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What changed in Digital Brands Group, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Digital Brands Group, Inc.'s 2024 and 2025 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 2025 report.

+220 added−286 removedSource: 10-K (2026-04-15) vs 10-K (2025-04-09)

Top changes in Digital Brands Group, Inc.'s 2025 10-K

220 paragraphs added · 286 removed · 148 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

41 edited+23 added−51 removed98 unchanged
Biggest changeAvo 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.
Biggest changeAvo 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. We currently have ten universities on the website, and expect to announce significantly more universities over the next few months. We believe that successful apparel brands sell in all revenue channels.
Completion of Offering of Common Stock and Pre-Funded Warrants On February 13, 2025, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering (the “Offering”) 11,365,340 units (the “Units”), including (i) 125,535 units consisting of one share of common stock, par value $0.0001 per share (the “Common Stock”) and two warrants to purchase one share of Common Stock each (the “Share Unit Warrants”), at a purchase price per unit equal to $0.66, and (ii) 11,239,805 units consisting of a pre-funded warrant to purchase one share of Common Stock (“Pre-Funded Warrants”), immediately exercisable at an exercise price of $0.0001 per share, and two warrants to purchase one share of Common Stock each (the “PFW Unit Warrants, and collectively with the Share Unit Warrants, the “Warrants”), at a purchase price per unit equal to $0.6599.
Completion of offering Common Stock and Pre-Funded Warrants On February 13, 2025, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering (the “Offering”) 11,365,340 units (the “Units”), including (i) 125,535 units consisting of one share of common stock, par value $0.0001 per share (the “Common Stock”) and two warrants to purchase one share of Common Stock each (the “Share Unit Warrants”), at a purchase price per unit equal to $0.66, and (ii) 11,239,805 units consisting of a pre-funded warrant to purchase one share of Common Stock (“Pre-Funded Warrants”), immediately exercisable at an exercise price of $0.0001 per share, and two warrants to purchase one share of Common Stock each (the “PFW Unit Warrants, and collectively with the Share Unit Warrants, the “Warrants”), at a purchase price per unit equal to $0.6599.
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.
As an example, the Digital Brands 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.
The exercise of the Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a Purchaser prior to the issuance of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon exercise of the Warrants held by the applicable holder, provided that the holder may increase or decrease the beneficial ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot be waived. 6 At the closing of the Offering, the Company issued warrants to RBW Capital Partners LLC, acting through Dawson James Securities, Inc.
The exercise of the Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a Purchaser prior to the issuance of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon exercise of the Warrants held by the applicable holder, provided that the holder may increase or decrease the beneficial ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot be waived. 4 At the closing of the Offering, the Company issued warrants to RBW Capital Partners LLC, acting through Dawson James Securities, Inc.
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.
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 Reverse Stock Split.
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.
DSTLD is primarily a digital direct-to-consumer brand. ● 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.
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
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.
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 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. 13 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.
We believe athleisure is one of the largest product categories in womenswear, with high repeat spend and closet share. DSTLD — Brand Summary DSTLD focuses on minimalist design, superior quality, and only the essential wardrobe pieces.
We believe athleisure is one of the largest product categories in womenswear, with high repeat spend and closet share. 8 DSTLD — Brand Summary DSTLD focuses on minimalist design, superior quality, and only the essential wardrobe pieces.
The brand level employees then execute the looks and styles and create the customized customer communication based on the information and data from the Digital Brand Group marketing and data teams.
The brand level employees then execute the looks and styles and create the customized customer communication based on the information and data from the Digital Brands Group marketing and data teams.
We also offer customers the option to upgrade to 2-Day or Overnight Shipping for an additional cost. 12 Design and Development Our products are designed at the headquarters of each brand, which are in Los Angeles, CA. Each brand’s design efforts are supported by well-established product development and production teams.
We also offer customers the option to upgrade to 2-Day or Overnight Shipping for an additional cost. 10 Design and Development Our products are designed at the headquarters of each brand, which are in Los Angeles, CA. Each brand’s design efforts are supported by well-established product development and production teams.
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.
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. 3 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.
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.
We expect this should result in higher customer loyalty, higher lifetime value, higher average order value and lower customer acquisition cost. 6 Organizational Structure We operate the brands on a decentralized basis with an emphasis on brand level execution supported by corporate coordination.
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.
The wholesale channel includes premium department stores, select independent boutiques and third-party online stores. 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.
Many of our competitors, including Vince, James Perse, Rag & Bone, Madewell, AG, FRAME, All Saints, Zegna and Ralph Lauren, have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution, and other resources than we do.
