XCel Brands, Inc.

Previous wording

Xcel is pioneering a true modern consumer products sales strategy 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. Our brands have generated over $5 billion in retail sales via live streaming in interactive television and digital channels alone and over 20,000 hours of content production time in live-stream and social commerce. Our portfolio reaches in excess of 40 million social media followers and 200 million households.

Current wording

Xcel is pioneering a true omni-channel and social commerce sales strategy which includes the promotion and sale of products under its brands through interactive television, digital live-stream shopping, social commerce, brick-and-mortar retailers, and e-commerce channels. Our brands have generated over $5 billion in retail sales via live streaming in interactive television and digital channels alone, and our brands collectively reach over 5.0 million social media followers

Previous wording

Direct operating costs and expenses decreased approximately $1.68 million, from $3.96 million in the prior year quarter to $2.28 million in the current quarter. This decrease was primarily attributable to the 2023 restructuring and transformation of our business operating model, along with additional cost reduction actions taken by management in 2024, which have significantly reduced the Company’s payroll, operating, and overhead costs. Management has continued to implement additional cost cutting measures throughout the first quarter of 2025 to further optimize the Company’s cost structure. As of the end of the first quarter of 2025, the Company has reduced its direct operating expenses to an expected run rate of less than $10 million per annum.

Current wording

Direct operating costs and expenses decreased approximately $1.22 million, from $3.12 million in the prior year quarter to $1.90 million in the current quarter. This decrease was primarily attributable to the combination of (i) the 2023 restructuring and transformation of our business operating model, along with additional cost reduction actions taken by management in 2024, which significantly reduced the Company’s payroll, operating, and overhead costs, and (ii) the impact of the employee retention tax credit recognized in the current quarter.

Previous wording

Depreciation and amortization expense decreased approximately $0.69 million, from $1.59 million in the prior year quarter to $0.90 million in the current quarter. This decrease is primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand, which included trademarks related to that brand with a net book value of approximately $1.93 million at the time of the divestiture.

Current wording

Depreciation and amortization expense decreased approximately $0.65 million, from $1.55 million in the prior year quarter to $0.90 million in the current quarter. This decrease is primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand, which included trademarks related to that brand with a net book value of approximately $1.93 million at the time of the divestiture.

Previous wording

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.58 million and $0.53 million for the current quarter and prior year quarter, respectively, due to the operations of those businesses, the distribution provisions applicable to each, and (in the current quarter) changes in estimated fair value. However, effective January 2025, the Company no longer applies the equity method of accounting to its investment in ORME, and effective April 2025, the Company will no longer apply the equity method of accounting to its investment in IM Topco. Going forward, the Company’s investments in these unconsolidated affiliates will be valued at adjusted cost basis, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer.

Current wording

We recognized losses related to our equity investments in unconsolidated affiliates (IM Topco, LLC and ORME Live Inc.) of $0.18 million and $0.56 million for the current quarter and prior year quarter, respectively. The decline in losses is primarily due to the fact that effective January 1, 2025 and April 15, 2025, the Company no longer applies the equity method of accounting to its investments in ORME and IM Topco, respectively.

Previous wording

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.

Current wording

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 both periods. 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.

Previous wording

We had a net loss of $2.80 million for the current quarter, compared with a net loss of $6.29 million for the prior year quarter, due to the combination of the factors outlined above.

Current wording

We had a net loss of $3.99 million for the current quarter, compared with net income of $0.20 million for the prior year quarter, due to the combination of the factors outlined above.

Previous wording

We had a non-GAAP net loss of approximately $1.37 million, or $0.58 per diluted share (“non-GAAP diluted EPS”), for the current quarter and a non-GAAP net loss of $1.80 million, or $0.88 per diluted share, for the prior year quarter. Non-GAAP net income (loss) is a non-GAAP unaudited term, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders, exclusive of amortization of trademarks, income (loss) from equity method investments, change in contingent reduction in equity ownership of IM Topco, LLC, stock-based compensation and cost of licensee warrants, asset impairment charges, and income taxes (if any). Non-GAAP net income (loss) and non-GAAP diluted EPS measures do not include the tax effect of the aforementioned adjusting items, due to the nature of these items and the Company’s tax strategy.

