What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-06-04 compared with 2024-12-20 · 269 added, 357 removed, 305 unchanged (67% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30, 2024

March 31, 2025

December 31, 2024

1 unchanged sentence

Cash and cash equivalents

Accounts receivable, net of allowances for credit losses of $ 30 and $ 75 at September 30, 2024 and December 31, 2023, respectively

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

Prepaid expenses and other current assets

4 unchanged sentences

Trademarks and other intangibles, net

Equity method investments, net

Equity method investments

Total non-current assets

6 unchanged sentences

Current portion of long-term debt

Current portion of contingent obligations

Contingent obligation

Total current liabilities

3 unchanged sentences

Long-term debt, net, less current portion

Long-term portion of contingent obligation

Other long-term liabilities

4 unchanged sentences

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

Common stock, $ .001 par value, 50,000,000 shares authorized, and 23,581,290 and 19,795,053 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Common stock, $ .001 par value, 50,000,000 shares authorized, and 2,386,325 and 2,368,072 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Paid-in capital

11 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Net licensing revenue

Cost of goods sold

Direct operating costs and expenses

2 unchanged sentences

Total direct operating costs and expenses

Operating loss before other operating costs and expenses (income)

Other operating costs and expenses (income)

Operating loss before other operating costs and expenses

Other operating costs and expenses

Depreciation and amortization

1 unchanged sentence

Loss from equity method investments

Reduction in equity ownership of IM TopCo, LLC

Gain on divestiture of Lori Goldstein Brand

Gain on sale of limited partner ownership interest

Gain on settlement of lease liability

Change in contingent reduction in equity ownership of IM Topco, LLC

Operating loss

Interest and finance expense (income)

Interest expense

Other interest and finance charges (income), net

Interest and finance expense (income), net

Loss before income taxes

Income tax benefit

Income tax provision

Net loss attributable to noncontrolling interest

Net loss attributable to Xcel Brands, Inc.

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

Loss per common share attributable to Xcel Brands, Inc.

stockholders:

Basic earnings (loss) per share

Diluted earnings (loss) per share

Basic and diluted net loss per share (1)

Weighted average number of common shares outstanding:

Basic weighted average common shares outstanding

Diluted weighted average common shares outstanding

Basic and diluted weighted average common shares outstanding (1)

(1) Amounts presented for 2024, including the weighted average number of shares outstanding and the resulting loss per share information have been retroactively adjusted in order to give effect to the Company’s March 24, 2025 1-for-10 reverse stock split.

See Note 1 and Note 7.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7 unchanged sentences

Compensation expense related to stock options and restricted stock

Shares issued to consultant in connection with stock grant

Balance as of March 31, 2023

Compensation expense related to stock options and restricted stock

Shares issued to consultant in connection with stock grant

Shares issued on exercise of stock options, net of shares surrendered for cashless exercises

Net income (loss)

Balance as of June 30, 2023

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants held by licensee

Shares issued to directors in connection with restricted stock grants

Shares issued to employee in connection with stock grant

Shares issued on exercise of stock options, net of shares surrendered for cashless exercises

Balance as of September 30, 2023

Balance as of December 31, 2023

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants held by licensee

Shares issued to consultant in connection with stock grant

1 unchanged sentence

Balance as of March 31, 2024

Balance as of December 31, 2024

Additional impact related to fractional shares from reverse stock split

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants held by licensee

Shares issued to directors in connection with restricted stock grants

Net income (loss)

Balance as of June 30, 2024

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants granted to licensee

Shares issued to employee in connection with stock grant

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

Balance as of September 30, 2024

Balance as of March 31, 2025

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

See Note 1 and Note 7.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements .

3 unchanged sentences

(in thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities

4 unchanged sentences

Stock-based compensation and cost of licensee warrants

Provision for (recovery of) credit losses

Restructuring of certain contractual arrangements

Undistributed proportional share of net loss of equity method investees

Change in contingent obligation related to equity method investee

Gain on divestiture of Lori Goldstein brand

Gain on sale of limited partner ownership interest

Gain on settlement of lease liability

Loss from equity method investments

Change in contingent reduction in equity ownership of IM Topco, LLC

Changes in operating assets and liabilities:

7 unchanged sentences

Cash flows from investing activities

Net proceeds from sale of assets

Purchase of property and equipment

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from exercise of stock options

Proceeds from public offering and private placement transactions, net of transaction costs

Proceeds from long-term debt

Shares repurchased including vested restricted stock in exchange for withholding taxes

Payment of long-term debt

Net cash provided by financing activities

Net decrease in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

4 unchanged sentences

Total cash, cash equivalents, and restricted cash

Supplemental disclosure of non-cash activities:

Recognition of operating lease right-of-use asset

Recognition of operating lease obligation

Supplemental disclosure of cash flow information:

5 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

March 31, 2025

Nature of Operations, Background, and Basis of Presentation

5 unchanged sentences

The results of operations for the interim periods presented herein are not necessarily indicative of the results for the entire fiscal year or for any future interim periods.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 19, 2024.

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

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

Currently, the Company’s brand portfolio consists of the Halston brands (the "Halston Brand"), the Judith Ripka brands (the "Ripka Brand"), the C Wonder brands (the "C Wonder Brand"), the Longaberger brand (the “Longaberger Brand”), the Isaac Mizrahi brands (the "Isaac Mizrahi Brand"), the TowerHill by Christie Brinkley brand (the “CB Brand”), and other proprietary brands.

Currently, the Company’s brand portfolio consists of the Halston brands (the "Halston Brand"), the Judith Ripka brands (the "Ripka Brand"), the C Wonder brands (the "C Wonder Brand"), the Longaberger brand (the “Longaberger Brand”), the Isaac Mizrahi brands (the “Isaac Mizrahi Brand”), and other proprietary brands.

● The Halston Brand, Ripka Brand, and C Wonder Brand are wholly owned by the Company.