Many of our competitors, including Vince, James Perse, Rag & Bone, Madewell, AG, FRAME, All Saints, and Vouri, have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution, and other resources than we do.
With our acquisition of Bailey 44, LLC, we view the following as tangible near term growth opportunities: ● Increase emphasis on email and SMS communications allowing for personalized direct customer engagement, retention and repurchases. ● Increase market share in existing and new wholesale, including specialty boutiques due to the well-known and respected designer we hired in June 2020. 9 ● Increase digital spend, social media presence, and brand and influencer collaborations. ● Selective opportunity to roll out proven retail concept in well defined, strategic locations. ● International expansion and licensing opportunities in select categories.
With our acquisition of Bailey 44, LLC, we view the following as tangible near term growth opportunities: ● Increase emphasis on email and SMS communications allowing for personalized direct customer engagement, retention and repurchases. ● Increase market share in existing and new wholesale, including specialty boutiques due to the well-known and respected designer we hired in June 2020. ● Increase digital spend, social media presence, and brand and influencer collaborations. ● Selective opportunity to roll out proven retail concept in well defined, strategic locations. ● International expansion and licensing opportunities in select categories. 7 Stateside — Brand Summary We acquired Stateside in August 2021.
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.
Employees As of December 31, 2025, we had 33 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.
Our Company Digital Brands Group is a curated collection of lifestyle brands 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.
National Securities Exchange [open] Our Company Digital Brands Group is a curated collection of lifestyle brands 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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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. 11 Marketing We believe marketing is a critical element in creating brand awareness and an emotional connection, as well as driving new customer acquisition and retention.
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.
Reverse Stock Split In December 2024, following the approval of shareholders, we completed a one-for-50 (1-for-50) reverse stock split (the “Reverse Stock Split”). As a result of the 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.
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.
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. Email Marketing: We utilize email marketing to build awareness and drive repeat purchases.
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.
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.
Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand. ● 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.
Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand. 5 ● Avo is a collegiate licensed loungewear brand that offers t-shirts, tanks, fleece sweats, shorts, and other loungewear products. Avo eliminates the wholesale mark-up, so its products have a sharper price point.
We have successfully placed clothing (and as a result, fashion press) on a number of well-known A-list celebrities. 15 Loyalty Program We plan to develop and launch a company-wide loyalty program, which would include all our brands.
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 and well known influencers. 12 Loyalty Program We plan to develop and launch a company-wide loyalty program, which would include all our brands.
Marketing We believe marketing is a critical element in creating brand awareness and an emotional connection, as well as driving new customer acquisition and retention. Each brand has its own in-house marketing department, which creates and produces marketing initiatives specific to each marketing channel and based on the specific purpose, such as acquisition, retention or brand building.
Each brand has its own in-house marketing department, which creates and produces marketing initiatives specific to each marketing channel and based on the specific purpose, such as acquisition, retention or brand building.
With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens our ability to efficiently acquire and retain customers while also driving high customer lifetime value.
Our products are sold direct-to-consumers principally through our websites and our own showrooms, but also through our wholesale channel, primarily in specialty stores and select department stores. With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens our ability to efficiently acquire and retain customers while also driving high customer lifetime value.
We also provide robust compensation and benefits programs to help meet the needs of our employees. Available Information Our Internet address is https://www.digitalbrandsgroup.co. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K.
Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K.
We believe that successful apparel brands sell in all revenue channels. However, each channel offers different margin structures and requires different customer acquisition and retention strategies. We were founded as a digital-first retailer that has strategically expanded into select wholesale and direct retail channels.
However, each channel offers different margin structures and requires different customer acquisition and retention strategies. We were founded as a digital-first retailer that has strategically expanded into select wholesale and direct retail channels. We strive to strategically create omnichannel strategies for each of our brands that blend physical and online channels to engage consumers in the channel of their choosing.
We may utilize outside agencies from time to time. We visit the major fashion, tech, and news outlets in New York City on a quarterly basis to keep them up to date on our latest launches and any relevant company developments. We also plan to host local Los Angeles press at our office space.
We visit the major fashion, tech, and news outlets in New York City on a quarterly basis to keep them up to date on our latest launches and any relevant company developments. Celebrity and Influencer Gifting We approach celebrity gifting in a strategic, discerning manner.
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.
On January 22, 2025, the Company issued a promissory note in the principal amount of $260,000 (purchase price $200,000 after a $60,000 original issue discount) to an accredited investor, maturing April 22, 2025, with default interest at 16% per annum.
