What changed in this filing

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Item 1. Financial Statements

2025-11-19 compared with 2025-08-14 · 275 added, 211 removed, 426 unchanged (53% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

June 30, 2025

September 30, 2025

December 31, 2024

1 unchanged sentence

Cash and cash equivalents

Accounts receivable, net of allowances for credit losses of $ 0

Accounts receivable, net of allowances for credit losses of $ 30 and $ 0 , respectively

Prepaid expenses and other current assets

25 unchanged sentences

Preferred stock, $ .001 par value, 1,000,000 shares authorized, none issued and outstanding

Common stock, $ .001 par value, 50,000,000 shares authorized, and 2,437,500 and 2,368,072 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Common stock, $ .001 par value, 50,000,000 shares authorized, and 4,806,776 and 2,368,072 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Paid-in capital

11 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net licensing revenue

8 unchanged sentences

Asset impairment charges

Loss from equity method investments

Loss from equity investments

Gain on divestiture of Lori Goldstein Brand

Operating (loss) income

Operating loss

Interest and finance expense (income)

3 unchanged sentences

Interest and finance expense (income), net

(Loss) income before income taxes

Loss before income taxes

Income tax provision (benefit)

Net (loss) income

Net loss attributable to noncontrolling interest

Net (loss) income attributable to Xcel Brands, Inc.

(Loss) earnings per common share attributable to Xcel Brands, Inc.

Net loss attributable to Xcel Brands, Inc.

Earnings (loss) per common share attributable to Xcel Brands, Inc.

stockholders:

Basic (loss) earnings per share (1)

Diluted (loss) earnings per share (1)

Basic earnings (loss) per share (1)

Diluted earnings (loss) per share (1)

Weighted average number of common shares outstanding:

21 unchanged sentences

Balance as of June 30, 2024

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants held by licensee

Shares issued to employee in connection with stock grant

Shares issued to executives for pro rata portion of base salaries, net of withholding taxes

Balance as of September 30, 2024

Balance as of December 31, 2024

10 unchanged sentences

Balance as of June 30, 2025

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants granted to licensee

Shares issued to executives for pro rata portion of base salaries, net of withholding taxes

Shares issued in connection with public offering and private placement transactions, net of transaction costs

Balance as of September 30, 2025

The values of Common stock and Paid-in capital, as well as the number of shares issued and outstanding, have been retroactively adjusted in order to give effect to the Company’s March 24, 2025 1-for-10 reverse stock split.

5 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities

32 unchanged sentences

Cash and cash equivalents

Restricted cash (reported in prepaid expenses and other current assets)

Restricted cash (reported in other non-current assets)

7 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

September 30, 2025

Nature of Operations, Background, and Basis of Presentation

6 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on May 28, 2025.

The Company is a media and consumer products company engaged in the design, licensing, marketing, live streaming, and social commerce sales of branded apparel, footwear, accessories, fine jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands.

As of June 30, 2025, the Company’s brand portfolio consists of the following:

Xcel is a media and consumer products company engaged in the design, licensing, marketing, live streaming, and social commerce sales of branded apparel, footwear, accessories, fine jewelry, home goods and other consumer products, and the acquisition of dynamic consumer lifestyle brands.

The Company primarily generates revenue through the licensing of its brands through contractual arrangements with manufacturers and retailers.

The Company, through its licensees, distributes through a modern consumer products sales strategy, which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels, to be everywhere its customers shop.

Currently, the Company’s brand portfolio consists of the following:

● the Halston, Judith Ripka, and C Wonder brands, which are wholly owned by Xcel;

1 unchanged sentence

● the LB70 by Lloyd Boston brand, which is a new co-branded collaboration between Xcel and Lloyd Boston that launched in August 2024;

● the Trust, Respect, Love by Cesar Millan brand, which is a new co-branded collaboration between Xcel and Cesar Millan that is planned to launch in Fall 2025;

● the Trust, Respect, Love by Cesar Millan brand, which is a new co-branded collaboration between Xcel and Cesar Millan that is planned to launch in the fourth quarter of 2025;

● the Longaberger brand, which Xcel manages through its 50 % ownership interest in Longaberger Licensing, LLC;

the Company consolidates Longaberger Licensing, LLC and recognizes noncontrolling interest for the remaining ownership interest held by a third party (see Note 2 for additional details);

● the Isaac Mizrahi brand, in which Xcel holds a noncontrolling interest through IM Topco, LLC (see Note 2 and Note 12 for additional details);

● a new brand which will be a co-branded collaboration between Xcel and Coco Rocha, that is planned to launch in Fall 2026;

● GemmaMade, which is a co-branded collaboration between Xcel and baking influencer Gemma Stafford which is planned to launch in the fourth quarter of 2025;

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

● GemmaMade, which is a co-branded collaboration between Xcel and baking influencer Gemma Stafford which is planned to launch in Fall 2025;

● Mesa Mia, which is a brand owned by Mexican home influencer Jenny Martinez, and for which Xcel holds the television rights through a long-term license agreement and expects to launch in Fall 2025.

The Company holds a 19 % noncontrolling interest in ORME Live, Inc.

September 30, 2025

Additionally, through October 1, 2025, the Company held a noncontrolling interest in the Isaac Mizrahi brand (see Note 2 and Note 12 for additional details).

The Company also holds a 19 % noncontrolling interest in ORME Live, Inc.

(“ORME”), a short-form video and social commerce marketplace that launched in April 2024.

The Company primarily generates revenue through the licensing of its brands through contractual arrangements with manufacturers and retailers.

The Company, through its licensees, distributes through a true modern consumer products sales strategy, which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels, to be everywhere its customers shop.

Change in Capital Structure

12 unchanged sentences

Restricted Cash

Restricted cash is reflected within other non-current assets in the condensed consolidated balance sheets.

Restricted cash at June 30, 2025 consisted of $ 0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease and $ 1.0 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement.

Restricted cash at December 31, 2024 consisted of $ 0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease.

Restricted cash at September 30, 2025 consisted of $ 0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease (reflected within other non-current assets in the condensed consolidated balance sheets) and $ 1.0 million of cash deposited in a bank account to satisfy a liquidity covenant in the Company’s term loan debt agreement (reflected within prepaid expenses and other current assets in the condensed consolidated balance sheets).

Restricted cash at December 31, 2024 consisted of $ 0.7 million of cash deposited as collateral for a standby letter of credit associated with a real estate lease (reflected within other non-current assets in the condensed consolidated balance sheets).

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As of June 30, 2025, the Company has incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

September 30, 2025

As of September 30, 2025, the Company has incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

While the Company has undertaken significant restructuring efforts during 2023 and 2024, and implemented additional measures during 2025 to further optimize its cost structure, management has determined that, absent additional funding, there is substantial doubt about the Company’s ability to meet its financial obligations as they become due within twelve months from the date these financial statements are issued.

19 unchanged sentences

The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Investments in Unconsolidated Affiliates and Variable Interest Entities

2 unchanged sentences

From June 1, 2022 through April 15, 2025, the Company accounted for its 30 % retained interest in the ongoing operations of IM Topco as a component of other operating costs and expenses under the equity method of accounting, using the distribution provisions set forth in the governing business venture agreement between the Company and WHP.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

On and effective April 15, 2025, pursuant to certain provisions contained in the May 31, 2022 membership interest purchase agreement between Xcel and WHP (as amended), the Company and two subsidiaries of WHP entered into a membership interest transfer agreement, under which Xcel transferred to WHP equity interests equal to 12.5 % of the outstanding equity interests of IM Topco.

As a result of the transfer, Xcel’s interest in IM Topco was reduced from a 30 % equity interest to a 17.5 % equity interest.