● The Company also owns the co-branded collaboration brands TowerHill by Christie Brinkley (which launched in May 2024), LB70 by Lloyd Boston (which launched in August 2024), Trust.

by Cesar Milan (which is planned to launch in Spring 2026), and GemmaMade by Gemma Stafford (which is planned to launch in Spring 2026).

● The Company manages the Longaberger Brand 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.

● The Company holds a noncontrolling interest in the Isaac Mizrahi Brand through its 30 % ownership interest in IM Topco, LLC;

the Company accounts for its interest in IM Topco, LLC using the equity method of accounting.

● The CB Brand is a new co-branded collaboration between Xcel and Christie Brinkley, announced in 2023 and launched in May 2024.

The Company’s brand portfolio also included the LOGO by Lori Goldstein brand (the “Lori Goldstein Brand”) as a wholly owned brand from April 1, 2021 through June 30, 2024;

the Lori Goldstein Brand was divested on June 30, 2024 (see Note 3 for additional details).

The Company also owns a 30 % interest in ORME Live, Inc.

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

● The Company holds a noncontrolling interest in the Isaac Mizrahi Brand through its 30 % ownership interest in IM Topco, LLC (see Note 2 and Note 12 for additional details).

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

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

● The Company holds a long-term license agreement in the Jenny Martinez Live brand.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

March 31, 2025

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, traditional brick-and-mortar retailers, and e-commerce channels, to be everywhere its customers shop.

Prior to and for a portion of 2023, the Company also engaged in wholesale and direct-to-consumer sales of products under its brands.

The Company’s former wholesale and direct-to-consumer operations were presented as "Net sales" and "Cost of goods sold" in the condensed consolidated statements of operations, separately from the Company’s licensing revenues.

The only net sales and cost of goods sold recognized for the nine months ended September 30, 2024 were (i) the final sale of certain residual jewelry inventories during the three months ended June 30, 2024 and (ii) the sale of all remaining inventory related to the Longaberger Brand during the three months ended September 30, 2024.

As of September 30, 2024, the Company has no remaining inventory.

Liquidity and Management’s Plans

The Company incurred a net loss attributable to Company stockholders of approximately $ 15.3 million during the nine months ended September 30, 2024 (which included non-cash expenses of approximately $ 15.8 million and a $ 3.80 million non-cash gain on the divestiture of the Lori Goldstein Brand), and had an accumulated deficit of approximately $ 69.2 million as of September 30, 2024.

Net cash used in operating activities was approximately $ 3.3 million for the nine months ended September 30, 2024, of which $ 2.6 million of the cash used in operating activities was attributable to the three months ended March 31, 2024.

The Company had unrestricted cash and cash equivalents of approximately $ 0.2 million as of September 30, 2024, and a working capital deficit (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares) of approximately $( 0.4 ) million as of September 30, 2024.

The aforementioned factors raise uncertainties about the Company’s ability to continue as a going concern.

However, in December 2024, the Company entered into a new term loan agreement for an aggregate amount of $ 10 million, which provides the Company with approximately $ 3.5 million of additional liquidity after repayment of the previous term loan (see Note 13 for additional details).

In connection with the new term loan debt, Company’s working capital increased by approximately $ 4.5 million subsequent to September 30, 2024.

During the year ended December 31, 2023, management implemented a plan to mitigate an expected shortfall of capital and to support future operations by shifting its business from a wholesale/licensing hybrid model into a “licensing plus” model.

These restructuring initiatives included entering into various new licensing agreements and joint venture arrangements with best-in-class business partners, and reducing the Company’s payroll, overhead, and other operating costs by approximately $ 15 million on an annualized basis when compared to 2022.

During the first nine months of 2024, management took further actions to optimize its cost structure and manage its liquidity, including entering into a divestiture transaction (see Note 3 for details) which eliminated certain operating and compensation expenses, relieved the Company of its contractual obligations to make future cash payments of approximately $ 1 million, and relieved the Company of a potential future contingent obligation to make future cash payments of up to approximately $ 11 million.

As of the third quarter of 2024, the Company has reduced its direct operating expenses to a current run rate of approximately $ 11 million per annum.

Also during the first nine months of 2024, the Company issued new shares of common stock for net proceeds of approximately $ 2 million.

Based on the aforementioned events and changes, management expects that existing cash and future operating cash flows will be adequate to meet the Company’s operating needs, term debt service obligations, and capital expenditure needs, for at least the twelve months subsequent to the filing date of this Quarterly Report on Form 10-Q;

therefore, such conditions

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

Change in Capital Structure

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

There were no changes to the total number of authorized common shares or par value per common share as a result of this reverse stock split.

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.

Restricted Cash

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

Restricted cash at March 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 $ 1.5 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.

Going Concern

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

and uncertainties with respect to the Company’s ability to continue as a going concern as of September 30, 2024 have been alleviated.

March 31, 2025

As of March 31, 2025, the Company has incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit.

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

Subsequent to March 31, 2025, the Company restructured its outstanding debt and received net proceeds from financing activities.

However, these proceeds may still be insufficient to fully address the Company’s liquidity needs.

Management is actively pursuing an equity offering to secure additional capital;

however, there can be no assurance that such efforts will be successful or that sufficient funds will be obtained to meet the Company’s obligations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management intends to continue exploring strategic financing alternatives and operational efficiencies to improve liquidity.

The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Recently Issued 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.

The ASU is required to be applied prospectively, with the option to apply it retrospectively, and is effective for fiscal years beginning after December 15, 2024.

The required disclosures will be included in the Company’s Form 10-K for the year ending December 31, 2025.

As the requirements of this ASU relate to disclosure only, the Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements.

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.

Investments in Unconsolidated Affiliates and Variable Interest Entities

1 unchanged sentence

On May 31, 2022, Xcel sold 70 % of the membership interests of IM Topco, LLC (“IM Topco”), 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.

