Financial Analysis

9. Commitments and Contingencies Leases The Company is party to operating leases for real estate, and for certain equipment and storage space with a term of 12 months or less. The Company is currently not a party to any finance leases. As of December 31, 2025, the Companys real estate leases have a weighted-average remaining lease term of approximately 3.97 years, and the lease liabilities are measured using a weighted-average discount rate of 8.13%. 1333 Broadway Lease The Company has an operating lease for approximately 29,600 square feet of office space at 1333 Broadway, 10th floor, New York, New York, which commenced on March 1, 2016 and expires on October 30, 2027. The average annual fixed rent over the term of this lease is approximately $1.3 million per year, and the lease requires the Company to pay additional rents related to increases in certain taxes and other costs on the property. On January 26, 2024, the Company (as sublessor) entered into an agreement for the sublease of the offices located at 1333 Broadway to a third-party subtenant through October 30, 2027. The average annual fixed rent over the term of the sublease is approximately $0.8 million per year. As a result of entering into the sublease, the Company recognized non-cash impairment charges of approximately $3.1 million during the Prior Year related to the right-of-use asset. Also in connection with entering into the sublease, the Company recognized a non-cash impairment charge of approximately $0.4 mi …

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4. Trademarks and Other Intangibles Trademarks and other intangibles, net consist of the following: Weighted Average December 31, 2025 Amortization Gross Carrying Accumulated Net Carrying ($ in thousands) Period Amount Amortization Amount Trademarks (finite-lived) 15 years 58,580 27,354 31,226 Copyrights and other intellectual property 8 years 429 426 3 Total $ 59,009 $ 27,780 $ 31,229 Weighted Average December 31, 2024 Amortization Gross Carrying Accumulated Net Carrying ($ in thousands) Period Amount Amortization Amount Trademarks (finite-lived) 15 years 58,580 23,852 34,728 Copyrights and other intellectual property 8 years 429 398 31 Total $ 59,009 $ 24,250 $ 34,759 Amortization expense for intangible assets was approximately $3.53 million and $4.83 million for the Current Year and Prior Year, respectively. Estimated future amortization expense related to finite-lived intangible assets over the remaining useful lives is as follows: ($ in thousands) Amortization Year Ending December 31, Expense 2026 $ 3,506 2027 3,503 2028 3,503 2029 3,503 2030 3,073 Thereafter (through 2036) 14,141 Total $ 31,229 …

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"10. Income Taxes The provision for income taxes in the consolidated statements of operations consists of the following: Years Ended December 31, ($ in thousands) 2025 2024 Current: Federal $ (52) $ 21 State and local 127 199 Total current 75 220 Deferred: Federal State and local Total deferred Total provision $ 75 $ 220 The reconciliation of the federal statutory income tax rate to the Companys effective tax rate reflected in the income tax provision shown in the consolidated statements of operations is as follows: Years Ended December 31, 2025 2024 Amount Percent Percent U.S. Federal Statutory Tax Rate $ (3,651) 21.00 % 21.00 % State and Local Income Taxes, Net of Federal Income Tax Effect (1,302) 7.49 7.34 Changes in Valuation Allowances 5,049 (29.04) (28.60) Nontaxable or Nondeductible Items Stock compensation (0.02) Life insurance 11 (0.06) (0.10) Other Adjustments Federal true-ups (32) 0.18 (0.61) Effective Tax Rate $ 75 (0.43) % (0.99) % In the table presented above, taxes related to the state and city of New York made up the majority (greater than 50%) of the tax effect in the State and local rate, net of federal tax benefit category. The significant components of net deferred tax assets (liabilities) of the Company consist of the following: December 31, ($ in thousands) 2025 2024 Deferred tax assets Federal, state and local net operating loss carryforwards $ 17,115 $ 12,847 Stock-based compensation 638 594 Accrued compensation and other accrued expenses 742 958 Allow …

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6. Debt The Companys net carrying amount of debt was comprised of the following: December 31, December 31, ($ in thousands) 2025 2024 Term loan debt (including accumulated unpaid PIK interest) $ 13,581 $ 7,950 Unamortized deferred finance costs and other reductions to carrying value (875) (1,381) Total 12,706 6,569 Current portion of debt 3,250 Long-term debt $ 9,456 $ 6,569 IDB Term Loan Debt (October 19, 2023 through December 11, 2024) On October 19, 2023, H Halston IP, LLC (the Borrower), a wholly owned indirect subsidiary of Xcel Brands, Inc., entered into a term loan agreement with Israel Discount Bank of New York (IDB). Pursuant to this loan agreement, IDB made a term loan to the Company in the aggregate amount of $5.0 million. The proceeds of this term loan were used to pay fees, costs, and expenses incurred in connection with entering into the loan agreement, and may be used for working capital purposes. Fees and costs totaling $0.30 million were deferred on the Companys balance sheet as a reduction of the carrying value of the term loan debt, and were being amortized to interest expense over the term of the debt using the effective interest method. The term loan was to mature on October 19, 2028. Principal on the term loan was payable in quarterly installments of $250,000 on each of January 2, April 1, July 1, and October 1 of each year, commencing on April 1, 2024. The Borrower had the right to prepay all or any portion of the term loan at any time without penalty. …