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.
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. Search Engine Optimization: This is the process of maximizing the number of visitors to our website by increasing our rankings in the search results on internet search engines.
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. 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.
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. We currently have ten universities on the website, and expect to announce significantly more universities over the next few months. Avo launched in late August 2024 as an everyday essentials brand.
Public Relations To generate ongoing organic and word-of-mouth awareness, we intend to work with print and online media outlets to announce new products and develop timely news stories. We are in contact with leading fashion, business, and tech writers in order to capitalize on celebrity fashion features, e-commerce trend pieces, or general brand awareness articles.
We are in contact with leading fashion, business, and tech writers in order to capitalize on celebrity fashion features, e-commerce trend pieces, or general brand awareness articles. We may utilize outside agencies from time to time.
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.
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.
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. 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 — Brand Summary Avo is a collegiate licensed loungewear brand that offers t-shirts, tanks, fleece sweats, shorts, and other loungewear products. Avo eliminates the wholesale mark-up, so its products have a sharper price point.
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.
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. 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.
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.
Avo also works directly with the Greek life at these universities. 9 Sales and Distribution DSTLD and Avo products are sold primarily direct-to-consumer, via our website. By selling direct-to-consumer, we are able to eliminate the wholesale mark-up and offer sharper pricing to the customer.
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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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ITEM 1. BUSINESS Recent Developments During 2025, the Company entered into several strategic agreements to expand its collegiate apparel and marketing platform, including arrangements with AAA Tuscaloosa (University of Alabama), LLC, Traffic Holdco, LLC, Buffalo Sports Properties / Learfield, The Grove Collective, LLC, and MavDB Consulting LLC.
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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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Effective July 16, 2025, the Company entered into Exclusive Private Label Manufacturing Agreements with AAA Tuscaloosa, LLC and Traffic Holdco, LLC. Under these agreements, the Company manufactures collegiate-branded apparel for distribution through university channels and related platforms.
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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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In connection with these arrangements, the Company agreed to issue common stock with total equity commitments of approximately $3.0 million for AAA and a minimum of $9.0 million for Traffic Holdco over three-year terms. The shares are issued in exchange for services including licensing access, marketing, distribution, and compliance support and are accounted for in accordance with ASC 718.
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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 Company records prepaid assets for the fair value of shares issued, which are amortized over the respective agreement terms.
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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.
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Both agreements include make-whole provisions (through March 2027) requiring the Company to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment; accordingly, the awards are liability-classified and remeasured at fair value each reporting period through earnings. 2 Effective December 3, 2025, the Company entered into a Marketing and Sponsorship Agreement with Buffalo Sports Properties, LLC, a Learfield property, for the University of Colorado athletic program.
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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.
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Under the agreement, the Company receives sponsorship, media, and NIL marketing benefits in exchange for annual consideration of $550,000, consisting of $350,000 in equity and $200,000 in cash, over a three-year term.
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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.
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The equity component is accounted for under ASC 718 and is subject to an 18-month make-whole provision (through June 2027), resulting in liability classification and periodic fair value remeasurement. The cash component is recorded as prepaid sponsorship expense and amortized over the period the related services are received.
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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.
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The agreement also includes variable and fixed NIL-related funding arrangements, which are recognized as expense as incurred or when the related activities occur. Effective November 19, 2025, the Company entered into an Exclusive Private Label Manufacturing Agreement with The Grove Collective, LLC.
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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”).
Added
In connection with the agreement, the Company issued shares of common stock with an aggregate fair value of approximately $2.9 million, representing a total equity commitment of $3.0 million. The shares vested immediately and are accounted for as consideration for services, including marketing and distribution support.
Removed
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).
Added
The Company recorded a prepaid asset for the fair value of the shares issued, which is being amortized over the three-year term. For the year ended December 31, 2025, approximately $0.1 million of marketing expense was recognized, with the remaining balance recorded as prepaid expense.
Removed
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.
Added
On March 12, 2025, the Company entered into a Vendor Agreement with MavDB Consulting LLC to provide capital markets advisory and consulting services, including investor introductions and strategic advisory support. In connection with the agreement, the Company agreed to pay a one-time fee of approximately $2.5 million.
Removed
The Company communicated with The Nasdaq Stock Market LLC regarding the aforementioned erroneous issuance of the Shares and subsequent remediation actions.