The Company accounts for its 30 % retained interest in the ongoing operations of IM Topco as a component of other operating costs and expenses under the equity method of accounting.

Pursuant to the business venture agreement between the Company and WHP governing the operation of IM Topco, IM Topco’s net cash flow (as defined in the agreement) shall be distributed to the members during each fiscal year no less than once per fiscal quarter, as follows:

(i) first, 100 % to WHP, until WHP has received an aggregate amount during such fiscal year equal to $ 8,852,000 (subject to adjustment in certain circumstances as set forth in the agreement);

(ii) second, 100 % to Xcel, until Xcel has received an aggregate amount during such fiscal year equal to $ 1,316,200 (subject to adjustment in certain circumstances as set forth in the agreement);

(iii) thereafter, in proportion to the members’ respective percentage interests.

Further, on April 12, 2024, the Company, WHP, and IM Topco entered into an amendment of the business venture agreement, such that on and after January 1, 2026, WHP shall receive 50 % of the net cash flow which would otherwise be payable to Xcel, until WHP has received an aggregate amount of additional net cash flow equal to $ 1,000,000 .

Based on these distribution provisions, the Company recognized an equity method loss related to its investment in IM Topco of $ 0.52 million for each of the three-month periods ended September 30, 2024 and 2023, and $ 1.55 million for each of the nine-month periods ended September 30, 2024 and 2023.

For cash flow earnings (i.e., net income before intangible asset amortization expense), management allocated the amounts based on the preferences outlined above.

As such, Xcel recognized no cash-based earnings for all of the periods presented.

For non-cash amortization expense, management allocated the amounts based on the relative ownership of each member (i.e., 70 % WHP and 30 % Xcel).

The equity method loss for each period presented is equal to Xcel’s share of amortization expense.

Summarized financial information for IM Topco for the three and nine months ended September 30, 2024 and 2023 is as follows:

For the three months ended

For the nine months ended

September 30,

($ in thousands)

Loss from continuing operations

Purchase Price Adjustment:

In accordance with the May 31, 2022 membership interest purchase agreement, as amended, WHP (as buyer) may be entitled to receive from Xcel 12.5 % of the total outstanding equity interests of IM Topco if, during

From June 1, 2022 through March 31, 2025, the Company accounted for its 30 % retained interest in the ongoing operations of IM Topco as a component of other operating costs and expenses under the equity method of accounting, using the distribution provisions set forth in the governing business venture agreement between the Company and WHP.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

the twelve-month period ending March 31, 2025, IM Topco receives less than $ 13.5 million in aggregate royalties (the “Purchase Price Adjustment”).

Based on current trends and projections of IM Topco’s revenues, the Company estimates that there is high likelihood that IM Topco’s revenues will be less than the required minimum and the Company will be obligated to transfer the required membership interests to WHP in accordance with the Purchase Price Adjustment.

The Company has recorded a contingent obligation of approximately $ 6.3 million as a reduction to the carrying value of the equity method investment as of September 30, 2024, based on the expected March 31, 2025 value of the potential transferred membership interest.

Refer to Note 11 and Note 12 for additional information regarding the Company’s ongoing relationship with IM Topco.

Investment in Orme Live, Inc.

In December 2023, the Company contributed $ 0.15 million of cash to ORME in exchange for a 30 % equity ownership interest in ORME.

The carrying value of this investment was $ 0.01 million and $ 0.15 million as of September 30, 2024 and December 31, 2023, respectively.

The Company accounts for its 30 % interest in the operations of ORME as a component of other operating costs and expenses under the equity method of accounting.

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

March 31, 2025

For the three months ended March 31, 2025, the Company recognized a $ 0.58 million loss related to its investment in IM Topco, comprised of (i) a $ 0.18 million equity method loss, and (ii) a $ 0.40 million charge to adjust the carrying value of the investment in IM Topco to its estimated fair value as of March 31, 2025.

For the three months ended March 31, 2024, the Company recognized a $ 0.52 million equity method loss related to its investment in IM Topco.

The May 31, 2022 membership interest purchase agreement between Xcel and WHP (as subsequently amended) also provided that if (i) IM Topco royalties were less than $ 13.5 million for the twelve-month period ending March 31, 2025 or (ii) IM Topco royalties were less than $ 18.0 million for the year ending December 31, 2025 or (iii) Xcel failed to make certain payments to IM Topco under the terms of a license agreement between Xcel and IM Topco on or before January 30, 2025 then Xcel would be required to transfer equity interests in IM Topco to WHP equal to 12.5 % of the total outstanding equity interests of IM Topco, such that Xcel’s ownership interest in IM Topco would decrease from 30 % to 17.5 %, and WHP’s ownership interest in IM Topco would increase from 70 % to 82.5 %.

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

On and effective April 15, 2025, the Company transferred such interests to WHP.

Refer to Note 11 for additional information regarding the Company’s accounting for this contingent contractual obligation, and refer to Note 12 for additional information regarding subsequent events related to the Company’s ownership interest in IM Topco.

Longaberger Licensing, LLC Variable Interest Entity

4 unchanged sentences

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

Divestiture Transaction

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.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

● The Company’s May 2, 2024 termination of the employment agreement and consulting agreement with the LG Parties was withdrawn and stayed until the closing date.

The Company paid Ms.

Goldstein and Lori Goldstein, Ltd 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.

Thus, 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 nine months ended September 30, 2024.

Trademarks and Other Intangibles

Trademarks and other intangibles, net consist of the following:

September 30, 2024

March 31, 2025

Gross Carrying

2 unchanged sentences

Copyrights and other intellectual property

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

December 31, 2024

3 unchanged sentences

Copyrights and other intellectual property

Amortization expense for intangible assets was approximately $ 0.89 million for the three-month period ended September 30, 2024 (the "current quarter") and approximately $ 1.53 million for the three-month period ended September 30, 2023 (the "prior year quarter").

