XCel Brands, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ​ ​ ​ ​ ​ ​ ​ Page ​ ​ ​ Report of Independent Registered Public Accounting Firm s (PCAOB ID: 392 and PCAOB ID: 688 ) ​ 50 Consolidated Balance Sheets ​ 53 Consolidated Statements of Operations ​ 54 Consolidated Statements of Stockholders’ Equity ​ 55 Consolidated Statements of Cash Flows ​ 56 Notes to Consolidated Financial Statements ​ 57 ​ ​ 48 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Board of Directors and Stockholders of Xcel Brands, Inc. and Subsidiaries Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheet of Xcel Brands, Inc. and Subsidiaries (the “Company”) as of December 31, 2025, the related consolidated statement of operations, stockholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. ​ Explanatory Paragraph – Going Concern ​ The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. ​ Critical Audit Matters ​ Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. ​ We have determined that there are no critical audit matters in the current period. ​ ​ We have served as the Company's auditor since 2025. ​ ​ /s/ Wolf & Company, P.C. Wolf & Company, P.C. Boston, Massachusetts April 14, 2026 ​ ​ 49 Table of Contents ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Xcel Brands, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Xcel Brands, Inc. and Subsidiaries (the “Company”) as of December 31, 2024, the related consolidated statement of operations, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. ​ Explanatory Paragraph – Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. ​ Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 50 Table of Contents ​ Finite-Lived Trademarks and Other Intangible Assets Critical Audit Matter Description As described further in Note 4 to the financial statements, the carrying amount of finite-lived trademarks and other intangible assets was $34.8 million as of December 31, 2024. Under the applicable accounting guidance, these assets shall be tested for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. Management has concluded that these assets are not impaired as of December 31, 2024. ​ How the Critical Audit Matter was Addressed in the Audit We determined the Company’s ability to assess if their trademark and other intangible assets are impaired as a critical audit matter due to the estimation and uncertainty regarding the Company’s ability to generate sufficient undiscounted cash flows to be in excess of the carrying value of the reported value of the assets. The Company evaluates its trademark and other intangible assets for impairment annually or when events are triggered by economic conditions. These events require the management to compare the carrying values to their estimated fair values as of the evaluation date. The Company uses the income approach using an undiscounted cash flow model to value the trademark and other intangible assets. If the carrying value of this asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds fair value. ​ Auditing the Company’s trademark and other intangible asset impairment is complex and subjective due to the significant estimation required to determine the forecasted cash flows used in the Company’s evaluation. Specifically, the forecasted cash flows are sensitive to significant assumptions such as revenue growth rates and expenses over the estimated useful life all of which are affected by expected future market or economic conditions, and other factors. ​ The primary procedures we performed to address this critical audit matter included the following, among others: ● We evaluated management’s assessment of events and changes in circumstances, which required a more detailed evaluation of undiscounted cash flows. ● We obtained management’s forecasts of undiscounted cash flows, and assumptions utilized in developing such forecasts. ● We evaluated management’s forecasts and key assumptions utilized to arrive at undiscounted cash flows. ● We performed sensitivity analysis of management’s forecasts and key assumptions used to arrive at undiscounted cash flows. ● We compared undiscounted cash flows to the carrying amounts of the respective assets and determined in all cases that undiscounted cash flows exceeded the carrying amounts. Investment in IM Topco, LLC Critical Audit Matter Description As described further in Note 3 to the financial statements, the Company’s investment in IM Topco, LLC was $10.1 million as of December 31, 2024. The Company’s investment in IM Topco, LLC is reviewed for impairment whenever there are indicators that their carrying value may not be recoverable; if a decrease in value of the investment has occurred and such decrease is determined to be other than temporary in nature, the Company shall record an impairment charge to reduce the carrying amount of the investment to its fair value. During the year ended December 31, 2024, the Company recognized $9.96 million of other non-cash charges related to IM Topco, LLC including (i) a $4.21 million non-cash charge to recognize the estimated value of their contractual obligation to transfer a portion of their equity ownership interests in IM 51 Table of Contents Topco, LLC to WHP in 2025, and (ii) a $5.75 million non-cash charge for the other-than-temporary impairment of their investment in IM Topco, LLC. How the Critical Audit Matter was Addressed in the Audit We determined the Company’s ability to assess if their Investment in IM Topco, LLC is impaired as a critical audit matter due to the estimation and uncertainty regarding the Company’s ability to generate sufficient undiscounted cash flows to be in excess of the carrying value of the reported value of the investment. The Company’s investments in unconsolidated affiliates are reviewed for impairment whenever there are indicators that their carrying value may not be recoverable; if a decrease in value of the investment has occurred and such decrease is determined to be other than temporary in nature, the Company shall record an impairment charge to reduce the carrying amount of the investment to its fair value. These events require the management to compare the carrying values to their estimated fair values as of the evaluation date. The Company uses the income approach using a discounted cash flow model to value the investment. If the carrying value of this investment is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the impairment exceeds fair value. Auditing the Company’s Investment in IM Topco, LLC impairment is complex and subjective due to the significant estimation required to determine the forecasted cash flows used in the Company’s evaluation. Specifically, the forecasted cash flows are sensitive to significant assumptions such as revenue growth rates, including the terminal growth rates, margins, expenses, and discount rates, all of which are affected by expected future market or economic conditions. In addition, our audit effort involved the use of professionals within our firm with specialized skill and knowledge in valuation methods and models. The primary procedures we performed to address this critical audit matter included the following, among others: ● We evaluated the Company’s forecasted revenue ● We evaluated the guideline companies used that operated in similar industries. ● We evaluated whether the Company used the appropriate modified capital asset pricing model and a weighted average cost of capital. ● We performed independent calculations to evaluate the sensitivity of the key assumptions used by management. ​ ​ /s/ Marcum LLP Marcum LLP ​ New York, NY May 27, 2025 ​ 52 Table of Contents ​ Xcel Brands, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ ​ ​ December 31, 2024 Assets ​ ​ ​ ​ Current Assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 1,150 ​ $ 1,254 Accounts receivable, net ​ 956 ​ 2,269 Prepaid expenses and other current assets ​ 1,564 ​ 520 Total current assets ​ 3,670 ​ 4,043 Non-current Assets: ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 130 ​ 182 Operating lease right-of-use assets ​ ​ 3,005 ​ ​ 3,751 Trademarks and other intangibles, net ​ 31,229 ​ 34,759 Investments in unconsolidated affiliates ​ ​ — ​ ​ 10,110 Other assets ​ 912 ​ 911 Total non-current assets ​ 35,276 ​ 49,713 ​ ​ ​ ​ ​ ​ ​ Total Assets ​ $ 38,946 ​ $ 53,756 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ ​ Current Liabilities: ​ ​ ​ ​ Accounts payable, accrued expenses and other current liabilities ​ $ 1,136 ​ $ 2,734 Deferred revenue ​ 1,330 ​ 1,380 Accrued income taxes payable ​ ​ 85 ​ ​ 554 Current portion of operating lease obligations ​ ​ 1,687 ​ ​ 1,513 Current portion of long-term debt ​ 3,250 ​ — Contingent obligation ​ — ​ 4,213 Total current liabilities ​ 7,488 ​ 10,394 Long-Term Liabilities: ​ ​ ​ ​ Deferred revenue ​ ​ 1,778 ​ ​ 2,667 Long-term portion of operating lease obligations ​ ​ 3,678 ​ ​ 5,297 Long-term debt, net, less current portion ​ 9,456 ​ 6,569 Other long-term liabilities ​ 722 ​ 431 Total long-term liabilities ​ 15,634 ​ 14,964 Total Liabilities ​ 23,122 ​ 25,358 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' Equity: ​ ​ ​ ​ 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 5,880,757 and 2,368,072 shares issued and outstanding at December 31, 2025 and 2024, respectively (1) ​ 6 ​ 2 Paid-in capital (1) ​ 111,660 ​ 106,666 Accumulated deficit ​ ( 93,705 ) ​ ( 76,244 ) Total Xcel Brands, Inc. stockholders' equity ​ 17,961 ​ 30,424 Noncontrolling interest ​ ​ ( 2,137 ) ​ ​ ( 2,026 ) Total Stockholders' Equity ​ 15,824 ​ 28,398 ​ ​ ​ ​ ​ ​ ​ Total Liabilities and Stockholders' Equity ​ $ 38,946 ​ $ 53,756 ​ (1) 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 1-for-10 reverse stock split. See Note 2 and Note 7. ​ See accompanying Notes to Consolidated Financial Statements. ​ 53 Table of Contents Xcel Brands, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ ​ December 31, ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ Revenues ​ ​ ​ ​ ​ ​ Net licensing revenue ​ $ 4,939 ​ $ 7,912 ​ Net sales ​ — ​ 347 ​ Net revenue ​ 4,939 ​ 8,259 ​ Cost of goods sold ​ — ​ 445 ​ Gross profit ​ 4,939 ​ 7,814 ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct operating costs and expenses ​ ​ ​ ​ ​ Salaries, benefits and employment taxes ​ 3,920 ​ 5,916 ​ Other selling, general and administrative expenses ​ 4,647 ​ 6,842 ​ Total direct operating costs and expenses ​ 8,567 ​ 12,758 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating loss before other operating costs and expenses (income) ​ ​ ( 3,628 ) ​ ​ ( 4,944 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other operating costs and expenses (income) ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 3,593 ​ 4,947 ​ Asset impairment charges ​ ​ — ​ ​ 3,483 ​ Loss from equity investments ​ ​ 6,010 ​ ​ 11,836 ​ Gain on divestiture of Lori Goldstein Brand ​ ​ — ​ ​ ( 3,801 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating loss ​ ( 13,231 ) ​ ( 21,409 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest and finance expense (income) ​ ​ ​ ​ ​ Interest expense ​ 2,078 ​ 618 ​ Other finance charges (income), net ​ 338 ​ 26 ​ Loss on early extinguishment of debt ​ ​ 1,850 ​ ​ 287 ​ Interest and finance expense (income), net ​ 4,266 ​ 931 ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss before income taxes ​ ( 17,497 ) ​ ( 22,340 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax provision ​ 75 ​ 220 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ( 17,572 ) ​ ​ ( 22,560 ) ​ Net loss attributable to noncontrolling interest ​ ​ ( 111 ) ​ ​ ( 165 ) ​ Net loss attributable to Xcel Brands, Inc. stockholders ​ $ ( 17,461 ) ​ $ ( 22,395 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss per common share attributable to Xcel Brands, Inc. stockholders: ​ ​ ​ ​ ​ Basic and diluted net loss per share (1) ​ $ ( 5.08 ) ​ $ ( 9.84 ) ​ Weighted average number of common shares outstanding: ​ ​ ​ ​ ​ Basic and diluted weighted average common shares outstanding (1) ​ 3,435,816 ​ 2,275,332 ​ ​ (1) Weighted average shares outstanding and per share information have been retroactively adjusted in order to give effect to the Company’s 1-for-10 reverse stock split. See Note 2 and Note 7. ​ See accompanying Notes to Consolidated Financial Statements. ​ 54 Table of Contents ​ Xcel Brands, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Xcel Brands, Inc. Stockholders ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Noncontrolling ​ ​ ​ ​ ​ ​ ​ Shares (1) ​ ​ ​ Amount (1) ​ ​ ​ Capital (1) ​ ​ ​ Deficit ​ ​ ​ Interest ​ ​ ​ Total Balance as of January 1, 2024 1,979,413 ​ $ 2 ​ $ 103,879 ​ $ ( 53,849 ) ​ $ ( 1,861 ) ​ $ 48,171 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock — ​ — ​ 138 ​ — ​ — ​ 138 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contra-revenue related to warrants held by licensee ​ — ​ ​ — ​ ​ 38 ​ ​ — ​ — ​ 38 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to directors in connection with restricted stock grants ​ 4,000 ​ ​ — ​ ​ — ​ ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to consultant in connection with stock grants ​ 7,800 ​ ​ — ​ ​ 98 ​ ​ — ​ — ​ 98 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to employee in connection with stock grant ​ 1,468 ​ ​ — ​ 10 ​ ​ — ​ ​ — ​ ​ 10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to executives for pro rata portion of base salaries, net of withholding taxes ​ 17,502 ​ ​ — ​ 120 ​ — ​ — ​ 120 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued in connection with public offering and private placement transactions, net of transaction costs ​ 357,889 ​ ​ — ​ ​ 1,902 ​ — ​ — ​ 1,902 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants issued in connection with refinancing of term loan debt ​ — ​ ​ — ​ ​ 481 ​ ​ — ​ ​ — ​ ​ 481 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss for the year ended December 31, 2024 — ​ — ​ — ​ ( 22,395 ) ​ ( 165 ) ​ ( 22,560 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2024 2,368,072 ​ 2 ​ 106,666 ​ ( 76,244 ) ​ ( 2,026 ) ​ 28,398 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional impact related to fractional shares from reverse stock split ​ ( 57 ) ​ ​ — ​ — ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation expense related to stock options and restricted stock — ​ — ​ 222 ​ — ​ — ​ 222 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contra-revenue related to warrants held by licensee ​ — ​ — ​ 38 ​ — ​ — ​ 38 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to directors in connection with restricted stock grants ​ 43,584 ​ ​ — ​ ​ — ​ ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to directors and management in connection with other restricted stock grants ​ 17,500 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to directors in connection with stock grants ​ 45,000 ​ ​ — ​ ​ 42 ​ ​ — ​ ​ — ​ ​ 42 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to employee in connection with stock grant ​ 63,674 ​ ​ — ​ 46 ​ — ​ — ​ 46 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued to executives for pro rata portion of base salaries, net of withholding taxes ​ 121,998 ​ ​ — ​ 