Added
The costs associated with this agreement are recognized as expense as the related services are performed. As of December 31, 2025, no make-whole payments were required under any of the above agreements, as the fair value of shares issued exceeded the respective contractual commitments.
Removed
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. 3 On October 28, 2024, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering (the “Offering”): (i) 124,673 shares of common stock (the “Common Stock”), at a purchase price of $5.00 per share of Common Stock, and (ii) 482,187 pre-funded warrants (“Pre-Funded Warrants”) to purchase Common Stock, at a purchase price of $4.995 per Pre-Funded Warrant, immediately exercisable at an exercise price of $0.005 per share.
Added
On January 21, 2025, the Company entered into a five-year marketing services agreement with MavDB Consulting LLC for services including content production, social media marketing, and student athlete engagement.
Removed
The Purchase Agreement contained customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties. The Offering closed on October 30, 2024.
Added
As consideration, the Company issued pre-funded warrants to purchase 2,068,965 shares of common stock at $0.01 per share, exercisable immediately and expiring five years from issuance, subject to a 4.99% beneficial ownership limitation (adjustable to 9.99% upon 61 days’ notice). The issuance was made in reliance on Section 4(a)(2) of the Securities Act.
Removed
The Common Stock, the Pre-Funded Warrants, and the Common Stock issuable upon exercise of the Pre-Funded Warrants were offered pursuant to a registration statement on Form S-1 as filed with the SEC on October 24, 2024, as amended, and was declared effective on October 28, 2024 (the “Registration Statement”).
Added
Avo works directly with the colleges and universities to design and create compelling products that feature student-athletes, fraternities and sororities in our digital ads, emails, SMS and website photos. Avo has raised over $17 million for student athletes since it was launched in April 2025.
Removed
RBW Capital Partners LLC, acting through Dominari Securities LLC (the “Placement Agent”), acted as the exclusive placement agent for the Offering pursuant to a Placement Agency Agreement dated October 28, 2024 (the “Placement Agency Agreement”) by and between the Company and the Placement Agent.
Added
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.
Removed
The Offering resulted in gross proceeds to the Company of approximately $3,000,000, before deducting placement agent fees and commissions and other offering expenses, and excluding proceeds to the Company, if any, that may result from the future exercise of the Pre-Funded Warrants issued in the Offering.
Added
Avo works directly with the colleges and universities to design and create compelling products that feature student-athletes, fraternities and sororities in our digital ads, emails, SMS and website photos. Avo has raised over $17 million for student athletes since it was launched in April 2025.
Removed
As compensation to the Placement Agent, as the exclusive placement agent in connection with the Offering, the Company paid to the Placement Agent a cash fee of 8.0% of the aggregate gross proceeds raised in the Offering, a non-accountable expense allowance of 1.0% of the aggregate gross proceeds raised in the Offering, reimbursement of up to $50,000 for expenses of legal counsel and other actual out-of-pocket expenses, and up to $15,950 for clearing agent closing costs.
Added
In April 2025, Avo pivoted to a collegiate licensed model, which launched at the University of Alabama through Yea Alabama. Since April 2025, Avo has added 9 universities to its offering and expects to add significantly more over the next few months.
Removed
The Company received net proceeds of approximately $2,555,261 from the Offering (the “Public Offering Proceeds”). On December 9, 2024, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate the 2024 Reverse Stock Split at a ratio of 1-for-50 (the “Amendment”).
Added
Prices for t-shirts and tanks range from $30 to $58 based on the fabric quality, gender and style (such as hoodies vs crew necks). The women’s softest fleece are $68 and we are launching a new fleece product for men and women that will arrange from $68 to $88 based on style and gender.
Removed
The Amendment became effective at 5:00 PM ET on December 12, 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+8 added−22 removed170 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. ● 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.
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 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. 16 ● 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 articles of incorporation and bylaws and under Nevada law could discourage a takeover that stockholders may consider favorable. ● We may be required to issue additional shares of our common stock further to agreements whereby we acquired Bailey.
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.
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. 15 ● 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.
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.
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. 25 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.
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.
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. 23 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.
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.
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.
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.
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.
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.
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. 30 These and other factors may lower the market price of our common stock, regardless of our actual operating performance.
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.
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.
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.
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. 26 We also depend upon third-party carriers for shipment of a significant amount of merchandise directly to our customers.
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.
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. 18 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 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.
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. 21 Our results of operations have been and could be in the future adversely affected as a result of asset impairments.
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.
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. 24 It may be difficult to accurately forecast demand and determine appropriate levels of product.
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.