Amortization expense for intangible assets was approximately $ 3.95 million for the nine-month period ended September 30, 2024 (the "current nine months") and approximately $ 4.60 million for the nine-month period ended September 30, 2023 (the "prior year nine months").

On June 30, 2024, the Company sold certain trademarks with a net book value of approximately $ 1.93 million (gross carrying amount of $ 10.30 million and accumulated amortization of approximately $ 8.37 million) related to the Lori Goldstein Brand (see Note 3 for additional details).

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows:

($ in thousands)

Year Ending December 31,

2024 (October 1 through December 31)

Thereafter (through 2036)

Amortization expense for intangible assets was approximately $ 0.88 million for the three-month period ended March 31, 2025 (the "current quarter") and approximately $ 1.53 million for the three-month period ended March 31, 2024 (the "prior year quarter").

Significant Contracts and Concentrations

4 unchanged sentences

Net licensing revenue from the Qurate Agreements totaled $ 0.33 million and $ 1.24 million for the current quarter and prior year quarter, respectively, representing approximately 25 % and 57 % of the Company’s total net revenue for the current quarter and prior year quarter, respectively.

Net licensing revenue from the Qurate Agreements totaled $ 3.27 million and $ 4.80 million for the current nine months and prior year nine months, respectively, representing approximately 46 % and 31 % of the Company’s total net revenue for the current nine months and prior year nine months, respectively.

As of September 30, 2024 and December 31, 2023, the Company had receivables from Qurate of $ 0.27 million and $ 1.3 million, respectively, representing approximately 9 % and 37 % of the Company’s total net accounts receivable, respectively.

Due to the divestiture of the Lori Goldstein Brand on June 30, 2024 (see Note 3 for details), the Company’s total net revenue and accounts receivable, as well as the relative proportional share of total net revenue and total accounts receivable attributable to the Qurate Agreements, have decreased;

however, due to the Company’s other brands, management expects that Qurate will remain a significant licensee.

As of March 31, 2025 and December 31, 2024, the Company had receivables from Qurate of $ 0.33 million and $ 0.40 million, respectively, representing approximately 16 % and 18 % of the Company’s total net accounts receivable, respectively.

Halston Master License

On May 15, 2023, the Company, through its wholly owned 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 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

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 in accordance with the terms of the Halston Master License.

The Licensor granted G-III a security interest in the Halston

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

period during the term.

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

As a result of the upfront cash payment and guaranteed minimum royalties discussed above, the Company has recognized $ 3.8 million and $ 4.4 million of deferred revenue contract liabilities on its condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

March 31, 2025

trademarks to secure the Licensor’s obligations under the Halston Master License, including to honor the obligations under the purchase option.

As a result of the upfront cash payment and guaranteed minimum royalties discussed above, the Company has recognized $ 3.76 million and $ 3.56 million of deferred revenue contract liabilities on its condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively.

As of December 31, 2024, approximately $ 0.89 million of the contract liability balance was classified as a current liability and approximately $ 2.6 7 million was classified as a long-term liability.

As of September 30, 2024, approximately $ 0.9 million of the contract liability balance was classified as a current liability and approximately $ 2.9 million was classified as a long-term liability;

As of March 31, 2025, approximately $ 1.31 million of the contract liability balance was classified as a current liability and approximately $ 2.45 million was classified as a long-term liability;

the balance of the deferred revenue contract liabilities will be recognized ratably as revenue over the next 3.75 years.

Net licensing revenue recognized from the Halston Master License was $ 0.64 million for both the current quarter and prior year quarter, representing approximately 48 % and 29 % of the Company’s total net revenue for the current quarter and prior year quarter, respectively.

Net licensing revenue recognized from the Halston Master License was $ 1.93 million and $ 0.98 million for the current nine months and prior year nine months, respectively, representing approximately 27 % and 6 % of the Company’s total net revenue for the current nine months and prior year nine months, respectively.

JTV / America’s Collectibles Network, Inc.

2 unchanged sentences

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

As of September 30, 2024 and December 31, 2023, the Company had receivables from JTV of $ 1.31 million and $ 1.37 million, respectively, representing approximately 45 % and 40 % of the Company’s total net accounts receivable, respectively.

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

As of March 31, 2025 and December 31, 2024, the Company had receivables from JTV of $ 0.80 million and $ 1.06 million, respectively, representing approximately 38 % and 45 % of the Company’s total net accounts receivable, respectively.

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

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

Lease expense (net of sublease income of approximately $ 0.2 and $ 0.5 million for the current quarter and current nine months, respectively) included in selling, general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations was approximately $ 0.3 million for the current quarter, approximately $ 0.4 million for the prior year quarter, approximately $ 0.7 million for the current nine months, and approximately $ 1.2 million for the prior year nine months.

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

As of September 30, 2024, the Company’s real estate leases have a weighted-average remaining lease term of approximately 4.82 years, and the lease liabilities are measured using a weighted-average discount rate of 7.78 %.

As of March 31, 2025, the Company’s real estate leases have a weighted-average remaining lease term of approximately 4.55 years, and the lease liabilities are measured using a weighted-average discount rate of 7.92 %.

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

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $ 0.4 million in both the current quarter and prior year quarter.

During the prior year quarter, as a result of entering into an agreement (as sublessor) for the sublease of offices located at 1333 Broadway to a third-party subtenant, the Company recognized a non-cash impairment charge of approximately $ 1.9 million related to the right-of-use asset for this location, and a non-cash impairment charge of approximately $ 0.4 million related to leasehold improvement assets at this location.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

1333 Broadway Lease

The Company has an operating lease for offices located 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 current nine months 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 current nine months related to leasehold improvement assets at this location.

As of September 30, 2024, the Company’s lease of 1333 Broadway has a remaining lease term of approximately 3.08 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 current quarter, 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 of 9.60 %.