222 ​ — ​ — ​ 222 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued in connection with public offering and private placement transactions, net of transaction costs ​ 2,324,860 ​ ​ 3 ​ ​ 1,962 ​ ​ — ​ ​ — ​ ​ 1,965 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares and warrants issued in connection with private investment in public equity transaction, net of transaction costs ​ 896,126 ​ ​ 1 ​ ​ 1,814 ​ ​ — ​ ​ — ​ ​ 1,815 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants issued and amended in connection with refinancing of term loan debt ​ — ​ ​ — ​ ​ 648 ​ ​ — ​ ​ — ​ ​ 648 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss for the year ended December 31, 2025 — ​ — ​ — ​ ( 17,461 ) ​ ( 111 ) ​ ( 17,572 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2025 5,880,757 ​ $ 6 ​ $ 111,660 ​ $ ( 93,705 ) ​ $ ( 2,137 ) ​ $ 15,824 ​ (1) 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 1-for-10 reverse stock split. See Note 2 and Note 7. ​ See accompanying Notes to Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ 55 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Xcel Brands, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Cash flows from operating activities ​ ​ ​ ​ Net loss ​ $ ( 17,572 ) ​ $ ( 22,560 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Depreciation and amortization expense ​ 3,593 ​ 4,947 Asset impairment charges ​ — ​ 3,483 Paid in-kind interest expense ​ ​ 710 ​ ​ — Amortization of deferred finance costs and other non-cash interest expense ​ 522 ​ 115 Stock-based compensation and cost of licensee warrants ​ 570 ​ 403 Provision for credit losses ​ ​ 30 ​ ​ 17 Loss from equity investments ​ ​ 6,010 ​ ​ 11,836 Loss on early extinguishment of debt ​ ​ 1,850 ​ ​ 287 Gain on divestiture of Lori Goldstein brand ​ ​ — ​ ​ ( 3,801 ) Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ 1,283 ​ 1,168 Inventory ​ — ​ 453 Prepaid expenses and other current and non-current assets ​ ( 44 ) ​ ( 279 ) Deferred revenue ​ ​ ( 939 ) ​ ​ ( 398 ) Accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities ​ ( 2,338 ) ​ 16 Lease-related assets and liabilities ​ ​ ( 699 ) ​ ​ ( 794 ) Other long-term liabilities ​ 1 ​ 391 Net cash used in operating activities ​ ( 7,023 ) ​ ( 4,716 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ ​ ​ Purchase of property and equipment ​ ( 10 ) ​ ( 112 ) Net cash used in investing activities ​ ( 10 ) ​ ( 112 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ ​ Proceeds from public offering and private placement transactions, net of transaction costs ​ ​ 1,965 ​ ​ 1,902 Proceeds from private investment in public equity transaction, net of transaction costs ​ ​ 1,815 ​ ​ — Proceeds from long-term debt ​ ​ 5,670 ​ ​ 7,950 Payment of deferred finance costs ​ ( 567 ) ​ ( 922 ) Shares repurchased including vested restricted stock in exchange for withholding taxes ​ ​ ( 204 ) ​ ( 107 ) Payment of long-term debt ​ ( 750 ) ​ ( 5,000 ) Net cash provided by financing activities ​ 7,929 ​ 3,823 ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash, cash equivalents, and restricted cash ​ 896 ​ ( 1,005 ) ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash at beginning of year ​ ​ 1,993 ​ ​ 2,998 ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash at end of year ​ $ 2,889 ​ $ 1,993 ​ ​ ​ ​ ​ ​ ​ Reconciliation to amounts on consolidated balance sheets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 1,150 ​ $ 1,254 Restricted cash reported in prepaid expenses and other current assets ​ ​ 1,000 ​ ​ — Restricted cash reported in other non-current assets ​ 739 ​ 739 Total cash, cash equivalents, and restricted cash ​ $ 2,889 ​ $ 1,993 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash activities: ​ ​ ​ ​ ​ ​ Recognition of operating lease right-of-use asset ​ $ — ​ $ 2,596 Recognition of operating lease obligation ​ $ — ​ $ 2,596 Issuance of warrants in connection with debt refinancing ​ $ 648 ​ $ 481 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ Cash paid during the year for interest ​ $ 814 ​ $ 505 Cash paid during the year for income taxes ​ $ 515 ​ $ — ​ See accompanying Notes to Consolidated Financial Statements. ​ ​ 56 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 1. Nature of Operations, Background, and Basis of Presentation Xcel Brands, Inc. (“Xcel” and, together with its subsidiaries, 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. 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 an omni-channel and social commerce 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. Prior to 2024, the Company also engaged in certain wholesale and direct-to-consumer sales of products under its brands. During the year ended December 31, 2024, the Company sold off all of its residual jewelry inventories and all remaining inventory related to the Longaberger brand; these final sales to third parties were the only net sales and cost of goods sold recognized for the year ending December 31, 2024. As of December 31, 2024, the Company has no remaining inventory. Brand Portfolio Currently, the Company’s brand portfolio consists of the following: ● the Halston, Judith Ripka, and C Wonder brands, which are wholly owned by Xcel; ● the Longaberger by Shannon Doherty 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 3 for additional details); ● the TowerHill by Christie Brinkley brand, which is a co-branded collaboration between Xcel and Christie Brinkley that launched in May 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 Spring 2026; ● the GemmaMade by Gemma Stafford brand, which is a new co-branded collaboration between Xcel and Gemma Stafford that is planned to launch in Spring 2026; ● the Off/Duty by Coco Rocha brand, which is a new co-branded collaboration between Xcel and Coco Rocha, which is planned to launch in Fall 2026; and ● Mesa Mia by Jenny Martinez, 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 Spring 2026. The Company’s brand portfolio also formerly included: ● the LOGO by Lori Goldstein brand (the “Lori Goldstein brand”) as a wholly owned brand from April 1, 2021 through June 30, 2024 (see Note 3 for additional details); and 57 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ ● the Isaac Mizrahi brand, in which the Company held a noncontrolling ownership interest through October 1, 2025 (see Note 3 for additional details). Going Concern The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit. Although the Company has undertaken significant restructuring and cost reduction efforts, obtained additional funding through a combination of equity issuances and debt financing, and continues to explore strategic financing alternatives and operational efficiencies to improve liquidity (see Note 12 for information regarding financing transactions entered into subsequent to year-end), management has determined that there is nonetheless 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. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. ​ 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Xcel, its wholly owned subsidiaries, and entities in which Xcel has a controlling financial interest as of and for the years ended December 31, 2025 (the "Current Year") and 2024 (the "Prior Year"). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and Exchange Commission (“SEC”). All significant intercompany accounts and transactions have been eliminated in consolidation, and net earnings have been adjusted by the portion of operating results of consolidated entities attributable to noncontrolling interests. Investments in Unconsolidated Affiliates The Company accounts for investments in entities over which it has the ability to exercise significant influence, but does not control, under the equity method of accounting, and recognizes its proportionate share of income or losses from the investee within other operating costs and expenses (income) in the consolidated statements of operations. The proportionate share of income or losses of an equity method investee is generally determined based on the investor’s proportional ownership interest. However, in cases where contractual agreements specify allocation ratios for profits and losses, specified costs and expenses, and/or distributions of cash from operations, that differ from the Company’s ownership interest, the Company uses such specified allocation ratios for purposes of determining its share of income or losses from the investee if the agreement is considered substantive. As of December 31, 2025, the Company no longer has any investments accounted for under the equity method. Investments in entities in which the Company does not have the ability to exercise significant influence nor control, are generally required to be accounted for at fair value, with unrealized holding gains and losses included in other operating costs and expenses (income) in the consolidated statements of operations. However, the Company may elect to measure an equity security without a readily determinable fair value at adjusted cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issue. The Company reviews its investments in unconsolidated affiliates that are not accounted for at fair value whenever there are indicators that their carrying value may not be recoverable; if a decrease in value of the investment has occurred and such decrease is determined to be other than temporary in nature, the company records an impairment charge to reduce the carrying amount of the investment to its fair value. 58 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ Change in Capital Structure As described more fully in Note 7, effective March 24, 2025, the Company effected a 1-for-10 reverse stock split for all of its issued and outstanding common stock. All share and per share amounts presented in these 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. There were no changes to the total number of authorized common shares or par value per common share as a result of this change. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates. The Company deems the following items to require significant estimates from management: ● Revenue recognition; ● Useful lives of trademarks; ● Assumptions used in the valuation of intangible assets, including cash flow estimates for initial determinations of fair value and/or impairment analysis; ● Accounting for and valuation of investments in unconsolidated affiliates; and ● Valuation allowances and effective tax rate for tax purposes. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Restricted Cash Restricted cash at December 31, 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. Accounts Receivable Accounts receivable are reported net of an allowance for credit losses. As of December 31, 2025 and 2024, the Company had approximately $ 1.0 million and $ 2.3 million, respectively, of accounts receivable, net of allowances of $ 0.03 million and $ 0.00 million, respectively. 59 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ The allowance for credit losses reflects lifetime expected credit losses and is determined based upon a variety of judgments and factors. Factors considered in determining the allowance include historical collection, write-off experience, and management's assessment of collectibility from customers, including current conditions, reasonable forecasts, and expectations of future collectibility and collection efforts. Management continuously assesses the collectibility of receivables and adjusts estimates based on actual experience and future expectations based on economic indicators. Management also monitors the aging analysis of receivables to determine if there are changes in the collections of accounts receivable. Receivable balances are written-off against the allowance for credit losses when such balances are deemed to be uncollectible. A rollforward of the allowance for credit losses for the Current Year and Prior Year is as follows: ​ ​ ​ ​ ​ ​ ​ ($ in thousands) ​ ​ ​ 2025 2024 Balance at January 1 ​ $ — ​ $ 75 Credit loss expense ​ 21 ​ 17 Write-offs ​ ( 25 ) ​ ( 92 ) Other (recovery of previously written-off amount) ​ 34 ​ — Balance at December 31 ​ $ 30 ​ $ — ​ As of December 31, 2025 and 2024, there was no earned revenue that had been accrued but not billed. Inventory As of January 1, 2024, inventory was composed of residual jewelry inventories related to the Judith Ripka brand and home goods and related items for the Longaberger brand. Such inventories consisted solely of finished goods, and were recorded at the lower of cost or net realizable value, with cost determined on a weighted average basis. During the Prior Year, the Company sold all of its remaining inventory items, and as of December 31, 2024, the Company had no remaining inventory. Property and Equipment Furniture, equipment, and software are stated at cost less accumulated depreciation and amortization, and are depreciated using the straight-line method over their estimated useful lives, generally three (3) to seven (7) years. Depreciation expense for the Current Year and Prior Year was approximately $ 0.06 million and $ 0.12 million, respectively. Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the leases. Betterments and improvements are capitalized, while repairs and maintenance are expensed as incurred. Costs to develop or acquire software for internal use incurred during the preliminary project stage and the post implementation stage are expensed, while internal and external costs to acquire or develop software for internal use incurred during the application development stage – including design, configuration, coding, testing, and installation – are generally capitalized. The Company’s long-lived property and equipment assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. To perform such impairment testing, the Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluates the asset group against the sum of undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on a discounted cash flows analysis or appraisals. 