Accordingly, as of and effective April 15, 2025, the Company concluded that as it no longer holds significant influence over IM Topco, and discontinued the application of the equity method of accounting.

Accordingly, as of and effective April 15, 2025, the Company concluded that as it no longer held significant influence over IM Topco, and discontinued the application of the equity method of accounting.

In accordance with relevant GAAP guidance, the Company remeasured its retained investment in IM Topco as of the date of discontinuance of the equity method, which was not significantly different from the value reflected on the Company’s condensed consolidated balance sheet at March 31, 2025.

From April 15, 2025, as the equity securities of IM Topco are not publicly traded and do not have readily determinable fair values, the Company has elected to measure its investment in IM Topco in accordance with ASC 321-10-35-2:

From April 15, 2025, as the equity securities of IM Topco are not publicly traded and do not have readily determinable fair values, the Company elected to measure its investment in IM Topco in accordance with ASC 321-10-35-2:

at adjusted cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer.

Thus, for the three months ended June 30, 2025, the Company recognized a $ 0.18 million loss related to its investment in IM Topco, comprised of (i) a $ 0.03 million equity method loss, and (ii) other related costs and adjustments totaling $ 0.15 million.

For the six months ended June 30, 2025, the Company recognized a $ 0.52 million loss related to its investment in IM Topco, comprised of (i) a $ 0.2 1 million equity method loss, (ii) a $( 0.24 ) million adjustment to the carrying value of a contingent contractual obligation related to IM Topco (see Note 11 for additional information), and (ii) other related costs and adjustments totaling $ 0.55 million.

For the three and six months ended June 30, 2024, the Company recognized equity method losses related to its investment in IM Topco of $ 0.52 million and $ 1.03 million, respectively .

On and effective September 26, 2025, the Company, IM Topco, and two subsidiaries of WHP entered into a settlement agreement, pursuant to which the Company agreed to transfer all of its remaining equity interests in IM Topco to WHP, in exchange for (i) the release of the Company’s liability under a license agreement with IM Topco (see Note 10) and (ii) a capital appreciation right for the Company to receive 15 % of the net consideration received by IM Topco and/or WHP in excess of $ 46 million in connection with any potential future capital transaction involving IM Topco which occurs on or before September 1, 2032.

The equity interests were transferred on October 1, 2025.

Based on consideration of the above along with other relevant facts and circumstances, the Company determined that there were indicators of impairment with respect to its investment in IM Topco, and that the estimated fair value of its investment in IM Topco as well as the estimated fair value of the capital appreciation right as of September 30, 2025 was effectively zero.

As such, the Company recognized a non-cash impairment charge to reduce the carrying value of its investment to zero.

Thus, for the three months ended September 30, 2025, the Company recognized a $ 5.49 million loss related to its investment in IM Topco, comprised of (i) a $ 5.53 million impairment charge, and (ii) a $( 0.04 ) million adjustment related to the settlement of certain net receivables and payables between Xcel and IM Topco.

For the nine months ended September 30, 2025, the Company recognized a $ 6.01 million loss related to its investment in IM Topco, comprised of (i) a $ 5.53 million impairment charge, (ii) a $ 0.21 million equity method loss, (ii) a $( 0.24 ) million adjustment to the carrying value of a contingent contractual obligation related to IM Topco (see Note 11 for additional information), and (iii) other related costs and adjustments totaling $ 0.51 million.

For the three and nine months ended September 30, 2024, the Company recognized equity method losses related to its investment in IM Topco of $ 0.52 million and $ 1.55 million, respectively, and also recognized a $ 6.25 million non-cash charge to recognize a contingent contractual obligation related to IM Topco (see Note 11 for additional information) .

Investment in Orme Live, Inc.

During 2024, the Company accounted for its investment in ORME under the equity method of accounting.

The Company’s proportional share of the operating results of ORME for the three and nine months ended September 30, 2024 was a loss of approximately $ 0.08 million and $ 0.14 million, respectively.

Effective January 2025, the Company no longer applies the equity method of accounting to its investment in ORME.

Instead, the Company currently accounts for its investment in ORME in accordance with ASC 321-10-35-2:

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer.

There were no amounts recognized in the condensed consolidated statement of operations related to ORME for the three and nine months ended September 30, 2025.

The carrying value of the Company’s investment in ORME as of September 30, 2025 and December 31, 2024 was zero.

Longaberger Licensing, LLC Variable Interest Entity

4 unchanged sentences

Therefore, as the primary beneficiary, the Company has consolidated LL since 2019, and has recognized the assets, liabilities, revenues, and expenses of LL as part of its consolidated financial statements, along with a noncontrolling interest which represents Hilco Global’s 50 % ownership share in LL.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

The amount of LL's losses attributed to Hilco Global's non-controlling interest for the three months ended September 30, 2025 and 2024 was $ 0.09 million and $ 0.01 million, respectively.

The amount of LL's losses attributed to Hilco Global's non-controlling interest for the nine months ended September 30, 2025 and 2024 was $ 0.09 million and $ 0.09 million, respectively.

Trademarks and Other Intangibles

Trademarks and other intangibles, net consist of the following:

June 30, 2025

September 30, 2025

Gross Carrying

7 unchanged sentences

Copyrights and other intellectual property

Amortization expense for intangible assets was approximately $ 0.88 million for the three-month period ended June 30, 2025 (the "current quarter") and approximately $ 1.52 million for the three-month period ended June 30, 2024 (the "prior year quarter").

Amortization expense intangible assets was approximately $ 1.77 million for the six-month period ended June 30, 2025 (the "current six months") and approximately $ 3.06 million for the six-month period ended June 30, 2024 (the "prior year six months").

Amortization expense for intangible assets was approximately $ 0.88 million for the three-month period ended September 30, 2025 (the "current quarter") and approximately $ 0.89 million for the three-month period ended September 30, 2024 (the "prior year quarter").

Amortization expense intangible assets was approximately $ 2.65 million for the nine-month period ended September 30, 2025 (the "current nine months") and approximately $ 3.95 million for the nine-month period ended September 30, 2024 (the "prior year nine months").

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

Significant Contracts and Concentrations

4 unchanged sentences

Net licensing revenue from the Qurate Agreements totaled $ 0.24 million and $ 0.26 million for the current quarter and prior year quarter, respectively, representing approximately 21 % and 14 % of the Company’s total net revenue for the current quarter and prior year quarter, respectively.

Net licensing revenue from the Qurate Agreements totaled $ 0.58 million and $ 3.01 million for the current six months and prior year six months, respectively, representing approximately 22 % and 59 % of the Company’s total net revenue for the current six months and prior year six months, respectively.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

As of June 30, 2025 and December 31, 2024, the Company had receivables from Qurate of $ 0.26 million and $ 0.40 million, respectively, representing approximately 14 % and 18 % of the Company’s total net accounts receivable, respectively.

Net licensing revenue from the Qurate Agreements totaled $ 0.81 million and $ 3.27 million for the current nine months and prior year nine months, respectively, representing approximately 22 % and 46 % of the Company’s total net revenue for the current nine months and prior year nine months, respectively.

As of September 30, 2025 and December 31, 2024, the Company had receivables from Qurate of $ 0.25 million and $ 0.40 million, respectively, representing approximately 18 % and 18 % of the Company’s total net accounts receivable, respectively.

Halston Master License

3 unchanged sentences

The Licensor granted G-III a security interest in the Halston trademarks to secure the Licensor’s obligations under the Halston Master License, including to honor the obligations under the purchase option.

As a result of the upfront cash payment and guaranteed minimum royalties discussed above, the Company has recognized $ 3.11 million and $ 3.56 million of deferred revenue contract liabilities on its condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024, respectively.