As a result, we may be unable to pursue our acquisition strategy successfully, which may prevent us from achieving our growth objectives. 20 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, 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.
As of December 31, 2025, 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.
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.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Controls and Procedures ” for information regarding our remediation efforts. 31 As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls.
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.
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. 22 Our business depends on our ability to maintain a strong portfolio of brands and engaged customers.
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.
During the years ended December 31, 2025, we recorded impairment expense of $4.4 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.
Organizations face growing regulatory and compliance requirements. New and evolving regulations and compliance standards for cyber security, data protection, privacy, and internal IT controls are often created in response to the tide of cyber-attacks and will increasingly impact organizations. Existing regulatory standards require that organizations implement internal controls for user access to applications and data.
New and evolving regulations and compliance standards for cyber security, data protection, privacy, and internal IT controls are often created in response to the tide of cyber-attacks and will increasingly impact organizations. Existing regulatory standards require that organizations implement internal controls for user access to applications and data.
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.
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 received capital funding to continue the business operations The Company has historically incurred net losses and experienced negative cash flows from operations.
Any failure on our part to provide an attractive, effective, reliable, user-friendly e-commerce platform that offers a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of sales, harm our reputation with customers, and could have a material adverse impact on our business and results of operations.
Any failure on our part to provide an attractive, effective, reliable, user-friendly e-commerce platform that offers a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of sales, harm our reputation with customers, and could have a material adverse impact on our business and results of operations. 28 Organizations face growing regulatory and compliance requirements.
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.
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. 19 Some or all of these factors could have a material adverse effect on our business, financial condition and results of operations.
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.
As of December 31, 2025, we had an accumulated deficit of $155.35 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, 2024 were $9.0 and $6.1 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, 2025 were $5.8 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.
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. 17 Risks related to our financial condition and business.
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.
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. 29 Risks Related to our Common Stock The price of our common stock has in the past and may in the future fluctuate substantially.
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.
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.
If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain “key person” life insurance on any of our executive officers.
Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain “key person” life insurance on any of our executive officers.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, a disruption of our operations, damage to our reputation, or a loss of confidence in our business, any of which could adversely affect our business, revenues, and competitive position.
Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, a disruption of our operations, damage to our reputation, or a loss of confidence in our business, any of which could adversely affect our business, revenues, and competitive position. 27 Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.
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.
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 $28.3 and $13.1 million for the years ended December 31, 2025 and 2024, respectively.
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.
The market price of our common stock has in the past and could in the future be extremely volatile.
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.
With this funding, we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial performance. While additional funding may be required in the future to support expansion, we are confident in our ability to secure capital on acceptable terms as needed.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. 32 Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K.
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.
Provisions in articles of incorporation and bylaws and under Nevada law could discourage a takeover that stockholders may consider favorable.
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.
As of December 31, 2025, we had a working capital deficit of $5.45 million. However, the Company has successfully obtained substantial capital funding, which provides the necessary liquidity to support its ongoing operations and allows it to continue as a going concern.
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 primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our 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.
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.
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).
From May 2021 to December 31, 2025, the high and low prices of our common stock as quoted on the NasdaqCM was $746,250 and $1.12, respectively (as appropriately adjusted for the 1-for-100 , 1-for-25 and 1-for-50 reverse stock splits effectuated by the Company in November 2022, August 2023 December 2024, respectively).
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.
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.
If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers.
Our future success largely depends upon the continued services of our executive officers and management team, especially our Chief Executive Officer and President, Mr. John “Hil” Davis. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all.
Some or all of these factors could have a material adverse effect on our business, financial condition and results of operations. Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect. In the apparel industry, differing brands are used to reach different market segments and capture new market share.
Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect. In the apparel industry, differing brands are used to reach different market segments and capture new market share. However, not every brand deployment is successful. In addition, integrating an acquired business or technology is risky.
Our sixth amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable because they, among other things: ● establish a supermajority voting requirement of at least 66 2∕3% of the outstanding voting stock in order to amend certain provisions in our sixth amended and restated certificate of incorporation, which makes it more difficult for stockholders to eliminate anti- takeover provisions; ● eliminate stockholder-initiated action by written consent in lieu of a meeting, which hampers the ability of stockholders to take action during the interim periods between annual meetings of stockholders; and ● require the written request of stockholders holding an aggregate of 25% of shares of our common stock in order for stockholders to call a special meeting, which together with the elimination of stockholder action by written consent described above, makes it very difficult for stockholders to take action during the interim periods between annual meetings of stockholders.