60 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ Trademarks and Other Intangible Assets The Company’s finite-lived intangible assets are amortized over their estimated useful lives of three (3) to eighteen (18) years. The Company re-evaluates the remaining useful life of its finite-lived intangible assets on an annual basis, based on consideration of current events and circumstances, the expected use of the asset, and the effects of demand, competition, and other economic factors. No changes were made to the estimated useful lives of intangible assets in the Current Year or Prior Year. The Company’s finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. To perform such impairment testing, the Company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluates the asset group against the sum of undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value, based on a discounted cash flows analysis or appraisals. No impairment charges were recorded related to intangible assets for the Current Year or Prior Year. See Note 4 for additional information related to the Company’s trademarks and other intangible assets. Deferred Finance Costs Costs incurred in connection with borrowings under term loans (primarily professional fees and lender underwriting fees) are deferred on the consolidated balance sheet as a reduction to the carrying value of the associated borrowings, and are amortized as interest expense over the term of the related borrowings using the effective interest method. Contingent Obligations When accounting for asset acquisitions, if any contingent obligations exist and the fair value of the assets acquired is greater than the consideration paid, any contingent obligations are recognized and recorded as the positive difference between the fair value of the assets acquired and the consideration paid for the acquired assets. When accounting for asset acquisitions, if any contingent obligations exist and the fair value of the assets acquired are equal to the consideration paid, any contingent obligations are recognized based upon the Company’s best estimate of the amount that will be paid to settle the liability. Under applicable accounting guidance, the Company is generally required to carry such contingent liability balances on its consolidated balance sheet until the measurement period of the earn-out expires and all related contingencies have been resolved. See Note 9 for additional information related to the Company’s contingent obligations. Revenue Recognition The Company applies the guidance in ASC Topic 606, “Revenue from Contracts with Customers” to recognize revenue. Specifically, the Company recognizes revenue continuously over time as it satisfies its continuous obligation of granting access to its licensed intellectual properties, which are deemed symbolic intellectual properties under ASC Topic 606. The Company determines the transaction price based on the terms of the contract. Payments are typically due after sales have occurred and have been reported by the licensees or, where applicable, in accordance with minimum guaranteed payment provisions. The timing of performance obligations is typically consistent with the timing of payments, though there may be differences if contracts provide for advances or significant escalations of contractually guaranteed minimum payments. With the exception of the Halston Master License agreement described in Note 5, there were no such differences that 61 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ would have a material impact on the Company’s consolidated balance sheets as of December 31, 2025 and 2024. In accordance with ASC 606-10-55-65, the Company recognizes net licensing revenue at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales- or usage-based royalty has been allocated is satisfied (in whole or in part). More specifically, the Company separately identifies: (i) Contracts for which, based on experience, royalties are expected to exceed any applicable minimum guaranteed payments, and to which an output-based measure of progress based on the “right to invoice” practical expedient is applied because the royalties due for each period correlate directly with the value to the customer of the Company’s performance in each period (this approach is identified as “View A” by the FASB Revenue Recognition Transition Resource Group, “TRG”); and (ii) Contracts for which revenue is recognized based on minimum guaranteed payments using an appropriate measure of progress, in which minimum guaranteed payments are straight-lined over the term of the contract and recognized ratably based on the passage of time, and to which the royalty recognition constraint to the sales-based royalties in excess of minimum guaranteed is applied and such sales-based royalties are recognized to the distinct period only when the minimum guaranteed is exceeded on a cumulative basis (this approach is identified as “View C” by the TRG). The Company’s unconditional right to receive consideration based on the terms and conditions of licensing contracts is presented as accounts receivable on the accompanying consolidated balance sheets. The Company does not typically provide access to its licensed intellectual properties or provide services to customers before the customer pays or before payment is due, thus the amounts of contract assets as defined by ASC 606-10-45-3 related to licensing contracts were not material as of December 31, 2025 and 2024. The Company does not typically receive consideration in advance of performance and, consequently, amounts of contract liabilities as defined by ASC 606-10-45-2 related to licensing contracts are generally not material; however, as of December 31, 2025 and 2024, the Company has recognized approximately $ 3.1 million and $ 3.6 million, respectively, of deferred revenue contract liabilities on its consolidated balance sheet related to the Halston Master License agreement (see Note 5 for additional details). With respect to this agreement, the Company recognized approximately $ 0.89 million of revenue during each of the years ended December 31, 2025 and 2024, that was included in the contract liability balances as of January 1, 2025 and 2024, respectively The Company does not disclose the amount attributable to unsatisfied or partially satisfied performance obligations for variable revenue contracts (identified under “View A” above) in accordance with the optional exemption allowed under ASC 606. The Company did not have any revenue recognized in the reporting period from performance obligations satisfied, or partially satisfied, in previous periods. Remaining minimum guaranteed payments for active contracts as of December 31, 2025 are expected to be recognized ratably in accordance with View C over the remaining term of each contract based on the passage of time and through December 2028, subject to renewal or extension upon termination. Advertising Costs All costs associated with production for the Company’s advertising, marketing, and promotion are expensed during the periods when the activities take place. All other advertising costs, such as print and online media, are expensed when the advertisement occurs. The Company incurred approximately $ 0.10 million and $ 0.73 million in advertising and marketing costs for the Current Year and Prior Year, respectively, which are included within other selling, general and administrative expenses in the accompanying consolidated statements of operations. 62 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ Leases The Company determines if an arrangement is a lease (as defined in ASC Topic 842) at the inception of the arrangement. The Company generally recognizes a right-of-use (“ROU”) asset, representing its right to use the underlying leased asset for the lease term, and a liability for its obligation to make future lease payments (the lease liability) at commencement date (the date on which the lessor makes the underlying asset available for use) based on the present value of lease payments over the lease term. The Company does not recognize ROU assets and lease liabilities for lease terms of 12 months or less, but recognizes such lease payments in operations on a straight-line basis over the lease terms. As the Company’s leases typically do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. For real estate leases of office space, the Company accounts for the lease and non-lease components as a single lease component. Variable lease payments that do not depend on an index or rate (such as real estate taxes and building insurance and lessee’s shares thereof), if any, are excluded from lease payments at lease commencement date for initial measurement. Subsequent to initial measurement, these variable payments are recognized when the event determining the amount of variable consideration to be paid occurs. Lease expense for operating lease payments is generally recognized on a straight-line basis over the lease term. The Company recognizes income from subleases (in which the Company is the sublessor) on a straight-line basis over the term of the sublease, as a reduction to lease expense. See Note 9 for additional information related to the Company’s leases. Stock-Based Compensation The Company accounts for stock-based compensation by recognizing the fair value of stock-based compensation as an operating expense over the service period of the award or term of the corresponding contract, as applicable. Non-employee awards are similarly measured at the grant date fair value of the equity instruments to be issued, and the Company recognizes compensation cost for grants to non-employees on a straight-line basis over the period of the grant. For stock option awards for which vesting is contingent upon the achievement of certain performance targets, the timing and amount of compensation expense recognized is also based upon the Company’s projections and estimates of the relevant performance metric(s) until the time the performance obligation is satisfied. Expense for such awards is recognized only to the extent that the achievement of the specified performance target(s) has been met or is considered probable. The Company accounts for forfeitures as a reduction of compensation cost in the period when such forfeitures occur. The fair value of restricted stock awards and other stock awards is determined via reference to the quoted market price of the Company’s common shares on the NASDAQ Capital Market at the date of grant. The fair value of warrants and most stock options (i.e., stock options with service-based or performance-based vesting) is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the awards and the expected stock price volatility over the terms of the awards. The expected life is based on the estimated average life of options and warrants using the simplified method; the Company utilizes the simplified method to determine the expected life of the options and warrants due to insufficient exercise activity during recent years as a basis from which to 63 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ estimate future exercise patterns. The risk-free rate is based on the U.S. Treasury rate for the expected term at the time of grant, volatility is based on the historical volatility of the Company’s common stock, and the expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The fair value of stock options with market-based vesting is estimated using a binomial lattice model. The valuation determined by a binomial lattice model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables, such as but not limited to, expected stock price volatility over the terms of the awards. Expected volatility is based on the historical volatility of the Company’s common stock, while the risk-free rate is based on the U.S. Treasury rate for the term of the options at the time of grant, and the expected dividend assumption is based on the Company’s history and expectation of dividend payouts. See Note 7 for additional information related to stock-based compensation. Income Taxes Current income taxes are based on the respective period’s taxable income for federal and state income tax reporting purposes. Deferred tax assets and liabilities are determined based on the differences between the financial statement and income tax bases of assets and liabilities, using enacted tax rates and laws that will be in effect for the year in which the differences are expected to reverse. A valuation allowance is recognized when necessary to reduce deferred tax assets to the amount expected to be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, and the overall prospects of the Company’s business. A valuation allowance is established if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company applies the applicable FASB guidance on accounting for uncertainty in income taxes, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also addresses derecognition, classification, interest, and penalties related to uncertain tax positions. The Company has no unrecognized tax benefits as of December 31, 2025 and 2024. Interest and penalties related to uncertain tax positions, if any, are recorded in income tax expense. Tax years that remain open for assessment for federal and state tax purposes include the years ended December 31, 2021 through December 31, 2025. The income tax effects of changes in tax laws are recognized in the period when enacted. See Note 10 for additional information related to income taxes. Fair Value ASC Topic 820, “Fair Value Measurement,” defines fair value and establishes a framework for measuring fair value under GAAP. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of the Company’s assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). Fair Value of Financial Instruments For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to the short-term maturities of these 64 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ instruments. The carrying value of term loan debt approximates fair value due to the floating interest rate structure of the term loan agreement. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, and accounts receivable. The Company limits its credit risk with respect to cash and cash equivalents and restricted cash by maintaining such balances with high quality financial institutions. At times, the Company’s cash and cash equivalents and restricted cash may exceed federally insured limits. Concentrations of credit risk with respect to accounts receivable are not considered significant due to the collection history and due to the nature of the Company’s royalty revenues. Generally, the Company does not require collateral or other security to support accounts receivable. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings (loss) per share reflect, in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options and warrants using the treasury stock method. The difference between basic and diluted weighted-average common shares results from the assumption that all dilutive stock options and warrants outstanding were exercised into common stock if the effect is not anti-dilutive. See Note 8 for additional information related to earnings (loss) per share. Segment Reporting Information The Company has a single reportable segment, which generates revenue from the design and licensing of branded apparel, jewelry, and similar consumer products. The Company derives revenue in North America and manages its business activities on a consolidated basis. The Company’s chief operating decision maker, as such term is defined under GAAP, is its Chief Executive Officer. The accounting policies of the Company’s single reportable segment are the same as those for the Company as a whole. The chief operating decision maker assesses performance for the single reportable segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The chief operating decision maker analyzes and reviews business performance based on available sales data from key licensees and quarterly sales and royalty reports provided by its licensees in addition to assessing the overall operating results on a monthly basis. The measure of segment assets is reported on the balance sheet as total consolidated assets, and, as the Company has a single reportable segment, the Company’s resources are applicable to the business as a whole. The Company does not have intra-entity sales or transfers. Recently Adopted Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU requires disclosure of additional categories of information about federal, state, and foreign income taxes in the rate reconciliation table and requires entities to provide more details about the reconciling items in some categories if items meet a quantitative threshold. The ASU also requires entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. ​ 65 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ ASU 2023-09 was effective for the Company for the fiscal year ending December 31, 2025. The Company adopted the new standard effective January 1, 2025, which primarily resulted in expanded disclosures in the rate reconciliation table and regarding certain reconciling items. In accordance with the transition provisions of ASU 2023-09, we applied the guidance prospectively; as a result, prior-period comparative disclosures have not been restated and continue to reflect the presentation requirements in effect at that time. See Note 10 for additional information. As the requirements of this ASU relate to disclosure only, the adoption of this ASU did not have a significant impact on the company’s consolidated financial statements. ​ Recently Issued Accounting Pronouncements ​ In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public business entities to disclose specified information about certain costs and expenses, including but not limited to purchases of inventory, employee compensation, depreciation, and intangible asset amortization, in a tabular format within the notes to their financial statements, as well as provide additional disclosures related to certain other specified expenses. The ASU may be applied on either a prospective or retrospective basis, and is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures. ​ There were no other accounting pronouncements recently issued by the FASB that are considered significant or relevant to the Company. ​ 3. Investments in Unconsolidated Affiliates, Variable Interest Entities, and Divestitures Investment in IM Topco, LLC On May 31, 2022, Xcel sold 70 % of the membership interests of IM Topco, LLC, a former subsidiary which holds the trademarks and other intellectual property rights relating to the Isaac Mizrahi brand, to a subsidiary of WHP Global (“WHP”), a private equity-backed brand management and licensing company. 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 (income) under the equity method of accounting, using the distribution provisions set forth in the governing business venture agreement between the Company and WHP. 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 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 through October 1, 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. 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 11) and (ii) 66 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ 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. All remaining IM Topco equity interests were transferred to WHP on October 1, 2025. For the Current Year, the Company recognized a $ 6.01 million loss related to its investment in IM Topco, comprised of: (i) a $ 0.21 million equity method loss, (ii) a $ 5.53 million other-than-temporary impairment of the Company’s investment in IM Topco, stemming from a decline in the fair value of the investment related to the continuing declines in IM Topco’s revenues and cash flows, and based on consideration of the facts and circumstances surrounding the September 26, 2025 settlement agreement, (iii) a $( 0.24 ) million adjustment to the carrying value of a contingent contractual obligation related to IM Topco (see Note 9 for details), and (iv) other related costs and adjustments totaling $ 0.51 million . For the Prior Year, the Company recognized a $ 11.69 million loss related to its investment in IM Topco, comprised of: (i) a $ 1.73 million equity method loss, (ii) a $ 5.75 million other-than-temporary impairment of the Company’s investment in IM Topco, stemming from a decline in the fair value of the investment as a result of decreases in IM Topco’s revenues and cash flows, and (iii) a $ 4.21 million non-cash charge to recognize a contingent obligation related to certain contractual provisions contained within the amended membership purchase agreement between Xcel and WHP (see Note 9 for details). The carrying value of the Company’s investment in IM Topco as of December 31, 2025 and 2024 was zero and $ 10.11 million, respectively. The reduction in carrying value during the Current Year reflects the Current Year loss detailed above, plus the settlement of the contingent contractual obligation related to IM Topco as described in Note 9, as a result of which the previously recorded liability was de-recognized by reducing the value of the investment. Investment in Other Unconsolidated Affiliate ​ In December 2023, the Company contributed $ 0.15 million of cash to a privately-held corporation (the “Affiliate”) in exchange for a 30 % equity ownership interest in the Affiliate. During the Prior Year, the Company accounted for its interest in the operations of the Affiliate as a component of other operating costs and expenses (income) under the equity method of accounting. The Company’s proportional share of the operating results of Affiliate for the Prior Year was a loss of approximately $ 0.15 million. Also during the Prior Year, the Company’s proportional ownership interest in the Affiliate was reduced from 30 % to 19 % as the result of dilution arising from other parties making investments in the Affiliate; however, by that point, the carrying value of the Company’s investment in the Affiliate had already been reduced to zero . ​ Effective January 2025, the Company no longer applies the equity method of accounting to its investment in the Affiliate. Instead, the Company currently accounts for its investment in the Affiliate 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. There were no amounts recognized in the consolidated statement of operations related to the Affiliate for Current Year, and the carrying value of the Company’s investment in the Affiliate as of both December 31, 2025 and 2024 was zero . 67 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ ​ Longaberger Licensing, LLC Variable Interest Entity ​ Since 2019, Xcel has been party to a limited liability company agreement with a subsidiary of Hilco Global related to Longaberger Licensing, LLC (“LL”). Hilco Global is the sole Class A Member of LL, and Xcel is the sole Class B Member of LL (each individually a “Member”). Each Member holds a 50 % equity ownership interest in LL; however, based on an analysis of the contractual terms and rights contained in the agreements between the Members, the Company has previously determined that under the applicable accounting standards, LL is a variable interest entity and the Company has effective control over LL. 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. ​ Divestiture of the Lori Goldstein Brand ​ On June 21, 2024, the Company (through its wholly owned subsidiary, Gold Licensing, LLC) entered into an asset purchase agreement with Lori Goldstein and Lori Goldstein, Ltd (together the “LG Parties”), pursuant to which the Company agreed to sell, and the LG Parties agreed to purchase, substantially all of the assets of the Lori Goldstein Brand, including the “LOGO by Lori Goldstein” trademark and other intellectual property rights relating thereto. Also in conjunction with this transaction, key license agreements related to the Lori Goldstein Brand were assigned to and assumed by the LG Parties. This divestiture transaction closed on June 30, 2024. ​ As consideration for the sale of these assets, the parties agreed to the following: ​ ● The LG Parties waived their rights with respect to certain contingent consideration amounts that had been previously earned by the LG Parties (under the terms of the April 1, 2021 purchase of the assets by Xcel), and terminated their rights to any future earn-out payments. ​ ● The Company retained the right to all royalties and fee income for net sales from licensees related to the Lori Goldstein Brand through the closing date. ​ ● The Company’s May 2, 2024 termination of the employment agreement and consulting agreement with the LG Parties was withdrawn. The Company paid the LG Parties a combined total of $ 25,000 as compensation for services rendered under the employment agreement and consulting agreement through June 30, 2024, and also reimbursed Ms. Goldstein for expenses incurred in the course of fulfilling her duties under the employment agreement through June 30, 2024. ● The Company and the LG Parties entered into a mutual general release and waiver of outstanding legal disputes. The total consideration received by the Company for this divestiture transaction was approximately $ 6.08 million, comprised of (i) the waiver of approximately $ 1.03 million of accrued earn-out payments earned by the LG Parties through June 30, 2024, plus (ii) the release of the remaining balance of approximately $ 5.05 million of contingent obligations recorded on the Company’s balance sheet. The remaining unamortized net book value of the Lori Goldstein intangible assets immediately prior to the sale was approximately $ 1.93 million, and the Company also incurred approximately $ 0.35 million of legal fees in connection with this transaction. Accordingly, the Company recorded a net non-cash gain on the divestiture of the Lori Goldstein Brand of approximately $ 3.80 million for the year ended December 31, 2024. ​ ​ ​ 68 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ ​ 4. Trademarks and Other Intangibles Trademarks and other intangibles, net consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average December 31, 2025 ​ Amortization ​ Gross Carrying ​ Accumulated ​ Net Carrying ($ in thousands) ​ Period ​ Amount ​ Amortization ​ Amount Trademarks (finite-lived) 15 years ​ 58,580 ​ 27,354 ​ 31,226 Copyrights and other intellectual property 8 years ​ 429 ​ 426 ​ 3 Total ​ ​ ​ $ 59,009 ​ $ 27,780 ​ $ 31,229 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average December 31, 2024 ​ Amortization Gross Carrying ​ Accumulated ​ Net Carrying ($ in thousands) ​ Period ​ Amount ​ Amortization ​ Amount Trademarks (finite-lived) 15 years ​ 58,580 ​ 23,852 ​ 34,728 Copyrights and other intellectual property 8 years ​ 429 ​ 398 ​ 31 Total ​ ​ $ 59,009 ​ $ 24,250 ​ $ 34,759 ​ Amortization expense for intangible assets was approximately $ 3.53 million and $ 4.83 million for the Current Year and Prior Year, respectively. ​ Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows: ​ ​ ​ ​ ​ ($ in thousands) ​ Amortization Year Ending December 31, ​ ​ ​ Expense 2026 ​ $ 3,506 2027 ​ 3,503 2028 ​ 3,503 2029 ​ 3,503 2030 ​ 3,073 Thereafter (through 2036) ​ 14,141 Total ​ $ 31,229 ​ ​ ​ 5. Significant Contracts Qurate Agreements Through its wholly owned subsidiaries, the Company has entered into direct-to-retail license agreements with Qurate Retail Group (“Qurate”), collectively referred to as the Qurate Agreements (individually, each a “Qurate Agreement”), pursuant to which the Company designs, and Qurate sources and sells, various products under the C Wonder brand, the TowerHill by Christie Brinkley brand, and the Longaberger brand. The Company was also previously party to a similar agreement with Qurate related to the and the LOGO by Lori Goldstein brand. Qurate owns the rights to all designs produced under these agreements, and the agreements include the sale of products across various categories through Qurate’s television media (including QVC and HSN) and related internet sites. Pursuant to these agreements, the Company has granted to Qurate and its affiliates the exclusive, worldwide right to promote the Company’s branded products, and the right to use and publish the related trademarks, service marks, copyrights, designs, logos, and other intellectual property rights owned, used, licensed and/or developed by the Company, for varying terms as set forth below. In connection with the Qurate Agreements and during the same periods, Qurate and 69 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ its subsidiaries have the exclusive, worldwide right to use the names, likenesses, images, voices, and performances of the Company’s spokespersons to promote the respective products. ​ ​ ​ ​ ​ ​ ​ Agreement ​ ​ ​ Current Term Expiry ​ ​ ​ Automatic Renewal ​ ​ ​ Product Launch C Wonder Qurate Agreement (HSN) ​ December 31, 2026 ​ two-year period ​ March 2023 TowerHill by Christie Brinkley Qurate Agreement (HSN) ​ May 30, 2027 ​ three-year period ​ May 2024 Longaberger Qurate Agreement (QVC) ​ October 31, 2027 two-year period November 2019 ​ On June 30, 2024, in connection with the divestiture of the LOGO by Lori Goldstein brand (see Note 3), the agreement with Qurate related to the LOGO by Lori Goldstein brand was assigned to assumed by the counterparties to the divestiture transaction. ​ Under the Qurate Agreements, Qurate is obligated to make payments to the Company on a quarterly basis, based upon the net retail sales of the specified branded products. Net retail sales are defined as the aggregate amount of all revenue generated through the sale of the specified branded products by Qurate and its subsidiaries under the Qurate Agreements, net of customer returns, and excluding freight, shipping and handling charges, and sales, use, or other taxes. The Qurate Agreements generally prohibit the Company from selling products under the specified respective brands to a direct competitor of Qurate without Qurate’s consent. Under certain of the Qurate Agreements, the Company may, with the permission of Qurate, sell the respective branded products via certain specified sales channels in exchange for making reverse royalty payments to Qurate based on the net retail sales of such products through such channels. However, the Company is generally restricted from selling products under the specified respective brands or trademarks to certain mass merchants. Net licensing revenue from Qurate totaled $ 0.99 million and $ 3.67 million for the Current Year and Prior Year, respectively, representing approximately 20 % and 44 % of the Company’s total net revenue, respectively. As of December 31, 2025 and 2024, the Company had receivables from Qurate of $ 0.21 million and $ 0.40 million, representing approximately 22 % and 18 % of the Company’s accounts receivable, respectively. The December 31, 2025 and 2024 Qurate receivables did not include any earned revenue accrued but not yet billed as of the respective balance sheet dates. ​ Halston Master License ​ On May 15, 2023, the Company, through its subsidiaries, H Halston, LLC and H Heritage Licensing, LLC (collectively, the “Licensor”), entered into a master license agreement relating to the Halston Brand (the “Halston Master License”) with G-III Apparel Group (“G-III”), an industry-leading wholesale apparel company, for men’s and women’s apparel, men’s and women’s fashion accessories, children’s apparel and accessories, home, airline amenity and amenity kits, and such other product categories as mutually agreed upon. The Halston Master License provided for an upfront cash payment and royalties payable to the Company, including certain guaranteed minimum royalties, includes significant annual minimum net sales requirements, and has a twenty-five-year term (consisting of an initial five-year period, followed by a twenty-year period), subject to G-III’s right to terminate with at least 120 days’ notice prior to the end of each five-year period during the term. G-III has an option to purchase the Halston Brand for $ 5.0 million at the end of the twenty-five-year term, which right may be accelerated under certain conditions associated with an uncured material breach of the Halston Master License in accordance with the terms of the Halston Master License. 