As of September 30, 2024, the Company’s lease of 550 Seventh Avenue has a remaining minimum lease term of approximately 7.58 years.

March 31, 2025

Future Lease Obligations

As of September 30, 2024, the maturities of future lease obligations were as follows:

As of March 31, 2025, the maturities of future lease obligations were as follows:

(in thousands)

2024 (October 1 through December 31)

2025 (April 1 through December 31)

Total lease payments

2 unchanged sentences

Non-current portion of lease liabilities

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

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

September 30,

($ in thousands)

Term loan debt

Unamortized deferred finance costs related to term loan debt

Unamortized deferred finance costs and other reductions to carrying value

Current portion of debt

Long-term debt

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.

Such costs incurred in connection with the borrowing included a commitment fee paid to IDB, plus various legal and other fees.

These fees and costs totaling $ 0.3 million have been deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt, and are being amortized to interest expense over the term of the debt using the effective interest method.

In connection with this term loan agreement, the Borrower and H Licensing, LLC (“H Licensing”), a wholly owned subsidiary of Xcel, entered into a security agreement (the “Security Agreement”) in favor of IDB, and Xcel entered into a Membership Interest Pledge Agreement (the “Pledge Agreement”) in favor of IDB.

Pursuant to the Security Agreement, the Borrower and H Licensing granted to IDB a security interest in substantially all of their respective assets, other than the trademarks owned by the Borrower and H Licensing, to secure the Borrower’s obligations under the October 2023 loan agreement.

Pursuant to the Pledge Agreement, Xcel granted to IDB a security interest in its membership interests in H Licensing to secure the Borrower’s obligations under the October 2023 loan agreement.

The term loan matures on October 19, 2028.

Principal on the term loan is 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 has the right to prepay all or any portion of the term loan at any time without penalty.

As of September 30, 2024, the aggregate remaining principal payments under the term loan were as follows:

On December 12, 2024, the Company and certain of its subsidiaries entered into a loan and security agreement with FEAC Agent, LLC, as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC, 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 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 previous term loan debt with Israel Discount Bank of New York, 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.

Approximately $ 1.5 million of the proceeds from the Delayed Draw Term Loan were deposited in a bank account to satisfy a liquidity covenant in the loan agreement.

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

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

($ in thousands)

Year Ending December 31,

2024 (October 1 through December 31)

Interest on the term loan accrues 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

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

Interest on amounts outstanding under the Term Loans accrues daily and is payable at the end of each calendar month.

In connection with entering into the Terms Loans, 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 Terms Loans, the Company issued warrants to the lenders to purchase an aggregate of 145,664 shares of the Company’s common stock.

These warrants have an exercise price of $ 6.32 per share, are immediately exercisable, and expire on December 12, 2034.

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.

The fair value of the term loan debt was determined using a net present value calculation, while the fair value of the warrants was determined using a Black-Scholes option pricing model.

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.

These reductions to the carrying value of the term loan debt totaling $ 1.40 million are being amortized to interest expense over the term of the debt using the effective interest method.

The loan agreement also requires that the Company pay an exit fee of $ 175,000 for the ratable benefit of the Term Loan A lenders and an exit fee of $ 375,000 for the ratable benefit of the Term Loan B lenders upon the maturity or full payment of the Term Loans.

The Company is accruing the cost of these exit fees over the term of the related debt.

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 in the loan agreement.

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

The Company subsequently refinanced its term loan debt in April 2025;

see Note 12 for additional information.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

month) plus 4.25 % per annum.

Interest on the term loan is payable on the first day of each calendar month.

In addition, on October 19, 2023, the Borrower also entered into a swap agreement with IDB, pursuant to which IDB will 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 is aligned with the amortization of the October 2023 term loan principal amount.

The fair value of this swap agreement was immaterial as of September 30, 2024 and December 31, 2023.

For the current quarter and current nine months, the Company incurred interest expense (including both interest paid in cash and the amortization of deferred finance costs) related to term loan debt of approximately $ 0.13 million and $ 0.42 million, respectively, reflecting an effective interest rate of approximately 11.6 %.

The term loan agreement also contains 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.

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

March 31, 2025

Stockholders’ Equity

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.

Public Offering and Private Placement Transactions

5 unchanged sentences

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

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

6 unchanged sentences

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Equity Incentive Plans

5 unchanged sentences

Stock-based Compensation

The Company accounts for stock-based compensation by recognizing the fair value of such compensation as an operating expense over the service period of the award or term of the corresponding contract, as applicable.

Forfeitures are accounted for as a reduction of compensation cost in the period when such forfeitures occur.

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 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.

Total expense recognized for all forms of stock-based compensation was approximately $ 0.16 million and $ 0.13 million for the current quarter and prior year quarter, respectively.

Of the current quarter expense amount, approximately $ 0.13 million related to employees and approximately $ 0.03 million related to directors and consultants .

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

Total expense recognized for all forms of stock-based compensation in the current nine months and prior year nine months was approximately $ 0.32 million and $ 0.17 million, respectively.

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

Of the prior year nine months expense amount, approximately $ 0.02 million related to employees and approximately $ 0.15 million related to directors and consultants.

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

Stock Options

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

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

Outstanding at January 1, 2025

Expired/Forfeited

Outstanding at September 30, 2024, and expected to vest

Exercisable at September 30, 2024

Outstanding at March 31, 2025, and expected to vest

Exercisable at March 31, 2025

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

Total unrecognized compensation expense related to unvested stock options at March 31, 2025 was approximately $ 0.02 million and is expected to be recognized over a weighted average period of approximately 1.00 year.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

On April 3, 2024, the Company granted options to purchase an aggregate of 100,000 shares of common stock to non-management directors.

The exercise price of the options is $ 0.85 per share, and 50 % of the options vest on each of April 3, 2025 and April 3, 2026.

