Xcel Brands, Inc. (“Xcel” and, together with its subsidiaries, the “Company”) is a media and consumer products company engaged in the design, production, marketing, live streaming, wholesale distribution, and direct-to-consumer 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 LOGO by Lori Goldstein brand (the “Lori Goldstein Brand”), 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 Company designs, produces, markets, and distributes products, licenses its brands to third parties, and generates licensing revenues through contractual arrangements with manufacturers and retailers. The Company and its licensees distribute through an omni-channel retail sales strategy, which includes distribution through interactive television, digital live-stream shopping, brick-and-mortar retail, wholesale, and e-commerce channels to be everywhere its customers shop.

The Company’s wholesale and direct-to-consumer operations are presented as "Net sales" and "Cost of goods sold" in the Consolidated Statements of Operations, separately from the Company’s licensing revenues.

Liquidity and Management’s Plans

The Company incurred net losses of approximately $5.4 million ($25.9 million excluding the gain on sale of a majority interest in the Isaac Mizrahi brand) and $13.0 million during the years ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of approximately $32.8 million and $28.8 million as of December 31, 2022 and 2021, respectively. Included in the net losses were non-cash expenses of approximately $8.2 million and $7.5 million for the years ended December 31, 2022 and 2021, respectively. Net cash used in operating activities was $14.2 million in 2022 and $6.6 million in 2021. The Company had working capital (current assets less current liabilities, excluding the current portion of lease obligations) of approximately $8.8 million and $7.9 million as of December 31, 2022 and 2021, respectively. The Company’s cash and cash equivalents were approximately $4.6 million as of December 31, 2022. The aforementioned factors raise uncertainties about the Company’s ability to continue as a going concern.

Management plans to mitigate an expected shortfall of capital and to support future operations by shifting the business from a wholesale/licensing hybrid model into a licensing plus business model and to divest or restructure the Longaberger brand. In the first quarter of 2023, the Company began to restructure its business operations by entering into new licensing agreements and joint venture arrangements with best-in-class business partners. The Company entered into a new

interactive television licensing agreement with America’s Collectibles Network, Inc. d/b/a JTV (“JTV”) for the Ripka Brand, and a separate license with JTV for the Ripka Brand’s e-commerce business. For apparel, similar transactions have recently been executed. In conjunction with the launch of the C Wonder Brand on HSN, the Company licensed the wholesale production operations related to the brand to One Jeanswear Group, LLC (“OJG”); this new license with OJG also includes other new celebrity brands that the Company plans to launch in 2023 and beyond. For the Halston Brand, management plans on entering into a joint venture related to the brand’s wholesale apparel business with another leading apparel manufacturer (the “Halston JV”). The Halston JV will develop an apparel business under the H Halston brand through department stores, e-commerce, and other retailers. The Halston JV will include a wholesale license to Xcel. Management expects the transition of these operating businesses to be completed by second quarter of 2023. Management believes that this evolution of the Company’s operating model will provide the Company with significant cost savings and allow the Company to reduce and better manage its exposure to operating risks. As of March 31, 2023, steps have been taken to reduce payroll costs by $6 million and operating expenses by $7 million over the next twelve months. Further, the Company intends to obtain a line of credit to provide additional capital resources. However, there is no assurance that this line of credit or any other external financing will be obtained.

Based on these recent changes in the Company’s business model, management expects to generate adequate cash flows to meet the Company’s operating and capital expenditure needs, for at least the twelve months subsequent to the filing date of this Annual Report on Form 10-K, and therefore, such conditions and uncertainties with respect to the Company’s ability to continue as a going concern as of December 31, 2022, have subsequently been alleviated.