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, as well as certain other advance payments of royalties received from G-III, the Company recognized $ 3.09 million and $ 3.56 million of deferred revenue contract liabilities on its consolidated balance sheet as of December 31, 2025 and 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 December 31, 2025, approximately $ 1.31 million of the contract liability balance was classified as a current liability and approximately $ 1.78 million was classified as a 70 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ long-term liability; the balance of the deferred revenue contract liabilities will be recognized ratably as revenue over the next 3.0 years. Net licensing revenue recognized from the Halston Master License was $ 2.55 million and $ 2.54 million for the Current Year and Prior Year, respectively, representing approximately 52 % and 31 % of the Company’s total net revenue, respectively. JTV / America’s Collectibles Network, Inc. The Company has a license agreement with America’s Collectibles Network, Inc. (d/b/a JTV) (“JTV”) that obligates JTV to pay the Company royalties based on product sales of Judith Ripka Brand merchandise. In addition, the Company has outstanding receivables from prior product sales of fine jewelry made to JTV. As of December 31, 2025 and 2024, the Company had receivables from JTV of $ 0.41 million and $ 1.06 million, respectively, representing approximately 42 % and 47 % of the Company’s total net accounts receivable, respectively. ​ 6. Debt The Company’s net carrying amount of debt was comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ($ in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 Term loan debt (including accumulated unpaid PIK interest) ​ $ 13,581 ​ $ 7,950 Unamortized deferred finance costs and other reductions to carrying value ​ ( 875 ) ​ ( 1,381 ) Total ​ 12,706 ​ 6,569 Current portion of debt ​ 3,250 ​ — Long-term debt ​ $ 9,456 ​ $ 6,569 ​ IDB Term Loan Debt (October 19, 2023 through December 11, 2024) On October 19, 2023, H Halston IP, LLC (the “Borrower”), a wholly owned indirect subsidiary of Xcel Brands, Inc., entered into a term loan agreement with Israel Discount Bank of New York (“IDB”). Pursuant to this loan agreement, IDB made a term loan to the Company in the aggregate amount of $ 5.0 million. The proceeds of this term loan were used to pay fees, costs, and expenses incurred in connection with entering into the loan agreement, and may be used for working capital purposes. Fees and costs totaling $ 0.30 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt, and were being amortized to interest expense over the term of the debt using the effective interest method. The term loan was to mature on October 19, 2028. Principal on the term loan was payable in quarterly installments of $ 250,000 on each of January 2, April 1, July 1, and October 1 of each year, commencing on April 1, 2024. The Borrower had the right to prepay all or any portion of the term loan at any time without penalty. Interest on the October 2023 term loan accrued at “Term SOFR ” (as defined in the loan agreement as the forward-looking term rate based on secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to one month on the day that is two U.S. Government Securities Business Days prior to the first day of each calendar month) plus 4.25 % per annum. Interest on the term loan was payable on the first day of each calendar month. The October 2023 term loan agreement contained customary covenants, including reporting requirements, trademark preservation, and certain financial covenants including annual guaranteed minimum royalty ratio, annual fixed charge coverage ratio, and minimum cash balance levels, all as specified and defined in the loan agreement. 71 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ In addition, on October 19, 2023, the Borrower also entered into a swap agreement with IDB, pursuant to which IDB agreed to pay the Borrower Term SOFR plus 4.25 % per annum on the notional amount of the swap in exchange for the Borrower paying IDB 9.46 % per annum on such notional amount. The term and declining notional amount of the swap agreement was aligned with the amortization of the October 2023 term loan principal amount. ​ The October 2023 term loan was repaid in full as part of the December 12, 2024 debt issuance transaction described below, and the related swap agreement was terminated concurrent with the loan repayment. ​ FEAC Term Loan Debt (December 12, 2024 through December 31, 2025) ​ On December 12, 2024, the Company and certain of its subsidiaries entered into a new loan and security agreement with FEAC Agent, LLC, 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 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: (1) a term loan in the amount of $ 3.95 million (“Term Loan A”) was made on the closing date, (2) a term loan in the amount of $ 4.0 million (“Term Loan B”) was made on the closing date, and (3) a term loan in the amount of $ 2.05 million (“Delayed Draw Term Loan”; Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as “Term Loans”) was subsequently made in March 2025. The proceeds from Term Loan A and Term Loan B were used to repay the remaining balance of the Company’s October 2023 term loan with IDB, as well as to pay fees, costs, and expenses incurred in connection with entering into the new loan agreement, and the balance may be used for working capital purposes. A portion of the proceeds from the Delayed Draw Term Loan were deposited in a bank account to satisfy a liquidity covenant in the loan agreement. On April 21, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for a $ 1.5 million repayment of the $ 3.95 million Term Loan A, and an additional Term Loan B in the amount of $ 5.12 million. The term loans outstanding after giving effect to the April 21, 2025 amendment and the application of the proceeds of the additional Term Loan B were as follows: (1) Term Loan A in the amount of $ 4.50 million, and (2) Term Loan B in the amount of $ 9.12 million. The proceeds from the additional Term Loan B were used to repay a portion of Term Loan A, as well as to pay fees, costs, and expenses incurred in connection with entering into the April 21, 2025 amendment, with the balance to be used for working capital purposes. In connection with the April 21, 2025 amendment and refinancing transaction, UTG Capital, Inc., a Delaware corporation (UTG”), purchased a 100 % undivided, participation interest in Term Loan B for a purchase price of $ 9.12 million. Also in connection with the refinancing, the Company issued certain warrants to UTG and Restore, and amended certain warrants that had been previously issued on December 12, 2024 (see Note 7 for additional details). On May 15, 2025, the Company repaid $ 0.50 million of the outstanding principal amount of Term Loan A. 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 (i) the agents and lenders (as defined in the loan and security agreement) consented to the transfer 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 $ 0.25 million against the outstanding principal amount of Term Loan A, of which $ 0.14 million 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 $ 3.25 million on Term Loan A by February 20, 2026, along with the 72 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ payment of an amendment fee of $ 0.45 million (of which $ 0.125 million is payable on December 5, 2025 and the remaining $ 0.325 million would be due only if the $ 3.25 million principal amount of Term Loan A was not repaid on or prior to February 20, 2026); and (iii) the payment of the remaining principal balance on Term Loan A of $ 0.5 million was changed to be due on December 31, 2026 which shall be held by IPX (See Note 11). 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. Further, 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. The Term Loans are guaranteed by certain direct and indirect subsidiaries of the Company, and are secured by all of the assets of the Company and such subsidiaries. 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, 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 consolidated financial statements. Principal As of December 31, 2025, $ 3.25 million of the principal amount on Term Loan A was due on February 20, 2026, with the remaining $ 0.50 million of the principal amount on Term Loan A due on December 31, 2026. The principal amount on Term Loan B is due at the maturity date of December 12, 2028 along with all accumulated paid in-kind (“PIK”) interest (as discussed below). Subsequent to fiscal year-end, the Company’s term loan debt was further amended such that the remaining $ 0.50 million of the principal amount on Term Loan A is due on September 20, 2027 (see Note 12 for additional details). Thus, the aggregate future principal payments under the Term Loans (inclusive of accumulated unpaid PIK interest of $ 0.71 million as of December 31, 2025) are as follows: ​ ​ ​ ​ ​ ​ Amount of ($ in thousands) Principal Year Ending December 31, ​ ​ ​ Payment 2026 ​ $ 3,250 2027 ​ 500 2028 ​ ​ 9,831 Total ​ $ 13,581 ​ Interest ​ 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 Year, the Company recognized approximately $ 0.71 million of PIK interest, and the accumulated PIK interest at December 31, 2025 (reported within the carrying value of long-term debt on the consolidated balance sheet) was $ 0.71 million. ​ 73 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ For the Current Year and Prior Year, the Company incurred interest expense related to term loan debt (including interest paid in cash, PIK, and the amortization of deferred finance costs) of approximately $ 2.08 million and $ 0.62 million, respectively, reflecting an effective interest rate of approximately 15.0 % and 11.9 %, respectively. ​ Exit Fees ​ The amended loan agreement also requires that the Company pay an exit fee of $ 0.175 million to FEAC related to Term Loan A and an exit fee of $ 0.40 million 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 remaining 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 (as described below). As of December 31, 2025, the amount of accrued exit fees with respect to Term Loan A was $ 0.11 million and is presented within Accounts payable, accrued expenses and other current liabilities on the consolidated balance sheet, while the amount of accrued exit fees with respect to Term Loan B was $ 0.29 million and is presented within Other long-term liabilities on the consolidated balance sheet. ​ Deferred Finance Costs and Other Reductions to Carrying Value of Debt ​ In connection with entering into the Term Loans in December 2024, the Company incurred loan origination fees, plus various legal and other fees; these fees and costs totaling $ 0.92 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt. Also in connection with entering into the Term Loans in December 2024, the Company issued certain warrants to the lenders to purchase shares of the Company’s common stock. In accordance with applicable GAAP, the Company allocated the value of the total proceeds of $ 10.0 million between the term loan debt and the warrants, based on the relative fair values of each; as a result, the Company recognized a $ 0.48 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. From December 12, 2024 through April 20, 2025, these reductions to the carrying value of the term loan debt totaling $ 1.40 million were being amortized to interest expense over the term of the debt using the effective interest method. 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 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 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 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 in the Current Year. 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. The $ 0.07 million amount related to the warrants was recorded with an offsetting increase to stockholders’ equity as additional paid-in capital. ​ As a result of the December 12, 2024 debt refinancing transaction as described above, the Company recognized a loss on extinguishment of debt of approximately $ 0.29 million in the Prior Year. This loss was primarily comprised of the write- 74 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ off of approximately $ 0.2 million of remaining unamortized deferred finance costs related to the October 2023 IDB term loan debt, and $ 0.1 million paid to exit the interest rate swap agreement with IDB. ​ 7. Stockholders’ Equity The Company has authority to issue up to 51,000,000 shares, consisting of 50,000,000 shares of common stock and 1,000,000 shares of preferred stock. Reverse Stock Split At a special meeting of the Company’s stockholders on March 12, 2025, the stockholders approved a proposal granting the Company’s Board of Directors the discretion to effect a reverse stock split of the Company’s issued and outstanding common stock at a ratio in the range of 1-for-2 to 1-for-10 , with such ratio to be determined by the Chairman of the Company’s Board of Directors. 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”). 