As a result of the upfront cash payment and guaranteed minimum royalties discussed above, the Company has recognized $ 2.89 million and $ 3.56 million of deferred revenue contract liabilities on its condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024, respectively.

As of December 31, 2024, approximately $ 0.89 million of the contract liability balance was classified as a current liability and approximately $ 2.67 million was classified as a long-term liability.

As of June 30, 2025, approximately $ 0.89 million of the contract liability balance was classified as a current liability and approximately $ 2.22 million was classified as a long-term liability;

As of September 30, 2025, approximately $ 0.89 million of the contract liability balance was classified as a current liability and approximately $ 2.00 million was classified as a long-term liability;

the balance of the deferred revenue contract liabilities will be recognized ratably as revenue over the next 3.25 years.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

Net licensing revenue recognized from the Halston Master License was $ 0.64 million for both the current quarter and prior year quarter, representing approximately 57 % and 33 % of the Company’s total net revenue for the current quarter and prior year quarter, respectively.

Net licensing revenue recognized from the Halston Master License was $ 1.28 million for both the current six months and prior year six months, representing approximately 48 % and 25 % of the Company’s total net revenue for the current six months and prior year six months, respectively.

Net licensing revenue recognized from the Halston Master License was $ 1.91 million and $ 1.93 million for the current nine months and prior year nine months, respectively, representing approximately 51 % and 27 % of the Company’s total net revenue for the current nine months and prior year nine months, respectively.

JTV / America’s Collectibles Network, Inc.

2 unchanged sentences

In addition, the Company has outstanding receivables from prior product sales of fine jewelry made to JTV.

As of June 30, 2025 and December 31, 2024, the Company had receivables from JTV of $ 0.68 million and $ 1.06 million, respectively, representing approximately 37 % and 47 % of the Company’s total net accounts receivable, respectively.

As of September 30, 2025 and December 31, 2024, the Company had receivables from JTV of $ 0.20 million and $ 1.06 million, respectively, representing approximately 14 % and 47 % of the Company’s total net accounts receivable, respectively.

The Company is party to operating leases for real estate, and for certain equipment and storage space with a term of 12 months or less.

The Company is currently not a party to any finance leases.

As of June 30, 2025, the Company’s real estate leases have a weighted-average remaining lease term of approximately 4.38 years, and the lease liabilities are measured using a weighted-average discount rate of 7.98 %.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Total lease expense (net of sublease income) included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $ 0.2 million for both the current quarter and prior year quarter, and approximately $ 0.4 million for both the current six months and prior year six months.

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $ 0.5 million for the current quarter, $ 0.4 million for the prior year quarter, $ 0.9 million for the current six months, and $ 0.8 million for the prior year six months.

During the prior year, as a result of entering into an agreement (as sublessor) in January 2024 for the sublease of offices located at 1333 Broadway to a third-party subtenant, the Company recognized non-cash impairment charges related to the right-of-use asset for this location and associated leasehold improvement assets at this location.

These impairment charges amounted to approximately $ 1.2 million for the prior year quarter and approximately $ 3.5 million for the prior year six months.

Future Lease Obligations

As of June 30, 2025, the maturities of future lease obligations were as follows:

As of September 30, 2025, the Company’s real estate leases have a weighted-average remaining lease term of approximately 4.22 years, and the lease liabilities are measured using a weighted-average discount rate of 8.05 %.

Total lease expense (net of sublease income) included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $ 0.1 million for the current quarter, $ 0.3 million for the prior year quarter, $ 0.5 million for the current nine months, and $ 0.7 million for the prior year nine months.

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $ 0.5 million for the current quarter, $ 0.4 million for the prior year quarter, $ 1.4 million for the current nine months, and $ 1.2 million for the prior year nine months.

During the prior year nine months, as a result of entering into an agreement (as sublessor) in January 2024 for the sublease of offices located at 1333 Broadway to a third-party subtenant, the Company recognized non-cash impairment charges related to the right-of-use asset for this location and associated leasehold improvement assets at this location.

These impairment charges amounted to approximately $ 3.1 million for the right-of-use asset and approximately $ 0.4 million for the leasehold improvements during the nine month period ended September 30, 2024.

As of September 30, 2025, the maturities of future lease obligations were as follows:

(in thousands)

2025 (July 1 through December 31)

2025 (October 1 through December 31)

Total lease payments

Present value of lease liabilities

Current portion of lease liabilities

Current portion of lease liabilities (October 1, 2025 through September 30, 2026)

Non-current portion of lease liabilities

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

The Company’s net carrying amount of debt is comprised of the following:

September 30,

($ in thousands)

Term loan debt

Accumulated paid in-kind interest

Unamortized deferred finance costs and other reductions to carrying value

1 unchanged sentence

Long-term debt

On December 12, 2024, the Company and certain of its subsidiaries entered into a loan and security agreement with FEAC Agent, LLC (“FEAC”), as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC (“Restore”), as agent for certain lenders, pursuant to which the lenders made term loans to the Company and

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

agreed to make additional term loans to the Company upon the satisfaction of a condition precedent described in the loan agreement.

The term loans under the loan agreement are as follows:

12 unchanged sentences

The loan agreement contains various customary financial covenants and reporting requirements, as specified and defined therein.

The Company was in compliance with all applicable covenants under the loan agreement as of and for all periods presented in the condensed consolidated financial statements.

Principal on Term Loan A is payable on a pro rata basis in quarterly installments of $ 250,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on March 31, 2026, with the unpaid balance due on the maturity date of December 12, 2028.

Principal on Term Loan B is payable on the maturity date of December 12, 2028.

The aggregate future principal payments under the Term Loans are as follows:

($ in thousands)

Year Ending December 31,

The Company was in compliance with all applicable covenants

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

September 30, 2025

under the loan agreement, or if not in compliance with certain covenants had obtained a waiver from the lenders with respect to such covenants, as of and for all periods presented in the condensed consolidated financial statements.

As of September 30, 2025, principal on Term Loan A was payable on a pro rata basis in quarterly installments of $ 250,000 on each of March 31, June 30, September 30, and December 31 of each year, commencing on March 31, 2026, with the unpaid balance due on the maturity date of December 12, 2028.

Principal on Term Loan B is payable on the maturity date of December 12, 2028.

However, as a result of the October 2025 and November 2025 amendments to the Company’s term loan debt (see Note 12), the Company became obligated to make a prepayment of $ 250,000 on Term Loan A in October 2025 and to make a prepayment of $ 3,250,000 on Term Loan A in February 2026, with the remaining principal balance on Term Loan A of $ 500,000 due on December 31, 2026.

These amendments are reflected in the table below.

Thus, the aggregate future principal payments due under the Term Loans are as follows:

($ in thousands)

2025 (October 1 through December 31)

Interest and Exit Fees

From December 12, 2024 through April 20, 2025, interest on Term Loans accrued at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0 % floor, plus (i) 8.5 % for Term Loan A and Delayed Draw Term Loan and (ii) 13.5 % for Term Loan B.

From and after April 21, 2025, interest on the Term Loans accrues at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months, subject to a 2.0 % floor, plus (i) 8.5 % for Term Loan A and (ii) 6.5 % for Term Loan B.

From December 12, 2024 through April 20, 2025, interest on Term Loans accrued at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months (the “3-month SOFR rate”), subject to a 2.0 % floor, plus (i) 8.5 % for Term Loan A and Delayed Draw Term Loan and (ii) 13.5 % for Term Loan B.

From and after April 21, 2025, interest on the Term Loans accrues at an annual rate equal to the 3-month SOFR rate, subject to a 2.0 % floor, plus (i) 8.5 % for Term Loan A and (ii) 6.5 % for Term Loan B.

Interest on amounts outstanding under the Term Loans accrues daily and is payable at the end of each calendar month, except that from April 21, 2025 through March 31, 2027, interest on the Term Loan B will be paid in-kind (“PIK”) by being capitalized and added to the principal amount of the Term Loan B at the end of each calendar month.