Current wording

We had a non-GAAP net loss of approximately $0.90 million, or $(0.37) per diluted share (“non-GAAP diluted EPS”), for the current quarter and a non-GAAP net loss of $0.30 million, or $(0.13) per diluted share, for the prior year quarter. Non-GAAP net income (loss) is a non-GAAP unaudited term, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders, exclusive of amortization of trademarks, income (loss) from equity method investments, stock-based compensation and cost of licensee warrants, loss on early extinguishment of debt (if any), gains on sales of assets and investments (if any), asset impairment charges (if any), and income taxes (if any). Non-GAAP net income (loss) and

Previous wording

We had Adjusted EBITDA of approximately $(0.70) million for the current quarter, compared with approximately $(1.57) million for the prior year quarter. Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders before interest and finance expenses (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity method investments, change in contingent reduction in equity ownership of IM Topco, LLC, asset impairment charges, stock-based compensation and cost of licensee warrants, and costs associated with restructuring of operations.

Current wording

We had Adjusted EBITDA of approximately $(0.30) million for the current quarter, compared with approximately $(0.04) million for the prior year quarter. Adjusted EBITDA is a non-GAAP unaudited measure, which we define as net income (loss) attributable to Xcel Brands, Inc. stockholders before interest and finance expenses (including loss on extinguishment of debt, if any), accretion of lease liability for exited leases, income taxes, other state and local franchise taxes, depreciation and amortization, income (loss) from equity method investments, asset impairment charges, stock-based compensation and cost of licensee warrants, gains on sales of assets and investments, and costs associated with restructuring of operations.

Previous wording

Current quarter net revenue decreased $0.85 million to $1.33 million from $2.18 million for the prior year quarter. This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand, partially offset by increased licensing revenues generated by our other brands, particularly for the C Wonder brand and the TowerHill by Christie Brinkley brand.

Current wording

Current six months net revenue decreased $2.49 million to $2.65 million from $5.14 million for the prior year six months. This decrease was primarily attributable to the June 30, 2024 divestiture of the Lori Goldstein brand and the loss of the licensing revenues associated with that brand, partially offset by increased licensing revenues generated by our other brands, particularly for the C Wonder brand and the TowerHill by Christie Brinkley brand.

Previous wording

During the prior year quarter we recognized asset impairment charges of $2.30 million related to our exit from and sublease of our offices at 1333 Broadway, of which approximately $1.9 million related to the operating lease right-of-use asset and approximately $0.4 million related to leasehold improvements at that location. There were no similar asset impairment charges recognized during the current quarter.

Current wording

During the prior year six months we recognized asset impairment charges of $3.48 million related to our exit from and sublease of our office space at 1333 Broadway, of which approximately $3.1 million related to the operating lease right-of-use asset and approximately $0.4 million related to leasehold improvements at that location. There were no similar asset impairment charges recognized during the current six months.

Previous wording

As of March 31, 2025 and December 31, 2024, our unrestricted cash and cash equivalents were $0.3 million and $1.3 million, respectively.

Current wording

As of June 30, 2025 and December 31, 2024, our unrestricted cash and cash equivalents were approximately $1.0 million and $1.3 million, respectively.

Previous wording

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.

Current wording

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.

Previous wording

We had a working capital (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) deficit of approximately $0.6 million as of March 31, 2025. We had working capital of $0.8 million as of December 31, 2024.

Current wording

We had working capital (current assets less current liabilities, excluding the current portions of lease obligations, deferred revenue, and any contingent obligations payable in shares or via other non-cash means) of approximately $0.70 million as of June 30, 2025. We had working capital of approximately $0.76 million as of December 31, 2024.

Previous wording

As of March 31, 2025, we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit. While we have undertaken significant restructuring efforts during 2023 and 2024, and have 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 accompanying unaudited condensed consolidated financial statements are issued.

Current wording

As of June 30, 2025, we have incurred recurring losses, a history of cash flows used in operating activities, and an accumulated deficit. While we have undertaken significant restructuring efforts during 2023 and 2024, and have 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 accompanying unaudited condensed consolidated financial statements are issued.

Previous wording

Commentary on the components of our cash flows for the current quarter as compared with the prior year quarter is set forth below.

Current wording

Commentary on the components of our cash flows for the current six months as compared with the prior year six months is set forth below.

Previous wording

The current quarter net cash used in operating activities was primarily attributable to the combination of the net loss of $(2.80) million plus non-cash items of approximately $1.45 million and the net change in operating assets and liabilities of approximately $(0.08) million. Non-cash items were comprised of approximately $0.90 million of depreciation and amortization expense, $0.34 million of non-cash expenses related to our equity method investees, $0.11 million of stock-based compensation and cost of licensee warrants, and $0.10 of amortization of deferred finance costs. The net change in operating assets and liabilities was primarily comprised of a decrease in deferred revenue of $(0.21) million and a decrease in lease-related assets and liabilities of $(0.08) million, partially offset by a decrease in accounts receivable of approximately $0.16 million.

