6. Debt

The Company’s net carrying amount of debt is comprised of the following:

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Term Loan Debt

On December 12, 2024, the Company and certain of its subsidiaries entered into a loan and security agreement with FEAC Agent, LLC (“FEAC”), as administrative agent and collateral agent, FEF Distributors, LLC, as lead arranger, and Restore Capital, LLC (“Restore”), as agent for certain lenders, pursuant to which the lenders made term loans to the Company and agreed to make additional term loans to the Company upon the satisfaction of a condition precedent described in the loan agreement. The term loans under the loan agreement are as follows: (1) a term loan in the amount of $3.95 million (“Term Loan A”) was made on the closing date, (2) a term loan in the amount of $4.0 million (“Term Loan B”) was made on the closing date, and (3) a term loan in the amount of $2.05 million (“Delayed Draw Term Loan”; Term Loan A, Term Loan B and Delayed Draw Term Loan are referred to as “Term Loans”) was subsequently made in March 2025. A portion of the proceeds from the Delayed Draw Term Loan were deposited in a bank account to satisfy a liquidity covenant in the loan agreement.  

The Term Loans are guaranteed by certain direct and indirect subsidiaries of the Company, and are secured by all of the assets of the Company and such subsidiaries. The loan agreement contains various customary financial covenants and reporting requirements, as specified and defined therein. The Company was in compliance with all applicable covenants under the loan agreement, or if not in compliance with certain covenants had obtained a waiver from the lenders with respect to such covenants, as of and for all periods presented in the condensed consolidated financial statements.

On April 21, 2025, the Company and certain of its subsidiaries and its lenders and FEAC entered into an amendment of the December 2024 loan and security agreement, which provided for a $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 were 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.

In connection with the April 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 the refinancing, the Company issued certain warrants to UTG and Restore, and amended certain warrants that had been previously issued in December 2024.

On May 15, 2025, the Company repaid $0.50 million of the outstanding principal amount of Term Loan A.

On October 7, 2025, the Company and certain of its subsidiaries and its lenders and FEAC entered into a further amendment of the December 2024 loan and security agreement, pursuant to which (i) the agents and lenders (as defined in the loan and security agreement) consented to the transfer and the release of the agents’ liens on the equity interests of IM Topco, LLC; (ii) the liquid asset covenant requirement was reduced to $1.0 million; and (iii) Xcel made a prepayment of $0.25 million against the outstanding principal amount of Term Loan A, of which $0.14 million was paid from the blocked account.

On November 18, 2025, the Company and certain of its subsidiaries and its lenders and FEAC entered into the fourth amendment of the December 2024 loan and security agreement, pursuant to which (i) the agents and lenders (as defined in the loan and security agreement) provided the Company with a limited waiver with respect to certain specified events of default, and also amended certain financial covenants related to the term loan agreement; (ii) the Company committed to make a prepayment of $3.25 million on Term Loan A by February 20, 2026, along with the payment of an amendment fee of $0.45 million (of which $0.125 million was payable on December 5, 2025 and the remaining $0.325 million would be due only if the $3.25 million principal amount of Term Loan A was not repaid on or prior to February 20, 2026); and (iii) the payment of the remaining principal balance on Term Loan A of $0.50 million was changed to be due on December 31, 2026 which shall be held by IPX Capital, LLC (“IPX”), a related party. In addition, upon the repayment of the $3.25 million of Term Loan A, the Company will have revised financial covenants. The minimum revenue requirement for the rolling 12 months ending December 31, 2025 will be $3.9 million and $1.7 million for the Included Subsidiaries and Halston, respectively, each as defined in the loan agreements. Further, after the Term Loan A payment is made, the minimum revenue requirement covenants shall remain at these levels for the duration of the loans and the minimum liquidity requirement shall be zero, which includes the lenders’ release of $1.0 million of restricted cash within the blocked account back to the Company.