Our articles of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable because they, among other things: ● the Nevada Revised Statutes, or NRS, “acquisition of controlling interest” statutes (NRS 78.378 through 78.3793, inclusive) contain provisions governing the acquisition of a controlling interest in certain Nevada corporations, and these “control share” laws provide generally that any person that acquires a “controlling interest” in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights; and ● require the written request of stockholders holding an aggregate of 25% of shares of our common stock in order for stockholders to call a special meeting, which together with the elimination of stockholder action by written consent described above, makes it very difficult for stockholders to take action during the interim periods between annual meetings of stockholders.
If this occurs, our financial results may be negatively impacted and we may determine it is in the best interest of the company to no longer support that brand. If a new brand does not generate sufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected.
If a new brand does not generate sufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected. Finally, acquisitions could be viewed negatively by analysts, investors or our customers.
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.
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.
Our board of directors could rely on this provision to prevent or delay an acquisition of us.
Our board of directors and disinterested stockholders could rely on these provisions to prevent or delay an acquisition of us. 33 We do not expect to pay any dividends in the foreseeable future.
However, not every brand deployment is successful. In addition, integrating an acquired business or technology is risky. We may incur significant costs acquiring, developing, and promoting new brands only to have limited market acceptance and limited resulting sales.
We may incur significant costs acquiring, developing, and promoting new brands only to have limited market acceptance and limited resulting sales. If this occurs, our financial results may be negatively impacted and we may determine it is in the best interest of the company to no longer support that brand.
As a Delaware corporation, we are also subject to the Delaware anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law.
As a Nevada corporation, we are also subject to the “acquisition of controlling interest” statutes contained in Sections 78.378 through 78.3793 of the NRS.
We will continue to monitor our financial position and capital needs going forward.
While we continue to monitor our financial position and capital needs, our recent funding strengthens our ability to operate effectively, respond to competitive pressures, and achieve long-term profitability.
Removed
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.
Added
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.
Removed
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.
Added
If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock. On January 17, 2023, Digital Brands Group, Inc.
Removed
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.
Added
(the “Company”) was notified by the Nasdaq Hearings Panel (the “Panel”) that the Company has evidenced compliance with all applicable requirements for continued listing on The NasdaqCM, including the $2.5 million stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b).
Removed
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.
Added
The Company remained subject to a “Panel Monitor,” as that term is defined by Nasdaq Listing Rule 5815(d)(4)(A), through January 17, 2024. There can be no assurance that we will successfully regain our Nasdaq listing.
Removed
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.
Added
As our Common Stock and warrants are currently traded on the OTC marketplace, and as of the date of filing these financial statements, the company has not yet returned to NasdaqCM, our stockholders may experience reduced liquidity and increased difficulty in obtaining accurate price quotations.
Removed
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.
Added
Additionally, the ability to issue additional securities for financing or other purposes, or to secure necessary funding in the future, may be materially and adversely affected due to the absence of a national securities exchange listing.
Removed
If the actual and potential tariffs and reciprocal tariffs are implemented as currently proposed, our results of operations could be materially negatively impacted, both directly and indirectly through negative effects to our supply chain, as a result of increased costs, decreased demand and other adverse economic impacts, and we may not be able to successfully mitigate or offset such impacts.
Added
Under Nevada law, an acquiring person who acquires a controlling interest in an “issuing corporation” may not exercise voting rights on any control shares unless such voting rights are conferred by a majority vote of the disinterested stockholders at a special or annual meeting.
Removed
Depending upon their implementation and duration, as well as our ability to mitigate their impact, these tariffs and any other future regulatory actions implemented on a broader range of products or raw materials could materially affect our business, including in the form of increased cost of goods sold, decreased margins, increased pricing for customers, reduced sales and disruption in our supply chain.
Added
Additionally, Nevada’s business combination statutes prohibit an “interested stockholder” from entering into a “combination” with a Nevada corporation for three years after becoming an interested stockholder unless certain conditions are met, including board approval of the transaction.
Removed
Furthermore, additional trade restrictions could be adopted with little to no advance notice, and we may not be able to effectively mitigate the adverse impacts from such measures, which could further increase the cost of our products, disrupt our supply chain and impair our ability to effectively operate and compete in the countries where we do business.
Removed
The Company is closely monitoring this evolving situation but there can be no assurance that the Company will be able to mitigate the impacts of any trade measures, which could be material to the Company’s business operations or harm the Company’s competitive position.
Removed
Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel. Our future success largely depends upon the continued services of our executive officers and management team, especially our Chief Executive Officer and President, Mr. John “Hil” Davis.
