4. Joint Ventures and Investments

Joint Ventures

As of September 30, 2017, the following joint ventures are consolidated with the Company:

Entity Name

Date of Original

Formation / Investment

Iconix's Ownership %

as of September 30, 2017

Joint Venture Partner

Put / Call Options, as

applicable⁽²⁾

Danskin China Limited⁽⁵⁾

October 2016

100%

Li-Ning (China) Sports Goods Co. Ltd.

—

Umbro China Limited⁽⁴⁾

July 2016

95%

Hong Kong MH Umbro International Co. Ltd.

Call Options

US Pony Holdings, LLC

February 2015

75%

Anthony L&S Athletics, LLC

—

Iconix MENA Ltd.⁽¹⁾⁽⁶⁾

December 2014

55%

Global Brands Group Asia Limited

Put / Call Options

Iconix Israel, LLC⁽¹⁾⁽³⁾

November 2013

50%

MGS

Call Option⁽³⁾

Iconix Europe LLC⁽¹⁾

December 2009

51%

Global Brands Group Asia Limited

Put / Call Options

Hydraulic IP Holdings

LLC⁽¹⁾

December 2014

51%

Top On International

—

Diamond Icon⁽¹⁾

March 2013

51%

Albion Agencies Ltd.

Buffalo brand joint

venture⁽¹⁾

February 2013

51%

Buffalo International

—

Icon Modern Amusement,

LLC⁽¹⁾

December 2012

51%

Dirty Bird Productions

—

Hardy Way, LLC

May 2009

85%

Donald Edward Hardy

—

⁽¹⁾

The Company determined, in accordance with ASC 810, based on the corporate structure, voting rights and contributions of the Company and its respective joint venture partner, the entity is a variable interest entity (VIE) and, as the Company has been determined to be the primary beneficiary, is subject to consolidation. The Company has consolidated this joint venture within its consolidated financial statements since inception. The liabilities of the VIE are not material and none of the VIE assets are encumbered by any obligation of the VIE or other entity.

⁽²⁾	Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for material terms of the put and call options associated with certain of the Company’s joint ventures.

⁽³⁾

The call option associated with Iconix Israel expired on May 14, 2016. However, in December 2016, the Company amended the Iconix Israel joint venture agreement to obtain the sole discretion and power to direct the activities of the Iconix Israel joint venture that most significantly impact its economic performance which requires the Company to continue to consolidate this joint venture its consolidated financial statements in accordance with ASC 810.

⁽⁴⁾

In July 2016, the Company executed an agreement with MH Umbro International Co. Limited (“MHMC”) to sell up to an aggregate 50% interest in a newly registered company in Hong Kong which holds the Umbro intellectual property in respect of the Greater China territory for total cash consideration of $25.0 million. The acquisition of such equity is expected to occur over a four-year period. As stipulated in the agreement, on each anniversary subsequent to the close of the transaction, MHMC will pay a portion of the total cash consideration to the Company in return for a percentage of the total potential 50% equity interest. In July 2016, the Company received $2.5 million in cash from MHMC for a 5% interest in Umbro China. In accordance with ASC 810, the Company has recorded noncontrolling interest of $1.8 million for the sale of 5% interest in Umbro China to MHMC and the corresponding gain associated with the sale of this interest is recorded in additional paid in capital on the Company’s consolidated balance sheet as of September 30, 2017.

⁽⁵⁾

In October 2016, the Company entered into an agreement with Li-Ning (China) Sports Goods Co., Ltd. (“LiNing”) to sell up to a 50% interest (and no less than a 30% interest) in its wholly-owned indirect subsidiary, Danskin China Limited (“Danskin China”), a new Hong Kong registered company, which holds the Danskin trademarks and related assets in respect of mainland China and Macau. LiNing’s purchase of the equity interest in Danskin China is expected to occur over a three-year period commencing on March 31, 2019 (the “First Closing”) for cash consideration of $5.4 million. The aggregate cash consideration paid by LiNing for its ownership of Danskin China may, based on the percentage interest in Danskin China and LiNing elects to purchase on each anniversary of the First Closing, increase to up to $8.6 million.

