XCel Brands Inc

To the Stockholders and Board of Directors of

Xcel Brands, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Xcel Brands, Inc. and Subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter Description

As described further in Note 1 to the financial statements, the Company has incurred recurring losses from operations, has used net cash in operating activities, and has an accumulated deficit. The ability of the Company to continue as a going concern is dependent on executing its business plans and meeting its obligations as they come due within the next twelve months from the filing date of this Annual Report on Form 10-K. Accordingly, the Company has determined that these factors raise uncertainty as to the Company’s ability to continue as a going concern. However, management has

implemented plans which are expected to mitigate these conditions or events, and therefore, has concluded that such conditions or events have been alleviated.

How the Critical Audit Matter was Addressed in the Audit

We determined the Company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the Company’s available capital and the risk of bias in management’s judgments and assumptions in their determination. Our audit procedures related to considering whether the results of our audit procedures, when considered in the aggregate, indicate that there could be uncertainty about the Company’s ability to continue as a going concern for a reasonable period of time, obtaining information about management’s plans that are intended to mitigate the effect of such conditions or events, and assessing the likelihood that such plans can be effectively implemented, included the following, among others:

Finite-Lived Trademarks and Other Intangible Assets

Critical Audit Matter Description

As described further in Note 4 to the financial statements, the carrying amount of finite-lived trademarks and other intangible assets was $41.5 million as of December 31, 2023. Under the applicable accounting guidance, these assets shall be tested for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. Management has concluded that these assets are not impaired as of December 31, 2023.

How the Critical Audit Matter was Addressed in the Audit

We determined the Company’s ability to assess if their finite-lived trademarks and other intangible assets are impaired is a critical audit matter due to the estimation and uncertainty regarding the Company’s ability to generate sufficient undiscounted cash flows, to be in excess of the carrying amounts of these assets.

The Company evaluates its finite-lived trademarks and other intangible assets for impairment when events are triggered by economic conditions. These events require the Company to compare the carrying values to the undiscounted cash flows from the operation and eventual disposition of these assets over their estimated useful lives (“undiscounted cash flows”).

If the carrying value of any of these assets is considered to be impaired, as described above, the amount of the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value.

Auditing the Company’s finite-lived trademarks and other intangible assets for impairment is complex and subjective due to the significant estimation required to determine the forecasted undiscounted cash flows used in the Company’s evaluation. Specifically, the forecasted undiscounted cash flows are sensitive to significant assumptions such as revenue growth rates, including the terminal growth rates, margins, and expenses over the estimated useful lives of these assets, all of which are affected by expected future market or economic conditions, and other factors.

The primary procedures we performed to address this critical audit matter included the following, among others:

/s/Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2021.

New York, NY

April 18, 2024