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

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

Total unrecognized compensation expense related to unvested stock options at September 30, 2024 was approximately $ 0.06 million and is expected to be recognized over a weighted average period of approximately 1.07 years.

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

March 31, 2025

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

Balance at January 1, 2025

Forfeited or Canceled

Balance at September 30, 2024

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

Balance at March 31, 2025

Of the total stock options outstanding at March 31, 2025, the vesting of 350,000 options is contingent upon the Company’s common stock achieving certain target prices, and the vesting of 10,000 options is dependent upon the achievement of certain revenue targets.

None of these 360,000 performance-based stock options have vested, and no compensation expense has been recorded related to such options.

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

Outstanding at January 1, 2025

Expired/Forfeited

Outstanding at September 30, 2024

On January 12, 2024, the Company issued 78,000 shares of common stock to a consultant, which vested immediately.

On April 3, 2024, the Company issued an aggregate of 40,000 shares of common stock to non-management directors, of which 50 % shall vest on April 3, 2025, and 50 % shall vest on April 3, 2026.

On July 30, 2024, the Company entered into amendments to the employment agreements dated February 27, 2019 with each of Robert W.

D’Loren, its Chairman of the Board, Chief Executive Officer and President, and Seth Burroughs, its Executive Vice President of Business Development.

Pursuant to each amendment, the Company agreed with the respective executive officer that commencing July 16, 2024 and ending December 31, 2025, the executive officer shall accept and the Company shall pay for each month 40 % of such executive officer’s pro rata portion of Base Salary (as defined in the respective employment agreement) for each such month through the issuance of shares of the Company’s common stock.

The shares of common stock will be issued on the last day of each month, and the number of shares issuable for a month to Mr.

D’Loren and Mr.

Burroughs shall be determined by dividing 40 % of executive officer’s pro-rated Base Salary for such month by the closing sale price of the Company’s common stock on the last trading day of such month.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Outstanding at March 31, 2025

In accordance with the amended employment agreements with each of Robert W.

D’Loren, Chairman of the Board, Chief Executive Officer and President, and Seth Burroughs, Executive Vice President of Business Development, effective July 16, 2024 and through December 31, 2025, the Company is paying 40% of each such executive officer’s base salary via the issuance of shares of the Company’s common stock, issued on the last day of each month.

D’Loren and Mr.

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

As a result of these amendments, the Company issued an aggregate of 74,488 shares of common stock (which vested immediately) to executives for the current quarter and current nine months.

Also, on August 2, 2024, the Company issued 14,685 shares of common stock to a member of management, which vested immediately.

Under the terms of these amended agreements, the Company issued an aggregate of 18,310 shares of common stock (which vested immediately) to executives for the current quarter.

Compensation expense related to stock awards was approximately $ 0.14 million for the current quarter and approximately $ 0.11 million for the prior year quarter.

Compensation expense related to stock awards was approximately $ 0.26 million for the current nine months and approximately $ 0.10 million for the prior year nine months.

Total unrecognized compensation expense related to unvested restricted stock grants at September 30, 2024 was approximately $ 0.04 million and is expected to be recognized over a weighted average period of approximately 1.08 years.

Total unrecognized compensation expense related to unvested restricted stock grants at March 31, 2025 was approximately $ 0.02 million and is expected to be recognized over a weighted average period of approximately 1.00 year.

Restricted Stock Units

There were no restricted stock units outstanding as of September 30, 2024 and December 31, 2023, and no restricted stock units have been issued since the inception of the 2021 Plan.

Shares Available Under the Company’s Equity Incentive Plans

At September 30, 2024, there were 2,900,118 shares of common stock available for future award grants under the 2021 Plan.

Shares Reserved for Issuance

As of September 30, 2024, there were 7,625,103 shares of common stock reserved for issuance under the Company’s Equity Incentive Plans, including 4,234,985 shares reserved pursuant to unexercised warrants and stock options previously granted under the 2011 Plan, 490,000 shares reserved pursuant to unexercised stock options granted under the 2021 Plan, and 2,900,118 shares available for issuance under the 2021 Plan.

As of September 30, 2024, there were also 1,182,952 shares of common stock reserved for issuance that were unrelated to the Company’s Equity Incentive Plans, including 1,000,000 shares reserved pursuant to unexercised warrants related to the Halston Master License (as described below) and 182,952 shares reserved pursuant to unexercised Representative’s Warrants related to the March 19, 2024 Offering (as described above).

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

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

March 31, 2025

Shares Available Under the Company’s Equity Incentive Plans

At March 31, 2025, there were 261,650 shares of common stock available for future award grants under the 2021 Plan.

Shares Reserved for Issuance

As of March 31, 2025, there were 711,042 shares of common stock reserved for issuance under the Company’s Equity Incentive Plans, including 400,392 shares reserved pursuant to unexercised warrants and stock options previously granted under the 2011 Plan, 49,000 shares reserved pursuant to unexercised stock options granted under the 2021 Plan, and 261,650 shares available for issuance under the 2021 Plan.

As of March 31, 2025, there were also 263,957 shares of common stock reserved for issuance that were unrelated to the Company’s Equity Incentive Plans, including 100,000 shares reserved pursuant to unexercised warrants related to the Halston Master License (as described below), 18,293 shares reserved pursuant to unexercised Representative’s Warrants related to the March 19, 2024 Offering (as described above), and 145,664 shares reserved pursuant to unexercised warrants related to the December 12, 2024 debt refinancing transaction (see Note 6).

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

Outstanding and exercisable at January 1, 2025

Expired/Forfeited

Outstanding at September 30, 2024

Exercisable at September 30, 2024

Warrants issued during the current nine months were related to the March 19, 2024 Offering (see “Public Offering and Private Placement Transactions” above for details).

There was no compensation expense recognized during the current nine months related to these warrants.