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Recently Adopted Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of additional categories of information about federal, state, and foreign income taxes in the rate reconciliation table and requires entities to provide more details about the reconciling items in some categories if items meet a quantitative threshold. The ASU also requires entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. ASU 2023-09 was effective for the Company for the fiscal year ending December 31, 2025. The Company adopted the new standard effective January 1, 2025, which primarily resulted in expanded disclosures in the rate reconciliation table and regarding certain reconciling items. In accordance with the transition provisions of ASU 2023-09, we applied the guidance prospectively; as a result, prior-period comparative disclosures have not been restated and continue to reflect the presentation requirements in effect at that time. See Note 10 for additional information. As the requirements of this ASU relate to disclosure only, the adoption of this ASU did not have a signi …

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11. Related Party Transactions IM Topco, LLC As described in Note 3, the Company held a noncontrolling interest in IM Topco through October 1, 2025. Services Agreement The Company was party to a services agreement with IM Topco that had been originally effective May 31 2022 and subsequently amended from time to time, pursuant to which the Company agreed to provide certain design and support services (including assistance with the operations of the interactive television business and related talent support) to IM Topco in exchange for a service fee. In April 2024, the services agreement was amended to set the service fees at $150,000 per year. In accordance with the terms of this services agreement, the Company recognized service fee income of $112,500 and $150,000 for the years ended December 31, 2025 and 2024, respectively. License Agreement The Company was previously party to a license agreement with IM Topco, pursuant to which IM Topco granted the Company a license to use certain Isaac Mizrahi trademarks related to womens sportswear products in exchange for the payment of royalties to IM Topco. This license agreement was later terminated in favor of a new similar license agreement between IM Topco and an unrelated third party; however, as part of such termination, Xcel had provided a guarantee to IM Topco for the payment of any difference between (i) the royalties received by IM Topco under the new agreement and (ii) the amount of royalties that IM Topco would have receive …

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"2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Xcel, its wholly owned subsidiaries, and entities in which Xcel has a controlling financial interest as of and for the years ended December 31, 2025 (the ""Current Year"") and 2024 (the ""Prior Year""). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and Exchange Commission (SEC). All significant intercompany accounts and transactions have been eliminated in consolidation, and net earnings have been adjusted by the portion of operating results of consolidated entities attributable to noncontrolling interests. Investments in Unconsolidated Affiliates The Company accounts for investments in entities over which it has the ability to exercise significant influence, but does not control, under the equity method of accounting, and recognizes its proportionate share of income or losses from the investee within other operating costs and expenses (income) in the consolidated statements of operations. The proportionate share of income or losses of an equity method investee is generally determined based on the investors proportional ownership interest. However, in cases where contractual agreements specify allocation ratios for profits and losses, s …

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7. Stockholders Equity The Company has authority to issue up to 51,000,000 shares, consisting of 50,000,000 shares of common stock and 1,000,000 shares of preferred stock. Reverse Stock Split At a special meeting of the Companys stockholders on March 12, 2025, the stockholders approved a proposal granting the Companys Board of Directors the discretion to effect a reverse stock split of the Companys issued and outstanding common stock at a ratio in the range of 1-for-2 to 1-for-10 , with such ratio to be determined by the Chairman of the Companys Board of Directors. Following the special meeting, the Chairman of the Companys Board of Directors approved a final split ratio of 1-for-10 (the Reverse Stock Split). Subsequently, the Company filed with the Delaware Secretary of State a Certificate of Amendment to the Companys Amended and Restated Certificate of Incorporation, which became effective at 5:00 p.m. on March 24, 2025, to effect such Reverse Stock Split. As a result of the Reverse Stock Split, every ten (10) shares (the Reverse Stock Split Number) of issued and outstanding Common Stock was automatically combined into one (1) issued and outstanding share of common stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Instead, stockholders who otherwise would have been entitled to receive fractional shares were entitled to receive a cash payment (without interest and subject to applicable withholding t …

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12. Subsequent Events Shares Issued to Chief Executive Officer In accordance with the terms of the amended employment agreement with Mr. DLoren (see Note 7 for details), the Company issued the following shares of common stock to Mr. DLoren: 13,058 shares of common stock on January 2, 2026, 9,771 shares of common stock on February 2, 2026, and 9,906 shares of common stock on February 27, 2026. Executive Stock Option Cancellation Effective January 21, 2026, certain stock options originally issued in 2019 to Messrs DLoren, Haran, and Burroughs to purchase an aggregate of 350,000 shares of common stock, were cancelled through mutual agreement between the Company and the respective executives. None of these options had vested, and no compensation was paid to the executives in exchange for such cancellation. January 2026 Equity Line Facility On January 21, 2026, the Company entered into a common stock purchase agreement with White Lion Capital, LLC (White Lion), pursuant to which White Lion has committed to purchase up to $15.0 million of the Companys common stock. Under the terms and conditions of this agreement, the Company has the right, but not the obligation, to sell to White Lion, and White Lion is obligated to purchase, up to $15.0 million of the Companys common stock. The actual amount and timing of any sales of Common Stock will be determined by the Company at its discretion. The aggregate number of shares that the Company can sell White Lion under this agreement is limite …

SubsequentEventsTextBlock · excerpt; the full note is in the filing