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What changed in Digital Brands Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Digital Brands Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+313 added−301 removedSource: 10-K (2025-04-09) vs 10-K (2024-04-15)

Top changes in Digital Brands Group, Inc.'s 2024 10-K

313 paragraphs added · 301 removed · 174 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDesign and Development Our products are designed at the headquarters of each brand Each brand’s design efforts are supported by well-established product development and production teams. The continued collaboration between design and merchandising ensures it responds to consumer preferences and market trends with new innovative product offerings while maintaining its core fashion foundation.
Biggest changeThe continued collaboration between design and merchandising ensures we respond to consumer preferences and market trends with new innovative product offerings while maintaining our core fashion foundation. In-house design and production teams in Los Angeles perform development of the sample line, allowing for speed to market, flexibility and quality of fit.
When deciding which factory to source a specific product from, we take into account the following factors: ● Cost of garment ● Retail price for end consumer ● Production time ● Minimum order quantity ● Shipping/delivery time ● Payment terms By taking all of these into consideration, we can focus on making sure we have access to in-demand and high quality products available for sale to our customers at competitive price points and sustainable margins for our business.
When deciding which factory to source a specific product from, we take into account the following factors: ● Cost of garment ● Retail price for end consumer ● Production time ● Minimum order quantity 13 ● Shipping/delivery time ● Payment terms By taking all of these into consideration, we can focus on making sure we have access to in-demand and high quality products available for sale to our customers at competitive price points and sustainable margins for our business.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 17
We expect this should result in higher customer loyalty, higher lifetime value, higher average order value and lower customer acquisition cost. Organizational Structure We operate the brands on a decentralized basis with an emphasis on brand level execution supported by corporate coordination.
We expect this should result in higher customer loyalty, higher lifetime value, higher average order value and lower customer acquisition cost. 8 Organizational Structure We operate the brands on a decentralized basis with an emphasis on brand level execution supported by corporate coordination.
If applicable, the conversion price for each outstanding share of preferred stock and the exercise price for each outstanding warrant will be increased, pursuant to their terms, in inverse proportion to the 1-for-25 split ratio such that upon conversion or exercise, the aggregate conversion price for conversion of preferred stock and the aggregate exercise price payable by the warrant holder to the Company for shares of common stock subject to such warrant will remain approximately the same as the aggregate conversion or exercise price, as applicable, prior to the Reverse Stock Split.
If applicable, the conversion price for each outstanding share of preferred stock and the exercise price for each outstanding warrant will be increased, pursuant to their terms, in inverse proportion to the 1-for-50 split ratio such that upon conversion or exercise, the aggregate conversion price for conversion of preferred stock and the aggregate exercise price payable by the warrant holder to the Company for shares of common stock subject to such warrant will remain approximately the same as the aggregate conversion or exercise price, as applicable, prior to the 2024 Reverse Stock Split.
As an example, the Digital Brand Group’s marketing and data team reviews 5 Table of Contents the customer data across all our portfolio brands and will work with each brand to identify the new customers from our other portfolio brands that they can target and what styles and looks should be created for each of those customer cohorts.
As an example, the Digital Brand Group’s marketing and data team reviews the customer data across all our portfolio brands and will work with each brand to identify the new customers from our other portfolio brands that they can target and what styles and looks should be created for each of those customer cohorts.
Historically, these factors are driven by the wholesale buyer’s belief of how well they think the product will sell at their stores. For example, if the collection is considered very strong by the wholesale 7 Table of Contents buyer, we usually achieve higher quantities, higher margins and lower future markdown guarantees.
Historically, these factors are driven by the wholesale buyer’s belief of how well they think the product will sell at their stores. For example, if the collection is considered very strong by the wholesale buyer, we usually achieve higher quantities, higher margins and lower future markdown guarantees.
Retargeting: We engage the services of certain retargeting engines that allow us to dynamically target our visitors on third-party websites via banner/content ads. 9 Table of Contents Content Marketing: We use content marketing platforms that allow us to serve up native ads in the form of articles promoting our brand story and specific products.
Retargeting: We engage the services of certain retargeting engines that allow us to dynamically target our visitors on third-party websites via banner/content ads. Content Marketing: We use content marketing platforms that allow us to serve up native ads in the form of articles promoting our brand story and specific products.
Our suits are expected to range from $295 to $495; similar quality brands produced at the same factories wholesale for approximately $300 to $600 and retail for $600 to $1,200. Our dress shirts will range from $55 to $65, while similar quality brands produced at the same factories wholesale for approximately $50 to $75 and retail for $95 to $150.
Our suits had range from $295 to $495; similar quality brands produced at the same factories wholesale for approximately $300 to $600 and retail for $600 to $1,200. Our dress shirts will range $55 to $65, similar quality brands produced at the same factories wholesale for approximately $50 to $75 and retail for $95 to $150.
Our portfolio currently consists of four brands that leverage our three channels: our websites, wholesale and our own stores. ● Bailey 44 combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go. Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway.
Our portfolio currently consists of five brands that leverage our three channels: our websites, wholesale and royalty (license revenue). ● Bailey 44 combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go. Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway.
We believe that we can create more compelling price points as we leverage our direct-to-consumer expertise. As we increase the direct-to-consumer revenue mix, we believe we will have opportunities to increase our margins, which will mostly be passed along to the customer with lower price points. Stateside — Brand Summary We acquired Stateside in August 2021.
We believe that we can create more compelling price points as we leverage our direct-to-consumer expertise. As we increase the direct-to-consumer revenue mix, we believe we will have opportunities to increase our margins, which will mostly be passed along to the customer with lower price points.
We do not have material terms or arrangements with our third-party distributors. As is customary in the wholesale side of the retail apparel industry, we work with the wholesale buyers for every product collection and season to develop a purchase order based on quantities, pricing, profit margin and any future mark-down agreements.
As is customary in the wholesale side of the retail apparel industry, we work with the wholesale buyers for every product collection and season to develop a purchase order based on quantities, pricing, profit margin and any future mark- down agreements.
Product Suppliers: Sourcing and Manufacturing We work with apparel manufacturers in North America, Asia and Europe. We work with full package suppliers, which supply fabric, trims, along with cut/sew/wash services, only invoicing us for the final full cost of each garment.
Product Suppliers: Sourcing and Manufacturing We work with a variety of apparel manufacturers in North America, Asia and Europe. We only work with full package suppliers, which supply fabric, trims, along with cut/sew/wash services, only invoicing us for the final full cost of each garment. This allows us the ability to maximize cash flows and optimize operations.
We make regular posts highlighting new products, brand stories, and other topics and images we deem “on brand”. By being a verified brand, our followers can shop products directly from our posts. We are also able to link to products in the stories feature.
We make regular posts highlighting new products, brand stories, and other topics and images we deem “on brand”. By being a verified brand, our followers can shop products directly from our posts.
Also, at the effective time of the Reverse Stock Split, the number of shares of common stock issuable upon exercise of warrants (including public warrants under the trading symbol “DBGIW”), preferred stock, and other convertible securities, as well as any commitments to issue securities, that provide for adjustments in the event of a reverse stock split will be appropriately adjusted pursuant to their applicable terms for the Reverse Stock Split.
The 2024 Reverse Stock Split did not (i) change the authorized number of shares, (ii) change the par value of the common stock, or (iii) modify any voting rights of the common stock. 5 Also, at the effective time of the 2024 Reverse Stock Split, the number of shares of common stock issuable upon exercise of warrants (including public warrants under the trading symbol “DBGIW”), preferred stock, and other convertible securities, as well as any commitments to issue securities, that provide for adjustments in the event of a reverse stock split will be appropriately adjusted pursuant to their applicable terms for the 2024 Reverse Stock Split.
None of our employees is currently covered by a collective bargaining agreement. We have had no labor-related work stoppages and we believe our relationship with our employees is strong. We believe that a diverse workforce is important to our success.
Employees As of December 31, 2024, we had 41 employees, all of whom were full-time employees. None of our employees is currently covered by a collective bargaining agreement. We have had no labor-related work stoppages and we believe our relationship with our employees is strong. We believe that a diverse workforce is important to our success.
Currently, our Bailey, DSTLD, Stateside and Sundry products are shipped from our suppliers to our distribution center in Los Angeles, CA, which currently handles all our warehousing, fulfillment, outbound shipping and returns processing. In 2023, we will review maintaining our own distribution centers versus using a third-party solution.
Our Sundry products will be shipped from our suppliers to our distribution center in Los Angeles, CA which will handle all our warehousing, fulfillment, outbound shipping and returns processing. During 2025, we will review maintaining our own distribution centers versus using a third-party solution.
Further, any actual or alleged failure to comply with any of these laws or regulations by us, our vendors or our network of influencers could hurt our reputation, brand and business, force us to incur significant expenses in defending against proceedings or investigations, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties. 11 Table of Contents Employees As of December 31, 2023, we had 56 employees, all of whom were full-time employees.
Further, any actual or alleged failure to comply with any of these laws or regulations by us, our vendors or our network of influencers could hurt our reputation, brand and business, force us to incur significant expenses in defending against proceedings or investigations, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties.
Our international business is subject to additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, as well as foreign laws and regulations addressing topics such as advertising and marketing practices, customs duties and taxes, privacy, data protection, information security and consumer rights, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories.
The growth and demand for eCommerce could result in more stringent domestic and foreign consumer protection laws that impose additional compliance burdens on companies that transact substantial business on the Internet. 16 Our international business is subject to additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, as well as foreign laws and regulations addressing topics such as advertising and marketing practices, customs duties and taxes, privacy, data protection, information security and consumer rights, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories.
The collection is influenced by the evolution of the classic t-shirt, offering a simple yet elegant look. Stateside is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand. ● Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products.
Stateside is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand. ● Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products.
The products are designed and mostly produced in Los Angeles from the finest fabrics. The majority of the knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles, with some sweaters made overseas. Sundry is known for delivering high quality novelty and resort style T-shirts, tops and bottoms.
The majority of the knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles, with some sweaters made overseas. Sundry is known for delivering high quality novelty and resort style T-shirts, tops and bottoms. Sundry is mostly a wholesale brand with meaningful online revenue.
We do not own or operate any manufacturing facilities and rely solely on third-party contract manufacturers operating primarily in Europe, the United States, and the Asia Pacific region for the production of our products, depending on the brand.
We do not have long-term written contracts with manufacturers, though we have long-standing relationships with a diverse base of vendors. We do not own or operate any manufacturing facilities and rely solely on third-party contract manufacturers operating primarily in Europe, United States, and the Asia Pacific region for the production of our products depending on the brand.
With our acquisition of Sundry, we view the following as tangible near-term growth opportunities: ● Increase online revenues significantly as we cross-market their customer base with the customer bases from our other brands, especially on the Bailey Shop. ● Increase gross margin dollars by updating the product line and driving increased volume through the wholesale and online channels. 6 Table of Contents ● Launch a new product category for 2024 in women’s athleisure.
Their T-shirt prices range from $68 to $98, their other tops range from $98 to $198, and their bottoms range from $80 to $228. 10 With our acquisition of Sundry, we view the following as tangible near-term growth opportunities: ● Increase online revenues significantly as we cross-market their customer base with the customer bases from our other brands. ● Increase gross margin dollars by updating the product line and driving increased volume through the wholesale and online channels. ● Launch a new product category for 2025 in women’s athleisure.
Stateside is a collection of elevated American basics influenced by the evolution of the classic T-shirt. All garments are designed and produced in Los Angeles from the finest fabrics. All knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles. Stateside is known for delivering high quality, luxury T-shirts, tops and bottoms.
Stateside — Brand Summary We acquired Stateside in August 2021. Stateside is a collection of elevated American basics influenced by the evolution of the classic T-shirt. All garments are designed and produced in Los Angeles from the finest fabrics. All knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles.
Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California. Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.
Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.
Stateside is primarily a wholesale brand with very limited online revenue. Their T-shirt prices range from $68 to $94, their other tops range from $98 to $130, and their bottoms from $80 to $144. Sundry — Brand Summary We acquired Sundry in December 2022.
Stateside is known for delivering high quality, luxury T-shirts, tops and bottoms. Stateside is primarily a wholesale brand with very limited online revenue. Their T-shirt prices range from $68 to $94, their other tops range from $98 to $130, and their bottoms from $80 to $144.
Customers will earn reward points that can be used to purchase products. We will also use loyalty point multipliers to create customer purchases, especially, which is a strategy beauty retailer have effectively used. Competition Our business depends on our ability to create consumer demand for our brands and products.
We will also use loyalty point multipliers to create customer purchases, especially, which is a strategy beauty retailer have effectively used. Competition Our business depends on our ability to create consumer demand for our brands and products. We focus on designing products that we hope exceed consumer expectations, which should result in retention and repurchases.
Celebrity gifting We approach celebrity gifting in a strategic, discerning manner. We have longstanding, personal relationships with the industry’s top stylists; we do not send clothing blindly or unsolicited. We have successfully placed clothing (and as a result, fashion press) on a number of well-known A-list celebrities.
Celebrity Gifting We approach celebrity gifting in a strategic, discerning manner. We have longstanding, personal relationships with the industry’s top stylists; we do not send clothing blindly or unsolicited.
The vendors’ factories are monitored by each brand’s production team to ensure quality control, and they are monitored by independent third-party inspectors we employ for compliance with local manufacturing standards 8 Table of Contents and regulations on an annual basis.
The vendors’ factories are monitored by each brand’s production team to ensure quality control, and they are monitored by independent third-party inspectors we employ for compliance with local manufacturing standards and regulations on an annual basis. We also monitor our vendors’ manufacturing facilities regularly, providing technical assistance and performing in-line and final audits to ensure the highest possible quality.
Affiliate Marketing: With select online publications and influencers, we’ve sought to establish [cost/commission] per action (“CPA”) or revenue sharing agreements. We believe these agreements are effective in incentivizing influencers or media to push our product and allowing us to only pay partners based on performance. Email Marketing: We utilize email marketing to build awareness and drive repeat purchases.