In connection with the entrance into the Halston Master License (see Note 5), the Company issued to G-III a ten-year warrant to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $ 1.50 per share, which vests based upon certain annual royalty targets being satisfied under the license agreement.

Outstanding at March 31, 2025

Exercisable at March 31, 2025

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

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

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

The amount of contra-revenue recognized related to this warrant during the current nine months and prior year nine months was approximately $ 0.03 million and $ 0.02 million, respectively.

As of September 30, 2024, no portion of this warrant had vested.

As of March 31, 2025, no portion of this warrant had vested.

Excluding the contra-revenue recognized with respect to the Halston Master License warrant, there was no compensation expense related to warrants recognized in any of the periods presented.

6 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

The following table is a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share computations for the three and nine months ended September 30, 2024 and 2023:

March 31, 2025

The following table is a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share computations for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

Net loss attributable to Xcel Brands, Inc.

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Stock options

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

The effective tax rate differed from the federal statutory rate due to the recording of a valuation allowance against the provision (benefit) and any deferred tax assets or liabilities that would have otherwise been recognized, as it was considered not more likely than not that any net operating losses generated during each period will be utilized in future periods.

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

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

The estimated annual effective income tax rate for the current quarter and the prior year quarter was approximately - 1.8 % and 0 %, respectively, resulting in an income tax provision (benefit) of $ 0.05 million and $ 0 , respectively.

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

Related Party Transactions

IM Topco, LLC

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

Under the two agreements outlined below, the Company has a net payable to IM Topco of $ 12,500 as of March 31, 2025.

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Related Party Transactions

IM Topco, LLC

As described in Note 2, the Company holds a noncontrolling interest in IM Topco, which is accounted for under the equity method of accounting.

March 31, 2025

Service Agreement

2 unchanged sentences

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

In addition, under the April 2024 amendment, IM Topco is required to prepay the service fees for the year ending December 31, 2025;

as of September 30, 2024, IM Topco has prepaid $ 62,500 of such service fees.

In accordance with the terms of this services agreement (as amended), the Company recognized service fee income of $ 0 and $ 150,000 for the three and nine months ended September 30, 2023, respectively, and service fee income of $ 37,500 and $ 112,500 for the three and nine months ended September 30, 2024, respectively.

Such service fee income is reflected within net licensing revenue in the condensed consolidated statements of operations.

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

as of March 31, 2025, IM Topco has prepaid $ 62,500 of such service fees.

In accordance with the terms of this services agreement (as amended), the Company recognized service fee income of $ 37,500 within net licensing revenue in the condensed consolidated statements of operations for the three months ended March 31, 2024.

No such service fee income was recognized for the three months ended March 31, 2025.

As of March 31, 2025, IM Topco owes the Company $ 125,000 under this agreement.

License Agreement

3 unchanged sentences

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

For the three and nine months ended September 30, 2023, the estimated amount of such shortfall was approximately $ 105,000 and $ 225,000 , respectively, which the Company recognized as royalty expense in the condensed consolidated statements of operations.

Royalties received by IM Topco from the third party agreement are expected to exceed the guaranteed royalties that IM Topco would have received under the Mary 31, 2022 agreement for the year ending December 31, 2024.

However, for both the current quarter and prior year quarter, 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 May 31, 2022 agreement, and thus no royalty expense for any shortfall was recognized for such periods.

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

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

During the current quarter and current nine months, the Company paid $ 137,500 and $ 237,500 to IM Topco.

As of September 30, 2024, the remaining payments due totaled $ 137,500 , which will be paid during the three months ending December 31, 2024 and are

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

reflected within accounts payable, accrued expenses and other current liabilities in the condensed consolidated balance sheets.

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

As of March 31, 2025, the remaining payments due totaled $ 137,500 , and are reflected within accounts payable, accrued expenses and other current liabilities in the condensed consolidated balance sheets.

As of the date of this Quarterly Report on Form 10-Q, this amount has not been paid to IM Topco.

Financing Transactions

3 unchanged sentences

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

and Seth Burroughs, Executive Vice President of Business Development and Treasury of the Company, purchased 146,250 , 146,250 , and 32,500 shares, respectively, at $ 0.65 per share, the same price at which the shares were sold to other purchasers in the Offering.

and Seth Burroughs,

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

Executive Vice President of Business Development and Treasury of the Company, purchased 14,625 , 14,625 , and 3,250 shares, respectively, at $ 6.50 per share, the same price at which the shares were sold to other purchasers in the Offering.

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

4 unchanged sentences

The purchase of the Private Placement Shares closed concurrently with the Offering.

Debt Refinancing

In connection with the December 2024 refinancing of the Company’s term loan debt, 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.

See Note 13 for additional details.

In 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, Mr.

D’Loren 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.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Debt Financing

In connection with the December 12, 2024 term loan debt transaction (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 this amount, $ 200,000 was repaid to IPX upon the closing of the December 12, 2024 debt transaction, and was subsequently returned by IPX to the Company during the three months ended March 31, 2025 for repayment by the Company at a later date.

From time to time, Mr.

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

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

In connection with the April 21, 2025 refinancing of the Company's term loan debt (see Note 12 for additional details), IPX’s participation in Term Loan B was repaid and IPX purchased a $ 500,000 undivided, last-out, subordinated participation interest in Term Loan A.

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

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

Commitments and Contingencies

2 unchanged sentences

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 initially amended such that the purchase price adjustment provision was waived until the measurement period ending March 31, 2024.

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

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

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

Prior to the current quarter, no amount was recorded on the Company’s consolidated balance sheets related to this contingent obligation.

During the current quarter, management concluded that, based on current trends in and projections of IM Topco’s royalty revenues, the Company would likely be required to make such transfer of equity interests to WHP after March 31, 2025.