Current wording

The current six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.79) million plus non-cash items of approximately $4.77 million and the net change in operating assets and liabilities of approximately $(1.78) million. Non-cash items were primarily comprised of $0.52 million of losses related to our equity method investments, $1.85 million from the loss on early extinguishment of debt, $1.80 million of depreciation and amortization expense, and $0.37 million of various non-cash interest expenses. The net change in operating assets and liabilities was primarily comprised of (i) approximately $(1.56) million of payments of accounts payable, accrued expenses, accrued income taxes payable, and other current liabilities, plus (ii) a decrease in deferred revenue of $(0.50) million.

Previous wording

The prior year quarter cash used in operating activitieswas primarily attributable to the combination of the net loss of $(6.35) million plus non-cash items of approximately $4.59 million and the net change in operating assets and liabilities of approximately $(0.85) million. Non-cash items were primarily comprised of asset impairment charges of approximately $2.30 million, $1.59 million of depreciation and amortization, and the $0.53 million undistributed proportional share of net loss of equity method investees. The net change in operating assets and liabilities was primarily comprised of (i) a decrease in deferred revenue of approximately $(0.22) million, mainly related to the Halston Master License agreement, (ii) a decrease in various operating liabilities of $(0.56) million, and (iii) a decrease in lease-related assets and liabilities of $(0.24) million.

Current wording

The prior year six months net cash used in operating activities was primarily attributable to the combination of the net loss of $(6.18) million plus non-cash items of approximately $4.10 million and the net change in operating assets and liabilities of approximately $(0.80) million. Non-cash items were primarily comprised of approximately $3.48 million of asset impairment charges, $3.13 million of depreciation and amortization, and our $1.09 million undistributed proportional share of net losses from equity method investees, partially offset by a $(3.80) million gain on the divestiture of the Lori Goldstein Brand. The net change in operating assets and liabilities was primarily comprised of (i) a decrease in various operating liabilities of $(0.56) million, (ii) a decrease in lease-related assets and liabilities of $(0.63) million, and (iii) an increase in other long-term liabilities of $0.39 million.

Previous wording

Net cash used in investing activities in the current quarter was comprised of purchases of equipment totaling approximately $0.01 million.

Current wording

Net cash used in investing activities in the current six months was comprised of purchases of equipment totaling approximately $0.01 million. Net cash used in investing activities in the prior year six months was comprised of purchases of furniture and fixtures totaling approximately $0.10 million

Previous wording

Net cash provided by financing activities in the current quarter was primarily attributable to $2.05 million of proceeds received from the delayed draw portion of the Company’s December 2024 term loan agreement.

Current wording

Net cash provided by financing activities in the current quarter was primarily attributable to $2.05 million of proceeds received from the delayed draw portion of the Company’s December 2024 term loan agreement, and $3.62 million of proceeds received from the Company’s April 2025 refinancing of its term loan debt (as described in more detail below). This was partially offset by $0.53 million of deferred finance costs paid in connection with the April 2025 refinancing, and $0.50 million of principal payments made on the Company’s term loan debt.

Previous wording

Net cash provided by financing activities in the prior year quarter was $1.90 million, attributable to the net proceeds received from the March 2024 public offering and private placement transactions in which the Company issued an aggregate of 357,889 shares of common stock along with warrants exercisable for an additional 18,293 shares of common stock.

Current wording

Net cash provided by financing activities in the prior year six months was $1.90 million, attributable to the net proceeds received from the March 2024 public offering and private placement transactions in which the Company issued an aggregate of 357,889 shares of common stock along with warrants exercisable for an additional 18,293 shares of common stock. This was partially offset by $0.25 million of scheduled principal payments made on our term loan debt.

Previous wording

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.

Current wording

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 $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.

Previous wording

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.

Current wording

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 this refinancing transaction, IPX’s participation in Term Loan B was repaid and IPX purchased a $0.50 million undivided, last-out, subordinated participation interest in Term Loan A.

Previous wording

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

Current wording

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.