For the current quarter and current six months, the Company recognized approximately $ 0.19 million of PIK interest.

For the current quarter and current six months, the Company incurred total interest expense (including interest paid in cash, PIK, and the amortization of deferred finance costs) related to term loan debt of approximately $ 0.46 million and $ 0.93 million, respectively, reflecting an effective interest rate of approximately 14.6 % and 16.8 %, respectively.

For the prior year quarter and prior year six months, the Company incurred total interest expense (including both interest paid in cash and the amortization of deferred finance costs) related to term loan debt of approximately $ 0.14 million and $ 0.29 million, respectively, reflecting an effective interest rate of approximately 11.6 %.

For the current quarter and current nine months, the Company recognized approximately $ 0.26 million and $ 0.45 million, respectively, of PIK interest.

For the current quarter and current nine months, the Company incurred interest expense (including interest paid in cash, PIK, and the amortization of deferred finance costs) related to term loan debt of approximately $ 0.39 million and $ 1.32 million, respectively, reflecting an effective interest rate of approximately 13.4 % and 15.6 %, respectively.

For the prior year quarter and prior year nine months, the Company incurred interest expense (including both interest paid in cash and the amortization of deferred finance costs) related to term loan debt of approximately $ 0.14 million and $ 0.42 million, respectively, reflecting an effective interest rate of approximately 11.6 %.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

The amended loan agreement also requires that the Company pay an exit fee of $ 175,000 to FEAC related to Term Loan A and an exit fee of $ 400,000 to Restore related to Term Loan B upon the maturity or full payment of the Term Loans.

The Company is accruing the cost of the Term Loan A exit fee over the term of the related debt, while the net present value of the Term Loan B exit fee was recognized as part of the loss on early extinguishment of debt on April 21, 2025.

The Company is accruing the cost of the Term Loan A exit fee over the term of the related debt, while the net present value of the Term Loan B exit fee on April 21, 2025 was recognized as part of the loss on early extinguishment of debt.

Deferred Finance Costs and Other Reductions to Carrying Value of Debt

6 unchanged sentences

The $ 1.26 million remaining unamortized balance of such amounts was written-off as part of the loss on early extinguishment of debt upon the closing of the April 21, 2025 debt refinancing.

In connection of the debt refinancing transaction on April 21, 2025 as described above, the Company incurred certain legal costs and other fees;

In connection with the debt refinancing transaction on April 21, 2025 as described above, the Company incurred certain legal costs and other fees;

these fees and costs totaling $ 0.53 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt.

Also in connection the April 21, 2025 debt refinancing transaction, the Company issued certain warrants to UTG to purchase shares of the Company’s common stock.

Also in connection with the April 21, 2025 debt refinancing transaction, the Company issued certain warrants to UTG to purchase shares of the Company’s common stock.

In accordance with GAAP, the Company allocated the value of the total proceeds of $ 13.62 million between the term loan debt and the warrants, based on the relative fair values of each;

as a result, the Company recognized a $ 0.58 million increase to stockholders’ equity as additional paid-in capital for the allocated fair value of the warrants, and an offsetting decrease to

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

the net carrying value of the term loan debt.

as a result, the Company recognized a $ 0.58 million increase to stockholders’ equity as additional paid-in capital for the allocated fair value of the warrants, and an offsetting decrease to the net carrying value of the term loan debt.

These reductions to the carrying value of the term loan debt totaling $ 1.11 million are being amortized to interest expense over the term of the debt using the effective interest method.

Loss on Early Extinguishment of Debt

As a result of the April 21, 2025 debt refinancing transaction as described above, the Company recognized a loss on extinguishment of debt of approximately $ 1.85 million for the current quarter and current six months.

As a result of the April 21, 2025 debt refinancing transaction as described above, the Company recognized a loss on extinguishment of debt of $ 0 and approximately $ 1.85 million for the current quarter and current nine months, respectively.

This loss was comprised of the write-off of $ 1.26 million of remaining unamortized deferred finance costs related to the December 2024 term loan, $ 0.25 million for a termination fee paid in cash to Restore at closing, $ 0.27 million for the net present value of the Term Loan B exit fee which will be paid to in cash to Restore upon the maturity or full payment of the Term Loans, and $ 0.07 million related to the new warrants granted to Restore and the amendment of certain warrants previously granted in December 2024.

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Following the special meeting, the Chairman of the Company’s Board of Directors approved a final split ratio of 1-for-10 (the “Reverse Stock Split”).

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

Subsequently, the Company filed with the Delaware Secretary of State a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, which became effective at 5:00 p.m.

9 unchanged sentences

All share and per share amounts presented in these condensed consolidated financial statements and accompanying notes, including but not limited to shares issued and outstanding, earnings/(loss) per share, and warrants and options, as well as the dollar amounts of common stock and paid-in capital, have been retroactively adjusted for all periods presented in order to reflect this change in capital structure.

2025 Public Offering and Private Placement Transactions

On August 1, 2025, the Company entered into a placement agency agreement with Maxim Group LLC (the “Placement Agent”), as lead placement agent, relating to a best efforts public offering (the “2025 Offering”) of 2,181,818 shares of the Company’s common stock at a price to the public of $ 1.10 per share.

The closing of the 2025 Offering occurred on August 4, 2025.

The net proceeds to the Company from the sale of the shares, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately $ 1.8 million.

In connection with the 2025 Offering, on August 1, 2025, the Company entered into subscription agreements with each of Robert W.

D’Loren, Chairman and Chief Executive Officer of the Company, and Mark DiSanto, a director of the Company, to purchase 82,159 and 60,883 shares, respectively, at a price of $ 1.38 per share.

The total number of shares purchased was 143,042 .

Net proceeds after payment of agent fees were approximately $ 0.2 million.

The purchase of such shares closed concurrently with the 2025 Offering.

The aggregate number of shares of common stock issued in the 2025 Public Offering and Private Placement Transactions was 2,324,860 shares and the total net proceeds received were approximately $ 2.0 million.

Upon the closing of these transactions, the Company issued the Placement Agent certain warrants to purchase up to 80,791 shares of common stock.

Such warrants will be exercisable at an exercise price of $ 1.10 per share, in whole or in part, during the four and one-half year period that commenced 180 days after August 1, 2025.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

September 30, 2025

2024 Public Offering and Private Placement Transactions

2 unchanged sentences

Upon closing of the 2024 Offering, the Company issued the Representative certain warrants to purchase up to 18,293 shares of common stock (the “Representative’s Warrants”) as compensation, which amount was offset against the proceeds received.

The Representative’s Warrants will be exercisable at a per share exercise price of $ 8.125 .

The Representative’s Warrants are exercisable, in whole or in part, during the four and one-half-year period commencing 180 days from the commencement of sales of the shares of common stock in the 2024 Offering.

In connection with the 2024 Offering, on March 14, 2024, the Company entered into subscription agreements with each of Robert W.

D’Loren, Chairman and Chief Executive Officer of the Company;

an affiliate of Mark DiSanto, a director of the Company;

Mark DiSanto, a director of the Company;

and Seth Burroughs, Executive Vice President of Business Development and Treasury of the Company to purchase 13,258 , 13,258 , and 2,946 shares, respectively, at a price of $ 9.80 per share.

The total number of shares purchased was 29,462 .

Net proceeds after payment of agent fees to the Representative were approximately $ 0.3 million.

Net proceeds after payment of agent fees were approximately $ 0.3 million.

The purchase of such shares closed concurrently with the 2024 Offering.

The aggregate number of shares of common stock issued from the 2024 Public Offering and Private Placement Transactions was 357,889 shares and the total net proceeds received was approximately $ 1.9 million.