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. on March 24, 2025, to effect such Reverse Stock Split. As a result of the Reverse Stock Split, every ten (10) shares (the “Reverse Stock Split Number”) of issued and outstanding Common Stock was automatically combined into one (1) issued and outstanding share of common stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Instead, stockholders who otherwise would have been entitled to receive fractional shares were entitled to receive a cash payment (without interest and subject to applicable withholding taxes) in lieu of such fractional shares equal to the fraction of a share of common stock to which such stockholder would otherwise be entitled multiplied by (i) the closing price per share of the common stock on the Nasdaq Capital Market at the close of business on the trading day preceding the date of the Certificate of Amendment, multiplied by (ii) the Reverse Stock Split Number. The aggregate number of fractional shares resulting from the Reverse Stock Split was 1,120 shares of common stock (or 112 shares on a pre-Reverse Stock Split basis); the aggregate cash payments made to stockholders in lieu of fractional shares was less than $ 1,000 . Immediately prior to the Reverse Stock Split there were 23,796,200 shares of common stock outstanding; immediately following the Reverse Stock Split there were 2,379,508 shares of common stock outstanding. The shares of common stock underlying the Company’s outstanding stock options and warrants were also proportionately adjusted along with corresponding adjustments to their exercise prices. All share and per share amounts presented in these 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. ​ August 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 “August 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 August 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 August 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 75 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ 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 August 2025 Offering. ​ The aggregate number of shares of common stock issued in the August 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. ​ December 2025 Private Investment in Public Equity Transaction ​ On December 17, 2025, the Company entered into a securities purchase agreement with several institutional and accredited investors for the issuance and sale in a private placement of securities for gross proceeds of $ 2.05 million. The securities purchase agreement provided for the issuance and sale of (i) 896,126 shares of the Company’s common stock, (ii) pre-funded warrants to purchase from the Company a total of 773,929 shares of common stock, at an exercise price per share equal to $ 0.001 , and (iii) warrants to purchase from the Company a total of 835,023 shares of common stock, at an exercise price per share equal to $ 3.00 . ​ The closing of this private placement transaction occurred on December 18, 2025. Robert W. D’Loren, Chairman and Chief Executive Officer of the Company, agreed to purchase 81,466 Shares and 40,733 Warrants for a total purchase price of $ 100,000 . The aggregate net proceeds to the Company from the sale of the shares of common stock and pre-funded warrants, after deducting the placement agent fees and other estimated offering expenses payable by the Company, were approximately $ 1.82 million. The Company intends to use the net proceeds from this transaction for working capital and general corporate purposes. ​ Pursuant to a placement agency agreement dated December 17, 2025, by and between the Company and Wellington Shields & Co. LLC (the “PIPE Placement Agent”), the PIPE Placement Agent served as the exclusive placement agent in connection with this transaction. Upon the closing of this transaction, the Company issued the PIPE Placement Agent certain warrants to purchase up to 66,802 shares of common stock, which are exercisable at an exercise price of $ 1.165 per share, in whole or in part, during the five year period that commenced December 18, 2025. ​ March 2024 Public Offering and Private Placement Transactions ​ On March 15, 2024, the Company entered into an underwriting agreement with Craig-Hallum Capital Group LLC (the “Representative”), as the representative of the underwriters, relating to a firm commitment underwritten public offering (the “2024 Offering”) of 328,427 shares of the Company’s common stock at a price to the public of $ 6.50 per share. ​ The closing of the 2024 Offering occurred on March 19, 2024. 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 $ 1.7 million. ​ 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; 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 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 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 76 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ 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 The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) is designed and utilized to enable the Company to provide its employees, officers, directors, consultants, and others whose past, present, and/or potential contributions to the Company have been, are, or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. Originally, a total of 400,000 shares of common stock were eligible for issuance under the 2021 Plan; during the Current Year, the Company’s stockholders approved amendment to the 2021 Plan that increased the number of shares authorized from 400,000 to 1,150,000 . The 2021 Plan provides for the grant of any or all of the following types of awards: stock options (incentive or non-qualified), restricted stock, restricted stock units, performance awards, or cash awards. The 2021 Plan is administered by the Company’s Board of Directors, or, at the Board’s discretion, a committee of the Board. In addition, stock-based awards (including options, warrants, and restricted stock) previously granted under the Company’s 2011 Equity Incentive Plan (the “2011 Plan”) remain outstanding and shares of common stock may be issued to satisfy options or warrants previously granted under the 2011 Plan, although no new awards may be granted under the 2011 Plan. Stock-Based Compensation Total expense recognized for all forms of stock-based compensation was approximately $ 0.76 million and $ 0.47 million in the Current Year and Prior Year, respectively. Of the Current Year expense amount, approximately $ 0.57 million related to employees and approximately $ 0.19 million related to directors; all of this expense was recorded as a direct operating cost in the accompanying statement of operations. Of the Prior Year expense amount, approximately $ 0.23 million related to employees and approximately $ 0.24 million related to directors and consultants; all of this expense was recorded as a direct operating cost in the accompanying statement of operations. Stock Options Options granted under the Company’s equity incentive plans expire at various times – generally either five or ten years from the date of grant, depending on the particular grant. A summary of the Company’s stock option activity for the Current Year is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Weighted ​ Remaining ​ ​ ​ ​ ​ ​ ​ Average ​ Contractual ​ Aggregate ​ ​ Number of ​ Exercise ​ Life ​ Intrinsic ​ ​ ​ ​ Options ​ ​ ​ Price ​ ​ ​ (in Years) ​ ​ ​ Value Outstanding at January 1, 2025 472,392 ​ $ 19.01 3.65 ​ $ — Granted 551,201 ​ 1.13 ​ ​ ​ Exercised — ​ — ​ ​ ​ Expired/Forfeited ( 45,898 ) ​ 24.22 ​ ​ ​ Outstanding at December 31, 2025, and expected to vest 977,695 ​ $ 8.69 3.98 ​ $ — Exercisable at December 31, 2025 197,494 ​ $ 9.23 4.14 ​ $ — ​ ​ 77 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ Current Year stock option grants were as follows: 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 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. The exercise price of the options is $ 2.6321 per share; 50 % of the options vested on May 28, 2025 and the remaining 50 % will vest on May 1, 2026. On May 28, 2025, the Company granted options to purchase an aggregate of 17,500 shares of common stock to Messrs. D’Loren, DiSanto, and Burroughs. 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. On December 3, 2025, the Company granted options to purchase an aggregate of 113,500 shares to non-management directors. These options were fully vested and exercisable upon issuance, and have an exercise price of $ 0.94 per share. On December 3, 2025, the Company granted options to purchase an aggregate of 340,201 shares of common stock to certain members of executive management: 250,674 to Robert W. D’Loren, the Company’s Chief Executive Officer, 53,716 to James F. Haran, the Company’s Chief Financial Officer, and 35,811 to Seth Burroughs, Executive Vice President of Business Development and Treasury. The exercise price is $ 0.94 per share, and the vesting of such options is dependent upon the Company’s common stock achieving certain stock trading prices: 97,500 shall vest if the stock price is equal to or greater than $ 3.00 per share, 81,500 shall vest if the stock price is equal to or greater than $ 5.00 per share, 67,000 shall vest if the stock price is equal to or greater than $ 7.00 per share, 54,200 shall vest if the stock price is equal to or greater than $ 9.00 per share, and 40,001 shall vest if the stock price is equal to or greater than $ 11.00 per share. Prior Year stock option grants were as follows: On April 3, 2024, the Company granted options to purchase an aggregate of 10,000 shares of common stock to non-management directors. The exercise price of the options is $ 8.50 per share, and 50 % of the options vest on each of April 3, 2025 and April 3, 2026. Of the total stock options outstanding at December 31, 2025, the vesting of 770,201 options is contingent upon certain performance-based or market-based criteria: ● the vesting of 340,201 options granted to members of executive management in December 2025 (as described above) is contingent upon the Company’s common stock achieving certain target prices; ● the vesting of 350,000 options granted to members of executive management in February 2019 is contingent upon the Company’s common stock achieving certain target prices ranging from $ 30.00 per share to $ 110.00 per share, such that 100,000 shall vest at $ 30.00 , 85,000 shall vest at $ 50.00 , 70,000 shall vest at $ 70.00 , 55,000 shall vest at $ 90.00 , and 40,000 shall vest at $ 110.00 ; ● the vesting of 20,000 options is contingent upon the achievement of certain revenue targets related to certain brands; and 78 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ ● 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 performance-based or market-based stock options have vested. The fair values of options granted in the Current Year and Prior Year were estimated at the respective dates of grant using a Black-Scholes option pricing model or (for options with market-based vesting criteria) a binomial lattice model, with the following range of assumptions as applicable: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Expected Volatility 41 – 100 % 78 % Expected Dividend Yield — % — % Expected Life (Term, in years) 1.5 – 5 3.25 ​ Risk-Free Interest Rate 3.50 – 4.05 % 4.46 % ​ Compensation expense related to stock options for the Current Year and Prior Year was approximately $ 0.14 million and $ 0.08 million, respectively. Total unrecognized compensation expense related to unvested stock options (excluding stock options with performance-based vesting) at December 31, 2025 amounts to approximately $ 0.16 million and is expected to be recognized over a weighted average period of 4.65 years. ​ The following table summarizes the Company’s stock option activity for non-vested options for the Current Year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ ​ ​ ​ Options ​ ​ ​ Fair Value Balance at January 1, 2025 375,000 ​ $ 0.24 Granted 551,201 ​ 0.57 Vested ( 146,000 ) ​ ​ 1.09 Forfeited or Canceled — ​ — Balance at December 31, 2025 780,201 ​ $ 0.31 ​ Stock Awards ​ A summary of the Company’s restricted stock activity for the Current Year is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Number of ​ Average ​ ​ Restricted ​ Grant Date ​ ​ ​ ​ Shares ​ ​ ​ Fair Value Outstanding at January 1, 2025 35,333 ​ $ 34.80 Granted 291,756 ​ 1.36 Vested ( 230,672 ) ​ 1.31 Expired/Forfeited — ​ — Outstanding at December 31, 2025 96,417 ​ $ 13.73 ​ Current Year stock award grants were as follows: 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 . 79 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ On May 28, 2025, the Company issued an aggregate of 17,500 shares of common stock to Messrs. D’Loren, DiSanto, and Burroughs, which vested on November 1, 2025. On November 20, 2025, the Company issued 63,674 shares of common stock to an employee, which vested immediately. On December 3, 2025, the Company issued an aggregate of 39,584 shares of common stock to non-management directors, which shall vest on March 31, 2026. On December 3, 2025, the Company issued 25,000 and 20,000 shares of common stock to Messrs. D’Loren and DiSanto, respectively, which vested immediately. Further, in accordance with the amended employment agreements with each of Mr. D’Loren and Mr. Burroughs, effective July 16, 2024, and through December 31, 2025 and August 31, 2025, respectively, the Company paid 40 % of each such executive officer’s base salary via the issuance of shares of the Company’s common stock, generally issued on the last day of each month. Each of Mr. D’Loren and Mr. Burroughs were 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 121,998 shares of common stock (net of shares exchanged for withholding taxes) to these executives for the Current Year, which vested immediately. Prior Year stock award grants were as follows: On January 12, 2024, the Company issued 7,800 shares of common stock to a consultant, which vested immediately. On April 3, 2024, the Company issued an aggregate of 4,000 shares of common stock to non-management directors, of which 50 % vests on each of April 3, 2025 and April 3, 2026. On August 2, 2024, the Company issued 1,468 shares of common stock to a member of management, which vested immediately. Also, under the terms of the aforementioned amended employment agreements with Messrs. D’Loren and Burroughs, the Company issued an aggregate of 17,502 shares of common stock (net of shares exchanged for withholding taxes) to these executives for the Prior Year, which vested immediately. Notwithstanding the foregoing, each grantee may extend the first anniversary of all or a portion of the restricted stock by six months and, thereafter one or more times may further extend such date with respect to all or a portion of the restricted stock until the next following date exactly six months thereafter, by providing written notice of such election to extend such date with respect to all or a portion of the restricted stock prior to such date. Total compensation expense related to stock awards for the Current Year and Prior Year (inclusive of the amounts detailed above) was approximately $ 0.62 million and $ 0.39 million, respectively. Total unrecognized compensation expense related to unvested restricted stock grants at December 31, 2025 amounts to $ 0.39 million and is expected to be recognized over a weighted average period of 0.43 years. ​ 80 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ The following table provides information with respect to restricted stock purchased and retired by the Company during the Current Year and Prior Year, all of which were exchanged from employees in connection with the income tax withholding obligations on behalf of such employees from the receipt of stock awards: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchased as ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Part of ​ ​ ​ ​ ​ Total Number ​ Actual ​ Publicly ​ Fair value of ​ ​ of Shares ​ Price Paid ​ Announced ​ Re-Purchased Date ​ ​ ​ Purchased ​ ​ ​ per Share ​ ​ ​ Plan ​ ​ ​ Shares January 31, 2025 ​ 5,104 ​ $ 4.23 ​ — ​ $ 21,590 February 28, 2025 ​ 7,628 ​ ​ 2.83 ​ — ​ ​ 21,587 March 31, 2025 ​ 7,654 ​ ​ 2.82 ​ — ​ ​ 21,584 April 30, 2025 ​ 8,297 ​ ​ 2.38 ​ — ​ ​ 19,746 May 30, 2025 ​ 8,403 ​ ​ 2.35 ​ — ​ ​ 19,746 June 30, 2025 ​ 10,909 ​ ​ 1.81 ​ — ​ ​ 19,746 August 15, 2025 ​ 17,973 ​ ​ 1.08 ​ — ​ ​ 19,411 August 29, 2025 ​ 13,865 ​ ​ 1.40 ​ — ​ ​ 19,411 September 30, 2025 ​ 7,774 ​ ​ 1.76 ​ — ​ ​ 13,683 October 31, 2025 ​ 10,859 ​ ​ 1.26 ​ — ​ ​ 13,683 December 3, 2025 ​ 14,556 ​ ​ 0.94 ​ — ​ 13,683 Total 2025 ​ 113,022 ​ $ 1.80 ​ — ​ $ 203,870 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ July 31, 2024 ​ 1,344 ​ $ 7.20 — ​ $ 9,680 August 31, 2024 ​ 2,760 ​ ​ 7.03 ​ — ​ ​ 19,411 September 30, 2024 ​ 2,594 ​ ​ 7.48 ​ — ​ ​ 19,411 October 31, 2024 ​ 2,458 ​ ​ 7.89 ​ — ​ ​ 19,411 November 31, 2024 ​ 2,824 ​ ​ 6.87 ​ — ​ ​ 19,411 December 31, 2024 3,768 ​ 5.15 — ​ 19,411 Total 2024 15,748 ​ $ 6.78 — ​ $ 106,735 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted Stock Units There were no restricted stock units outstanding as of December 31, 2025 and 2024, and no restricted stock units have been issued since the inception of the 2021 Plan. Shares Reserved for Issuance At December 31, 2025, there were 4,320,907 shares of common stock reserved for issuance, including 381,494 shares reserved pursuant to unexercised stock options previously granted under the 2011 Plan, 596,201 shares reserved pursuant to unexercised stock options granted under the 2021 Plan, and 191,003 shares available for issuance (future award grants) under the 2021 Plan. Also included in the aforementioned total shares reserved for issuance were 3,152,209 shares reserved pursuant to unexercised warrants issued through various corporate transactions, as described further below. Warrants Warrants granted by the Company expire at various times – generally either five or ten years from the date of grant, depending on the particular grant. 