⁽⁶⁾

In December 2016, the Company irrevocably exercised its call right to acquire an additional 5% equity interest in Iconix MENA from GBG for total cash consideration of $1.8 million. After taking into effect this transaction and as of December 31, 2016, the Company’s ownership interest in Iconix MENA effectively increased to 55%. Such acquisition closed in February 2017. In addition to the increase in ownership interest, the joint venture agreement gives the Company the sole discretion and power to direct the activities of the Iconix MENA joint venture that most significantly impact the joint venture’s economic performance. As a result of this transaction, the Company continues to consolidate this joint venture in its consolidated financial statements in accordance with ASC 810.

In July 2017, the Company purchased the 50% ownership interest in both Iconix Canada L.P. and Ico Brands L.P. (together with Iconix Canada L.P., collectively, “Iconix Canada”) owned by its joint venture partner for $19.0 million plus 50% of the net asset value of Iconix Canada (estimated to be approximately $2.0 million), in cash, of which $9.0 million was paid at closing and the remaining $10.0 million will be paid over a two-year period through the Company’s distributions from its 51% interest in the Buffalo brand joint venture. The Company also paid 50% of the estimated net asset value of Iconix Canada at closing, subject to a post-closing reconciliation based on 50% of the actual net asset value of Iconix Canada. Additionally, as part of this transaction, the remaining outstanding purchase price installment payment of $2.9 million due from the Company’s joint venture partner, in respect of such partner’s interest in the joint venture at inception was paid to the Company.

In July 2017, the Company sold its 51% ownership interest in NGX, LLC for a purchase price of $2.4 million in cash. As a result of this transaction, the Company recognized a loss of less than $0.1 million which has been recorded within Other Income on the Company’s condensed consolidated statement of operations during the Current Quarter.

As part of the formation of certain joint ventures, the Company entered into arrangements whereby the joint venture partner paid for its investment in the joint venture entity through payment of a portion of the purchase price in cash at closing and the remainder due over a pre-determined period of time.

As of September 30, 2017, the following amounts due from such joint venture partners remain recorded on the Company’s consolidated balance sheet:

Entity	Joint Venture Partner	Amount		Recorded in
Iconix Israel, LLC	MGS	$	195	Non-controlling interest
Iconix India joint venture	Reliance Brands Ltd.	$	1,000	Other Assets - Current
Buffalo brand joint venture	Buffalo International	$	2,516	Other Assets - Current

Investments

Equity Method Investments

Entity Name	Date of Original Formation / Investment	JV Partner	Put / Call Options, as applicable⁽³⁾
Iconix Australia, LLC⁽¹⁾	September 2013	Pac Brands USA, Inc.	Put / Call Options
Iconix India joint venture⁽¹⁾	June 2012	Reliance Brands Ltd.		—
Iconix SE Asia, Ltd.⁽¹⁾⁽⁴⁾	October 2013	Global Brands Group Asia Limited	Put / Call Options
MG Icon⁽¹⁾	March 2010	Purim LLC		—
Galore Media, Inc.⁽¹⁾⁽²⁾	April 2016	Various minority interest holders		—

⁽¹⁾

The Company determined, in accordance with ASC 810, based on the corporate structure, voting rights and contributions of the Company and its respective joint venture partner, that the joint venture is not a VIE and not subject to consolidation. The Company has recorded its investment under the equity method of accounting since inception.