The aggregate number of shares of common stock issued in the 2024 Public Offering and Private Placement Transactions was 357,889 shares and the total net proceeds received were approximately $ 1.9 million.

Upon the closing of these transactions, the Company issued the Representative certain warrants to purchase up to 18,293 shares of common stock.

Such warrants are exercisable at an exercise price of $ 8.125 per share, in whole or in part, during the four and one-half year period that commenced 180 days after March 15, 2024.

Equity Incentive Plans

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Of the current quarter expense amount, approximately $ 0.13 million related to employees and approximately $ 0.02 million related to directors and consultants .

Of the prior year quarter expense amount, substantially all of the expense was related to directors and consultants.

Total expense recognized for all forms of stock-based compensation was approximately $ 0.33 million and $ 0.17 million for the current six months and prior year six months, respectively.

Of the current six months expense amount, approximately $ 0.27 million related to employees and approximately $ 0.06 million related to directors and consultants .

Of the prior year six months expense amount, substantially all of the expense was related to directors and consultants.

Of the prior year quarter expense amount, approximately $ 0.11 million related to employees and approximately $ 0.04 million related to directors and consultants.

Total expense recognized for all forms of stock-based compensation was approximately $ 0.48 million and $ 0.32 million for the current nine months and prior year nine months, respectively.

Of the current nine months expense amount, approximately $ 0.40 million related to employees and approximately $ 0.08 million related to directors and consultants .

Of the prior year nine months expense amount, approximately $ 0.11 million related to employees and approximately $ 0.21 million related to directors and consultants.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

September 30, 2025

Stock-based compensation expense is recorded as a component of Other selling, general and administrative expenses in the condensed consolidated statements of operations.

Stock Options

A summary of the Company’s stock options activity for the current six months is as follows:

A summary of the Company’s stock options activity for the current nine months is as follows:

Outstanding at January 1, 2025

Expired/Forfeited

Outstanding at June 30, 2025, and expected to vest

Exercisable at June 30, 2025

Outstanding at September 30, 2025, and expected to vest

Exercisable at September 30, 2025

On April 7, 2025, the Company granted options to purchase an aggregate of 10,000 shares of common stock to certain key individuals.

The exercise price of the options is $ 2.91316 per share, and the vesting of such options is dependent upon the achievement of certain revenue targets.

The exercise price of the options is $ 2.91316 per share, and the vesting of such options is contingent upon the achievement of certain revenue targets.

On May 28, 2025, the Company granted options to purchase an aggregate of 10,000 shares of common stock to non-management directors.

4 unchanged sentences

The exercise price of the options is $ 2.6321 per share, and the options vested immediately upon grant.

On September 24, 2025, the Company granted options to purchase an aggregate of 60,000 shares of common stock to a member of management.

The exercise price of the options is $ 1.585 per share, and the vesting of such options is contingent upon the Company’s common stock achieving certain target prices or the Company achieving certain financial performance targets.

Compensation expense related to stock options for the current quarter and the prior year quarter was approximately $ 0.01 million and $ 0.02 million, respectively.

Compensation expense related to stock options for the current six months and the prior year six months was approximately $ 0.06 million and $ 0.03 million, respectively.

Total unrecognized compensation expense related to unvested stock options at June 30, 2025 was approximately $ 0.02 million and is expected to be recognized over a weighted average period of approximately 0.76 years.

A summary of the Company’s non-vested stock options activity for the current six months is as follows:

Balance at January 1, 2025

Forfeited or Canceled

Balance at June 30, 2025

Of the total stock options outstanding at June 30, 2025, the vesting of 350,000 options is contingent upon the Company’s common stock achieving certain target prices, and the vesting of 20,000 options is dependent upon the achievement of

Compensation expense related to stock options for the current nine months and the prior year nine months was approximately $ 0.07 million and $ 0.06 million, respectively.

Total unrecognized compensation expense related to unvested stock options at September 30, 2025 was approximately $ 0.01 million and is expected to be recognized over a weighted average period of approximately 0.51 years.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

certain revenue targets.

September 30, 2025

A summary of the Company’s non-vested stock options activity for the current nine months is as follows:

Balance at January 1, 2025

Forfeited or Canceled

Balance at September 30, 2025

Of the total stock options outstanding at September 30, 2025, the vesting of 350,000 options is contingent upon the Company’s common stock achieving certain target prices, the vesting of 20,000 options is contingent upon the achievement of certain revenue targets, and the vesting of 60,000 options is contingent upon the Company’s common stock achieving certain target prices or the Company achieving certain financial performance targets.

None of these 430,000 performance-based stock options have vested, and no compensation expense has been recorded related to such options.

A summary of the Company’s restricted stock activity for the current six months is as follows:

A summary of the Company’s restricted stock activity for the current nine months is as follows:

Outstanding at January 1, 2025

Expired/Forfeited

Outstanding at June 30, 2025

Outstanding at September 30, 2025

On May 28, 2025, the Company issued an aggregate of 4,000 shares of common stock to non-management directors, of which 50 % vests on each of April 1, 2026 and April 1, 2027 .

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Burroughs are permitted to pay the withholding tax through the exchange of a portion of the shares.

Under the terms of these amended agreements, the Company issued an aggregate of 47,985 shares of common stock (which vested immediately) to executives for the current six months.

Under the terms of these amended agreements, the Company issued an aggregate of 92,401 shares of common stock (which vested immediately) to executives for the current nine months.

Compensation expense related to stock awards was approximately $ 0.14 million for the current quarter and approximately $ 0.13 million for the prior year quarter.

Compensation expense related to stock awards was approximately $ 0.27 million for the current six months and approximately $ 0.13 million for the prior year six months.

Total unrecognized compensation expense related to unvested restricted stock grants at June 30, 2025 was approximately $ 0.06 million and is expected to be recognized over a weighted average period of approximately 0.66 years.

Restricted Stock Units

There were no restricted stock units outstanding as of June 30, 2025 and December 31, 2024, and no restricted stock units have been issued since the inception of the 2021 Plan.

Shares Available Under the Company’s Equity Incentive Plans

At June 30, 2025, there were 176,975 shares of common stock available for future award grants under the 2021 Plan.

Shares Reserved for Issuance

As of June 30, 2025, there were 640,969 shares of common stock reserved for issuance under the Company’s Equity Incentive Plans, including 381,494 shares reserved pursuant to unexercised warrants and stock options previously granted

Compensation expense related to stock awards was approximately $ 0.41 million for the current nine months and approximately $ 0.26 million for the prior year nine months.

Total unrecognized compensation expense related to unvested restricted stock grants at September 30, 2025 was approximately $ 0.03 million

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

under the 2011 Plan, 82,500 shares reserved pursuant to unexercised stock options granted under the 2021 Plan, and 176,975 shares available for issuance under the 2021 Plan.

As of June 30, 2025, there were also 1,395,664 shares of common stock reserved for issuance that were unrelated to the Company’s Equity Incentive Plans, including 100,000 shares reserved pursuant to unexercised warrants related to the Halston Master License (as described below), 18,293 shares reserved pursuant to unexercised Representative’s Warrants related to the March 19, 2024 Offering (as described above), 139,916 shares reserved pursuant to unexercised warrants related to the December 12, 2024 debt refinancing transaction (see Note 6), and 1,137,455 shares reserved pursuant to unexercised warrants related to the April 21, 2025 debt refinancing transaction (see Note 6).

A summary of the Company’s warrants activity for the current six months is as follows:

September 30, 2025

and is expected to be recognized over a weighted average period of approximately 0.68 years.

Restricted Stock Units

There were no restricted stock units outstanding as of September 30, 2025 and December 31, 2024, and no restricted stock units have been issued since the inception of the 2021 Plan.