We are also able to link to products in the stories feature. 14 Affiliate Marketing: With select online publications and influencers, we’ve sought to establish CPA or revenue sharing agreements. We believe these agreements are effective in incentivizing influencers or media to push our product and allowing us to only pay partners based on performance.
We will invest in cross merchandising brands to customers through customized customer communications and personalized styles and looks utilizing products across all our portfolio brands, which we believe creates a competitive advantage for our brands versus single brands. As noted above, each of our brands has different competitors depending on product, quality and price point.
We plan to invest in cross merchandising brands to customers through customized customer communications and personalized styles and looks utilizing products across all our portfolio brands, which we believe creates a competitive advantage for our brands versus single brands. The markets in which we compete are highly competitive.
Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products. Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.
Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California. The products are designed and mostly produced in Los Angeles from the finest fabrics.
As a result of the Reverse Stock Split, every twenty-five (25) shares of the Company’s pre-Reverse Stock Split common stock was combined and automatically became one (1) share of common stock. The Company’s post-Reverse Stock Split common stock began trading on August 22, 2023 with a new CUSIP number of 25401N408.
As a result of the 2024 Reverse Stock Split, every fifty (50) shares of the Company’s pre-reverse stock split common stock was combined and automatically became one (1) share of common stock.
Stateside and Sundry products are distributed through wholesale and direct-to-consumer channels, including premium department stores and national chains, select independent boutiques and third-party online stores. DSTLD products have historically been sold solely direct-to-consumer, via our website. We started offering DSTLD products through a wholesale channel in October 2020.
Stateside and Sundry products are distributed through wholesale and direct-to-consumer channels includes premium department stores and national chains, select independent boutiques and third-party online stores. We do not have material terms or arrangements with our third-party distributors.
DSTLD is primarily a digital direct-to-consumer brand, to which we recently added select wholesale retailers to generate brand awareness. 4 Table of Contents ● Stateside is an elevated, America first brand with all knitting, dyeing, cutting and sewing sourced and manufactured locally in Los Angeles.
DSTLD is primarily a digital direct-to-consumer brand. 7 ● Stateside is an elevated, America first brand with all knitting, dyeing, cutting and sewing sourced and manufactured locally in Los Angeles. The collection is influenced by the evolution of the classic t-shirt, offering a simple yet elegant look.
Videos and blog posts will include interviews with our designers, a behind-the- scenes look at how products are made, features of other artists or creatives, and photo shoots. Retail Stores: We have successfully tested retail “pop ups” in the past.
Videos and blog posts will include interviews with our designers, a behind-the- scenes look at how products are made, features of other artists or creatives, and photo shoots. Instagram and Influencer Marketing Instagram and influencer marketing is one of our largest initiatives. On a weekly basis, we reach out to and receive requests from tastemakers in fashion, lifestyle, and photography.
Our focus is not on the size of an account, but on creating organic relationships with influencers who are excited to tell our story.
We have developed a certain set of criteria for working with influencers (for example, engagement level, aesthetic, audience demographic) that have enabled us to garner impactful impressions. Our focus is not on the size of an account, but on creating organic relationships with influencers who are excited to tell our story.
Our casual pants will range $85 to $109, with similar quality brands produced at the same factories wholesaling for approximately $85 to $115 and retailing for $175 to $250. We anticipate rolling out the ACE Studios brand in the second quarter of 2024 as a digitally native first brand.
Our casual pants will range $85 to $109, similar quality brands produced at the same factories wholesale for approximately $85 to $115 and retail for $175 to $250.
Loyalty Program We plan to develop and launch a company-wide loyalty program, which would include all our brands. Our customer loyalty program will be designed to engage and reward our customers in a direct and targeted manner, and to cross merchandise our portfolio brands to 10 Table of Contents our customers.
Our customer loyalty program will be designed to engage and reward our customers in a direct and targeted manner, and to cross merchandise our portfolio brands to our customers. Customers will earn reward points that can be used to purchase products.
We rely on a limited number of suppliers to provide our finished products, so we can aggregate pricing power. As we continue to increase our volumes, we will source additional factories to spread out our risks.
As we continue to increase our volumes, we will source additional factories to spread out our risks.
We believe this can be the most personalized customer communication channel for our brands, and therefore should continue to be one of our highest performing channels. We use an email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails, with the main goal of driving increased site traffic and purchases.
Email Marketing: We utilize email marketing to build awareness and drive repeat purchases. We believe this can be the most personalized customer communication channel for our brands, and therefore should continue to be one of our highest performing channels.
Sales and Distribution Bailey products are distributed through wholesale and direct-to-consumer channels. The wholesale channel includes premium department stores, select independent boutiques and third-party online stores. Since all the product is custom made, there is no old stock to sell off.
By selling direct-to-consumer, we are able to eliminate the wholesale mark-up and offer sharper pricing to the customer. Bailey products are distributed through wholesale and direct-to-consumer channels. The wholesale channel includes premium department stores, select independent boutiques and third-party online stores.
The licensee has asked to add additional categories to their current offering, which we agreed to. 2 Table of Contents We entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb of Dallas. We plan to open the store in April 2024.
In April of 2024, we entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb of Dallas. We opened the store in April 2024. The Company closed the store in October 2024 to focus on its e-commerce strategy with VaynerCommerce, a digital marketing agency.
We maintain a database through which we track and utilize key metrics such as customer acquisition cost, lifetime value per customer, cost per impression and cost per click.
We use an email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails, with the main goal of driving increased site traffic and purchases. We maintain a database through which we track and utilize key metrics such as customer acquisition cost, lifetime value per customer, cost per impression and cost per click.
All of our DSTLD, Bailey, Stateside, Sundry and ACE Studios sellable products are, or will be with respect to ACE Studios, stored at our corporate warehouse and distribution center in Vernon, CA, which also houses our corporate office.
All of our DSTLD, Avo, Bailey and Stateside and Sundry sellable product is stored at our corporate warehouse and distribution center in Los Angeles, CA, which also houses our corporate office. In addition to storing product, we also receive and process new product deliveries, process and ship outbound orders, and process and ship customer returns in this same facility.
We also monitor our vendors’ manufacturing facilities regularly, providing technical assistance and performing in-line and final audits to ensure the highest possible quality. We source our products from a variety of domestic and international manufacturers.
We source our products from a variety of domestic and international manufacturers.
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ITEM 1. BUSINESS Recent Developments Business We entered into a license deal for Bailey 44 in January 2023 that is paid quarterly based on the results. We have received two license payouts since November 2023 for approximately $124,000 in total.
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ITEM 1. BUSINESS Company Overview We are a curated collection of lifestyle brands, including Bailey, DSTLD, Stateside, Sundry and Avo, that offers a variety of apparel products through direct-to-consumer and wholesale distribution. Our complementary brand portfolio provides us with the unique opportunity to cross merchandise our brands.
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We expect the store to generate meaningful cash flow as we already have excess product that we can sell, which means we will not have to use cash to create inventory for sale. We expect the store to generate over $1.5 million in annual revenue and over $500,000 in free cash flow.
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As a result, we have been able to realize operational efficiencies and continue to identify additional cost-saving opportunities to scale our brands and overall portfolio. Recent Developments In April of 2024, we entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb of Dallas.
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Reverse Stock Split On August 22, 2023, following the approval of shareholders at a special meeting held on August 21, 2023, we completed a one-for-twenty-five (1-for-25) reverse stock split (the “Reverse Stock Split”).
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The Company closed the store in October 2024 to focus on its e-commerce strategy with VaynerCommerce, a digital marketing agency. 2 On October 2, 2024, the Company received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that the Staff has determined to delist the Company’s common stock from Nasdaq at the opening of business on October 11, 2024, based on the Company’s failure to maintain a minimum bid price of $1 per share per Listing Rule 5550(a)(2), unless the Company requests an appeal of such determination by October 9, 2024.
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The Reverse Stock Split did not (i) change the authorized number of shares, (ii) change the par value of the common stock, or (iii) modify any voting rights of the common stock.
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The Company submitted the appeal request to Nasdaq on October 9, 2024. Nasdaq granted a hearing of the appeal to be held on December 3, 2024.
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H&J Settlement Agreement and Disposition of H&J We have been involved in a dispute with the former owners of H&J regarding our obligation to “true up” their ownership interest in our company further to that membership interest purchase agreement dated May 10, 2021 whereby we acquired all of the outstanding membership interests of H&J (as amended, the “H&J Purchase Agreement”).
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On November 20, 2024, the Company received notice from the Staff of Nasdaq that the Company no longer satisfied the $35,000,000 market value of listed securities requirement, or the alternative $2,500,000 stockholders’ equity requirement, as set forth in Listing Rule 5550(b), and that such failure would serve as an additional basis for the delisting of the Company’s securities from Nasdaq.
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Further to the H&J Purchase Agreement, we agreed that if, at May 18, 2022, the one year anniversary of the closing date of our initial public offering, the product of the number of shares of our common stock issued at the closing of such acquisition multiplied by the average closing price per share of our shares of common stock as quoted on the NasdaqCM for the thirty (30) day trading period immediately preceding such date plus the gross proceeds, if any, of shares of our stock issued to such sellers and sold by them during the one year period from the closing date of the offering does not exceed the sum of $9.1 million, less the value of any shares of common stock cancelled further to any indemnification claims or post-closing adjustments under the H&J Purchase Agreement, then we shall issue to the subject sellers an additional aggregate number of shares of common stock equal to any such valuation shortfall at a per share price equal to the then closing price per share of our common stock as quoted on the NasdaqCM.
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In the Company’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the period ended September 30, 2024 (the “Q3 Report”), filed with the SEC on November 15, 2024, the Company reported stockholders’ equity of $19,046 and, therefore, no longer complied with the Rule.
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We did not honor our obligation to issue such shares and the former owner of H&J have claimed that they were damaged as a result.
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On December 16, 2024, the Staff of Nasdaq notified the Company that the Nasdaq Hearings Panel (the “Panel”) determined to delist the Company’s common stock and trading of the Company’s securities was suspended on Nasdaq at the open of trading on December 18, 2024.
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On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby contemporaneously with the parties’ execution of the Settlement Agreement (i) the Company made aggregate cash payments of $229,000 to D. Jones Tailored Collection, Ltd. (“D. Jones”), (ii) the Company issued 78,103 shares of common stock to D.
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Immediately after the delisting of the Company’s common stock, the Company’s common stock began being quoted on the OTC Pink Market under its existing symbol, “DBGI”. The Panel reached its decision because the Company was in violation of Listing Rules 5550(a)(2), 5550(b)(1), and 5635, the Bid Price, Shareholders’ Equity, and Shareholder Approval Rules, respectively.
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Jones at a per share purchase price of $17.925 which represented the lower of (i) the closing price per share of the Company’s common stock as reported on Nasdaq on June 20, 2023, and (ii) the average closing price per share of common stock as reported on the NasdaqCM for the five trading days preceding June 21, 2023, and (iii) the Company assigned and transferred one hundred percent (100%) of the Company’s membership interest in H&J to D.
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The Company and various purchasers (the “Investors”) executed a securities purchase agreement (the “SPA”) on or around April 7, 2023, whereby the Investors purchased from the Company promissory notes in the aggregate principal amount of approximately $2,500,000 (the “Original Notes”), and the remaining balances of such Original Notes as of October 1, 2023, were exchanged by the Investors for replacement promissory notes issued on October 1, 2023, in the aggregate principal amount of approximately $1,789,668.37 (the “2023 Notes”).
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Jones. This transaction is known as the “H&J Settlement”.
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On May 24, 2024, the Company entered into settlement agreements with the Investors (each a “Settlement Agreement”), pursuant to which the Company agreed to pay aggregate cash payments equal to $1,789,668.37 to extinguish all obligations and claims under the SPA, Original Notes, and 2023 Notes, as follows: (i) $500,000.00 on or before May 28, 2024 and (ii) $1,289,668.37 on or before September 30, 2024 (the “Final Payment”).
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The Settlement Agreement contained a resale registration rights provision, pursuant to which the Company agreed to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-1 covering the resale of all the shares issued pursuant to the Settlement Agreement and all the shares owned by D.
Added
On or around October 3, 2024, the Company entered into amendments to each Settlement Agreement with the Investors, whereby the Final Payment due date was extended to October 31, 2024. On November 1, 2024, the Company entered into a second amendment to each Settlement Agreement with the Investors, whereby the Final Payment due date was extended to November 4, 2024.
Removed
Jones and its principals by no later than the earlier of the following dates: (i) within 90 calendar days following the effective date of an offering that the Company was contemplating at that time but did not consummate and (ii) October 31, 2023.
Added
On November 4, 2024, the Company paid the Final Payment to extinguish all obligations and claims under the SPA, Original Notes, and 2023 Notes. Between July 1, 2024 and October 22, 2024, the Company issued and sold 105,125 shares of Common Stock (the “Recent ATM Share Sales”) to H.C.
Removed
The Company agreed to use its commercial best efforts to have the resale registration statement declared effective as soon as possible and D. Jones and its principals have agreed to sell no more than $500,000 worth of shares in any calendar month after the registration statement is declared effective.
Added
Wainwright & Co., LLC (the “Agent”) as sales agent or principal, pursuant to the terms of the Company’s previously announced At-The-Market Offering Agreement, dated December 27, 2023, between us and the Agent (the “Sales Agreement”). The Company received net proceeds of $2,063,386 from the Recent ATM Share Sales.
Removed
As of the date hereof, a registration statement on Form S-1 has not been declared effective. 3 Table of Contents Norwest Waiver On June 21, 2023, the Company, on the one hand, and Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP (together, the “Norwest Investors”), on the other hand, executed a Waiver and Amendment (the “Norwest Amendment”) whereby the Norwest Investors agreed to waive and terminate certain true up rights of the Norwest Investors under the Agreement and Plan of Merger, dated February 12, 2020, among the Company, Bailey, Norwest Venture Partners XI, LP, and Norwest Venture Partners XII, LP and Denim.LA Acquisition Corp.