81 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ A summary of the Company’s warrant activity for the Current Year is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Weighted ​ Remaining ​ ​ ​ ​ ​ ​ Average Contractual ​ Aggregate ​ ​ Number of ​ Exercise Life ​ Intrinsic ​ ​ ​ ​ Warrants ​ ​ ​ Price ​ ​ ​ (in Years) ​ ​ ​ Value Outstanding and exercisable at January 1, 2025 263,957 ​ $ 9.73 8.96 ​ $ — Issued 2,894,000 ​ 5.51 ​ ​ ​ Amended ( 5,748 ) ​ 4.38 ​ ​ ​ Exercised — ​ — ​ ​ ​ Expired/Forfeited — ​ — ​ ​ ​ Outstanding at December 31, 2025 3,152,209 ​ $ 5.70 4.47 ​ $ — Exercisable at December 31, 2025 2,971,418 ​ $ 5.52 4.36 ​ $ — ​ Warrants issued during the Current Year include the following: In connection with the April 21, 2025 refinancing of the Company’s term loan debt (see Note 6), the Company issued warrants to purchase 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. The warrants issued to UTG are exercisable for a period of seven years from the date of issuance at the following exercise prices: 131,100 shares at $ 6.60 per share, and 195,271 shares at each of $ 7.50 , $ 10.00 , $ 12.50 , $ 15.00 , and $ 17.50 per share. 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. 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. These amendments resulted in a net reduction of 5,748 in the total warrants outstanding. In connection with the August 2025 public offering and private placement transactions (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. Finally, in connection with the December 2025 private investment in public equity transaction (the details of which are disclosed above), the Company issued warrants to purchase an aggregate of up to 1,675,754 shares of common stock, including 835,023 investor warrants, 773,929 pre-funded warrants, and 66,802 placement agent warrants. Warrants issued during the Prior Year included (i) warrants to purchase up to 18,293 shares of common stock issued in connection with the March 19, 2024 Offering (see “2024 Public Offering and Private Placement Transactions” discussed above) and (ii) warrants to purchase up to 145,664 shares of common stock issued in connection with the December 12, 2024 debt refinancing transaction (see Note 6). There was no compensation expense recognized related to the aforementioned warrants in the Current Year or Prior Year. In connection with the entrance into the Halston Master License in 2023 (see Note 5), 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 82 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ warrant during the Current Year and Prior Year was approximately $ 0.04 million in each period. As of December 31, 2025, no portion of this warrant had vested. Dividends The Company has not paid any dividends to date. ​ 8. Earnings (Loss) Per Share The following table is a reconciliation of the numerator and denominator of the basic and diluted net loss per share computations for the years ended December 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Numerator: ​ ​ ​ ​ ​ ​ Net loss attributable to Xcel Brands, Inc. stockholders (in thousands) ​ $ ( 17,461 ) ​ $ ( 22,395 ) ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ Basic weighted average number of shares outstanding ​ ​ 3,435,816 ​ 2,275,332 Add: Effect of warrants ​ ​ — ​ — Add: Effect of stock options ​ ​ — ​ ​ — Diluted weighted average number of shares outstanding ​ ​ 3,435,816 ​ 2,275,332 ​ ​ ​ ​ ​ ​ ​ Basic net income (loss) per share ​ $ ( 5.08 ) ​ $ ( 9.84 ) Diluted net income (loss) per share ​ $ ( 5.08 ) ​ $ ( 9.84 ) ​ As a result of the net loss presented for the Current Year and Prior Year, the Company calculated diluted loss per share using basic weighted-average shares outstanding for both years, as utilizing diluted shares would be anti-dilutive to loss per share. ​ The computation of basic and diluted loss per share excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Stock options ​ 977,695 ​ 472,392 Warrants ​ 3,152,209 ​ 263,957 Total ​ 4,129,904 736,349 ​ ​ ​ ​ ​ 9. Commitments and Contingencies Leases 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 December 31, 2025, the Company’s real estate leases have a weighted-average remaining lease term of approximately 3.97 years, and the lease liabilities are measured using a weighted-average discount rate of 8.13 %. 83 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ 1333 Broadway Lease The Company has an operating lease for approximately 29,600 square feet of office space at 1333 Broadway, 10th floor, New York, New York, which commenced on March 1, 2016 and expires on October 30, 2027. The average annual fixed rent over the term of this lease is approximately $ 1.3 million per year, and the lease requires the Company to pay additional rents related to increases in certain taxes and other costs on the property. On January 26, 2024, the Company (as sublessor) entered into an agreement for the sublease of the offices located at 1333 Broadway to a third-party subtenant through October 30, 2027. The average annual fixed rent over the term of the sublease is approximately $ 0.8 million per year. As a result of entering into the sublease, the Company recognized non-cash impairment charges of approximately $ 3.1 million during the Prior Year related to the right-of-use asset. Also in connection with entering into the sublease, the Company recognized a non-cash impairment charge of approximately $ 0.4 million during the Prior Year related to leasehold improvement assets at this location. As of December 31, 2025, this lease had a remaining lease term of approximately 1.83 years. 550 Seventh Avenue Lease Effective February 29, 2024, the Company entered into an operating lease for new corporate offices located at 550 Seventh Avenue, 11th floor, New York, New York. This lease commenced in April 2024 and expires in April 2031. The average annual lease cost over the term of this lease is approximately $ 0.5 million per year. Upon commencement of the lease during the Prior Year, the Company recognized a right-of-use asset and corresponding lease liability related to this lease of approximately $ 2.6 million; the discount rate used for the measurement of this right-of-use asset and lease liability was based on the Company’s incremental borrowing rate at the time of 9.60 %. As of December 31, 2025, this lease had a remaining minimum lease term of approximately 6.33 years. Summary Lease Information For the years ended December 31, 2025 and 2024, total lease expense included in selling, general and administrative expenses on the Company's consolidated statements of operations was approximately $ 0.7 million and $ 0.9 million, respectively, and was comprised of the following: ​ ​ ​ ​ ​ ​ ​ ($ in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 Operating lease cost ​ $ 1,129 ​ $ 1,205 Short-term lease cost ​ 43 ​ 98 Variable lease cost ​ 225 ​ 247 Sublease income ​ ( 721 ) ​ ( 671 ) Total lease cost ​ $ 676 ​ $ 879 ​ Cash paid in the Current Year and Prior Year for amounts included in the measurement of operating lease liabilities was approximately $ 1.9 million and $ 1.6 million, respectively. Cash received from subleasing in the Current Year and Prior Year was approximately $ 0.8 million and $ 0.5 million, respectively. ​ ​ 84 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ As of December 31, 2025, the maturities of lease liabilities were as follows: ​ ​ ​ ​ ​ ​ Amount Year ​ ​ ​ (in thousands) 2026 ​ $ 2,060 2027 ​ ​ 1,841 2028 ​ 570 2029 ​ 585 2030 ​ 599 Thereafter ​ 821 Total lease payments ​ ​ 6,476 Less: Discount ​ ​ 1,111 Present value of lease liabilities ​ ​ 5,365 Current portion of lease liabilities ​ ​ 1,687 Non-current portion of lease liabilities ​ $ 3,678 ​ Employment Agreements ​ The Company has employment contracts with certain executives. The total future minimum compensation payments due under these contracts for the remainder of their current terms are $ 2.20 million, of which $ 2.01 million and $ 0.18 million will be paid during the years ending December 31, 2026 and 2027, respectively. ​ In addition, the Company’s employment contracts with certain executives contain performance-based bonus provisions, which include bonuses based on the Company achieving revenues in excess of established targets and/or on operating results. Certain of the employment agreements contain severance and/or change in control provisions. Aggregate potential severance compensation amounted to approximately $ 2.71 million as of December 31, 2025. Contingent Obligation – Lori Goldstein Earn-Out In connection with the April 1, 2021 purchase of the Lori Goldstein trademarks, the Company had agreed to pay the seller additional cash consideration (the “Lori Goldstein Earn-Out”) of up to $ 12.5 million, based on royalties earned during the six calendar year period commencing in 2021. The Lori Goldstein Earn-Out was initially recorded as a liability of $ 6.6 million, based on the difference between the fair value of the acquired assets of the Lori Goldstein brand and the total consideration paid, in accordance with the guidance in ASC Subtopic 805-50. Through January 1, 2024, the Company paid $ 0.2 million to the seller, and as of January 1, 2024, the remaining balance of the contingent obligation was $ 6.4 million, of which approximately $ 1.03 million had been earned and was payable to the seller. During the year ended December 31, 2024, the Company paid approximately $ 0.3 million of the $ 1.0 million earned to the seller. However, as a result of the June 30, 2024 divestiture of the Lori Goldstein brand (as described in Note 3), the seller waived their rights with respect to the Lori Goldstein Earn-Out amounts that had been previously earned and had not yet been paid, and terminated their rights to any future payments under the Lori Goldstein Earn-Out. As a result, the Company de-recognized approximately $ 1.03 million of accrued Lori Goldstein Earn-Out payments and the remaining balance of approximately $ 5.05 million of contingent obligations recorded on the Company’s balance sheet. As of December 31, 2024, there were no liability amounts remaining on the Company’s consolidated balance sheet related to the Lori Goldstein Earn-Out. 85 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ 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 (i) IM Topco royalties are less than $ 13.5 million for the twelve-month period ending March 31, 2025 or (ii) IM Topco royalties are less than $ 18.0 million for the year ending December 31, 2025 or (iii) Xcel fails to make certain payments to IM Topco under the terms of the license agreement between Xcel and IM Topco (see Note 11) on or before January 30, 2025, then 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 the Prior Year, 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 $ 4.21 million in the accompanying consolidated balance sheets, and recognized a corresponding non-cash charge in the consolidated statements of operations for the Prior Year. During the Current Year, the Company adjusted the carrying value of the contingent obligation to its estimated fair value of $ 3.97 million, and recognized a $( 0.24 ) million credit in the consolidated statements of operations. On and effective April 15, 2025, such equity interests were transferred to WHP in full satisfaction and settlement of this contractual obligation, and the previously recorded liability was de-recognized by reducing the value of the asset for the investment in IM Topco. Legal Proceedings From time to time, the Company becomes involved in legal claims and litigation in the ordinary course of business. The Company routinely assesses all its litigation and threatened litigation as to the probability of ultimately incurring a liability and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable. In the opinion of management, based on consultations with legal counsel, the disposition of litigation pending against the Company as of December 31, 2025 is unlikely to have, individually or in the aggregate, a materially adverse effect on the Company’s business, financial position, results of operations, or cash flows. ​ 86 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ ​ 10. Income Taxes The provision for income taxes in the consolidated statements of operations consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ($ in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 Current: ​ ​ ​ ​ Federal ​ $ ( 52 ) ​ $ 21 State and local ​ 127 ​ 199 Total current ​ 75 ​ 220 ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ ​ ​ Federal ​ — ​ — State and local ​ — ​ — Total deferred ​ — ​ — ​ ​ ​ ​ ​ ​ ​ Total provision ​ $ 75 ​ $ 220 ​ The reconciliation of the federal statutory income tax rate to the Company’s effective tax rate reflected in the income tax provision shown in the consolidated statements of operations is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ 2025 ​ 2024 ​ ​ Amount ​ Percent ​ Percent ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. Federal Statutory Tax Rate $ ( 3,651 ) ​ 21.00 % ​ 21.00 % State and Local Income Taxes, Net of Federal Income Tax Effect ​ ( 1,302 ) ​ 7.49 ​ 7.34 Changes in Valuation Allowances ​ 5,049 ​ ( 29.04 ) ​ ( 28.60 ) Nontaxable or Nondeductible