On February 20, 2026 and March 20, 2026, the Company entered into the fifth and sixth amendments to the loan and security agreement with the term loan debt lenders and FEAC. Pursuant to such amendments, (i) the Company prepaid $0.50 million on Term Loan A (paid from the blocked account, as defined in the loan and security agreement) in connection with the fifth amendment and irrevocably authorized FEAC (as the administrative agent) to transfer up to $0.50 million (the “Sixth Amendment Cash Collateral”) from the blocked account to an account maintained by the Administrative Agent to be held as cash collateral securing the Obligations (as defined in the loan and security agreement); (ii) the Company irrevocably authorized the administrative agent to: (a) apply all or any portion of the Sixth Amendment Cash Collateral to repay the Term Loan A, or (b) return all or any portion of the Sixth Amendment Cash Collateral to the Company, in each case at the lenders’ sole discretion; (iii) the liquid asset covenant requirement was reduced to: (a) at all times prior to the repayment in full of the First Out Obligations (as defined in the loan and security agreement), $0.50 million minus that amount of Sixth Amendment Cash Collateral used to repay Term Loan A, and (b) at all times after the repayment in full of the First Out Obligations, $0; and (iv) the transaction closing date was extended to March 24, 2026.

On April 13, 2026, the Company entered into the seventh amendment to the loan and security agreement with the term loan debt lenders and FEAC, which provided for, among other things: the ability of the Company to consummate the issuance of certain senior secured notes (as described below); the ability for IPX to convert its $0.50 million Term Loan A to common shares of the Company at the price per share equal to $1.35, subject to adjustment; modifications to certain payment terms; modifications to certain financial covenants; modifications to certain financial reporting requirements; and the amendment of the FEAC’s role to include certain limitations. In connection with the seventh amendment, FEAC’s affiliated lenders entered into agreements whereby a $0.50 million portion of Term Loan A was sold and assigned to IPX, and the entirety of Term Loan B was sold and assigned to UTG. Additionally, the Company was relieved of its obligation to pay the remaining $0.325 million amendment fee as specified in the fourth amendment.

With respect to the April 13, 2026 changes in terms related to the $0.50 million of Term Loan A debt held by IPX, and considering that IPX was a common lender for both a portion of the Term Loan A debt and a portion of the new senior secured notes (as described below), the Company evaluated and determined that the changes related to the debt held by

IPX represented an extinguishment under ASC 470-50. Accordingly, the Company recognized a $0.01 million loss on early extinguishment of debt for the three and six months ended June 30, 2026, due to the write-off of unamortized deferred finance costs related to such debt. The Company also evaluated the aforementioned conversion feature that was added to the Term Loan A debt held by IPX, and determined that it is not required to be separated and accounted for as a derivative under ASC 815; the Term Loan A debt is being accounted for as a single liability under ASC 470-20.

Also on April 13, 2026, the Company repaid a total of $3.25 million of Term Loan A debt – of which, $2.25 million was repaid using the net proceeds received from the issuance of the senior secured notes (as described below) and $1.00 million was paid with the Company’s restricted cash. This resulted in the repayment of all remaining principal owed to FEAC under the term loans; in connection with this repayment, the Company paid $0.14 million of fees to FEAC, which were recorded as loss on early extinguishment of debt for the three and six months ended June 30, 2026.

Principal

As of June 30, 2026, the remaining principal balance of Term Loan A was $0.50 million and is due on September 20, 2027.

As of June 30, 2026, the remaining principal balance of Term Loan B was $10.35 million (which includes $9.12 million of original proceeds borrowed plus $1.23 million of accumulated paid in-kind (“PIK”) interest, as discussed below) and is due at the maturity date of December 12, 2028.

Interest

From December 12, 2024 through April 20, 2025, interest on Term Loans accrued at an annual rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for an interest period equal to three months (the “3-month SOFR rate”), subject to a 2.0% floor, plus (i) 8.5% for Term Loan A and Delayed Draw Term Loan and (ii) 13.5% for Term Loan B. From and after April 21, 2025, interest on the Term Loans accrues at an annual rate equal to the 3-month SOFR rate, subject to a 2.0% floor, plus (i) 8.5% for Term Loan A and (ii) 6.5% for Term Loan B.