Added
Between October 23, 2024 and December 17, 2024, the Company issued and sold 65,236 shares of Common Stock to the Agent as sales agent or principal, pursuant to the terms of the Sales Agreement, and received net proceeds of $278,160.
Removed
This transaction is known as the “Norwest Waiver”.
Added
Between October 3, 2024 and October 15, 2024, the Company issued 26,226 shares of the Company’s common stock (the “Shares”) to a certain note holder upon conversion of a portion of their promissory note originally issued by the Company on or around October 1, 2023 (the “Note”).
Removed
Sundry Conversion On June 21, 2023, the Company and the former owners of Sundry (collectively, the “Sundry Investors”) executed a Securities Purchase Agreement (the “Sundry SPA”) whereby the Company issued 5,761 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”) to the Sundry Investors at a purchase price of $1,000 per share.
Added
On October 16, 2024, the Company became aware that the issuance of the Shares was in error and not permitted under the terms of the Note due to the requirement thereunder that stockholder approval be obtained prior to the issuance of more than 19.9% of the Company’s pre-transaction shares outstanding upon conversion(s) of the Note, as referenced and specifically required under Nasdaq Listing Rule 5635(d).
Removed
The Series C Preferred Stock is convertible into a number of shares of the Company’s common stock equal to $1,000 divided by an initial conversion price of $17.925 which represents the lower of (i) the closing price per share of the common stock as reported on the NasdaqCM on June 20, 2023, and (ii) the average closing price per share of common stock as reported on the NasdaqCM for the five trading days preceding June 21, 2023.
Added
The Company then notified the note holder that the Shares must be returned to the Company’s transfer agent for cancellation. On November 5, 2024, the holder facilitated the cancellation of 26,226 shares of the Company’s common stock in accordance with the Company’s remediation plan.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

61 edited+16 added−47 removed162 unchanged
Biggest changeWe may not be able to maintain and enhance our existing brand portfolio if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, operating results and growth prospects. • An economic downturn or economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for our products. • We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue. • Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties. • If we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would have a material adverse effect on our business and operating results. • We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected. • Merchandise returns could harm our business. • We rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity. • Our sales and gross margins may decline as a result of increasing product costs and decreasing selling prices. • Our operations are currently dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse and distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on our business and operations. • Our sales and gross margins may decline as a result of increasing freight costs. 13 Table of Contents • Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations. • Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. • Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel. • If we cannot successfully protect our intellectual property, our business could suffer. • If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results could be materially adversely affected. • Organizations face growing regulatory and compliance requirements. • Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity. • Our business is affected by seasonality. • The price of our common stock has in the past and may in the future fluctuate substantially. • If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock. • If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock. • We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors and may make it more difficult to compare our performance with other public companies. • Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price. • Provisions in our sixth amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable. • Our sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders. • We may be required to issue additional shares of our common stock further to agreements whereby we acquired Bailey.
Biggest changeWe may not be able to maintain and enhance our existing brand portfolio if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, operating results and growth prospects. ● An economic downturn or economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for our products. ● Adverse macroeconomic and geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results of operations and financial condition. 18 ● We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue. ● Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties. ● If we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would have a material adverse effect on our business and operating results. ● We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected. ● Merchandise returns could harm our business. ● We rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity. ● Our sales and gross margins may decline as a result of increasing product costs and decreasing selling prices. ● Our operations are currently dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse and distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on our business and operations. ● Our sales and gross margins may decline because of increasing freight costs. ● Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations. ● Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. ● Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel. ● If we cannot successfully protect our intellectual property, our business could suffer. ● If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results could be materially adversely affected. ● Organizations face growing regulatory and compliance requirements. ● Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity. ● Our business is affected by seasonality. ● The price of our common stock has in the past and may in the future fluctuate substantially. ● If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock. 19 ● We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors and may make it more difficult to compare our performance with other public companies. ● Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price. ● Provisions in our sixth amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable. ● Our sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders. ● We may be required to issue additional shares of our common stock further to agreements whereby we acquired Bailey.
If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.
If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all your investment.
Our sixth amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: ● any derivative action or proceeding brought on our behalf; ● any action asserting a breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; ● any action asserting a claim against us or our directors, officers or other employees arising under the Delaware General Corporation Law, our sixth amended and restated certificate of incorporation or our bylaws; ● any action or proceeding to interpret, apply, enforce or determine the validity of our sixth amended and restated certificate of incorporation or our bylaws; ● any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; or ● any action asserting a claim against us or our directors, officers or other employees that is governed by the “internal affairs doctrine” as that term is defined in Section 115 of the Delaware General Corporation Law.
Our sixth amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: ● any derivative action or proceeding brought on our behalf; ● any action asserting a breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; ● any action asserting a claim against us or our directors, officers or other employees arising under the Delaware General Corporation Law, our sixth amended and restated certificate of incorporation or our bylaws; ● any action or proceeding to interpret, apply, enforce or determine the validity of our sixth amended and restated certificate of incorporation or our bylaws; 34 ● any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; or ● any action asserting a claim against us or our directors, officers or other employees that is governed by the “internal affairs doctrine” as that term is defined in Section 115 of the Delaware General Corporation Law.
Additionally: ● the key personnel of the acquired business may decide not to work for us; ● changes in management at an acquired business may impair its relationships with employees and customers; ● we may be unable to maintain uniform standards, controls, procedures and policies among acquired businesses; ● we may be unable to successfully implement infrastructure, logistics and systems integration; ● we may be held liable for legal claims (including environmental claims) arising out of activities of the acquired businesses prior to our acquisitions, some of which we may not have discovered during our due diligence, and we may not have indemnification claims available to us or we may not be able to realize on any indemnification claims with respect to those legal claims; ● we will assume risks associated with deficiencies in the internal controls of acquired businesses; ● we may not be able to realize the cost savings or other financial benefits we anticipated; ● we may be unable to successfully scale an acquired business; and ● our ongoing business may be disrupted or receive insufficient management attention.
Additionally: ● the key personnel of the acquired business may decide not to work for us; ● changes in management at an acquired business may impair its relationships with employees and customers; ● we may be unable to maintain uniform standards, controls, procedures and policies among acquired businesses; ● we may be unable to successfully implement infrastructure, logistics and systems integration; 21 ● we may be held liable for legal claims (including environmental claims) arising out of activities of the acquired businesses prior to our acquisitions, some of which we may not have discovered during our due diligence, and we may not have indemnification claims available to us or we may not be able to realize on any indemnification claims with respect to those legal claims; ● we will assume risks associated with deficiencies in the internal controls of acquired businesses; ● we may not be able to realize the cost savings or other financial benefits we anticipated; ● we may be unable to successfully scale an acquired business; and ● our ongoing business may be disrupted or receive insufficient management attention.
We may not be able to consummate those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that we realize will be adequate to meet debt service obligations when due. Our results of operations have been and could be in the future adversely affected as a result of asset impairments.
We may not be able to consummate those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that we realize will be adequate to meet debt service obligations when due. 23 Our results of operations have been and could be in the future adversely affected as a result of asset impairments.
In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant unanticipated compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net revenues. Any international operations are also subject to compliance with the U.S.
In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant unanticipated compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net revenues. 30 Any international operations are also subject to compliance with the U.S.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. 33 Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
As a result of such failures, we could also become subject to investigations by Nasdaq, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition and divert financial and management resources.
As a result of such failures, we could also become subject to investigations by the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition and divert financial and management resources.
Failure to respond to changing customer preferences and fashion trends could also negatively impact the image of our brands with our customers and result in diminished brand loyalty. Our business depends on our ability to maintain a strong portfolio of brands and engaged customers.
Failure to respond to changing customer preferences and fashion trends could also negatively impact the image of our brands with our customers and result in diminished brand loyalty. 24 Our business depends on our ability to maintain a strong portfolio of brands and engaged customers.
For example, it could: ● make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; ● require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes; ● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; ● place us at a competitive disadvantage to our competitors with proportionately less debt for their size; ● limit our ability to refinance our existing indebtedness or borrow additional funds in the future; ● limit our flexibility in planning for, or reacting to, changing conditions in our business; and 18 Table of Contents ● limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.
For example, it could: ● make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; ● require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes; ● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; ● place us at a competitive disadvantage to our competitors with proportionately less debt for their size; ● limit our ability to refinance our existing indebtedness or borrow additional funds in the future; ● limit our flexibility in planning for, or reacting to, changing conditions in our business; and ● limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.
The enforceability of similar exclusive federal forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and while the Delaware Supreme Court has ruled that this type of 31 Table of Contents exclusive federal forum provision is facially valid under Delaware law, there is uncertainty as to whether other courts would enforce such provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
The enforceability of similar exclusive federal forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and while the Delaware Supreme Court has ruled that this type of exclusive federal forum provision is facially valid under Delaware law, there is uncertainty as to whether other courts would enforce such provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Below is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations: • We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations. • If we do not obtain adequate capital funding or improve our financial performance, we may not be able to continue as a going concern. • Widespread outbreak of an illness or any other public health crisis, including the recent coronavirus (COVID-19) global pandemic, could materially and adversely affect, and has materially and adversely affected, our business, financial condition and results of operations. • If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business and our revenues and operating results will be adversely affected. 12 Table of Contents • We may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer. • We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them. • Our ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we may be unable to obtain on acceptable terms. • We have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability to react to changes in our business. • We may not be able to generate sufficient cash to service all of our debt or refinance our obligations and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful. • Our results of operations have been and could be in the future adversely affected as a result of asset impairments. • If we fail to effectively manage our growth, our business, financial condition and operating results could be harmed. • If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner, our business, financial condition and operating results could be harmed. • Our business depends on our ability to maintain a strong portfolio of brands and engaged customers.
Below is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations: ● We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations. ● If we do not obtain adequate capital funding or improve our financial performance, we may not be able to continue as a going concern. ● Widespread outbreak of an illness or any other public health crisis could materially and adversely affect, and has materially and adversely affected, our business, financial condition and results of operations. ● If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business, and our revenues and operating results will be adversely affected. ● We may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer. ● We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them. ● Our ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we may be unable to obtain on acceptable terms. ● We have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability to react to changes in our business. ● We may not be able to generate sufficient cash to service all our debt or refinance our obligations and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful. ● Our results of operations have been and could be in the future adversely affected as a result of asset impairments. ● If we fail to effectively manage our growth, our business, financial condition and operating results could be harmed. ● If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner, our business, financial condition and operating results could be harmed. ● Our business depends on our ability to maintain a strong portfolio of brands and engaged customers.
There can be no assurance that any 25 Table of Contents patents we obtain will adequately protect our inventions or survive a legal challenge, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain.
There can be no assurance that any patents we obtain will adequately protect our inventions or survive a legal challenge, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain.
As a result, termination of these supply arrangements, an adverse change in the financial condition of these 23 Table of Contents suppliers or an adverse change in their ability to manufacture and/or deliver desired products on a timely basis each could have a material adverse effect on our business, financial condition and results of operations.
As a result, termination of these supply arrangements, an adverse change in the financial condition of these suppliers or an adverse change in their ability to manufacture and/or deliver desired products on a timely basis each could have a material adverse effect on our business, financial condition and results of operations.
If we fail to effectively manage our hiring needs or successfully integrate new hires, our efficiency, our ability to meet forecasts and our employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results. 19 Table of Contents We are also required to manage numerous relationships with various vendors and other third parties.
If we fail to effectively manage our hiring needs or successfully integrate new hires, our efficiency, our ability to meet forecasts and our employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results. We are also required to manage numerous relationships with various vendors and other third parties.
The future market price of our common stock may be significantly affected by factors, such as: ● market conditions affecting the apparel industries; ● quarterly variations in our results of operations; ● changes in government regulations; ● the announcement of acquisitions by us or our competitors; ● changes in general economic and political conditions; ● volatility in the financial markets; ● results of our operations and the operations of others in our industry; ● changes in interest rates; ● threatened or actual litigation and government investigations; ● the addition or departure of key personnel; ● actions taken by our stockholders, including the sale or disposition of their shares of our common stock; and ● differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections.
The future market price of our common stock may be significantly affected by factors, such as: ● market conditions affecting the apparel industries; ● quarterly variations in our results of operations; ● changes in government regulations; ● the announcement of acquisitions by us or our competitors; ● changes in general economic and political conditions; ● volatility in the financial markets; ● results of our operations and the operations of others in our industry; ● changes in interest rates; ● threatened or actual litigation and government investigations; ● the addition or departure of key personnel; ● actions taken by our stockholders, including the sale or disposition of their shares of our common stock; and ● differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections. 31 These and other factors may lower the market price of our common stock, regardless of our actual operating performance.
For example, global economic conditions may also adversely affect our suppliers’ access to capital and liquidity with which to maintain their inventory, production levels, and product quality and to operate their 20 Table of Contents businesses, all of which could adversely affect our supply chain.
For example, global economic conditions may also adversely affect our suppliers’ access to capital and liquidity with which to maintain their inventory, production levels, and product quality and to operate their businesses, all of which could adversely affect our supply chain.
Increases in the costs of labor and other costs of doing business in these countries could significantly 22 Table of Contents increase our costs to produce our products and could have a negative impact on our operations, net revenue, and earnings.
Increases in the costs of labor and other costs of doing business in these countries could significantly increase our costs to produce our products and could have a negative impact on our operations, net revenue, and earnings.
During the years ended December 31, 2023, we recorded impairment expense of $0.0 million and $15.5 million pertaining to the goodwill and intangible assets. Any future impairments, including impairments of goodwill, intangible assets, long-lived assets or investments, could have a material adverse effect on our financial condition and results of operations for the period in which the impairment is recognized.