Items ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock compensation ​ — ​ — ​ ( 0.02 ) Life insurance ​ 11 ​ ( 0.06 ) ​ ( 0.10 ) Other Adjustments ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal true-ups ​ ( 32 ) ​ 0.18 ​ ( 0.61 ) Effective Tax Rate $ 75 ​ ( 0.43 ) % ​ ( 0.99 ) % ​ In the table presented above, taxes related to the state and city of New York made up the majority (greater than 50%) of the tax effect in the “State and local rate, net of federal tax benefit” category. ​ ​ 87 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ The significant components of net deferred tax assets (liabilities) of the Company consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ($ in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 Deferred tax assets ​ ​ ​ ​ Federal, state and local net operating loss carryforwards ​ $ 17,115 ​ $ 12,847 Stock-based compensation ​ ​ 638 ​ ​ 594 Accrued compensation and other accrued expenses ​ 742 ​ 958 Allowance for doubtful accounts ​ 9 ​ — Charitable contribution carryover ​ 2 ​ 1 Property and equipment ​ 257 ​ 273 Interest expense ​ 842 ​ 176 Total deferred tax assets ​ ​ 19,605 ​ ​ 14,849 Valuation allowance ​ ​ ( 17,930 ) ​ ​ ( 12,881 ) Total deferred tax assets, net of valuation allowance ​ ​ 1,675 ​ ​ 1,968 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities ​ ​ ​ ​ ​ ​ Basis difference arising from intangible assets of acquisition ​ ( 1,675 ) ​ ( 1,968 ) Total deferred tax liabilities ​ ( 1,675 ) ​ ( 1,968 ) ​ ​ ​ ​ ​ ​ ​ Net deferred tax assets ​ $ — ​ $ — ​ In assessing the realizability of deferred tax assets, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time. As of December 31, 2025 and 2024, the Company had approximately $ 59.1 million and $ 44.4 million, respectively, of federal net operating loss carryforwards ("NOLs") available to offset future taxable income. The federal NOL as of December 31, 2017 of $ 0.3 million has an expiration period through 2037. The federal NOLs generated during tax years beginning after December 31, 2017 of $ 58.8 million have an indefinite life and do not expire. The Company has approximately $ 72.7 million and $ 54.1 million of state NOLs as of December 31, 2025 and December 31, 2024, respectively. The state NOLs expire at various times between 2035 and 2045. As of December 31, 2025 and 2024, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its consolidated financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its consolidated financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year. ​ 11. Related Party Transactions IM Topco, LLC As described in Note 3, the Company held a noncontrolling interest in IM Topco through October 1, 2025. Services Agreement The Company was party to a services agreement with IM Topco that had been originally effective May 31 2022 and subsequently 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 88 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ 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 $ 112,500 and $ 150,000 for the years ended December 31, 2025 and 2024, respectively. License Agreement 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. For both the Current Year and Prior Year, 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 either such period. 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 year ended December 31, 2025. Effective September 26, 2025, pursuant to the terms of a settlement agreement entered into with IM Topco and WHP (see Note 3 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. Equity Offerings August 2025 Public Offering and Private Placement Transactions – In connection with the public offering which closed 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 of common stock, respectively, at $ 1.10 per share, the same price at which the shares were sold to other purchasers in the public offering. Also, in connection with this public 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 of common stock, respectively, at a price of $ 1.38 per share; the purchase of such shares closed concurrently with the public offering. December 2025 Private Investment in Public Equity Transaction – In connection with the private placement transaction which closed on December 18, 2025 (see Note 7 for additional details), Mr. D’Loren purchased 81,466 shares of common stock and 40,733 warrants for a total purchase price of $ 100,000 . March 2024 Public Offering and Private Placement Transactions – In connection with the public offering which closed on March 19, 2024 (see Note 7 for additional details), Mr. D’Loren, Mr. DiSanto, and Seth Burroughs, Executive Vice President of Business Development and Treasury of the Company, purchased 14,625 , 14,625 , and 3,250 shares of common stock, respectively, at $ 6.50 per share, the same price at which the shares were sold to other purchasers in the public offering. Also, in connection with this public offering, on March 14, 2024, the Company entered into subscription 89 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ agreements with each of Messrs. D’Loren, DiSanto, and Burroughs to purchase 13,258 , 13,258 , and 2,946 shares, respectively, at a price of $ 9.80 per share, the purchase of which closed concurrently with the public offering. Debt Refinancing ​ In connection with the December 2024 refinancing of the Company’s term loan debt (see Note 6 for additional details), IPX Capital, LLC (“IPX”), a company controlled by Mr. D’Loren, made a $ 250,000 advance to one of the Company’s subsidiaries, of which $ 200,000 was repaid to IPX upon the closing of the debt refinancing transaction. Additionally, IPX purchased a 12.5 % undivided, last-out, subordinated participation interest in a portion of the new term loan debt for a purchase price of $ 500,000 , and received a pro rata share of warrants received by the Term B Lenders to purchase shares of the Company’s common stock. ​ In connection with the April 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. ​ Guarantee ​ Since October 2024, in connection with a required increase to a standby letter of credit associated with the Company’s real estate lease for offices located at 1333 Broadway (see Note 9), Mr. D’Loren has provided 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. ​ 12. Subsequent Events Shares Issued to Chief Executive Officer In accordance with the terms of the amended employment agreement with Mr. D’Loren (see Note 7 for details), the Company issued the following shares of common stock to Mr. D’Loren: 13,058 shares of common stock on January 2, 2026, 9,771 shares of common stock on February 2, 2026, and 9,906 shares of common stock on February 27, 2026. Executive Stock Option Cancellation Effective January 21, 2026, certain stock options originally issued in 2019 to Messrs D’Loren, Haran, and Burroughs to purchase an aggregate of 350,000 shares of common stock, were cancelled through mutual agreement between the Company and the respective executives. None of these options had vested, and no compensation was paid to the executives in exchange for such cancellation. January 2026 Equity Line Facility On January 21, 2026, the Company entered into a common stock purchase agreement with White Lion Capital, LLC (“White Lion”), pursuant to which White Lion has committed to purchase up to $ 15.0 million of the Company’s common stock. Under the terms and conditions of this agreement, the Company has the right, but not the obligation, to sell to White Lion, and White Lion is obligated to purchase, up to $ 15.0 million of the Company’s common stock. The actual amount and timing of any sales of Common Stock will be determined by the Company at its discretion. The aggregate number of shares that the Company can sell White Lion under this agreement is limited to and may not exceed 1,178,173 shares (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or other similar transaction), which is equal to 19.99 % of the total shares of the Company’s common stock outstanding immediately prior to the execution of the agreement, unless (i) the Company obtains stockholder 90 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ approval to issue additional shares in excess of this amount, or (ii) the average price paid for all shares of Common Stock issued under the agreement equals or exceeds certain levels as specified in the agreement. In consideration for White Lion’s execution and entry into such arrangement, the Company agreed to issue White Lion $ 37,500 worth of common stock, with the number of shares issued determined based on the closing price of the Company’s stock on the business day immediately preceding the day on which the related registration statement is declared effective by the SEC. Additionally, pursuant to the terms of an advisory agreement between the Company and Maxim Group LLC, the Company agreed to pay Maxim Group LLC a cash fee equal to 4.0 % of the gross proceeds received from any sales of securities to White Lion under this arrangement. Debt Amendments and Refinancing On February 20, 2026 and March 20, 2026, the Company entered into the fifth and sixth amendments to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC. Pursuant to such amendments, (i) the Company prepaid $ 500,000 on Term Loan A (paid from the Blocked Account, as defined in the loan and security agreement) in connection with the fifth amendment and irrevocably authorized FAEC Agent, LLC, as the administrative agent to transfer up to $ 500,000 (the “Sixth Amendment Cash Collateral”) from the Blocked Account to an account maintained by the Administrative Agent to be held as cash collateral securing the Obligations (as defined in the loan and security agreement); (ii) the Company irrevocably authorized the administrative agent to: (a) apply all or any portion of the Sixth Amendment Cash Collateral to repay the Term Loan A, or (b) return all or any portion of the Sixth Amendment Cash Collateral to the Company, in each case at the lenders’ sole discretion; (iii) the liquid asset covenant requirement was reduced to: (a) at all times prior to the repayment in full of the First Out Obligations (as defined in the loan and security agreement), $ 500,000 minus that amount of Sixth Amendment Cash Collateral used to repay Term Loan A, and (b) at all times after the repayment in full of the First Out Obligations, $ 0 ; and (iv) the transaction closing date was extended to March 24, 2026. On April 13, 2026, the Company entered into the seventh amendment to the loan and security agreement with the term loan debt lenders and FEAC Agent, LLC, which provided for, among other things: the ability of the Company to consummate the issuance of certain senior secured notes (as described below); the ability for IPX to convert its $ 500,000 Term Loan A to common shares of the Company at the price per share equal to $ 1.435 , subject to adjustment; modifications to certain payment terms; modifications to certain financial covenants; modifications to certain financial reporting requirements; and the amendment of the FEAC Agent, LLC’s role to include certain limitations. In connection with the seventh amendment, FEAC Agent LLC’s affiliated lenders entered into agreements whereby a $ 500,000 portion of Term Loan A was sold and assigned to IPX, and the entirety of Term Loan B was sold and assigned to UTG. Additionally, the Company was relieved of its obligation to pay the remaining $ 325,000 amendment fee as specified in the fourth amendment. Also on April 13, 2026, the Company entered into certain agreements with Smithline Family Trust II (“SFT”), Quick Capital, LLC (“Quick”), and IPX (collectively, the “Purchasers”), pursuant to which the Company issued and sold to the Purchasers 12.5 % Senior Secured Notes due April 13, 2027 in the original principal amount of $ 3,005,780 (the “Secured Notes”) and 100,579 shares of the Company’s common stock. The Secured Notes were issued with an original issue discount, such that the cash proceeds received by the Company were $ 2,600,000 . The Company is required to make $ 100,000 monthly payments on the Secured Notes commencing October 13, 2026, with the balance due at maturity. The Company’s obligations under the Secured Notes are guaranteed by certain direct and indirect subsidiaries of the Company pursuant to a subsidiary guarantee, and are secured by the assets of the Company and the subsidiary guarantors pursuant to a security agreement. At any time after the occurrence of an event of default under the Secured Notes and for so long as such event of default is continuing, the Secured Notes are convertible into shares of common stock of the Company (i) initially at a fixed conversion price equal to $ 1.165 per share and (ii) after May 17, 2026, at a price equal to the lesser of (a) 85 % multiplied by the lowest volume weighted average price of the common stock during the 10-trading day period prior to conversion and (b) $ 1.165 . In addition, to the extent that Company is listed on the Nasdaq Capital Market, the aggregate number of 91 Table of Contents XCEL BRANDS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2025 and 2024 ​ shares of common stock issuable to the Purchasers and any subsequent holder of the Secured Note shall not exceed 19.9 % of the total number of shares of common stock outstanding or of the voting power of the common stock as of April 13, 2026 less the shares issued pursuant to the securities purchase agreement unless the Company has obtained stockholder approval in compliance with Nasdaq Listing Rule 5635(d) to authorize the issuance of shares of common stock in connection with the conversion or exchange of all Secured Notes. ​ The Company granted the Purchasers certain piggyback registration rights with respect to the shares of common stock issuable upon conversion of the Secured Notes. ​ Fees incurred in connection with the transactions described above were approximately $ 0.1 million. As part of the transactions described above, IPX purchased $ 57,803 original principal amount of the Secured Notes and purchased 1,742 shares of common stock, on the same terms as the other Purchasers, except that the shares of common stock purchased by IPX were priced at current market value. ​ The net proceeds received from the April 13, 2026 issuance of the Secured Notes and shares as described above were used to repay $ 2.25 million of the Term Loan A debt, and an additional $ 1 million of the Term Loan A debt was paid with the Company’s restricted cash. As such, following the funding and completion of the transactions described above, the Company’s debt obligations will be as follows: (1) Senior Secured Notes in the principal amount of $ 2.6 million, with payments commencing October 13, 2026 and a maturity date of April 13, 2027, (2) Term Loan A in the principal amount of $ 0.5 million, payable on the maturity date of September 20, 2027, and (3) Term Loan B in the amount of $ 9.9 million, payable on the maturity date of December 12, 2028. ​ ​ ​ ​ 92 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no disagreements with our auditors which would require disclosure under Item 304(b) of Regulation S-K. ​