Removed
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K.
Removed
Under Delaware law, a corporation may not engage in a business acquisition with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.
Removed
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.
Removed
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.
Removed
Our sixth amended and restated certificate of incorporation further provides that unless the Company consents in writing to the selection of an alternative forum, the U.S. federal district courts have exclusive jurisdiction of the resolution of any complaint asserting a cause of action arising under the Securities Act.
Removed
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.
Removed
This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Removed
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to this exclusive forum provision of our sixth amended and restated certificate of incorporation.
Removed
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.
Removed
Alternatively, if a court were to find this choice of forum provision in our sixth amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Removed
Additional costs associated with resolving an action in other jurisdictions could materially adversely affect our business, financial condition and results of operations. We do not expect to pay any dividends in the foreseeable future.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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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.
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 .
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.
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. 34 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.
Management has primary responsibility for our overall cybersecurity risk management program and supervises both the internal cybersecurity personnel and external cybersecurity consultants. The Company’s Information Systems Manager has many years of experience leading cybersecurity oversight and has extensive experience with information technology, including security, auditing, compliance, systems, and programming.
The Company’s Information Systems Manager has many years of experience leading cybersecurity oversight and has extensive experience with information technology, including security, auditing, compliance, systems, and programming .
The Audit Committee reports to the full Board of Directors regarding its activities, including those related to cybersecurity. The full Board of Directors also receives briefings from management on the cybersecurity risk management program as needed. Management is responsible for assessing and managing our material risks from cybersecurity threats.
The full Board of Directors also receives briefings from management on the cybersecurity risk management program as needed. Management is responsible for assessing and managing our material risks from cybersecurity threats. Management has primary responsibility for our overall cybersecurity risk management program and supervises both the internal cybersecurity personnel and external cybersecurity consultants.
It has delegated oversight of cybersecurity and other information technology risks to the Audit Committee. The Audit Committee oversees the implementation of the cybersecurity risk management program. The Audit Committee receives periodic reports from management on potential cybersecurity risks and threats and receives presentations on cybersecurity topics from the Company’s Information Systems Manager.
The Audit Committee receives periodic reports from management on potential cybersecurity risks and threats and receives presentations on cybersecurity topics from the Company’s Information Systems Manager. The Audit Committee reports to the full Board of Directors regarding its activities, including those related to cybersecurity.
Removed
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.
Added
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.
Added
Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function. It has delegated oversight of cybersecurity and other information technology risks to the Audit Committee. The Audit Committee oversees the implementation of the cybersecurity risk management program.

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 Location Type (approximate) Vernon, California Corporate Warehouse and Distribution Center 42,206 36
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 35

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThis 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.
Biggest changeThese matters also include the following: ● On March 20, 2024, a former temporary worker engaged through a third-party placement agency, who was never an employee of the Company, filed a wrongful termination lawsuit against the Company. The Company is disputing this claim.
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.
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, 2025. Depending on the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive orders.
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 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 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 has made all the payments and the lawsuit is dismissed. ● In June 2021, a vendor filed a lawsuit against Bailey related to a retail store lease in the amount of $1,500,000. The Company is disputing the claim for damages and the matter is ongoing.
The 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.
The Company is currently challenging the judgment and has initiated a new action reasserting its claims. ● On November 15, 2023, a vendor, Simon Showroom, filed a lawsuit against the company related to trade payables totaling approximately $582,208, representing “double damages,” while the actual amount due to the vendor was $292,604.
Removed
These matters also include the following: ● On March 21, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $43,501. 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 settled this matter in March 2026 for $16,000. ● On April 17, 2024, a former employee filed a wrongful termination lawsuit against the Company. The employee was part of the marketing team, which was fully transitioned to a third-party outsourced marketing solution.
Removed
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.
Added
The Company disputed the claim and initially pursued arbitration; however, the matter was settled in May 2025 for a payment by the company of $81,000. Of this amount, $41,000 was paid in June 2025, with the remaining $40,000 to be paid in three equal installments of $13,000 in July, August 2025, and September 2025.
Removed
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.
Added
In the summer of 2024, Century City Mall, LLC obtained a judgment against Bailey 44, LLC in the amount of approximately $1.4 million, inclusive of both damages for unpaid rent and attorney fees and costs. This amount is included within the liabilities of Bailey 44, LLC in these accompanying financial statements.
Removed
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.