During the years ended December 31, 2024, we recorded impairment expense of $0.0 million and $1.4 million pertaining to the goodwill and intangible assets. Any future impairments, including impairments of goodwill, intangible assets, long-lived assets or investments, could have a material adverse effect on our financial condition and results of operations for the period in which the impairment is recognized.
As of December 31, 2023, we had an accumulated deficit of $113.9 million. We may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, delays, and other unknown events, as well as the inflationary and potentially recessive economic environment.
As of December 31, 2024, we had an accumulated deficit of $127.2 million. We may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, delays, and other unknown events, as well as the inflationary and potentially recessive economic environment.
Goodwill and other intangible assets that have indefinite useful lives cannot be amortized, but instead must be tested at least annually for impairment. As a result of our acquisitions of Sundry, Stateside and Bailey, our goodwill and intangible assets as of December 31, 2023 were $19.0 and $21.9 million, respectively.
Goodwill and other intangible assets that have indefinite useful lives cannot be amortized, but instead must be tested at least annually for impairment. As a result of our acquisitions of Sundry, Stateside and Bailey, our goodwill and intangible assets as of December 31, 2024 were $9.0 and $6.1 million, respectively.
Any such additional issuances would result in additional dilution to our stockholders. • We do not expect to pay any dividends in the foreseeable future. • If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline. 14 Table of Contents Risks related to our financial condition and business.
Any such additional issuances would result in additional dilution to our stockholders. ● We do not expect to pay any dividends in the foreseeable future. ● If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline.
Demand may be affected by seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors, and our consumers may not purchase products in the quantities that we expect.
Demand may be affected by seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors, and our consumers may not purchase products in the quantities that we expect. 26 It may be difficult to accurately forecast demand and determine appropriate levels of product.
This seasonality may adversely affect our business and cause our results of operations to fluctuate, and, as a result, we believe that comparisons of our operating results between different quarters within a single fiscal year are not necessarily meaningful and that results of operations in any period should not be considered indicative of the results to be expected for any future period. 26 Table of Contents Risks Related to our Common Stock The price of our common stock has in the past and may in the future fluctuate substantially.
This seasonality may adversely affect our business and cause our results of operations to fluctuate, and, as a result, we believe that comparisons of our operating results between different quarters within a single fiscal year are not necessarily meaningful and that results of operations in any period should not be considered indicative of the results to be expected for any future period.
Any of these factors could result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of their investment. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Any of these factors could result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of their investment.
If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs.
We generally do not have the right to return unsold products to our suppliers. If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs.
Freight costs are impacted by changes in fuel prices through surcharges, among other factors. Fuel prices and surcharges affect freight costs both on inbound freight from suppliers to the distribution center as well as outbound freight from the distribution center to stores/shops, supplier returns and third-party liquidators, and shipments of product to customers.
Fuel prices and surcharges affect freight costs both on inbound freight from suppliers to the distribution center as well as outbound freight from the distribution center to stores/shops, supplier returns and third-party liquidators, and shipments of product to customers.
Any significant interruption in the operation of the warehouse and fulfillment/ distribution center due to COVID-19 restrictions, natural disasters, accidents, system issues or failures, or other unforeseen causes that materially impair our ability to access or use our facility, could delay or impair the ability to distribute merchandise and fulfill online orders, which could cause sales to decline.
Any significant interruption in the operation of the warehouse and fulfillment/ distribution center due to COVID-19 restrictions, natural disasters, accidents, system issues or failures, or other unforeseen causes that materially impair our ability to access or use our facility, could delay or impair the ability to distribute merchandise and fulfill online orders, which could cause sales to decline. 28 We also depend upon third-party carriers for shipment of a significant amount of merchandise directly to our customers.
As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by: ● quickly adapting to changes in customer requirements or consumer preferences; ● discounting excess inventory that has been written down or written off; ● devoting resources to the marketing and sale of their products, including significant advertising campaigns, media placement, partnerships and product endorsement; and ● engaging in lengthy and costly intellectual property and other disputes.
As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by: ● quickly adapting to changes in customer requirements or consumer preferences; ● discounting excess inventory that has been written down or written off; ● devoting resources to the marketing and sale of their products, including significant advertising campaigns, media placement, partnerships and product endorsement; and ● engaging in lengthy and costly intellectual property and other disputes. 25 Our inability to compete successfully against our competitors and maintain our gross margin could have a material adverse effect on our business, financial condition and results of operations.
Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of our common stock and materially affect the value of your investment.
The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of our common stock and materially affect the value of your investment.
Supply chain issues have specifically impacted the following for our brands: ● Increased costs in raw materials from fabric prices, which have increased 10% to 100% depending on the fabric, the time of year, and the origin of the fabric, as well as where the fabric is being shipped; ● Increased cost per kilo to ship via sea or air, which has increased from 25% to 300% depending on the time of year and from the country we are shipping from; ● Increased transit time via sea or air, which have increased by two weeks to two months; and ● Increased labor costs for producing the finished goods, which have increased 5% to 25% depending on the country and the labor skill required to produce the goods.
Supply chain issues have specifically impacted the following for our brands: ● Increased costs in raw materials from fabric prices, which have increased 10% to 100% depending on the fabric, the time of year, and the origin of the fabric, as well as where the fabric is being shipped; ● Increased cost per kilo to ship via sea or air, which has increased from 25% to 300% depending on the time of year and from the country we are shipping from; ● Increased transit time via sea or air, which have increased by two weeks to two months; and ● Increased labor costs for producing the finished goods, which have increased 5% to 25% depending on the country and the labor skill required to produce the goods. 27 The operations of our suppliers can be subject to additional risks beyond our control, including shipping delays, labor disputes, trade restrictions, tariffs and embargos, or any other change in local conditions.
We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations. We have incurred significant net losses since inception. Our net loss was approximately $10.2 and $38.0 million for the years ended December 31, 2023 and 2022, respectively.
Risks related to our financial condition and business. We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations. We have incurred significant net losses since inception. Our net loss was approximately $13.2 and $10.3 million for the years ended December 31, 2024 and 2023, respectively.
The market price of our common stock has in the past and could in the future be extremely volatile.
Risks Related to our Common Stock The price of our common stock has in the past and may in the future fluctuate substantially. The market price of our common stock has in the past and could in the future be extremely volatile.
We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base. Our substantial debt could have important consequences to us.
As of December 31, 2024, we had an aggregate principal amount of debt outstanding of approximately $6.5 million. We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base. Our substantial debt could have important consequences to us.
The amount and timing of our future funding requirements depends on many factors, including: ● The timing and cost of potential future acquisitions; ● Integration of the businesses that we have acquired or may acquire in the future; ● The hiring of additional management and other personnel as we continue to grow; and ● Any costs associated with any build-out and opening of showrooms, as needed, for certain of our brands, We cannot be certain that additional funding will be available on acceptable terms, or at all.
The amount and timing of our future funding requirements will depend on various factors, including: ● The timing and cost of potential future acquisitions; ● Integration of businesses we have acquired or may acquire in the future; ● Hiring additional management and personnel to support our growth; and ● Costs associated with the build-out and opening of showrooms for certain brands, as needed.
If competitive pressures or other 24 Table of Contents factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could have a material adverse effect on our business, financial condition and results of operations.
If competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could have a material adverse effect on our business, financial condition and results of operations. Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen. Advanced attacks are multi-staged, unfold over time, and utilize a range of attack vectors with military-grade cyber weapons and proven techniques, such as spear phishing and social engineering, leaving organizations and users at high risk of being compromised.
Advanced attacks are multi-staged, unfold over time, and utilize a range of attack vectors with military-grade cyber weapons and proven techniques, such as spear phishing and social engineering, leaving organizations and users at high risk of being compromised.
Others may independently develop the same or similar technologies and processes, or may improperly acquire and use information about our technologies and processes, which may allow them to provide a service similar to ours, which could harm our competitive position.
Others may independently develop the same or similar technologies and processes, or may improperly acquire and use information about our technologies and processes, which may allow them to provide a service similar to ours, which could harm our competitive position. Our principal trademark assets include the registered trademarks “DSTLD”, “Bailey 44”, “AVO”, “STATESIDE” and “SUNDRY” and our logos and taglines.
Internet domain name and various related domain names, which are subject to Internet regulatory bodies and trademark and other related laws of each applicable jurisdiction. If we are unable to protect our trademarks or domain names, our brand recognition and reputation would suffer, we would incur significant expense establishing new brands and our operating results would be adversely impacted.
If we are unable to protect our trademarks or domain names, our brand recognition and reputation would suffer, we would incur significant expense establishing new brands and our operating results would be adversely impacted.
We also depend upon third-party carriers for shipment of a significant amount of merchandise directly to our customers. An interruption in service by these third-party carriers for any reason could cause temporary disruptions in business, a loss of sales and profits, and other material adverse effects. Our sales and gross margins may decline as a result of increasing freight costs.
An interruption in service by these third-party carriers for any reason could cause temporary disruptions in business, a loss of sales and profits, and other material adverse effects. Our sales and gross margins may decline as a result of increasing freight costs. Freight costs are impacted by changes in fuel prices through surcharges, among other factors.
We use third-party social media platforms as, among other things, marketing tools. We also maintain relationships with many social media influencers and engage in sponsorship initiatives.
Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties. We use third-party social media platforms as, among other things, marketing tools. We also maintain relationships with many social media influencers and engage in sponsorship initiatives.
These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. 30 Table of Contents Provisions in our sixth amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable.
These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Finally, acquisitions could be viewed negatively by analysts, investors or our customers. 17 Table of Contents In addition, we may not be successful in acquiring businesses and may expend time and expenses in connection with failed acquisitions.
Finally, acquisitions could be viewed negatively by analysts, investors or our customers. In addition, we may not be successful in acquiring businesses and may expend time and expenses in connection with failed acquisitions. In addition to such time and expenses, public announcement of a failed acquisition could also negatively impact the trading price of our common stock.
We primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our business.
We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes. We primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our business.
We do not prescribe what our influencers post, and if we were held responsible for the content of their posts or their actions, we could be fined or forced to alter our practices, which could have an adverse impact on our business. 21 Table of Contents Negative commentary regarding us, our products or influencers and other third parties who are affiliated with us may also be posted on social media platforms and may be adverse to our reputation or business.
We do not prescribe what our influencers post, and if we were held responsible for the content of their posts or their actions, we could be fined or forced to alter our practices, which could have an adverse impact on our business.
These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the public offering price. Furthermore, in recent years the stock market has experienced significant price and volume fluctuations.
As a result, our common stock may trade at prices significantly below the public offering price. Furthermore, in recent years the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies.
However, there can be no assurance that we will be able to obtain financing if and when it is needed or that it will be available on terms that we deem acceptable. As a result, we may be unable to pursue our acquisition strategy successfully, which may prevent us from achieving our growth objectives.
However, there can be no assurance that we will be able to obtain financing if and when it is needed or that it will be available on terms that we deem acceptable.
We are in the process of taking steps intended to remedy these material weaknesses, and we will not be able to fully address these material weaknesses until these steps have been completed. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Controls and Procedures ” for information regarding our remediation efforts.
We are in the process of taking steps intended to remedy these material weaknesses, and we will not be able to fully address these material weaknesses until these steps have been completed.
Even if we are able to report our consolidated financial statements accurately and timely, if we do not make all the necessary improvements to address the material weaknesses, continued disclosure of our material weaknesses will be required in future filings with the SEC, which could reduce investor confidence in our reported results and our cause our stock price to decline. 29 Table of Contents We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors and may make it more difficult to compare our performance with other public companies.
Even if we are able to report our consolidated financial statements accurately and timely, if we do not make all the necessary improvements to address the material weaknesses, continued disclosure of our material weaknesses will be required in future filings with the SEC, which could reduce investor confidence in our reported results and our cause our stock price to decline.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Controls and Procedures ” for information regarding our remediation efforts. 32 As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls.
We face significant competition for skilled personnel in our industries. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business.
There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industries. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees.
In addition, our continuing ability to attract and retain highly qualified personnel, especially employees with experience in the fashion and fitness industries, will also be critical to our success because we will need to hire and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel.
Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our stock. 29 In addition, our continuing ability to attract and retain highly qualified personnel, especially employees with experience in the fashion and fitness industries, will also be critical to our success because we will need to hire and retain additional personnel as our business grows.
We have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability to react to changes in our business. As of December 31, 2023, we had an aggregate principal amount of debt outstanding of approximately $9.7 million.
As a result, we may be unable to pursue our acquisition strategy successfully, which may prevent us from achieving our growth objectives. 22 We have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability to react to changes in our business.
This situation is changing rapidly and additional impacts may arise that we are not aware of currently. 16 Table of Contents If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business and our revenues and operating results will be adversely affected.
Additionally, we remain mindful of any debt financing covenants that may restrict our ability to incur additional debt, pay dividends, or engage in certain transactions. 20 If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business and our revenues and operating results will be adversely affected.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information, and financial and other personally identifiable information of our customers and employees.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information, and financial and other personally identifiable information of our customers and employees. The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy.
In addition to such time and expenses, public announcement of a failed acquisition could also negatively impact the trading price of our common stock. We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.
We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.
Our principal trademark assets include the registered trademarks “DSTLD”, “Bailey 44”, “ACE STUDIOS”, “STATESIDE” and “SUNDRY” and our logos and taglines. Our trademarks are valuable assets that support our brand and consumers’ perception of our services and merchandise. We also hold the rights to the “www.digitalbrandsgroup.co”, www.dstld.com, “www.bailey44.com”, and www.harperandjones.com.
Our trademarks are valuable assets that support our brand and consumers’ perception of our services and merchandise. We also hold the rights to the “www.digitalbrandsgroup.co”, www.dstld.com, “www.bailey44.com” Internet domain name and various related domain names, which are subject to Internet regulatory bodies and trademark and other related laws of each applicable jurisdiction.
The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions.
Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen.
As a result, the value of your investment could be significantly reduced or completely lost. If we cannot successfully protect our intellectual property, our business could suffer. We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes.
Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. As a result, the value of your investment could be significantly reduced or completely lost. If we cannot successfully protect our intellectual property, our business could suffer.
From May 2021 to March 31, 2023, the high and low prices of our common stock as quoted on the NasdaqCM was $22,000 and $2.30, respectively (as appropriately adjusted for the 1-for-100 and 1-for-25 reverse stock splits effectuated by the Company in November 2022 and August 2023, respectively).
From May 2021 to March 31, 2025, the high and low prices of our common stock as quoted on the Nasdaq Capital Market (through December 17, 2024) and the OTC Pink (beginning on December 18, 2024) was $746,250 and $1.03, respectively (as appropriately adjusted for Reverse Stock Splits).
Any failure to achieve and maintain profitability would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our financial condition. If we do not obtain adequate capital funding or improve our financial performance, we may not be able to continue as a going concern.
Any failure to achieve and maintain profitability would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our financial condition. We have historically incurred net losses and experienced negative cash flows from operations. The Company has historically incurred net losses and experienced negative cash flows from operations.
Removed
We have incurred a net loss in each year since our inception and expect to incur losses in future periods as we continue to increase our expenses in order to grow our business. We had a working capital deficit of $17.65 million at December 31, 2023.
Added
As of December 31, 2024, we had a working capital deficit of $16.1 million. However, the Company has successfully obtained substantial capital funding, which, we believe, provides the necessary liquidity to support our ongoing operations.
Removed
These factors raise substantial doubt about our Company’s ability to continue as a going concern. If we are unable to obtain adequate funding or if we are unable to grow our revenue substantially to achieve and sustain profitability, we may not be able to continue as a going concern.
Added
With this funding, we believe we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial performance, although additional funding may be required in the future to support expansion.
Removed
The report of our independent registered public accounting firm for the year ended December 31, 2023 included herein contains an explanatory paragraph indicating that there is substantial doubt as to our ability to continue as a going concern as a result of recurring losses from operations.
Added
We will continue to monitor our financial position and capital needs going forward.
Removed
If we are unable to raise additional capital when required or on acceptable terms, we will be required to significantly delay, scale back or restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained.
Added
Adverse macroeconomic and geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results of operations and financial condition.
Removed
If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us. In addition, our ability to achieve profitability or to respond to competitive pressures would be significantly limited.
Added
Challenging macroeconomic conditions, including as a result of geopolitical events, changes to international trade policies, public health crises, disruptions in global supply chains, and changes in inflation and interest rates, may negatively impact our costs from our suppliers and consumer demand for our products, as well as sales cycles, and in turn may materially affect the Company’s business, results of operations and financial condition.
Removed
In addition, we have in the past and may in the future be restricted or limited by our current outstanding indebtedness on our ability to enter into additional indebtedness and 15 Table of Contents any future debt financing based upon covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.
Added
Such economic factors and uncertainties are beyond the Company’s control and the Company has no comparative advantage in forecasting their effects. The U.S. has established free trade laws and regulations that set certain duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements.
Removed
Widespread outbreak of an illness or any other public health crisis, including the recent coronavirus (COVID-19) global pandemic, could materially and adversely affect, and has materially and adversely affected, our business, financial condition and results of operations.
Added
Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where our supplies may be sourced could have a material adverse effect on our business and financial results.
Removed
Our business has been, and will continue to be, impacted by the effects of the COVID-19 global pandemic in countries where our suppliers, third-party service providers or consumers are located.
Added
In recent years, the U.S. and Chinese governments have imposed a series of significant incremental retaliatory tariffs to certain imported products. Further, the U.S. administration recently has begun to enact additional or enhanced tariffs in various jurisdictions relevant to our business.
Removed
These effects include recommendations or mandates from governmental authorities to close businesses, limit travel, avoid large gatherings or to self-quarantine, as well as temporary closures and decreased operations of the facilities of our suppliers, service providers and customers.
Added
Implementation of tariffs or other restrictive trade measures by the United States and potentially reciprocally by other countries subject to such to tariffs remains highly uncertain.
Removed
The impacts on us have included, and in the future could include, but are not limited to: ● significant uncertainty and turmoil in global economic and financial market conditions causing, among other things: decreased consumer confidence and decreased consumer spending, now and in the mid and long-term.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas.
Biggest changeCYBERSECURITY Risk Management and Strategy Our comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats involves a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization’s operations, data, and systems. 35 Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas.
The cybersecurity risk management program includes: • Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and broader enterprise IT environment; • A team principally responsible for managing (i) cybersecurity risk assessment processes, (ii) security controls, and (iii) response to cybersecurity incidents; 32 Table of Contents • The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of security controls; • Cybersecurity awareness training for users and senior management, including through the use of third-party providers for regular mandatory training; • A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and, • A risk management process for third-party service providers, suppliers and vendors, including a rigorous vetting process and ongoing monitoring mechanisms designed to ensure compliance with cybersecurity standards.
The cybersecurity risk management program includes: ● Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and broader enterprise IT environment; ● A team principally responsible for managing (i) cybersecurity risk assessment processes, (ii) security controls, and (iii) response to cybersecurity incidents; ● The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of security controls; ● Cybersecurity awareness training for users and senior management, including through the use of third-party providers for regular mandatory training; ● A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and ● A risk management process for third-party service providers, suppliers and vendors, including a rigorous vetting process and ongoing monitoring mechanisms designed to ensure compliance with cybersecurity standards.
As of the date of this Annual Report on Form 10-K, the Company is not aware of any cybersecurity incidents that have had a materially adverse effect on our operations, business, results of operations, or financial condition. Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function.
As of the date of this Annual Report on Form 10-K, the Company is no t aware of any cybersecurity incidents that have had a materially adverse effect on our operations, business, results of operations, or financial condition. Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function.
Removed
ITEM 1C. CYBERSECURITY Risk Management and Strategy Our comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats involves a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization’s operations, data, and systems.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth information with respect to our facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Square ​ ​ ​ ​ ​ ​ Footage ​ Lease ​ Location ​ Type ​ (approximate) ​ Expiration ​ Vernon, California Corporate Warehouse and Distribution Center 42,206 2024 ​ Los Angeles, California Showroom 2,000 2025 ​ Austin, Texas Interim Corporate Headquarters 500 2024 (1) ​ (1) We are currently leveraging shared office space and working remotely as we work with an agent to secure long-term office space in Austin, TX for our corporate headquarters. ​ 33 Table of Contents
Biggest changeThe following table sets forth information with respect to our facilities: Square Footage Location Type (approximate) Vernon, California Corporate Warehouse and Distribution Center 42,206 36
ITEM 2. PROPERTIES We currently lease approximately 44,706 square feet of office and showroom spaces in California and Texas, with leases that expire through 2025. We believe that our existing facilities will be sufficient for our needs for the foreseeable future.
ITEM 2. PROPERTIES We currently have month to month rented properties approximately 44,206 square feet of office and showroom spaces in California. We believe that our existing facilities will be sufficient for our needs for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

8 edited+2 added−5 removed3 unchanged
Biggest changeThe Company does not believe it is probable that losses in excess of such pay trade payables will be incurred. ● On November 15, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $582,208, which represents “double damages.” The amount due to the vendor is $292,604.
Biggest changeThe Company is disputing this new amount after review of the lease. ● On November 15, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $582,208, which represents “double damages.” The amount due to the vendor is $292,604. Such amounts are included in the accompanying balance sheets.
All claims above, to the extent management believes it will be liable, have been included in accounts payable and accrued expenses and other liabilities in the accompanying consolidated balance sheet as of December 31, 2023. Depending on the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive orders.
All claims above, to the extent management believes it will be liable, have been included in accounts payable and accrued expenses and other liabilities in the accompanying consolidated balance sheet as of December 31, 2024. Depending on the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive orders.
While it is not possible to determine the 34 Table of Contents outcomes, we believe based on our current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, cash flows, or financial condition. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.
While it is not possible to determine the outcomes, we believe based on our current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, cash flows, or financial condition.
The vendor has recently updated the claim to now be $450,968 after signing a long-term lease with another brand for this location. The Company is disputing this new amount after review of the lease.
The vendor has recently updated the claim to now be $450,968 after signing a long-term lease with another brand for this location.
Such amounts are included in the accompanying balance sheets. The Company does not believe it is probable that losses in excess of such pay trade payables will be incurred. ● On December 21, 2023, a former employee filed a wrongful termination lawsuit against the Company.
The Company does not believe it is probable that losses in excess of such pay trade payables will be incurred. ● On December 21, 2023, a former employee from over two years ago filed a wrongful termination lawsuit against the Company.
The Company is disputing this claim. ● A vendor filed a lawsuit against Bailey 44 related to a retail store lease in the amount of $1.5 million. The Company is disputing the claim for damages and the matter is ongoing.
The marketing team was let go and the Company moved to a third-party outsourced marketing solution. ● A vendor filed a lawsuit against Bailey 44 related to a retail store lease in the amount of $1.5 million. The Company is disputing the claim for damages and the matter is ongoing.
The Company is actively working to resolve this matter. ● On November 16, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $345,384, which represents past due fees and late fees. Such amounts are included in the accompanying balance sheets.
The Company does not believe it is probable that the losses in excess of such trade payables will be incurred. ● On November 16, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $345,384, which represents past due fees and late fees. Such amounts are included in the accompanying balance sheets.
The Company does not believe it is probable that the losses in excess of such trade payables will be incurred. ● On February 7, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $182,400.
The Company does not believe it is probable that losses in excess of such pay trade payables will be incurred. The matter was settled for $400,000 and is currently on a monthly payment plan.
Removed
Such amounts include interest due, and are included in accounts payable, net of payments made to date, in the accompanying consolidated balance sheets.
Added
The Company is disputing this claim and has been awarded arbitration for this matter. ● On March 20, 2024, a former employee from over two years ago filed a wrongful termination lawsuit against the Company. The Company is disputing this claim.
Removed
The Company does not believe it is probable that the losses in excess of such trade payables will be incurred. ● On November 9, 2022, a vendor filed a lawsuit against Digital Brand’s Group related to prior services rendered. The claims (including fines, fees, and legal expenses) total an aggregate of $ 50,190.
Added
This person was not a Company employee at any time and was temporary worker we used from a third party placement agency. ● On April 17, 2024, a former employee filed a wrongful termination lawsuit against the Company. The Company is disputing this claim and has been awarded arbitration for this matter. This employee was part of the marketing team.
Removed
The matter was settled in January 2023 and are on payment plans which will be paid off in the second quarter of 2024. ● In August 2020 and March 2021, two lawsuits were filed against Bailey’s by third- parties related to prior services rendered. The claims (including fines, fees, and legal expenses) total an aggregate of $96,900.
Removed
Both matters were settled in February 2022 and are on payment plans which will be paid off in second quarter of 2024. ● On December 21, 2020, a Company investor filed a lawsuit against DBG for reimbursement of their investment totaling $100,000.
Removed
Claimed amounts are included in short-term convertible note payable in the accompanying consolidated balance sheets and the Company does not believe it is probable that losses in excess of such short-term note payable will be incurred.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+29 added−23 removed3 unchanged
Biggest changeIn connection with the April note agreement, the Company granted warrants to acquire 12,577 shares of common stock at an exercise price of $122.00 per share expiring in April 2027. On May 10, 2022, pursuant to the Underwriting Agreement, the Company issued the Underwriters’ Warrants to purchase up to an aggregate of 14,956 shares of common stock.
Biggest changeIn addition, pursuant to the Inducement Agreement, the Company issued to the Investor a Series A-1 common share purchase warrant to purchase up to 20,555 shares of Common Stock (“Series A-1 Warrant”) and Series B-1 common share purchase warrant to purchase up to 20,555 shares of Common Stock (“Series B-1 Warrant”, and collectively with the Series A-1 Warrant, the “Warrants”) on May 7, 2024, each at an initial exercise price equal to $144 per share of Common Stock.
No awards may be made under the 2020 Plan after the tenth anniversary of its effective date. Awards under the 2020 Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock Units, performance share or Unit awards, other stock-based awards and cash-based incentive awards.
No awards may be made under the 2020 Plan after the tenth anniversary of its effective date. 40 Awards under the 2020 Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock Units, performance share or Unit awards, other stock-based awards and cash-based incentive awards.
Securities Authorized for Issuance Under Equity Compensation Plans We have adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 1,320 shares of our common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan.
Securities Authorized for Issuance Under Equity Compensation Plans We have adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 26 shares of our common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan.
The 2020 Plan administrator may grant awards to any employee, director, and consultants of the company and its subsidiaries. To date, grants covering 1,093 shares of common stock (as adjusted for the Reverse Stock Split) have been made under the 2020 Plan and 227 shares remain eligible for issuance under the 2020 Plan.
The 2020 Plan administrator may grant awards to any employee, director, and consultants of the company and its subsidiaries. To date, grants covering 22 shares of common stock have been made under the 2020 Plan and 4 shares remain eligible for issuance under the 2020 Plan.
Holders As of April 15, 2024, there were 3,747 holders of record of our common stock. Dividends We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.
Dividends We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends.
In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our shares of common stock will be your sole source of gain for the foreseeable future.
As a result, capital appreciation, if any, of our shares of common stock will be your sole source of gain for the foreseeable future. 38 Recent Sales of Unregistered Securities In February 2024, the Company issued an aggregate of 1,059 shares of common stock to a marketing vendor for services.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock and Class A Warrants began trading on the NasdaqCM under the symbols “DBGI” and “DBGIW,” respectively, on May 14, 2021. Prior to that time, there was no public market for our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Common Stock is quoted on The OTC Pink Marketplace under the symbol “DBGI”. Prior to December 18, 2024, the Company’s common stock was listed on the Nasdaq Capital Market.
In March 2023, the Company issued an aggregate of 118,890 shares of common stock to Sundry executives based on their employment agreements with the Company. The fair value of $499,338, or $4.20 per share, as determined by the agreements, was included in general and administrative expenses in the consolidated statements of operations.
