8-K: Xcel Brands Appoints CBIZ CPAs as New Auditor Following Marcum Acquisition, Discloses Going Concern Warning

Xcel Brands, Inc. has appointed CBIZ CPAs P.C. as its new independent registered public accounting firm for the 2025 fiscal year, following CBIZ's acquisition of Marcum LLP's attest business, while also disclosing a going concern explanatory paragraph in its 2024 audit report.

Summary

• Xcel Brands, Inc. (the "Company") has changed its independent registered public accounting firm from Marcum LLP to CBIZ CPAs P.C.
• The change was effective May 27, 2025, and was approved by the Company's Audit Committee.
• This transition occurred because CBIZ CPAs P.C. acquired the attest business of Marcum LLP, effective November 1, 2024.
• Marcum LLP's audit reports for the fiscal years ended December 31, 2024, and 2023, contained no adverse opinions, disclaimers, or qualifications, except for an explanatory paragraph in the December 31, 2024, report regarding substantial doubt about the Company's ability to continue as a going concern.
• There were no disagreements with Marcum LLP on accounting principles, financial statement disclosure, or auditing scope during the fiscal years ended December 31, 2024, and 2023, and the subsequent interim period through May 27, 2025.
• No reportable events occurred, other than the material weaknesses existing as of December 31, 2024, which were disclosed in the Company's Annual Report on Form 10-K and are being remediated.
• The Company did not consult with CBIZ CPAs P.C. on accounting principles or audit opinions prior to their engagement.
• Marcum LLP has provided a letter to the SEC confirming their agreement with the Company's statements in the Form 8-K.

Sentiment

Score: 4

Explanation: While the auditor change itself is procedural due to an acquisition, the disclosure of a 'going concern' explanatory paragraph and 'material weaknesses' in internal controls for the fiscal year ended December 31, 2024, introduces significant negative sentiment regarding the Company's financial health and operational controls.

Positives

• The change in auditor was a result of an acquisition in the accounting firm, indicating a procedural rather than performance-driven change.
• There were no disagreements with the former auditor, Marcum LLP, on accounting principles, financial statement disclosure, or auditing scope.
• The audit reports for fiscal years 2023 and 2024 did not contain adverse opinions, disclaimers, or qualifications, apart from the going concern matter.

Negatives

• The audit report for the fiscal year ended December 31, 2024, included an explanatory paragraph indicating substantial doubt about the Company's ability to continue as a going concern.
• Material weaknesses in internal control existed as of December 31, 2024, as disclosed in the Company's Annual Report on Form 10-K.

Risks

• Substantial doubt about the Company's ability to continue as a going concern, as noted in the December 31, 2024, audit report.
• Existence of material weaknesses in internal control as of December 31, 2024, which the Company is taking steps to remediate.

Future Outlook

The Company is taking steps to remediate the material weaknesses that existed as of December 31, 2024.

Management Comments

• James F. Haran, Chief Financial Officer, signed the report on behalf of Xcel Brands, Inc.

Industry Context

The change in Xcel Brands' certifying accountant reflects a broader trend of consolidation and mergers & acquisitions within the accounting and attest services industry, where larger firms acquire practices from smaller or mid-sized firms, leading to changes in auditor relationships for their clients.

Corporate Governance

Stakeholder Impact

• Shareholders: The 'going concern' warning and 'material weaknesses' could raise concerns about the Company's financial stability and future viability, potentially impacting share price and investor confidence.
• Management: Responsible for remediating the identified material weaknesses and addressing the underlying issues contributing to the going concern doubt.

Next Steps

• The Company is taking steps to remediate the material weaknesses identified as of December 31, 2024.

Key Dates

Recommendation

Keywords

Xcel Brands, SEC filing, Form 8-K, auditor change, CBIZ CPAs, Marcum LLP, going concern, material weaknesses, financial reporting, corporate governance, accounting firm, public accounting