⁽²⁾

In September 2017, the Company entered into a stock repurchase agreement with Galore Media, Inc. (“Galore”) whereby the Company agreed to sell, and Galore agreed to repurchase, the Company’s 50,050 outstanding shares of Series A Preferred Stock of Galore for $0.5 million. Pursuant to the stock repurchase agreement, the Company received $0.3 million upon execution of the agreement and the remaining $0.2 million is expected to be received on or before December 31, 2017 and is being accounted for as a receivable recorded within Other Assets - Current on the Company’s condensed consolidated balance sheet as of September 30, 2017. Additionally, pursuant to the stock repurchase agreement, the Company agreed to forfeit and surrender the 46,067 shares of Series A Preferred Stock of Galore that were received in April 2016 upon the Company’s exercise of the initial warrant. All remaining warrants to purchase additional shares of Series A Preferred Stock of Galore were also forfeited as part of the stock repurchase arrangement. This transaction resulted in the Company’s ownership interest in Galore being reduced to zero.

⁽³⁾	Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for material terms of the put and call options associated with the Company’s joint venture.

⁽⁴⁾

Prior to June 30, 2017, the Company consolidated this joint venture in accordance with ASC 810. In June 2017, the Company received the final purchase price installment payment due from its joint venture partner, in respect of such partner’s interest in the joint venture, which resulted in the Company no longer having a de facto agency relationship with the Iconix SE Asia, Ltd. joint venture partner. In accordance with ASC 810, the receipt of the final purchase price installment payment was considered a reconsideration event and although the joint venture remains a VIE, the Company is no longer the primary beneficiary. As a result, the Company deconsolidated this entity from its condensed consolidated balance sheet as of June 30, 2017 and recognized a pre-tax gain on deconsolidation of $3.8 million in its condensed consolidated statement of operations for the six months ended June 30, 2017. The Company recorded an equity-method investment at fair value in Iconix SE Asia, Ltd. of $17.4 million in the condensed consolidated balance sheet as of June 30, 2017 and all assets and liabilities of the joint venture are no longer reflected in the Company’s condensed consolidated balance sheet as of June 30, 2017. Fair value of the equity-method investment was determined utilizing the income method with Level 3 inputs in accordance with ASC 820. For the six months ended June 30, 2017, the joint venture’s financial results are reflected within the individual financial statement line items of the condensed consolidated statement of operations. For the Current Quarter, Iconix SE Asia, Ltd. is accounted as an equity-method investment with earnings from the investment being recorded in equity earnings from joint ventures in the Company’s condensed consolidated statement of operations.

Additionally, through its ownership of Iconix China Holdings Limited, the Company has equity interests in the following private companies which are accounted for as equity method investments:

Brands Placed	Partner	Ownership by Iconix China	Value of Investment As of September 30, 2017
Candie’s	Candies Shanghai Fashion Co. Ltd.	20%	$	10,427
Marc Ecko	Shanghai MuXiang Apparel & Accessory Co. Limited	15%		2,398
Material Girl	Ningo Material Girl Fashion Co. Ltd.	20%		2,217
Ecko Unltd	Ai Xi Enterprise (Shanghai) Co. Limited	20%		10,566
			$	25,608

Cost Method Investments

Entity Name		Date of Original Formation / Investment
Marcy Media Holdings, LLC⁽¹⁾		July 2013
Complex Media⁽¹⁾⁽²⁾		September 2013
iBrands International, LLC⁽¹⁾		April 2014

⁽¹⁾	As the Company does not have significant influence over the entity, its investment has been recorded under the cost method of accounting.

⁽²⁾

In July 2016, the Company received $35.3 million in connection with the sale of its interest in Complex Media. An additional $3.7 million is being held in escrow to satisfy specified indemnification claims, with a portion of such escrow expected to be released twelve months following the closing of the transaction and the remainder expected to be released eighteen months following the closing of the transaction, subject to any such claims, at which time, the Company will record the gain within its consolidated statement of operations. The Company recognized a gain of $10.2 million as a result of this transaction which has been recorded in Other Income on the Company’s consolidated statement of operations during the third quarter of the year ended December 31, 2016. In July 2017, the Company received $2.7 million in cash of the total $3.7 million being held in escrow. As a result, the Company has recognized a gain of $2.7 million recorded within Other Income on the Company’s condensed consolidated statement of operations in the Current Quarter.