Shares Available Under the Company’s Equity Incentive Plans

At September 30, 2025, there were 72,559 shares of common stock available for future award grants under the 2021 Plan.

Shares Reserved for Issuance

As of September 30, 2025, there were 596,553 shares of common stock reserved for issuance under the Company’s Equity Incentive Plans, including 381,494 shares reserved pursuant to unexercised warrants and stock options previously granted under the 2011 Plan, 142,500 shares reserved pursuant to unexercised stock options granted under the 2021 Plan, and 72,559 shares available for issuance under the 2021 Plan.

As of September 30, 2025, there were also 1,476,455 shares of common stock reserved for issuance that were unrelated to the Company’s Equity Incentive Plans, including 100,000 shares reserved pursuant to unexercised warrants related to the Halston Master License (as described below), 18,293 shares reserved pursuant to unexercised Representative warrants related to the 2024 Offering (as described above), 80,791 shares reserved pursuant to unexercised Placement Agent warrants related to the 2025 Offering (as described above), 139,916 shares reserved pursuant to unexercised warrants related to the December 12, 2024 debt refinancing transaction (see Note 6), and 1,137,455 shares reserved pursuant to unexercised warrants related to the April 21, 2025 debt refinancing transaction (see Note 6).

A summary of the Company’s warrants activity for the current nine months is as follows:

Outstanding and exercisable at January 1, 2025

Expired/Forfeited

Outstanding at June 30, 2025

Exercisable at June 30, 2025

Outstanding at September 30, 2025

Exercisable at September 30, 2025

In connection with the April 21, 2025 refinancing of the Company’s term loan debt (see Note 6), the Company issued an aggregate of 1,107,455 shares of the common stock to UTG and warrants to purchase 30,000 shares of common stock to Restore Capital (EQ-W), LLC.

2 unchanged sentences

The warrants issued to Restore Capital (EQ-W), LLC are exercisable for a period of seven years from the date of issuance at an exercise price of $ 6.67 per share.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

Also in connection with the April 21, 2025 refinancing, the Company and certain holders amended certain warrants that had been previously issued on December 12, 2024:

(i) the exercise price of previously outstanding warrants to purchase 107,333 shares of common stock was reduced from $ 6.315 per share to $ 2.2477 per share, and (ii) the number of shares issuable under previously outstanding warrants to purchase an aggregate of 22,998 shares of common stock was reduced to 17,250 shares of common stock, and the exercise price of such warrants was reduced from $ 6.315 per share to $ 3.00 per share.

In connection with the 2025 Offering (the details of which are disclosed above), the Company issued the Placement Agent certain warrants to purchase up to 80,791 shares of common stock.

Such warrants will be exercisable at an exercise price of $ 1.10 per share, in whole or in part, during the four and one-half year period that commenced 180 days after August 1, 2025.

In connection with the entrance into the Halston Master License in 2023 (see Note 4), the Company issued to G-III a ten-year warrant to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $ 15.00 per share, which vests based upon certain annual royalty targets being satisfied under the license agreement.

The fair value of this warrant is being recognized as a reduction of revenue over the term of the related license agreement, with an offsetting increase to stockholders’ equity as additional paid-in capital.

The amount of contra-revenue recognized related to this warrant during the current quarter and prior year quarter was approximately $ 0.01 million in each period, and the amount of contra-revenue recognized was during the current six months end prior year six months was approximately $ 0.02 million in each period.

As of June 30, 2025, no portion of this warrant had vested.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

The amount of contra-revenue recognized related to this warrant during the current quarter and prior year quarter was approximately $ 0.01 million in each period, and the amount of contra-revenue recognized was during the current nine months end prior year nine months was approximately $ 0.03 million in each period.

As of September 30, 2025, no portion of this warrant had vested.

Earnings (Loss) Per Share

2 unchanged sentences

Diluted EPS excludes all potentially dilutive shares of common stock if their effect is anti-dilutive.

The following table is a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share computations for the three and six months ended June 30, 2025 and 2024:

The following table is a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share computations for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

Net (loss) income attributable to Xcel Brands, Inc.

Nine Months Ended

September 30,

Net loss attributable to Xcel Brands, Inc.

stockholders (in thousands)

3 unchanged sentences

Diluted weighted average number of shares outstanding

Basic net (loss) earnings per share

Diluted net (loss) earnings per share

As a result of the net loss for the current quarter, the current six months, and the prior year six months, the Company calculated diluted EPS using basic weighted average shares outstanding for such periods, as utilizing diluted shares would be anti-dilutive to loss per share.

The computation of diluted EPS excludes the following potentially dilutive securities because their inclusion would be anti-dilutive:

Three Months Ended

Six Months Ended

Stock options

Basic earnings (loss) per share

Diluted earnings (loss) per share

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

The estimated annual effective income tax rate was approximately 0 % for both the current quarter and the prior year quarter, resulting in an income tax provision (benefit) of $ 0 for each such period.

The estimated annual effective income tax rate for the current six months and the prior year six months was approximately - 0.7 % and 0 % respectively, resulting in an income tax provision (benefit) of $ 0.05 million and $ 0 , respectively.

September 30, 2025

As a result of the net loss for all periods presented, the Company calculated diluted EPS using basic weighted average shares outstanding for all such periods, as utilizing diluted shares would be anti-dilutive to loss per share.

The computation of diluted EPS excludes the following potentially dilutive securities because their inclusion would be anti-dilutive:

Three Months Ended

Nine Months Ended

September 30,

Stock options

The estimated annual effective income tax rate was for the current quarter and the prior year quarter was approximately

- 0.3 % and 0 %, resulting in an income tax provision (benefit) of $ 0.03 million and $ 0 , respectively.

The estimated annual effective income tax rate for the current nine months and the prior year nine months was approximately - 0.5 % and 0 % respectively, resulting in an income tax provision (benefit) of $ 0.08 million and $ 0 , respectively.

For all periods presented, the federal statutory rate differed from the effective tax rate due to the recording of a valuation allowance against the benefit that would have otherwise been recognized, as it was considered not more likely than not that the net operating losses generated during each period will be utilized in future periods.

1 unchanged sentence

IM Topco, LLC

As described in Note 2, the Company holds a noncontrolling interest in IM Topco.

As described in Note 2, the Company held a noncontrolling interest in IM Topco as of September 30, 2025.

Service Agreement

On May 31, 2022, the Company entered into a services agreement with IM Topco, pursuant to which the Company agreed to provide certain design and support services (including assistance with the operations of the interactive television business and related talent support) to IM Topco in exchange for payments of $ 300,000 per year.

In November 2023, the services agreement was amended such that the Company agreed to provide IM Topco with a $ 600,000 reduction of future service fees over the next eighteen months, beginning on July 1, 2023.

In April 2024, the services agreement was further amended to set the service fees at $ 150,000 per year beginning with the fiscal year ending December 31, 2024;

also under the April 2024 amendment, IM Topco was required to prepay the service fees for the year ending December 31, 2025.

In accordance with the terms of this services agreement (as amended), the Company recognized service fee income of $ 37,500 and $ 75,000 , respectively, within net licensing revenue in the condensed consolidated statements of operations for the three and six months ended June 30, 2024, respectively.

The Company recognized service fee income related to this services agreement of $ 112,500 for the three and six months ended June 30, 2025.

The Company is party to a services agreement with IM Topco that has been amended from time to time, pursuant to which the Company agreed to provide certain design and support services (including assistance with the operations of the interactive television business and related talent support) to IM Topco in exchange for a service fee.

In April 2024, the services agreement was amended to set the service fees at $ 150,000 per year.

In accordance with the terms of this services agreement, the Company recognized service fee income of $ 0 and $ 37,500 , respectively, within net licensing revenue in the condensed consolidated statements of operations for the three months ended September 30, 2025 and 2024, respectively.