The fair value of $173,290 or $163.50 per share as determined by the agreements, was included in sales and marketing expenses in the consolidated statements of operations. In February 2024, the Company issued an aggregate of 311 shares of common stock to a vendor as conversion of accounts payable for a total value of $50,975.
The following table sets forth the high and low closing bid prices for our common stock for the fiscal quarters indicated as reported on Nasdaq.
The following table sets forth the high and low sale prices for our common stock as reported by The Nasdaq Stock Market (through December 17, 2024) and OTC Markets (beginning on December 18, 2024). The OTC Markets is a computer network that provides information on current “bids” and “asks,” as well as volume information.
Removed
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended High Low March 31, 2024 ​ $ 12.80 ​ $ 2.30 December 31, 2023 ​ $ 8.49 ​ $ 2.79 September 30, 2023 ​ $ 24.75 ​ $ 7.34 June 30, 2023 ​ $ 39.00 ​ $ 14.50 March 31, 2023 ​ $ 106.75 ​ $ 27.75 December 31, 2022 ​ $ 13.00 ​ $ 3.21 September 30, 2022 ​ $ 22.80 ​ $ 22.80 June 30, 2022 ​ $ 184.00 ​ $ 16.00 March 31, 2022 ​ $ 275.00 ​ $ 91.00 ​ The closing price of our common stock on April 12, 2024 was $4.21.
Added
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Dollar amounts included in the table have been adjusted to reflect the Reverse Stock Splits.
Removed
Recent Sales of Unregistered Securities During the year ended December 31, 2022, the Company issued an aggregate of 1,995,183 shares of common stock pursuant to the conversion of the FirstFire and Oasis Notes. In September 2022, the Company issued 750 shares of common stock pursuant to a consultant agreement at a fair value of $123,000.
Added
Low High Fiscal 2023 First Quarter (January 1, 2023 - March 31, 2023) $ 1,387.50 $ 5,337.50 Second Quarter (April 1, 2023 - June 30, 2023) $ 725.00 $ 1,950.00 Third Quarter (July 1, 2023 - September 30, 2023) $ 367.00 $ 1,237.50 Fourth Quarter (October 1, 2023 - December 31, 2023) $ 139.50 $ 424.50 Fiscal 2024 First Quarter (January 1, 2024 - March 31, 2024) $ 115.00 $ 640.00 Second Quarter (April 1, 2024 - June 30, 2024) $ 65.50 $ 242.50 Third Quarter (July 1, 2024 - September 30, 2024) $ 15.00 $ 105.50 Fourth Quarter (October 1, 2024 - December 31, 2024) $ 1.03 $ 30.34 Fiscal 2025 First Quarter (January 1, 2025 - March 31, 2025) $ 1.25 $ 10.19 On April 8, 2025, the last reported sale price of our common stock was $9.39 per share.
Removed
As part of the Sundry acquisition, the Company issued 90,909 shares of common stock to the Sundry Sellers at a fair value of $1,000,000. 35 Table of Contents In connection with the December 2022 Notes, the Company issued 60,000 shares of common stock.
Added
There is no established public trading market for the Units, the Warrants or the Pre-Funded Warrants. We do not intend to apply for listing of the Units, the Warrants or the Pre-Funded Warrants on any securities exchange or recognized trading system. Holders On April 9, 2025, there were 62 stockholders of record.
Removed
The Underwriters’ Warrants may be exercised beginning on November 1, 2022 until May 5, 2027. The initial exercise price of each Underwriters’ Warrant is $32.50 per share, which represents 130% of the public offering price.
Added
In March 2024, 3,042 shares of Series C Convertible Preferred Stock converted into 3,840 shares of common stock.
Removed
In connection with the July 22 and July 28, 2022 notes, the Company issued an aggregate of 41,124 and 27,655 warrants to purchase common stock at an exercise price of $15.20 and $11.30 per share, respectively. The warrants expire in July 2027.
Added
On May 3, 2024, the Company entered into that certain inducement offer to exercise common stock purchase warrants with the Investor (the “Inducement Agreement”), pursuant to which (i) the Company agreed to lower the exercise price of the Existing Warrants to $156.50 per share and (ii) the Investor agreed to exercise the Existing Warrants into 20,555 shares of common stock (the “Exercise Shares”) by payment of the aggregate exercise price of $3,216,857.
Removed
In connection with the November 2022 public offering, the Company granted 1,650,181 pre-funded warrants which were immediately exercised for shares of common stock. The Company also granted an additional 1,818,181 Class B Warrants and 1,818,181 Class C Warrants as part of the offering.
Added
The closing occurred on May 7, 2024. The Company has issued all of the 20,555 shares of common stock underlying the Existing Warrants. The Company received the entire gross proceeds of $3,216,857 in May 2024, which represents the exercise of the entire 20,555 warrants at the $156.50 exercise price.
Removed
Each Class B Warrant has an exercise price of $5.25 per share, is immediately exercisable upon issuance and expires five years after issuance. Each Class C Warrant has an exercise price of $5.25 per share, is immediately exercisable upon issuance and expires thirteen months after issuance.
Added
The Company received net proceeds of $2,877,475 after placement agent fees and expenses.
Removed
The Company also granted the placement agent 136,364 warrants, which are exercisable 180 days after issuance and expire in five years. In connection with the December 2022 Notes, the Company issued to the investors an aggregate of 469,480 warrants to purchase common stock at an exercise price equal to $4.26. The warrants are immediately exercisable.
Added
The Series A-1 Warrant are exercisable immediately upon issuance and expires five and one-half (5.5) years following the issuance date and the Series B-1 Warrant are exercisable immediately upon issuance and expires fifteen (15) months following the issuance date. In connection with the Inducement Agreement, we entered into an engagement agreement with H.C.
Removed
In November 2022, The Company granted 44,000 warrants to purchase common stock at an exercise price of $5.00 to the lender in connection with its merchant advances.
Added
Wainwright & Co., LLC (“Wainwright”), pursuant to which we have, among other things, issued to Wainwright’s designees warrants to purchase up to 1,541 shares of Common Stock (the “Wainwright Warrants”). The terms of the Wainwright Warrants are substantially the same as the terms of the Series A-1 Warrant except that they have an exercise price of $195.63 per share.
Removed
In connection with the January 2023 Private Placement, the Company, entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which the Company agreed to issue and sell, in a private placement (the “January Private Placement”), an aggregate of 475,000 shares of the Company’s common stock (“Common Stock”), and accompanying warrants to purchase 475,000 shares of Common Stock, at a combined purchase price of $3.915 per share and Common Warrant, and (ii) the Company granted 802,140 pre-funded warrants which were immediately exercised for shares of common stock.
Added
In July 2024, the Company issued 1,210 shares of common stock to a vendor for services rendered for a total value of $172,501. In July 2024, 299 shares of Series C Convertible Preferred Stock converted into 333 shares of common stock. In August 2024, 101 shares of Series C Convertible Preferred Stock converted into 112 shares of common stock.
Removed
The Company also granted an additional 1,277,140 warrants as part of the offering. Each warrant has an exercise price of $3.80 per share, is immediately exercisable upon issuance and expires five years after issuance.
Added
In August 2024, the Company issued 2,120 shares of common stock to a commercial debt holder in satisfaction of $313,816 of debt.
Removed
The Company also granted the placement agent 95,786 warrants to purchase common stock at an exercise price of $4.8938 per share, which is immediately exercisable upon issuance and expires five years after issuance. In January 2023, the Company issued 110,000 shares of common stock at a fair value of $322,300 to a former convertible noteholder pursuant to default provisions.
Added
Between October 3, 2024 and October 15, 2024, the Company issued 26,226 shares of the Company’s common stock (the “Shares”) to a certain note holder upon conversion of a portion of their promissory note originally issued by the Company on or around October 1, 2023 (the “Note”).
Removed
In March 2023, in connection with merchant advances, the Company granted 152,380 warrants to purchase common stock at an exercise price of $5.25. The warrants were immediately exercisable upon issuance and expire five years after issuance.
Added
On October 16, 2024, the Company became aware that the issuance of the Shares was in error and not permitted under the terms of the Note due to the requirement thereunder that stockholder approval be obtained prior to the issuance of more than 19.9% of the Company’s pre-transaction shares outstanding upon conversion(s) of the Note, as referenced and specifically required under Nasdaq Listing Rule 5635(d).
Removed
In June 2023, the Company issued 1,952,580 shares of common stock to D. Jones at a fair value of $1,357,043 pursuant to the H&J Settlement Agreement. In connection with the January 2023 Private Placement, the Company granted 32,085 pre-funded warrants which were immediately exercised for shares of common stock.
Added
The Company then notified the note holder that the Shares must be returned to the Company’s transfer agent for cancellation. On November 5, 2024, the holder facilitated the cancellation of 26,226 shares of the Company’s common stock in accordance with the Company’s remediation plan.
Removed
The Company also granted an additional 51,085 warrants as part of the offering. Each warrant has an exercise price of $9.43 per share, is immediately exercisable upon issuance and expires five years after issuance.
Added
The Company communicated with The Nasdaq Stock Market LLC regarding the aforementioned erroneous issuance of the Shares and subsequent remediation actions. The Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC considered the Company’s non-compliance with Nasdaq Listing Rule 5635(d) as an additional basis for the delisting of the Company’s securities from Nasdaq.
Removed
The Company also granted the placement agent 3,831 warrants to purchase common stock at an exercise price of $122.35 per share, which is immediately exercisable upon issuance and expires five years after issuance. 36 Table of Contents In connection with merchant advances (Note 6), the Company granted 6,095 warrants to purchase common stock at an exercise price of $131.25.
Added
On or around January 17, 2025, the Company closed a private placement pursuant to a securities purchase agreement with a certain accredited investor, pursuant to which the Company agreed to issue and sell, in a private placement, a promissory note in the principal amount of $121,900.00 (the “January 2025 Note”).
Removed
The warrants are immediately exercisable upon issuance and expire five years after issuance. In connection with the August 2023 Private Placement, the Company granted 481,875 pre-funded warrants, which had not yet been exercised for shares of common stock as of September 30, 2023. The Company also granted an additional 1,027,750 warrants as part of the offering.
Added
The January 2025 Note is convertible into common stock upon default at a conversion price equal to 61% of the lowest closing bid price during the ten trading days prior to the conversion date.
Removed
Each warrant has an exercise price of $9.43 per share, is immediately exercisable upon issuance and expires 5.5 years after issuance. The Company also granted the placement agent 38,541 warrants to purchase common stock at an exercise price of $12.16 per share, which is immediately exercisable upon issuance and expires 5.5 years after issuance.
Added
The January 2025 Note provides that the total number of shares of common stock that may be issued upon conversion thereof shall not exceed 19.99% of the shares of Common Stock outstanding as of the issuance date of the January 2025 Note. 39 On or around January 20, 2025, the Company entered into a vendor agreement (the “Vendor Agreement”) with MavDB Consulting LLC (the “Vendor”).
Removed
In connection with the August Private Placement, the Company entered into a warrant amendment (the “Warrant Amendment”) with certain investors to amend certain existing warrants to purchase up to 196,542 shares of Common Stock that were previously issued in December 2022 and January 2023 to the investors, with an exercise price of $131.25 per share and $95.00 per share, respectively (the “Amended Warrants”) as follows: (i) to reduce the exercise price of the Amended Warrants to $9.43 per share, and (ii) to extend the original expiration date of the Amended Warrants so that they will terminate five and one half years from the closing of the offering.
Added
The engagement of the Vendor is for a five (5) year period and the vendor services to be provided include, but are not limited to, product content production, social media marketing, engagement of influencers and student athletes for product awareness, and event and staffing costs (the “Services”).
Removed
Immediately following the Warrant Amendment, the Company exercised warrants for 123,814 shares of common stock for proceeds of $1,167,566. In October 2023, 975 Series C Convertible Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), converted into 54,394 shares of common stock, par value $0.0001 per share (the “Common Stock”).
Added
In consideration for the Services, the Company will pay the Vendor a vendor fee equal to $3,000,000 (the “Cash Fee”) within thirty calendar days after the date of the Vendor Agreement (the “Payment Period”), provided, however, that Vendor may elect to receive the Vendor Shares (as defined below) and/or Vendor Pre-Funded Warrants (as defined below) as described below in lieu of the Cash Fee by providing written notice to the Company of such election during the Payment Period (the “Written Notice”).
Removed
In December 2023, the Company granted 481,875 pre-funded warrants in August Private Placement, were fully sold and exercised with an exercise price of $9.73.
Added
The “Vendor Shares” shall mean a number of Common Stock equal to the Cash Fee divided by $1.45, provided, however, if the issuance of any of the Vendor Shares would cause the Vendor to exceed 4.99% of the of the outstanding Common Stock, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder, then the Company shall instead issue to Vendor pre-funded warrants (the “Vendor Pre-Funded Warrants”) for the purchase of the amount of Vendor Shares in excess of the beneficial ownership limitation, provided, further, that if the Vendor specifies in the Written Notice that the Vendor elects to receive Vendor Pre-Funded Warrants in lieu of the entire amount of the Vendor Shares, then the Company shall instead issue to Vendor the Vendor Pre-Funded Warrants to purchase the entire amount of the Vendor Shares.
Removed
Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder).
Added
The Vendor delivered the Written Notice to the Company during the Payment Period and the Company issued the Vendor Pre-Funded Warrants for the purchase of 2,068,965 shares of Common Stock to Vendor on January 21, 2025. The Vendor Pre-Funded Warrants have an initial exercise price per share of Common Stock equal to $0.01.
Removed
The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
Added
The Vendor Pre-Funded Warrants are immediately exercisable and will expire five (5) years after the issuance date of the Vendor Pre-Funded Warrants. The exercise price and number of shares of Common Stock issuable upon exercise is subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events.
Added
The Vendor Pre-Funded Warrants will be exercisable, at the option of the Vendor, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise (except in the case of a cashless exercise).