Interest on amounts outstanding under the Term Loans accrues daily and is payable at the end of each calendar month, except that from April 21, 2025 through March 31, 2027, interest on the Term Loan B will be paid in-kind (“PIK”) by being capitalized and added to the principal amount of the Term Loan B at the end of each calendar month. For the current quarter and current six months, the Company recognized PIK interest approximately $0.26 million and $0.52 million, respectively. For the prior year quarter and prior year six months, the Company recognized approximately $0.19 million of PIK interest.

For the current quarter and current six months, the Company incurred interest expense (including interest paid in cash, PIK, and the amortization of deferred finance costs) related to term loan debt of approximately $0.42 million and $0.91 million, respectively.

For the prior year quarter and prior year six months, the Company incurred total interest expense (including interest paid in cash, PIK, and the amortization of deferred finance costs) related to term loan debt of approximately $0.46 million and $0.93 million, respectively.

Exit Fees

The amended loan agreement also requires that the Company pay an exit fee of $0.175 million to FEAC related to Term Loan A and an exit fee of $0.40 million to Restore related to Term Loan B upon the maturity or full payment of the Term Loans. The Company recognized the cost of the Term Loan A exit fee over the remaining term of the related debt, while

the net present value of the Term Loan B exit fee on April 21, 2025 was recognized as part of the loss on early extinguishment of debt recorded in the second quarter of 2025. As of June 30, 2026, the amount of accrued exit fees with respect to Term Loan A was $0.13 million, while the amount of accrued exit fees with respect to Term Loan B was $0.32 million; both amounts are presented within Other long-term liabilities on the condensed consolidated balance sheet as of June 30, 2026.

Deferred Finance Costs and Other Reductions to Carrying Value of Debt

In connection with entering into the Term Loans in December 2024, the Company incurred loan origination fees, plus various legal and other fees; these fees and costs totaling $0.92 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt. Also in connection with entering into the Term Loans in December 2024, the Company issued certain warrants to the lenders to purchase shares of the Company’s common stock. In accordance with applicable GAAP, the Company allocated the value of the total proceeds of $10.0 million between the term loan debt and the warrants, based on the relative fair values of each; as a result, the Company recognized a $0.48 million increase to stockholders’ equity as additional paid-in capital for the allocated fair value of the warrants, and an offsetting decrease to the net carrying value of the term loan debt. From December 12, 2024, and through April 20, 2025, these reductions to the carrying value of the term loan debt totaling $1.40 million were being amortized to interest expense over the term of the debt using the effective interest method. The $1.26 million remaining unamortized balance of such amounts was written-off as part of the loss on early extinguishment of debt upon the closing of the April 21, 2025 debt refinancing.

In connection with the debt refinancing transaction on April 21, 2025, the Company incurred certain legal costs and other fees; these fees and costs totaling $0.53 million were deferred on the Company’s balance sheet as a reduction of the carrying value of the term loan debt. Also in connection with the April 21, 2025 debt refinancing transaction, the Company issued certain warrants to UTG to purchase shares of the Company’s common stock. In accordance with GAAP, the Company allocated the value of the total proceeds of $13.62 million between the term loan debt and the warrants, based on the relative fair values of each; as a result, the Company recognized a $0.58 million increase to stockholders’ equity as additional paid-in capital for the allocated fair value of the warrants, and an offsetting decrease to the net carrying value of the term loan debt. These reductions to the carrying value of the term loan debt totaling $1.11 million are being amortized to interest expense over the term of the debt using the effective interest method.

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Senior Secured Notes

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On April 13, 2026, the Company entered into certain agreements with Smithline Family Trust II (“SFT”), Quick Capital, LLC (“Quick”), and IPX (collectively, the “Purchasers”), pursuant to which the Company issued and sold to the Purchasers 12.5% Senior Secured Notes due April 13, 2027 in the original principal amount of $3,005,780 (the “Secured Notes”) and 100,579 shares of the Company’s common stock. The Secured Notes were issued with an original issue discount, such that the net cash proceeds received by the Company after the discount were $2.60 million. The Company’s obligations under the Secured Notes are guaranteed by certain direct and indirect subsidiaries of the Company pursuant to a subsidiary guarantee, and are secured by the assets of the Company and the subsidiary guarantors pursuant to a security agreement.

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At any time after the occurrence of an event of default under the Secured Notes and for so long as such event of default is continuing, the Secured Notes are convertible into shares of common stock of the Company (i) initially at a fixed conversion price equal to $1.165 per share in the case of SFT and Quick or $1.435 per share in the case of IPX, and (ii) after May 17, 2026, at a price equal to the lesser of (a) 85% multiplied by the lowest volume weighted average price of the common stock during the 10-trading day period prior to conversion and (b) $1.165 in the case of SFT and Quick or $1.435 per share in the case of IPX. In addition, to the extent that Company is listed on the Nasdaq Capital Market, the aggregate number of shares of common stock issuable to the Purchasers and any subsequent holder of the Secured Note shall not exceed 19.99% of the total number of shares of common stock outstanding or of the voting power of the common

stock as of April 13, 2026 less the shares issued pursuant to the securities purchase agreement unless the Company has obtained stockholder approval in compliance with Nasdaq Listing Rule 5635(d) to authorize the issuance of shares of common stock in connection with the conversion or exchange of all Secured Notes.

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Under the conversion feature described above, because the post-May 17, 2026 conversion price varies with the market price of the Company’s common stock, this feature is not considered indexed to the Company’s own stock under ASC 815-40 and therefore represents an embedded derivative. As the feature is exercisable only upon an event of default, and management considers the likelihood of such an occurrence to be remote, the Company concluded that the fair value of the embedded derivative was not material and has therefore not recorded a separate liability. The Company will reassess this conclusion each reporting period.

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Fees incurred in connection with the transactions described above were approximately $0.1 million.

As part of the transactions described above, IPX (a related party) purchased $57,803 original principal amount of the Secured Notes and purchased 1,742 shares of common stock, on the same terms as the other Purchasers, except that the shares of common stock purchased by IPX were priced at current market value.  

Principal

The Company is required to make $0.10 million monthly payments on the Secured Notes commencing October 13, 2026, with the balance due at maturity. In addition, the terms of the Secured Notes require mandatory prepayments in certain specified situations, including the sale of any brand or license, or the sale of any debt or equity securities by the Company.

The Company made additional principal payments to the lenders during the current quarter and current six months totaling $0.45 million. The remaining principal balance due under the Secured Notes at June 30, 2026 was $2.55 million.

Interest

Interest is payable monthly, on the thirteenth day of each calendar month, beginning on May 13, 2026 and on the maturity date, at a rate of 12.5% per annum.

For the current quarter and current six months, the Company incurred interest expense (including interest paid in cash, and the amortization of deferred finance costs and OID) related to the Secured Notes of approximately $0.25 million.

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Deferred Finance Costs and Other Reductions to Carrying Value of Debt

In connection with the issuance of the Secured Notes in April 2026, the Company incurred various fees and costs totaling $0.35 million, which were deferred on the Company’s balance sheet as a reduction of the carrying value of the related debt. Also in connection with the issuance of the Secured Notes in April 2026, the Company issued shares of common stock as described above. In accordance with applicable GAAP, the Company allocated the value of the total proceeds between the debt and the shares of common stock, based on the relative fair values of each; as a result, the Company recognized a $0.12 million increase to stockholders’ equity as additional paid-in capital for the allocated fair value of the shares, and an offsetting decrease to the net carrying value of the debt. These reductions to the carrying value of the Secured Notes (plus the impact of the original issue discount of $0.41 million) totaling $0.88 million are being amortized to interest expense over the term of the debt using the effective interest method.