The Company recognized service fee income related to this services agreement of $ 112,500 for both the nine months ended September 30, 2025 and 2024.

License Agreement

On May 31, 2022, the Company entered into a license agreement with IM Topco, pursuant to which IM Topco granted the Company a license to use certain Isaac Mizrahi trademarks on and in connection with the design, manufacture, distribution, sale, and promotion of women’s sportswear products in the United States and Canada during the term of the agreement, in exchange for the payment of royalties in connection therewith.

The initial term of this agreement was set to end on December 31, 2026, and provided guaranteed minimum royalties to IM Topco of $ 400,000 per year.

Effective December 16, 2022, the license agreement between IM Topco and Xcel was terminated in favor of a new similar license agreement between IM Topco and an unrelated third party.

However, as part of the termination of the May 31, 2022 license agreement, Xcel provided a guarantee to IM Topco for the payment of any difference between (i) the royalties received by IM Topco from the unrelated third party under the new agreement and (ii) the amount of guaranteed royalties that IM Topco would have received from Xcel under the May 31, 2022 agreement.

However, for all periods presented in these condensed consolidated financial statements, royalties received by IM Topco from the third-party agreement were

The Company was previously party to a license agreement with IM Topco, pursuant to which IM Topco granted the Company a license to use certain Isaac Mizrahi trademarks related to women’s sportswear products in exchange for the payment of royalties to IM Topco.

This license agreement was later terminated in favor of a new similar license agreement between IM Topco and an unrelated third party;

however, as part of such termination, Xcel had provided a guarantee to IM Topco for the payment of any difference between (i) the royalties received by IM Topco under the new agreement and (ii) the amount of royalties that IM Topco would have received under the original license agreement with Xcel.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

expected to exceed the guaranteed royalties that IM Topco would have received under the May 31, 2022 agreement, and thus no royalty expense for any shortfall was recognized for such periods.

In November 2023, the Company, WHP, and IM Topco entered into an amendment of the May 2022 membership purchase agreement, under which Xcel agreed to make additional royalty payments to IM Topco totaling $ 450,000 over the following 11 months.

As a result of this amendment, the Company recognized a $ 450,000 increase to the carrying value basis of its equity method investment in IM Topco and a corresponding increase in current liabilities.

The Company paid $ 75,000 of the additional royalty payments to IM Topco during the year ended December 31, 2023, and paid $ 237,500 during the year ended December 31, 2024.

The remaining amount of $ 137,500 has not been paid to IM Topco.

September 30, 2025

periods presented in these condensed consolidated financial statements, royalties received by IM Topco from the third-party agreement were expected to exceed the guaranteed royalties that IM Topco would have received under the original license agreement with Xcel, and thus no royalty expense for any shortfall was recognized for such periods.

Additionally, pursuant to the terms of a 2023 amendment to the May 2022 membership purchase agreement, Xcel had agreed to make additional royalty payments to IM Topco totaling $ 450,000 , of which $ 75,000 was paid during the year ended December 31, 2023, and $ 237,500 was paid during the year ended December 31, 2024.

No payments of these additional royalties were made during the nine months ended September 30, 2025.

Effective September 26, 2025, pursuant to the terms of a settlement agreement entered into with IM Topco and WHP (see Note 2 for additional details), the Company was released from any current or future liability related to the aforementioned guarantee to IM Topco and the aforementioned additional royalty payments.

Financing Transactions

2025 Public Offering and Private Placement Transactions

In connection with the 2025 Offering of 2,181,818 shares of the Company’s common stock at a price to the public of $ 1.10 per share which was consummated on August 4, 2025 (see Note 7 for additional details), Robert W.

D’Loren, Chairman and Chief Executive Officer of the Company, and Mark DiSanto, a director of the Company, purchased 124,200 and 91,800 shares, respectively, at $ 1.10 per share, the same price at which the shares were sold to other purchasers in the Offering.

In connection with the 2025 Offering, on August 1, 2025, the Company entered into subscription agreements with each of Mr.

D’Loren and Mr.

DiSanto, to purchase 82,159 and 60,883 shares, respectively, at a price of $ 1.38 per share.

The purchase of such shares closed concurrently with the 2025 Offering.

2024 Public Offering and Private Placement Transactions

In connection with the 2024 Offering of 328,427 shares of the Company’s common stock at a price to the public of $ 6.50 per share which was consummated on March 19, 2024 (see Note 7 for additional details), Robert W.

5 unchanged sentences

Burroughs to purchase 13,258 , 13,258 , and 2,946 shares, respectively, at a price of $ 9.80 per share.

The total number of shares purchased was 29,462 .

Net proceeds after payment of agent fees to the Representative were approximately $ 0.3 million.

The purchase of such shares closed concurrently with the 2024 Offering.

5 unchanged sentences

D'Loren may advance funds to the Company on a short-term basis as necessary.

Additionally, IPX purchased a 12.5 % undivided, last-out, subordinated participation interest in a portion of the December 2024 Term Loan B debt for a purchase price of $ 500,000 , and received a pro rata share of warrants received by the Term Loan B Lenders to purchase shares of the Company’s common stock.

In connection with the April 21, 2025 refinancing of the Company's term loan debt (see Note 6 for additional details), IPX’s participation in Term Loan B was repaid and IPX purchased a $ 500,000 undivided, last-out, subordinated participation interest in Term Loan A.

Since October 2024, in connection with a required standby letter of credit associated with the Company’s real estate lease for offices located at 1333 Broadway (see Note 5), Mr.

D’Loren has provided and continues to provide a personal guarantee to the financial institution providing such letter of credit, in order to satisfy a portion of the associated collateral requirements for the letter of credit.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

September 30, 2025

Loan B Lenders to purchase shares of the Company’s common stock.

Since October 2024, in connection with a required standby letter of credit associated with the Company’s real estate lease for offices located at 1333 Broadway (see Note 5), Mr.

Commitments and Contingencies

Contingent Obligation – Isaac Mizrahi Transaction

In connection with the May 31, 2022 transaction related to the sale of a majority interest in the Isaac Mizrahi brand, the Company agreed with WHP that, in the event that IM Topco receives less than $ 13.3 million in aggregate royalties for any four consecutive calendar quarters over a three-year period ending on May 31, 2025, WHP would be entitled to receive from Xcel up to $ 16 million, less all amounts of net cash flow distributed to WHP on an accumulated basis, as an adjustment to the purchase price previously paid by WHP.

Such amount would be payable by the Company in either cash or equity interests in IM Topco held by the Company.

In November 2023, this agreement was amended such that the purchase price adjustment provision was waived until the measurement period ending March 31, 2024.

On April 12, 2024, this agreement was further amended such that the purchase price adjustment provision within the membership purchase agreement was waived until the measurement period ending September 30, 2025.

This amendment also provided that if IM Topco royalties are less than $ 13.5 million for the twelve-month period ending March 31, 2025 or less than $ 18.0 million for the year ending December 31, 2025, Xcel shall transfer equity interests in IM Topco to WHP equal to 12.5 % of the total outstanding equity interests of IM Topco, such that Xcel’s ownership interest in IM Topco would decrease from 30 % to 17.5 %, and WHP’s ownership interest in IM Topco would increase from 70 % to 82.5 %.

During 2024, management concluded that, based on current trends in and projections of IM Topco’s royalty revenues as well as the Company’s decision to not make the remaining royalty payments to IM Topco, it was virtually certain that the Company would be required to make such transfer of equity interests to WHP in 2025.

As such, the Company estimated and recorded a contingent obligation of approximately $ 4.21 million in the condensed consolidated balance sheets as of December 31, 2024.