Previous wording

We continue to seek to expand and diversify the types of licensed products being produced under our brands. We plan to continue to diversify the distribution channels within which licensed products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands. The Halston brand, C Wonder brand, TowerHill by Christie Brinkley brand, and the LB70 by Lloyd Boston brand have a core business in fashion apparel and accessories. The Ripka brand is a fine jewelry business, and the Longaberger brand focuses on home good products, which we believe helps diversify our industry focus while at the same time complements our business operations and relationships.

Current wording

We continue to seek to expand and diversify the types of licensed products being produced under our brands. We plan to continue to diversify the distribution channels and product categories within which licensed products are sold, in an effort to reduce dependence on any particular retailer, consumer, or market sector within each of our brands. The Halston brand, C Wonder brand, TowerHill by Christie Brinkley brand, and the LB70 by Lloyd Boston brand, which together currently represent a majority of our revenues, have a core business in fashion apparel and accessories. Our other brands – including the Judith Ripka brand, which is a fine jewelry brand; the Longaberger brand, which focuses on home good products; GemmaMade and Mesa Mia, which focus on cooking and baking related products; and Trust, Respect, Love, which focuses on pet-related products – help to diversify our industry focus while at the same time complement our business operations and relationships.

Previous wording

While the 2022 sale of a majority interest in the Isaac Mizrahi brand and the 2024 divestiture of the LOGO by Lori Goldstein brand resulted in significant decreases in our licensing revenues, we have taken and continue to take actions to replace those revenues with new strategic business initiatives, as we concentrate our resources on growing our brands, launching new brands, and entering into new business partnerships. We continue to seek new opportunities, including expansion through interactive television, live streaming, and additional domestic and international licensing arrangements, and acquiring and collaborating with additional brands, including the TowerHill by Christie Brinkley brand and LB70 by Lloyd Boston brand, both of which launched in 2024. We recently announced two new co-branded collaborations, which are planned to launch in Spring 2026.

Current wording

While the 2022 sale of a majority interest in the Isaac Mizrahi brand and the 2024 divestiture of the LOGO by Lori Goldstein brand resulted in significant decreases in our licensing revenues, we have taken and continue to take actions to replace those revenues with new strategic business initiatives, as we concentrate our resources on growing our brands, launching new brands, and entering into new business partnerships. We continue to seek new opportunities, including expansion through interactive television, live streaming, and additional domestic and international licensing arrangements, and acquiring and collaborating with additional brands, including the TowerHill by Christie Brinkley brand and LB70 by Lloyd Boston brand, both of which launched in 2024. We plan to launch four new brands over the next 12 to 15 months, including Trust, Respect, Love by Cesar Millan, GemmaMade, and Mesa Mia in Fall 2025, and a new co-branded collaboration with Coco Rocha in Fall 2026.

Previous wording

During 2023 and throughout 2024, we have restructured our business operations into a leaner, more focused “licensing plus” business model. We have entered into structured contractual arrangements with best-in-class business partners in order to more efficiently operate our former wholesale and e-commerce businesses while reducing and better managing our exposure to operating risks, and taken additional actions to generate cost savings. Based on all of these actions taken to date, plus additional measures implemented during the first quarter of 2025 to further optimize the Company’s cost structure, the Company’s direct operating costs on an annualized basis have been reduced from approximately $8 million per quarter under our previous operating model to less than $2.5 million per quarter on a going-forward basis. This represents more than $22 million of cost savings on an annualized basis compared to our cost structure in 2022.

Current wording

During 2023 and throughout 2024, we have restructured our business operations into a leaner, more focused “licensing plus” business model. We have entered into structured contractual arrangements with best-in-class business partners in order to more efficiently operate our former wholesale and e-commerce businesses while reducing and better managing our exposure to operating risks, and taken additional actions to generate cost savings. Based on all of these actions taken to date, plus additional measures implemented during the current year to further optimize the Company’s cost structure, the Company’s direct operating costs on an annualized basis have been reduced from approximately $8 million per quarter

Previous wording

sentiment, decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer products, which would adversely affect our operating income and results of operations. If we are unable to take effective measures in a timely manner to mitigate the impact of inflation and/or a potential recession, our business, financial condition, and results of operations could be adversely affected.

Current wording

Nonetheless, we continue to face a number of headwinds in the current macroeconomic environment. Poor economic and market conditions, including the impacts of inflation and rising consumer debt levels, may negatively impact market sentiment, decreasing the demand for apparel, footwear, accessories, fine jewelry, home goods, and other consumer products, which would adversely affect our operating income and results of operations. If we are unable to take effective measures in a timely manner to mitigate the impact of inflation and/or a potential recession, our business, financial condition, and results of operations could be adversely affected.