Added
The Vendor (together with its affiliates) may not exercise any portion of the Vendor Pre-Funded Warrants to the extent that the Vendor would own more than 4.99% of the outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the Vendor to us, the Vendor may increase the amount of beneficial ownership of outstanding shares after exercising the Vendor’s Pre-Funded Warrants up to 9.99% of the number of our shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Vendor Pre-Funded Warrants.
Added
In lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the Vendor may elect instead to receive upon such exercise (either in whole or in part) the number of shares of Common Stock determined according to a formula set forth in the Vendor Pre-Funded Warrants.
Added
On January 22, 2025, the Company issued a promissory note in the principal amount of $260,000.00 (the “Second Note”) to an accredited investor (“Investor”), pursuant to which the Investor made a loan to the Company. The Second Note carries an original issue discount of $60,000.00, and accordingly the purchase price of the Second Note is $200,000.00.
Added
The Second Note matures on April 22, 2025, and contains customary events of default.
Added
Upon the occurrence of any event of default under the Second Note, the Second Note will become immediately due and payable in an amount equal to the outstanding principal and accrued interest under the Second Note plus default interest at the rate of sixteen percent (16%) per annum.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

45 edited+7 added−15 removed71 unchanged
Biggest changeThe report of our independent registered public accounting firm for the year ended December 31, 2023 included herein contains an explanatory paragraph indicating that there is substantial doubt as to our ability to continue as a going concern as a result of recurring losses from operations. 48 Table of Contents Cash Flow Activities The following table presents selected captions from our condensed statement of cash flows for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 2022 Net loss ​ $ (10,247,133) ​ $ (38,043,363) Non-cash adjustments ​ $ 1,364,216 ​ $ 23,122,024 Change in operating assets and liabilities ​ $ 2,869,975 ​ $ 4,350,445 Net cash used in operating activities ​ $ (6,012,942) ​ $ (10,570,889) Net cash provided by investing activities ​ $ 88,819 ​ $ (7,313,384) Net cash provided by financing activities ​ $ 4,661,614 ​ $ 18,639,161 Net change in cash ​ $ (1,254,843) ​ $ 747,221 ​ Cash Flows Used In Operating Activities Our cash used in operating activities decreased by $4.6 million to $6.0 million to cash used for the year ended December 31, 2023 as compared to cash used of $10.6 million for the corresponding fiscal period in 2022.
Biggest changeIn February 2025, the Company completed an offering consisting of the sale of common stock, warrants and pre-funded warrants for gross proceeds of $7,500,000, before deducting placement agent fees and commissions and other offering expenses. 51 Cash Flow Activities The following table presents selected captions from our statement of cash flows for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Net cash provided by operating activities: Net loss $ (13,106,589 ) $ (10,247,133 ) Non-cash adjustments $ 6,621,107 $ 1,364,216 Change in operating assets and liabilities $ 331,144 $ 2,869,975 Net cash used in operating activities $ (6,152,338 ) $ (6,012,644 ) Net cash provided by investing activities $ - $ 88,819 Net cash provided by financing activities $ 6,295,996 $ 4,661,615 Net change in cash $ 143,658 $ (1,262,509 ) Cash Flows Used In Operating Activities Our cash used in operating activities increased by $0.1 million to $6.1 million for the year ended December 31, 2024 as compared to cash used of $6 million for the corresponding fiscal period in 2023.
For example, it could: ● make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; ● require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes; 40 Table of Contents ● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; ● place us at a competitive disadvantage to our competitors with proportionately less debt for their size; ● limit our ability to refinance our existing indebtedness or borrow additional funds in the future; ● limit our flexibility in planning for, or reacting to, changing conditions in our business; and ● limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.
For example, it could: ● make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness; ● require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes; ● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; 43 ● place us at a competitive disadvantage to our competitors with proportionately less debt for their size; ● limit our ability to refinance our existing indebtedness or borrow additional funds in the future; ● limit our flexibility in planning for, or reacting to, changing conditions in our business; and ● limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Unless otherwise indicated by the context, references to “DBG” refer to Digital Brands Group, Inc. solely, and references to the “Company,” “our,” “we,” “us” and similar terms refer to Digital Brands Group, Inc., together with its wholly-owned subsidiaries Bailey 44, LLC (“Bailey”), Harper & Jones LLC (“H&J”), MOSBEST, LLC (“Stateside”) and Sunnyside (“Sundry”).
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Unless otherwise indicated by the context, references to “DBG” refer to Digital Brands Group, Inc. solely, and references to the “Company,” “our,” “we,” “us” and similar terms refer to Digital Brands Group, Inc., together with its wholly-owned subsidiaries Bailey 44, LLC (“Bailey”), MOSBEST, LLC (“Stateside”) and Sunnyside (“Sundry”).
The decrease in general and administrative expenses was primarily due to lower consulting and professional fees, as well as other cost cutting measures across our company, as all brands achieved operational synergies in 2023.
The decrease in general and administrative expenses was primarily due to lower consulting and professional fees, as well as other cost cutting measures across our company, as all brands achieved operational synergies in 2024.
Critical Accounting Policies and Estimates Basis of Presentation and Principles of Consolidation Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). 42 Table of Contents Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Policies and Estimates Basis of Presentation and Principles of Consolidation Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). 45 Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
We will also balance marketing spend with advertising focused on creating emotional brand recognition, which we believe will represent a lower percentage of our spend. 41 Table of Contents Ability to Drive Repeat Purchases and Customer Retention We accrue substantial economic value and margin expansion from customer cohort retention and repeat purchases of our products on an annual basis.
We will also balance marketing spend with advertising focused on creating emotional brand recognition, which we believe will represent a lower percentage of our spend. 44 Ability to Drive Repeat Purchases and Customer Retention We accrue substantial economic value and margin expansion from customer cohort retention and repeat purchases of our products on an annual basis.
Sundry’s fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse. 46 Table of Contents Sales and Marketing Sundry’s sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives.
Sundry’s fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse. 49 Sales and Marketing Sundry’s sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives.
The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk. 43 Table of Contents Goodwill Impairment We are required to assess our goodwill for impairment at least annually for each reporting unit that carries goodwill.
The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk. 46 Goodwill Impairment We are required to assess our goodwill for impairment at least annually for each reporting unit that carries goodwill.
Our portfolio consists of four significant brands that leverage our three channels: our websites, wholesale and our own stores. ● Bailey 44 combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go. Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway.
Our portfolio consists of five significant brands that leverage our three channels: our websites, wholesale and license revenue. ● Bailey 44 combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go. Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway.
In 2023, the Company recorded a $10.7 million increase in the change in fair value of contingent consideration pertaining to the Norwest waiver for Bailey and H&J Settlement. Other Expenses Other expenses increased by $0.3 million to $6.2 million in the year ended December 31, 2023 compared to $5.9 million in the corresponding fiscal period in 2022.
In 2023, the Company recorded a $10.7 million increase in the change in fair value of contingent consideration pertaining to the Norwest waiver for Bailey and H&J Settlement. Other Expenses Other expenses decreased by $3.2 million to $3.0 million in the year ended December 31, 2024 compared to $6.2 million in the corresponding fiscal period in 2023.
General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses related to Stateside’s stores and to Stateside’s operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.
These costs consist of general and administrative, fulfillment and shipping expense to the customer. General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses related to Stateside’s stores and to Stateside’s operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.
Cash Flows Provided by Financing Activities Cash provided by financing activities was $4.7 million for the year ended December 31, 2023 compared to cash provided of $18.6 million for the corresponding fiscal period in 2022.
Cash Flows Provided by Financing Activities Cash provided by financing activities was $6.3 million for the year ended December 31, 2024 compared of $4.7 million for the corresponding fiscal period in 2023.
Jones. This transaction is known as the “H&J Settlement”. Our Company Digital Brands Group is a curated collection of lifestyle brands, including Bailey 44, DSTLD, Stateside, Sundry and ACE Studios, that offers a variety of apparel products through direct-to-consumer and wholesale distribution. Our complementary brand portfolio provides us with the unique opportunity to cross merchandise our brands.
Business Overview Our Company Digital Brands Group is a curated collection of lifestyle brands, including Bailey 44, DSTLD, Stateside, Sundry and ACE Studios, that offers a variety of apparel products through direct-to-consumer and wholesale distribution. Our complementary brand portfolio provides us with the unique opportunity to cross merchandise our brands.
The Company may pursue secondary offerings or debt financings to provide working capital and satisfy debt obligations. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans.
There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans.
Historically each of DBG, Bailey, Stateside and Sundry has maintained credit line facilities to support such working capital needs and makes repayments on that facility with excess cash flow from operations. As of December 31, 2023, we had cash of $20,773, but we had a working capital deficit of $17,655,720.
Historically each of DBG, Bailey, Stateside and Sundry has maintained credit line facilities to support such working capital needs and makes repayments on that facility with excess cash flow from operations. As of December 31, 2024, we had cash of $164,431, but we had a working capital deficit of $16.1 million.
Liquidity and Capital Resources Each of DBG, Bailey, Stateside and Sundry has historically satisfied our liquidity needs and funded operations with borrowings capital raises and internally generated cash flow, Changes in working capital, most notably accounts receivable, are driven primarily by levels of business activity.
Liquidity and Capital Resources Each of DBG, Bailey, Stateside and Sundry has historically satisfied both liquidity needs and funding of operations through borrowings capital raises and internally generated cash flow, Changes in working capital, are driven primarily by levels of business activity.
We agreed on the consideration that we paid in each acquisition in the course of arm’s length negotiations with the holders of the membership interests in each of Bailey, H&J, Stateside and Sundry.
We acquired Bailey in February 2020, Stateside in August 2021 and Sundry in December 2022. We agreed on the consideration that we paid in each acquisition in the course of arm’s length negotiations with the holders of the membership interests in each of Bailey, Stateside and Sundry.
We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base. Our substantial debt could have important consequences to us.
Substantial Indebtedness As of December 31, 2024, we had an aggregate principal amount of debt outstanding of approximately $6.5 million. We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base. Our substantial debt could have important consequences to us.
Off-Balance Sheet Arrangements and Future Commitments We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Aside from our remaining non-current SBA obligations, all outstanding loans have maturity dates through 2025. 52 Off-Balance Sheet Arrangements and Future Commitments We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Cash inflows in 2023 included $8.1 million in equity proceeds after offering costs, $1.2 million in proceeds from the exercise of warrants, $5.4 million from the issuance of notes, loans and merchant advances, partially offset by note, loan and merchant advance repayments of 10.1 million.
Cash inflows in 2024 included $9.4 million in equity proceeds after offering costs including proceeds from the exercise of warrants, $0.8 million from the issuance of notes, loans and merchant advances, partially offset by note, loan and notes payable repayments of $3.9 million.
Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California. Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.
Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.
Contractual Obligations and Commitments As of December 31, 2023, we have $9.7 million in outstanding principal on debt, primarily our promissory notes due to the Bailey44 Sellers, the March 2023 Notes, PPP and merchant advances. Aside from our remaining non-current SBA obligations, all outstanding loans have maturity dates through 2024.
Contractual Obligations and Commitments As of December 31, 2024, we have $6.5 million in outstanding principal on debt, primarily our promissory notes due to the Bailey44 Sellers, the March 2023 Notes, PPP and merchant advances.
In determining and negotiating this consideration, we relied on the experience and judgment of our management and our evaluation of the potential synergies that could be achieved in combining the operations of Bailey, Stateside and Sundry. We did not obtain independent valuations, appraisals or fairness opinions to support the consideration that we paid/agreed to pay.
In determining and negotiating this consideration, we relied on the experience and judgment of our management and our evaluation of the potential synergies that could be achieved in combining the operations of Bailey, Stateside and Sundry.
DBG Net Revenue We sell our products to our customers directly through our website. In those cases, sales, net represents total sales less returns, promotions and discounts.
Interest Expense Bailey’s interest expense consists primarily of interest related to its outstanding debt to our senior lender. DBG Net Revenue We sell our products to our customers directly through our website. In those cases, sales, net represents total sales less returns, promotions and discounts.
The decrease in net cash used in operating activities was primarily driven by a lower net loss in 2023, partially offset by a decrease in non-cash adjustments of $21.8 million and more cash provided by changes in our operating assets and liabilities in 2022.
The increase in net cash used in operating activities was primarily driven by a higher net loss in 2024, partially offset by a increase in non-cash adjustments of $5.4 million and lesser cash provided by changes in our operating assets and liabilities compared to 2023.
Bailey also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores.
Bailey also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores. In 2024, Bailey also has entered into a license agreement whereby it earns royalty revenues.
Cost 45 Table of Contents of net revenue includes an allocation of overheard costs such as rent, utilities and commercial insurance pertaining to direct inventory activities. Operating Expenses Stateside’s operating expenses include all operating costs not included in cost of net revenues and sales and marketing. These costs consist of general and administrative, fulfillment and shipping expense to the customer.
Cost of net revenue also includes direct labor to production activities such as pattern makers, cutters and sewers. Cost of net revenue includes an allocation of overheard costs such as rent, utilities and commercial insurance pertaining to direct inventory activities. Operating Expenses Stateside’s operating expenses include all operating costs not included in cost of net revenues and sales and marketing.
Cash Flows Used in Investing Activities Our cash provided by investing activities was $0.1 million in the year ended December 31, 2023 as compared to cash used of $7.3 million for the corresponding fiscal period in 2022. Cash provided in 2023 was primarily due to a reduction of deposits, partially offset by purchase of property.
Cash Flows provided by Investing Activities Our cash provided by investing activities was $0 in the year ended December 31, 2024 as compared to $0.1 million for the corresponding fiscal period in 2023.
Net Loss from Continuing Operations Our net loss from continuing operations decreased by $29.3 million to a loss of $8.7 million for the year ended December 31, 2023 compared to a loss of $38.0 million for the corresponding fiscal period in 2022 primarily due to the impairment, change in fair value of contingent consideration and higher gross profit.