Under the terms of the May 31, 2022 transaction related to the sale of a majority interest in the Isaac Mizrahi brand (as subsequently amended in 2023 and 2024), the Company had agreed with WHP that, in the event that the aggregate royalties received by IM Topco were less than $ 13.5 million for the twelve-month period ending March 31, 2025 or less than $ 18.0 million for the year ending December 31, 2025, Xcel was obligated to transfer equity interests in IM Topco to WHP equal to 12.5 % of the total outstanding equity interests of IM Topco, such that Xcel’s ownership interest in IM Topco would decrease from 30 % to 17.5 %, and WHP’s ownership interest in IM Topco would increase from 70 % to 82.5 %.

During 2024, management concluded that, based on current trends in and projections of IM Topco’s royalty revenues as well as the Company’s decision to not make the remaining additional royalty payments to IM Topco (see Note 10), it was virtually certain that the Company would be required to make such transfer of equity interests to WHP in 2025.

As such, the Company estimated and recorded a contingent obligation of approximately $ 6.25 million as of September 30, 2024, and recognized a corresponding non-cash charge in the statement of operations for the prior year quarter and prior year nine months.

During the three months ended December 31, 2024, the Company recorded an adjustment to this contingent obligation of approximately $( 2.04 ) million, resulting in a $ 4.21 million contingent obligation reflected on the condensed consolidated balance sheet as of December 31, 2024.

As of March 31, 2025, in accordance with the terms of the amended membership purchase agreement between Xcel and WHP, WHP became contractually entitled to receive from Xcel equity interests in IM Topco equal to 12.5 % of the total outstanding equity interests of IM Topco.

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On and effective April 15, 2025, such equity interests were transferred to WHP in full satisfaction and settlement of this contractual obligation, and the previously recorded liability was de-recognized by reducing the value of the asset for the investment in IM Topco.

Contractual Commitment – Disposition of IM Topco Equity Interests

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2025

in excess of $ 46 million in connection with any potential future capital transaction involving IM Topco which occurs on or before September 1, 2032.

The equity interests were transferred on October 1, 2025.

Legal Matters

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In the opinion of management, based on consultations with legal counsel, the disposition of litigation currently pending against the Company is unlikely to have, individually or in the aggregate, a materially adverse effect on the Company’s business, financial position, results of operations, or cash flows.

Subsequent Events

IM Topco Equity Interest Transfer

On October 1, 2025, in accordance with the settlement agreement described in Note 2 and Note 11, Xcel transferred to WHP equity interests equal to 17.5 % of the outstanding equity interests of IM Topco (which represented all of Xcel’s remaining equity interest in IM Topco) in exchange for (i) the release of the Company’s liability under a license agreement with IM Topco (see Note 10) and (ii) a capital appreciation right for the Company to receive 15 % of the net consideration received by IM Topco and/or WHP in excess of $ 46 million in connection with any potential future capital transaction involving IM Topco which occurs on or before September 1, 2032.

Term Loan Debt Amendments

On October 7, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into a further amendment of the December 12, 2024 loan and security agreement, pursuant to which the (i) the agents and lenders (as defined in the loan and security agreement) consented to the transfer and the release of the termination of the pledge agreement and the release of the agents’ liens on the equity interests of IM Topco, LLC;

(ii) the liquid asset covenant requirement was reduced to $ 1,000,000 ;

and (iii) Xcel made a prepayment of $ 250,000 against the outstanding principal amount of Term Loan A, of which $ 140,000 was paid from the blocked account.

On November 18, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into the fourth amendment of the December 12, 2024 loan and security agreement, pursuant to which (i) the agents and lenders (as defined in the loan and security agreement) provided the Company with a limited waiver with respect to certain specified events of default, and also amended certain financial covenants related to the term loan agreement;

(ii) the Company committed to make a prepayment of $ 3,250,000 on Term Loan A by February 20, 2026, along with the payment of an amendment fee of $ 450,000 (of which $ 125,000 is payable on December 5, 2025 and the remaining $ 325,000 will be due if the $ 3,250,000 principal amount of Term Loan A is not repaid on or prior to February 20, 2026);

and (iii) the payment of the remaining principal balance on Term Loan A of $ 500,000 was changed to be due on December 31, 2026 which shall be held by IPX (See Note 10).

In addition, upon the repayment of the $ 3.25 million of Term Loan A, the Company will have revised financial covenants.

The minimum revenue requirement for the rolling 12 months ending December 31, 2025 will be $ 3.9 million and $ 1.7 million for the Included Subsidiaries and Halston, respectively, each as defined in the loan agreements.

And after the Term Loan A payment is made, the minimum revenue requirement covenants shall remain at these levels for the duration of the loans and the minimum liquidity requirement shall be zero, which includes the lenders’ release of $ 1.0 million of restricted cash within the blocked account back to the Company.

XCEL BRANDS, INC.

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Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Subsequent Events

2025 Public Offering and Private Placement Transactions

On August 4, 2025, the Company completed a best-efforts public offering of 2,181,818 shares of its common stock at a price to the public of $ 1.10 per share.

D’Loren, Chairman and Chief Executive Officer of the Company, and Mark DiSanto, a Director of the Company, purchased 124,200 and 91,800 shares in this offering, respectively.

Simultaneously with completing such offering, the Company also sold 82,159 shares to Mr.

D’Loren and 60,883 shares to Mr.

DiSanto, at a price of $ 1.38 per share pursuant to subscription agreements entered into on August 1, 2025.

The aggregate net proceeds to the Company from the sale of the shares sold in the best-efforts public offering and the private placement (after deducting the placement agent fees and other estimated offering expenses) were approximately $ 2.0 million.

The Company intends to use the net proceeds from these transactions for brand development and launch, working capital, and general corporate purposes.

Upon closing of these transactions, the Company issued placement agent warrants to purchase up to 80,782 shares of common stock.

Such warrants are exercisable at an exercise price of $ 1.10 per share, in whole or in part, during the four and one-half year period commencing 180 days from August 1, 2025.

Tax Law Changes

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into U.S.

The OBBBA includes significant tax provisions, such as the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions.

The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

ASC Topic 740, "Income Taxes," requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted.

As the legislation was signed into law after June 30, 2025, it had no impact on the Company’s operating results for the three months and six months ended June 30, 2025.

The Company is currently assessing the impact of the OBBBA on its consolidated financial statements.

September 30, 2025

Stock-based Awards

On October 30, 2025, the Company’s Board of Directors resolved that the Company shall grant of the following stock-based awards, subject to and conditioned upon stockholder approval of the proposal to increase the number of shares of common stock authorized for issuance under the 2021 Plan at the annual stockholder meeting scheduled to be held on December 3, 2025:

● options to purchase an aggregate of 113,500 shares of common stock to non-management directors, with exercise price to be equal to the last sale price of the common stock on the grant date and vesting determined by the Board of Directors or the Compensation Committee on the grant date;

● an aggregate of 39,583 shares of common stock to non-management directors, with vesting determined by the Board of Directors or the Compensation Committee on the grant date;

● 25,000 and 20,000 shares of common stock to Mr.

D’Loren and Mr.

DiSanto, respectively, which shall be fully vested immediately upon grant;

● options to purchase an aggregate of 340,200 shares of common stock to senior management, with vesting contingent upon the Company’s common stock achieving certain specified target prices and the exercise price to be equal to the last sale price of the common stock on the grant date.

The vesting of 97,500 options shall occur if the stock price reaches $ 3.00 per share;

81,500 options shall vest if the stock price reaches $ 5.00 per share;

67,000 options shall vest if the stock price reaches $ 7.00 per share;

54,200 options shall vest if the stock price reaches $ 9.00 per share;

and 40,000 options shall vest if the stock price reaches $ 11.00 per share.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements