What changed in this filing

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Item 1. Financial Statements

2025-08-14 compared with 2025-06-04 · 274 added, 211 removed, 363 unchanged (57% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

March 31, 2025

June 30, 2025

December 31, 2024

8 unchanged sentences

Trademarks and other intangibles, net

Equity method investments

Investments in unconsolidated affiliates

Total non-current assets

18 unchanged sentences

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

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

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

Paid-in capital

11 unchanged sentences

For the Three Months Ended

For the Six Months Ended

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

Other operating costs and expenses

Operating loss before other operating costs and expenses (income)

Other operating costs and expenses (income)

Depreciation and amortization

1 unchanged sentence

Loss from equity method investments

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

Operating loss

Gain on divestiture of Lori Goldstein Brand

Operating (loss) income

Interest and finance expense (income)

1 unchanged sentence

Other interest and finance charges (income), net

Loss on early extinguishment of debt

Interest and finance expense (income), net

Loss before income taxes

Income tax provision

(Loss) income before income taxes

Income tax provision (benefit)

Net (loss) income

Net loss attributable to noncontrolling interest

Net loss attributable to Xcel Brands, Inc.

Loss per common share attributable to Xcel Brands, Inc.

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

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

stockholders:

Basic and diluted net loss per share (1)

Basic (loss) earnings per share (1)

Diluted (loss) earnings per share (1)

Weighted average number of common shares outstanding:

Basic and diluted weighted average common shares outstanding (1)

Basic weighted average common shares outstanding (1)

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.

13 unchanged sentences

Balance as of March 31, 2024

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

Balance as of December 31, 2024

4 unchanged sentences

Balance as of March 31, 2025

Compensation expense related to stock options and restricted stock

Contra-revenue related to warrants held by licensee

Warrants issued and amended in connection with refinancing of term loan debt

Shares issued to management and directors in connection with restricted stock grants

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

Balance as of June 30, 2025

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

5 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities

2 unchanged sentences

Asset impairment charges

Amortization of deferred finance costs included in interest expense

Paid in-kind interest expense

Amortization of deferred finance costs and other non-cash interest expense

Stock-based compensation and cost of licensee warrants

Provision for (recovery of) credit losses

Loss from equity method investments

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

Loss on early extinguishment of debt

Gain on divestiture of Lori Goldstein brand

Changes in operating assets and liabilities:

12 unchanged sentences

Proceeds from long-term debt

Payment of deferred finance costs

Shares repurchased including vested restricted stock in exchange for withholding taxes

Payment of long-term debt

Net cash provided by financing activities

13 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

June 30, 2025

Nature of Operations, Background, and Basis of Presentation

7 unchanged sentences

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”), 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;

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

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

● the TowerHill by Christie Brinkley brand, which is a new co-branded collaboration between Xcel and Christie Brinkley that launched in May 2024;

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

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

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

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

● The 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.

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

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

June 30, 2025

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

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

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

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

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

7 unchanged sentences

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 Company’s chief operating decision maker, as such term is defined under GAAP, is its Chief Executive Officer.

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.

4 unchanged sentences

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

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

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

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.

June 30, 2025

Going Concern

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

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

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

In April 2025, the Company restructured its outstanding debt and received net proceeds from financing activities.

In August 2025, the Company closed on a public offering and private placement of its common stock, which provided the Company with additional net proceeds.

While these transactions have significantly improved the Company’s liquidity position, the proceeds received may still be insufficient to fully address the Company’s liquidity needs.

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

15 unchanged sentences

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

Investments in Unconsolidated Affiliates and Variable Interest Entities

Investment in IM Topco, LLC

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.

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

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.

June 30, 2025

Investments in Unconsolidated Affiliates and Variable Interest Entities

Investment in IM Topco, LLC

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

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

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

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

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

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

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

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

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

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

Longaberger Licensing, LLC Variable Interest Entity

4 unchanged sentences

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Trademarks and Other Intangibles

Trademarks and other intangibles, net consist of the following:

March 31, 2025

June 30, 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 $ 0.88 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").

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

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

Significant Contracts and Concentrations

4 unchanged sentences

Net licensing revenue from the Qurate Agreements totaled $ 0.24 million and $ 1.77 million for the current quarter and prior year quarter, respectively, representing approximately 18 % and 60 % of the Company’s total net revenue for the current quarter and prior year quarter, respectively.

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.

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

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

Halston Master License

2 unchanged sentences

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.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

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.

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

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

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

As of 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;

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

the balance of the deferred revenue contract liabilities will be recognized ratably as revenue over the next 3.5 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 22 % of the Company’s total net revenue for the current quarter and prior year quarter, respectively.

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

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 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.

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

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

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

As of 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.

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

June 30, 2025

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

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

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

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

Future Lease Obligations

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

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

(in thousands)

2025 (April 1 through December 31)

2025 (July 1 through December 31)

Total lease payments

8 unchanged sentences

Long-term debt

On December 12, 2024, the Company and certain of its subsidiaries entered into a loan and security agreement with FEAC Agent, LLC, 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.

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

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

The term loans under the loan agreement are as follows:

3 unchanged sentences

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

On April 21, 2025, the Company and certain of its subsidiaries and its lenders and FEAC Agent, LLC entered into an amendment of the December 12, 2024 loan and security agreement, which provided for $ 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 $ 4.50 million, and (2) Term Loan B in the amount of $ 9.12 million.

The proceeds from the additional Term Loan B were used to repay a portion of Term Loan A, as well as to pay fees, costs, and expenses incurred in connection with entering into the April 21, 2025 amendment, and the balance will be used for working capital purposes.

In connection with the April 21, 2025 amendment and refinancing transaction, UTG Capital, Inc., a Delaware corporation (UTG”), purchased a 100 % undivided, participation interest in Term Loan B for a purchase price of $ 9.12 million.

Also in connection with the refinancing, the Company issued certain warrants to UTG and Restore, and amended certain warrants that had been previously issued on December 12, 2024 (see Note 7 for additional details).

On May 15, 2025, the Company repaid $ 0.50 million of the outstanding principal amount of Term Loan A.

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

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

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

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

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

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

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Year Ending December 31,

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.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Interest and Exit Fees

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

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

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

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

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

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

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

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

Deferred Finance Costs and Other Reductions to Carrying Value of Debt

In connection with entering into the Term Loans in December 2024, the Company incurred loan origination fees, plus various legal and other fees;

these fees and costs totaling $ 0.92 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt.

Also in connection with entering into the 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.

Also in connection with entering into the Term Loans in December 2024, the Company issued certain warrants to the lenders to purchase shares of the Company’s common stock.

In accordance with applicable GAAP, the Company allocated the value of the total proceeds of $ 10.0 million between the term loan debt and the warrants, based on the relative fair values of each;

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.

From December 12, 2024 through April 20, 2025, these reductions to the carrying value of the term loan debt totaling $ 1.40 million were being amortized to interest expense over the term of the debt using the effective interest method.

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

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

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

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

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

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

June 30, 2025

the net carrying value of the term loan debt.

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

Loss on Early Extinguishment of Debt

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

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

The $ 0.07 million amount related to the warrants was recorded with an offsetting increase to stockholders’ equity as additional paid-in capital.

Stockholders’ Equity

13 unchanged sentences

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

2024 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 2024 Offering.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2025

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

1 unchanged sentence

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

and Seth Burroughs, Executive Vice President of Business Development and Treasury of the Company to purchase 13,258 , 13,258 , and 2,946 shares, respectively (collectively, the “Private Placement Shares”), at a price of $ 9.80 per Private Placement Share.

The total number of Private Placement Shares purchased was 29,462 .

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

The total number of shares purchased was 29,462 .

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

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

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.

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

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

Equity Incentive Plans

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

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

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

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Stock Options

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

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

Outstanding at January 1, 2025

Expired/Forfeited

Outstanding at March 31, 2025, and expected to vest

Exercisable at March 31, 2025

Outstanding at June 30, 2025, and expected to vest

Exercisable at June 30, 2025

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

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

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

The exercise price of the options is $ 2.6321 per share;

50 % of the options vested on May 28, 2025 and the remaining 50 % will vest on May 1, 2026.

On May 28, 2025, the Company granted options to purchase an aggregate of 17,500 shares of common stock to Messrs.

D’Loren, DiSanto, and Burroughs.

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

Compensation expense related to stock options for the current quarter and the prior year quarter was approximately $ 0.04 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.

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

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

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

Balance at January 1, 2025

Forfeited or Canceled

Balance at June 30, 2025

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

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 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.

June 30, 2025

certain revenue targets.

None of these 370,000 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:

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

Outstanding at January 1, 2025

Expired/Forfeited

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.

Outstanding at June 30, 2025

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

On May 28, 2025, the Company issued an aggregate of 17,500 shares of common stock to Messrs.

D’Loren, DiSanto, and Burroughs, which vest on November 1, 2025.

In accordance with the amended employment agreements with each of Mr.

D’Loren and Mr.

Burroughs, effective July 16, 2024 and through December 31, 2025, 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.

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.

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

Compensation expense related to stock awards was approximately $ 0.14 million for the current quarter and approximately $ 0.02 million for the prior year quarter.

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.

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

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

Restricted Stock Units

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

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

Shares Available Under the Company’s Equity Incentive Plans

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

Shares Reserved for Issuance

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

XCEL BRANDS, INC.

1 unchanged sentence

Notes to Unaudited Condensed Consolidated Financial Statements

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:

June 30, 2025

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

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

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

Outstanding and exercisable at January 1, 2025

Expired/Forfeited

Outstanding at March 31, 2025

Exercisable at March 31, 2025

Outstanding at June 30, 2025

Exercisable at June 30, 2025

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

The warrants issued to UTG are exercisable for a period of seven years from the date of issuance at the following exercise prices:

131,100 shares at $ 6.60 per share, and 195,271 shares at each of $ 7.50 , $ 10.00 , $ 12.50 , $ 15.00 , and $ 17.50 per share.

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

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

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

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.

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.

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

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Earnings (Loss) Per Share

2 unchanged sentences

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

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:

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

Three Months Ended

Net loss attributable to Xcel Brands, Inc.

Six Months Ended

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

stockholders (in thousands)

3 unchanged sentences

Diluted weighted average number of shares outstanding

Basic net income (loss) per share

Diluted net income (loss) per share

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

Basic net (loss) earnings per share

Diluted net (loss) earnings per share

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

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

Three Months Ended

Six Months Ended

Stock options

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

March 31, 2025

June 30, 2025

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

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

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

Related Party Transactions

IM Topco, LLC

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

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 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.

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

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

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

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.

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.

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

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

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

1 unchanged sentence

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.

The remaining amount of $ 137,500 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,

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.

and Seth Burroughs, 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 2024 Offering, on March 14, 2024, the Company entered into subscription agreements with each of Mr.

DiSanto, and Mr.

Burroughs to purchase 13,258 , 13,258 , and 2,946 shares, respectively (collectively, the “Private Placement Shares”), at a price of $ 9.80 per Private Placement Share.

The total number of Private Placement Shares purchased was 29,462 .

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

The total number of shares purchased was 29,462 .

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

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

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

Debt Financing

8 unchanged sentences

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

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2025

Commitments and Contingencies

4 unchanged sentences

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.

XCEL BRANDS, INC.

AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

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 %.

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

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

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

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).

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

Also during the three months ended March 31, 2025, 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 and settlement of this contractual obligation, and the previously recorded liability was de-recognized by reducing the value of the asset for the investment in IM Topco.

Legal Matters

2 unchanged sentences

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

Subsequent Events

IM Topco Equity Interest Transfer

On 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.

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

March 31, 2025

Shares Issued to Executives

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).

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.

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.

June 30, 2025

Subsequent Events

2025 Public Offering and Private Placement Transactions

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

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

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

D’Loren and 60,883 shares to Mr.

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

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

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

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

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

Tax Law Changes

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

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

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

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

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

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

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