Galaxy received $1,000 in shareholder contributions during the three months ended March 31, 2014. During the three months ended March 31, 2013, Galaxy made $500 of repayments under the term loans.

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DELIVERY OF MATERIALS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” information statements. This means that only one copy of our Information Statement may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of our Information Statement to you if you call or write us at the following address or phone number: Sequential Brands Group, Inc., 1065 Avenue of the Americas, 30^th Floor, New York, NY 10018, Attn: Investor Relations, (646) 564-2577. If you would like to receive separate copies of information statements, annual reports, proxy statements or similar documents in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and phone number.

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WHERE YOU CAN FIND MORE INFORMATION

The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information that we file with the SEC at the following location of the SEC:

Public Reference Room
100 F. Street, N.E., Room 1580
Washington, D.C. 20549

Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also inspect reports, proxy statements and other information that we have filed electronically with the SEC at the SEC’s web site at http://www.sec.gov or on the Company’s web site at http://www.sequentialbrandsgroup.com.

The SEC’s rules allow us to “incorporate by reference” information into this Information Statement. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this Information Statement. This Information Statement and the information that we file later with the SEC may update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the information in this Information Statement.

We are incorporating by reference in this Information Statement the documents listed below and any future filings that we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the consummation of the transactions contemplated by the Merger Agreement provided, however, that we are not incorporating by reference any information furnished (but not filed) under Item 2.02 or Item 7.01 of any Current Report on Form 8-K:

You may obtain copies of documents incorporated by reference into this Information Statement, without charge, by written or telephonic request directed to us at Sequential Brands Group, Inc., 1065 Avenue of the Americas, 30^th Floor, New York, New York 10018, Attn: Investor Relations, (646) 564-2577.

You should rely only on the information provided in this Information Statement or incorporated by reference. We have not authorized anyone else to provide you with different information. This Information Statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy. You should not assume that the information in this Information Statement, any supplement thereto or any document incorporated by reference is accurate as of any date other than the date of the applicable document.

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INDEX TO FINANCIAL STATEMENTS

		Page Number
Audited Financial Statements of Galaxy Brands Holdings, Inc. and Subsidiaries for the period from May 13, 2013 to December 31, 2013			F-2
Report of Independent Auditors			F-3
Consolidated Balance Sheet			F-4
Consolidated Statement of Comprehensive Income			F-5
Consolidated Statement of Changes in Members’ Equity			F-6
Consolidated Statements of Cash Flow			F-7
Notes to Consolidated Financial Statements			F-8
Audited Consolidated Financial Statements of Galaxy Brands LLC and Subsidiary for the period from January 1, 2013 to May 13, 2013			F-18
Report of Independent Auditors			F-19
Consolidated Balance Sheet			F-20
Consolidated Statement of Comprehensive Income			F-21
Consolidated Statement of Changes in Members’ Equity			F-22
Consolidated Statements of Cash Flow			F-23
Notes to Consolidated Financial Statements			F-24
Audited Financial Statements and Consolidating Supplementary Information of Galaxy Brands LLC and Subsidiary for the period from January 1, 2012 to December 31, 2012			F-29
Independent Auditor’s Report			F-30
Consolidated Financial Statements			F-32
Balance Sheet			F-32
Statement of Operations			F-33
Statement of Members’ Equity			F-34
Statements of Cash Flow			F-35
Notes to Financial Statements			F-36
Consolidating Supplementary Information			F-39
Balance Sheet			F-40
Statement of Operations			F-41
Schedule of Operating Expenses			F-42
Unaudited Consolidated Financial Statements of Galaxy Brands Holdings, Inc. and Subsidiaries for the period from January 1, 2014 to March 31, 2014			F-43
Consolidated Balance Sheets			F-44
Consolidated Statement of Comprehensive Income			F-45
Consolidated Statement of Stockholders’ Equity			F-46
Consolidated Statement of Cash Flow			F-47
Notes to Consolidated Financial Statements			F-48
Unaudited Pro Forma Condensed Combined Financial Information of Sequential Brands Group, Inc. and Subsidiaries			F-54
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2014			F-56
Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March 31, 2014			F-58
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2013			F-59

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Audited Financial Statements of