As such, the Company estimated and recorded a contingent obligation of $ 6.3 million as a reduction to the carrying value of the equity method investment in the accompanying condensed consolidated balance sheet as of September 30, 2024, and recognized a corresponding non-cash charge in the condensed consolidated statements of operations for the current quarter and current nine months (see Note 2 for additional details).

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.

As of December 31, 2022, based on the performance of the Lori Goldstein Brand to date, approximately $ 0.2 million of additional consideration was earned by the seller, and this $ 0.2 million of additional consideration was paid to the seller during 2023.

Based on the performance of the Lori Goldstein Brand through December 31, 2023, approximately $ 1.0 million of incremental additional consideration was earned by the seller, which would have been paid out in 2024.

During the first quarter of 2024, the Company paid approximately $ 0.3 million of the $ 1.0 million earned.

During the current nine months, as a result of the 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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

balance of approximately $ 5.05 million of contingent obligations recorded on the Company’s balance sheet.

As of September 30, 2024, there are no liability amounts remaining on the Company’s balance sheet related to the Lori Goldstein Earn-Out.

March 31, 2025

equal to 12.5 % of the total outstanding equity interests of IM Topco, such that Xcel’s ownership interest in IM Topco would decrease from 30 % to 17.5 %, and WHP’s ownership interest in IM Topco would increase from 70 % to 82.5 %.

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

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

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

Also during the current quarter, the Company adjusted the carrying value of the contingent obligation to its estimated fair value of $ 3.97 million as of March 31, 2025 in the condensed consolidated balance sheets, and recognized a $( 0.24 ) million credit in the condensed consolidated statements of operations.

On and effective April 15, 2025, such equity interests were transferred to WHP in full satisfaction of this contractual obligation (see Note 12 for additional details).

Legal Matters

3 unchanged sentences

Subsequent Events

Debt Refinancing

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, 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:

Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as “Term Loans”) which will be made upon the satisfaction of a condition precedent described in the loan agreement.

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.

The proceeds from the Delayed Draw Term Loan will be deposited in a bank account to satisfy a liquidity covenant in the loan agreement.

Interest on amounts outstanding under the Term Loans accrues daily and is payable at the end of each calendar month.

The Term Loans are guaranteed by certain direct and indirect subsidiaries of the Company, and are secured by all of the asset of the Company and such subsidiaries.

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

In connection with the loan agreement, the Company issued warrants to purchase an aggregate of 1,456,667 shares of the Company’s common stock.

These warrants have an exercise price of $ 0.6315 per share, are immediately exercisable, and expire on December 12, 2034.

IM Topco Equity Interest Transfer

On and effective April 15, 2025, the Company and two subsidiaries of WHP entered into a Membership Interest Transfer Agreement, pursuant to 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.

As a result, the Company concluded that as of and effective April 2025, it no longer holds 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.

Going forward, as the equity securities of IM Topco are not publicly traded and do not have readily determinable fair values, the Company has elected to measure its investment in IM Topco in accordance with ASC 820-10-35-59:

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Further, IPX Capital, LLC, a company controlled by Mr.

D’Loren, purchased a 12.5 % undivided, last-out, subordinated participation interest in Term Loan B for a purchase price of $ 500,000 ;

IPX also received 153,333 of the aforementioned warrants, which is the pro rata share of the Term B Lenders’ warrants that were issued by the Company.

Also, in October 2024, IPX made a $ 250,000 non-interest-bearing advance to one of the Company’s subsidiaries, of which $ 200,000 was repaid to IPX upon the closing of the December 12, 2024 debt refinancing transaction.

March 31, 2025

Shares Issued to Executives

On October 31, 2024, the Company issued an aggregate of 27,311 shares of common stock to executives, in accordance with the terms of the amended employment agreements with Mr.

D’Loren and Mr.

Burroughs (see Note 8 for details).

On November 30, 2024, the Company issued an aggregate of 31,372 shares of common stock to executives, in accordance with the terms of the amended employment agreements with Mr.

On April 30, 2025, the Company issued an aggregate of 8,917 shares of common stock to executives, in accordance with the terms of the amended employment agreements with Mr.

D’Loren and Mr.

Burroughs (see Note 7 for details).

In 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, Mr.

D’Loren 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.

On May 28, 2025, the Company granted Mr.

D’Loren 8,750 restricted shares of common stock and options to purchase an aggregate of 8,750 shares of common stock.

Also on May 28, 2025, the Company granted Mr.

Burroughs 2,500 restricted shares of common stock and options to purchase an aggregate of 2,500 shares of common stock.

Debt Refinancing

On April 21, 2025, the Company and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for $ 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 are as follows:

(1) Term Loan A in the amount of $ 2.45 million, (2) Term Loan B in the amount of $ 9.12 million, and (3) Delayed Draw Term Loan in the amount of $ 2.05 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, and the balance will be used for working capital purposes.

Within 30 days after April 21, 2025, the outstanding principal amount of the Term Loan A was repaid, on a pro rata basis in an aggregate amount equal to $ 500,000 .

Also in connection with this refinancing transaction, 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.

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

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

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

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

From and after April 21, 2025 through March 31, 2027, interest on the Term Loan B will be paid in-kind by being capitalized and added to the principal amount of the Term Loan B at the end of each calendar month.

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 April 21, 2025 amendment contains various customary financial covenants and reporting requirements, as specified and defined therein;

the Company is currently in compliance with all applicable covenants.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

Also in connection with this 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 and received warrants entitling it to purchase 1,107,457 warrants shares of the Company.

Such warrants are exercisable for a period of seven years from the date of issuance, at specified exercise prices ranging from $ 6.60 per share to $ 17.50 per share.

Further, the Company also issued warrants to purchase 30,000 shares of common stock to Restore Capital (EQ-W), LLC (“Restore”), another of the lenders, and amended warrants to purchase an aggregate of 107,333 shares of common stock held by Restore and warrants previously issued to warrants of FEAC Agent, LLC.

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

What changed 10-Q

Item 1. Financial Statements