Net Loss from Continuing Operations Our net loss from continuing operations increased by $4.5 million to a loss of $13.2 million for the year ended December 31, 2024 compared to a loss of $8.7 million for the corresponding fiscal period in 2023 primarily due to the impairment and lower gross profit.
The decrease in sales and marketing expenses was primarily due to decreased spending on advertising and other cost-cutting marketing efforts. Sales and marketing expenses as a percentage of revenue was 27% in 2023 as compared to 35% in 2022. Other Operating Expenses Other operating expenses included distribution expenses, impairment and change in fair value of contingent consideration.
Sales and marketing expenses as a percentage of revenue was 25% in 2024 as compared to 27% in 2023. Other Operating Expenses (income) Other operating expenses included distribution expenses, impairment and change in fair value of contingent consideration.
Cash inflows in 2022 were primarily related to $16.4 million in equity proceeds after offering costs, $10.2 million from convertible notes and loans, partially offset by note repayments of $7.4 million.
Cash inflows in 2023 were primarily related to $8.1 million in equity proceeds after offering costs, $1.1 million from exercise of warrants, $5.6 million from convertible notes and loans and advances from factor, partially offset by note repayments and related party advances of $10.3 million.
We aim for our customers to wear our brands head to toe and to capture what we call “closet share” by gaining insight into their preferences to create targeted and personalized content specific to their cohort.
We aim for our customers to wear our brands head to toe and to capture what we call “closet share” by gaining insight into their preferences to create targeted and personalized content specific to their cohort. Operating our brands under one portfolio provides us with the ability to better utilize our technological, human capital and operational capabilities across all brands.
Results of Operations Year ended December 31, 2023 compared to year ended December 31, 2022 The following table presents our results of operations for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 2022 Net revenues ​ $ 14,916,422 ​ $ 13,971,178 Cost of net revenues ​ 8,372,642 ​ 8,030,908 Gross profit ​ 6,543,780 ​ 5,940,270 General and administrative ​ ​ 14,299,389 ​ ​ 16,371,536 Sales and marketing ​ ​ 4,035,835 ​ ​ 4,950,635 Impairment ​ ​ — ​ ​ 15,539,332 Other operating expenses ​ ​ (9,696,132) ​ ​ 1,175,872 Loss from Operations ​ (2,095,312) ​ (32,097,105) Other expenses ​ (6,221,284) ​ (5,946,257) Loss before provision for income taxes ​ (8,316,596) ​ (38,043,362) Provision for income taxes ​ (368,034) ​ — Net loss from continuing operations ​ ​ (8,684,630) ​ ​ (38,043,362) (Loss) income from discontinued operations, net of tax ​ ​ (1,562,503) ​ ​ — Net loss ​ $ (10,247,133) ​ $ (38,043,362) ​ Net Revenues Net revenues increased by $0.9 million to $14.9 million for the year ended December 31, 2023, compared to $14.0 million in the corresponding fiscal period in 2022.
Results of Operations Year ended December 31, 2024 compared to year ended December 31, 2023 The following table presents our results of operations for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Net revenues $ 11,555,656 $ 14,916,422 Cost of net revenues 7,911,536 8,372,642 Gross profit 3,644,120 6,543,780 General and administrative 8,652,361 14,299,389 Sales and marketing 2,896,698 4,035,835 Other operating expenses (income) 2,295,843 (9,696,132 ) Operating loss (10,200,782 ) (2,095,312 ) Other expenses (3,024,851 ) (6,221,284 ) Loss before provision for income taxes (13,106,589 ) (8,316,596 ) Provision for income taxes 119,044 (368,034 ) Net loss from continuing operations (13,106,589 ) (8,684,630 ) Loss from discontinued operations - (1,562,503 ) Net loss $ (13,106,589 ) $ (10,247,133 ) Net Revenues Net revenues decreased by $3.4 million to $11.6 million for the year ended December 31, 2024, compared to $14.9 million in the corresponding fiscal period in 2023.
Cost of Net Revenue Stateside’s cost of net revenue includes the direct cost of purchased and manufactured merchandise; inventory shrinkage; inventory adjustments due to obsolescence including excess and slow-moving inventory and lower of cost and net realizable reserves; duties; and inbound freight. Cost of net revenue also includes direct labor to production activities such as pattern makers, cutters and sewers.
Stateside also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores. 48 Cost of Net Revenue Stateside’s cost of net revenue includes the direct cost of purchased and manufactured merchandise; inventory shrinkage; inventory adjustments due to obsolescence including excess and slow-moving inventory and lower of cost and net realizable reserves; duties; and inbound freight.
We have been able to pass along some of these increased costs and also offset some of these increased costs with higher gross margin online revenue.
We have been able to pass along some of these increased costs and also offset some of these increased costs with higher gross margin online revenue. Seasonality Our quarterly operating results vary due to the seasonality of our individual brands, and are historically stronger in the second half of the calendar year.
Other operating expenses represented a gain of $9.7 million in 2023 as compared to $16.7 million in 2022, a decrease in expenses of $10.9 million. In 2022, there were $15.5 million in impairment charges on Bailey’s and Harper’s goodwill and intangible assets.
Other operating expenses were $2.3 million in 2024 as compared to gain of $9.7 million in 2023, an increase in expenses of $12 million. In 2024, there was $1.3 million in impairment charges on Bailey’s and Stateside’s intangible assets.
Operating our brands under one portfolio provides us with the ability to better utilize our technological, human capital and 38 Table of Contents operational capabilities across all brands. As a result, we have been able to realize operational efficiencies and continue to identify additional cost saving opportunities to scale our brands and overall portfolio.
As a result, we have been able to realize operational efficiencies and continue to identify additional cost saving opportunities to scale our brands and overall portfolio.
Bailey’s fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse.
Bailey’s fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse. 47 Sales & Marketing Bailey’s sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives.
We define Lifetime Value or LTV as an estimate of the average revenue that a customer will generate throughout their lifespan as our customer.
We define Lifetime Value or LTV as an estimate of the average revenue that a customer will generate throughout their lifespan as our customer. This value/revenue of a customer helps us determine many economic decisions, such as marketing budgets per marketing channel, retention versus acquisition decisions, unit level economics, profitability and revenue forecasting.
Supply Chain Disruptions We are subject to global supply chain disruptions, which may include longer lead times for raw fabrics, inbound shipping and longer production times.
If the customer bundles two units then they receive a 40% discount and if they bundle three units or more the customer receives a 60% discount. Material Trends, Events and Uncertainties Supply Chain Disruptions We are subject to global supply chain disruptions, which may include longer lead times for raw fabrics, inbound shipping and longer production times.
The increase in gross margin was primarily attributable to increased revenue in 2023 and the gross profit achieved by Sundry since the acquisition. Our gross margin was 43.9% for the year ended December 31, 2023 compared to 42.5% for year ended December 31, 2022.
The decrease in gross margin was primarily attributable to a decrease in sales. Our gross margin was 31.5% for the year ended December 31, 2024 compared to 43.9% for year ended December 31, 2023. The decrease in gross margin was due to corresponding decrease in the ecommerce revenue and write down of sundry’s inventory.
The Company requires significant capital to meet its obligations as they become due. These factors raise substantial doubt about our Company’s ability to continue as a going concern. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through the equity line of credit agreement.
The Company requires significant capital to meet its obligations as they become due. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through its operations. The Company may pursue secondary equity offerings or debt financings to provide working capital and satisfy debt obligations.
The increase was primarily due to full results in 2023 pertaining to the acquisition of Sundry in December 2022. Gross Profit Our gross profit increased by $0.6 million for the year ended December 31, 2023 to $6.5 million from $5.9 million for the corresponding fiscal period in 2022.
The decrease was primarily due to a delay in wholesale shipments, and lower ecommerce revenues across each brand due to less digital advertising spend. Gross Profit Our gross profit decreased by $2.9 million for the year ended December 31, 2024 to $3.6 million from $6.5 million for the corresponding fiscal period in 2023.
General and administrative expenses as a percentage of revenue was 95% in 2023 as compared to 117% in 2022. 47 Table of Contents Sales and Marketing Expenses Sales and marketing expenses decreased by $0.9 million for the year ended December 31, 2023 to $4.0 million compared to $4.9 million in 2022.
Sales and Marketing Expenses Sales and marketing expenses decreased by $1.1 million for the year ended December 31, 2024 to $2.9 million compared to $4 million in 2023. The decrease in sales and marketing expenses was primarily due to decreased spending on advertising and other cost-cutting marketing efforts.
The increase in gross margin was due to a shift in sales mix towards e-commerce, led by the Sundry business, which is able to achieve higher margins than wholesale. General and Administrative Expenses General and administrative expenses decreased by $2.1 million for the year ended December 31, 2023 to $14.3 million compared to $16.4 million in 2022.
General and Administrative Expenses General and administrative expenses decreased by $5.6 million for the year ended December 31, 2024 to $8.7 million compared to $14.3 million in 2023.
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Business Overview Recent Developments We entered into a license deal for Bailey 44 in January 2023 that is paid quarterly based on the results. We have received two license payouts since November 2023 for approximately $124,000 in total. The licensee has asked to add additional categories to their current offering, which we agreed to.
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Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand. 41 ● Avo – Avo is a women’s essential brand that will offer t-shirts, sweats, dresses, sweaters and athleisure. Avo eliminates the wholesale mark-up, so its products have a sharper price point.
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We entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb of Dallas. We plan to open the store in April 2024.
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Avo also offers larger discounts when the customer bundles multiple products to their cart, which allows Avo to leverage its shipping and fulfillment costs. Avo leverages the Company’s current design and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands.
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We expect the store to generate meaningful cash flow as we already have excess product that we can sell, which means we will not have to use cash to create inventory for sale. We expect the store to generate over $1.5 million in annual revenue and over $500,000 in free cash flow.
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We did not obtain independent valuations, appraisals or fairness opinions to support the consideration that we paid/agreed to pay. 42 Avo – Brand Summary Avo is a women’s essential brand that will offer t-shirts, sweats, dresses, sweaters and athleisure. Avo eliminates the wholesale mark-up, so its products have a sharper price point.
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We have been involved in a dispute with the former owners of Haper & Jones, LLC (“H&J”) regarding our obligation to “true up” their ownership interest in our company further to that membership interest purchase agreement dated May 10, 2021 whereby we acquired all of the outstanding membership interests of H&J (as amended, the “H&J Purchase Agreement”).
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Avo also offers larger discounts when the customer bundles multiple products to their cart, which allows Avo to leverage its shipping and fulfillment costs. Avo leverages the Company’s current design and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands.
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Further to the H&J Purchase Agreement, we agreed that if, at May 18, 2022, the one year anniversary of the closing date of our initial public offering, the product of the number of shares of our common stock issued at the closing of such acquisition multiplied by the average closing price per share of our shares of common stock as quoted on the NasdaqCM for the thirty (30) day trading period immediately preceding such date plus the gross proceeds, if any, of shares of our stock issued to such sellers and sold by them during the one year period from the closing date of the offering does not exceed the sum of $9.1 million, less the value of any shares of common stock cancelled further to any indemnification claims or post-closing adjustments under the H&J Purchase Agreement, then we shall issue to the subject sellers an additional aggregate number of shares of common stock equal to any such valuation shortfall at a per share price equal to the then closing price per share of our common stock as quoted on the NasdaqCM.
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Avo launched in late August 2024 and prices for t-shirts range from $20 to $50 based on the size of the customer’s bundle. Other product prices will range from $17.50 for tanks to $198 for sweaters with no retail price above $99 if the customer bundles three units or more.
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We did not honor our obligation to issue such shares and the former owner of H&J have claimed that they were damaged as a result.
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These synergies included the elimination of its warehouse, office, fulfillment and redundancies in headcount. 50 General and administrative expenses as a percentage of revenue was 75% in 2024 as compared to 96% in 2023.
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On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby contemporaneously with the parties’ execution of the Settlement Agreement (i) the Company made aggregate cash payment of $229,000 to D. Jones Tailored Collection, Ltd. (“D. Jones”), (ii) the Company issued 78,103 shares of common stock to D.
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The decrease in other expenses in 2023 was primarily due to lower interest expense in 2024 compared to 2023.
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Jones at a per share purchase price of $17.925 which represented the lower of (i) the closing price per share of the Common Stock as reported on Nasdaq on June 20, 2023, and (ii) the average closing price per share of Common Stock as reported on the Nasdaq for the five trading days preceding June 21, 2023, and (iii) the Company assigned and transferred one hundred percent (100%) of the Company’s membership interest in H&J to D.
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This value/revenue of a customer helps us determine many economic decisions, such as marketing budgets per marketing channel, retention versus acquisition decisions, unit level economics, profitability and revenue forecasting. 39 Table of Contents We acquired Bailey in February 2020, Stateside in August 2021 and Sundry in December 2022.
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Material Trends, Events and Uncertainties COVID-19 After the impact of COVID-19, we have implemented cost controls to reduce discretionary spending to help mitigate the loss of sales and to conserve cash while continuing to support employees.
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We are also assessing our forward inventory purchase commitments to ensure proper matching of supply and demand, which will result in an overall reduction in future commitments. As we continue to actively monitor the situation, we may take further actions that affect our operations.
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Seasonality Our quarterly operating results vary due to the seasonality of our individual brands, and are historically stronger in the second half of the calendar year Substantial Indebtedness As of December 31, 2023, we had an aggregate principal amount of debt outstanding of approximately $9.7 million.
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Sales & Marketing Bailey’s sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives. 44 Table of Contents Interest Expense Bailey’s interest expense consists primarily of interest related to its outstanding debt to our senior lender.
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Stateside also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores.
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The increase in other expenses in 2023 was primarily due to $1.4 million on loss on extinguishment of debt in 2023 and the change in fair value of derivative liability, partially offset by PPP forgiveness.

Other DBGI 10-K year-over-year comparisons