Added
In this action, Century City Mall is attempting to hold Digital liable for the judgment against Bailey 44 on the theory that Digital is Bailey 44’s “alter ego.” The case is set for trial on July 21, 2026.
Removed
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.
Added
The Company is unable to weigh in on the likely outcome of the case but will vigorously defend. ● In June 2022, a dispute originated due to a contractual arrangement involving alleged unpaid service fees of approximately $28,000, as well as additional disputed amounts, and counterclaims asserted by the Company for damages arising from website-related issues.
Added
A default judgment of approximately $28,000 was entered against the Company in January 2025.
Added
The case was settled in full on December 10, 2024, for a total settlement amount of $400,000. As part of the settlement, the Company paid $50,000 in December 2024, followed by a $60,000 payment in February 2025.
Added
As of December 31, 2025, the Company had an outstanding balance of $130,000 remaining, with monthly payments of $30,000 being made under the terms of the settlement agreement. The Company has made all payments, and the lawsuit is dismissed.
Added
Except as may be set forth above the Company is not a party to any legal proceedings, and the Company is not aware of any claims or actions pending or threatened against us.
Added
In the future, the Company might from time to time become involved in litigation relating to claims arising from its ordinary course of business, the resolution of which the Company does not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Removed
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.
Added
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Item 6. Reserved 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8. Financial Statements and Supplementary Data 50 Item 9.
Removed
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.
Added
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 50 Item 9A. Controls and Procedures 50
Removed
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
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
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
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.
Removed
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.
Removed
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.
Removed
In March 2024, 3,042 shares of Series C Convertible Preferred Stock converted into 3,840 shares of common stock.
Removed
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
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
The Company received net proceeds of $2,877,475 after placement agent fees and expenses.
Removed
In 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.
Removed
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
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 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
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
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
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 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 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
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 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
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
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
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
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
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 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.
Removed
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).
Removed
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.
Removed
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.
Removed
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.
Removed
The Second Note matures on April 22, 2025, and contains customary events of default.
Removed
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.
Removed
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.
Removed
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.
Removed
The 2020 Plan is currently administered by the Compensation Committee of the Board as the Plan administrator.
Removed
The 2020 Plan administrator has the authority to determine, within the limits of the express provisions of the 2020 Plan, the individuals to whom awards will be granted, the nature, amount and terms of such awards and the objectives and conditions for earning such awards.
Removed
The Board may at any time amend or terminate the 2020 Plan, provided that no such action may be taken that adversely affects any rights or obligations with respect to any awards previously made under the 2020 Plan without the consent of the recipient.
Removed
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.

Item 7. Management's Discussion & Analysis

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

49 edited+27 added−18 removed56 unchanged
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.
Biggest changeCash Flow Activities The following table presents selected captions from our condensed statement of cash flows for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Net cash provided by operating activities: Net loss $ (28,252,558 ) $ (13,106,589 ) Non-cash adjustments $ 6,587,661 $ 6,621,108 Change in operating assets and liabilities $ 5,787,729 $ 333,144 Net cash used in operating activities $ (15,877,168 ) $ (6,152,338 ) Net cash provided by (used in) investing activities $ - $ - Net cash provided by financing activities $ 23,391,742 $ 6,295,996 Net change in cash $ 7,514,574 $ 143,658 Cash Flows Used In Operating Activities For the year ended December 31, 2025, net cash used in operating activities was $15.9 million, compared to $6.2 million for the year ended December 31, 2024.
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.
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. 40 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.
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.
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.
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.
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. 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 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.
Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand. ● 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.
These costs consist of general and administrative, sales and marketing, and 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, and expenses related to our operations at our headquarters, including utilities, depreciation and amortization, and other costs related to the administration of our business.
These costs consist of general and administrative, sales and marketing, and fulfillment and shipping expense to the customer. 45 General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, and expenses related to our operations at our headquarters, including utilities, depreciation and amortization, and other costs related to the administration of our business.
Sales & Marketing Stateside’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 Net Revenue Sundry sells its products directly to customers.
Sales & Marketing Stateside’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. 46 Sundry Net Revenue Sundry sells its products directly to customers.
Cost of net revenue includes an allocation of overheard costs such as rent, utilities and commercial insurance pertaining to direct inventory activities. Operating Expenses Bailey’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 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.
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 Bailey’s operating expenses include all operating costs not included in cost of net revenues and sales and marketing.
Cost of Net Revenue Bailey’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.
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.
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.
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 Bailey’s operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.
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.
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 $2.5 million for the year ended December 31, 2025 to $1.1 million from $3.6 million for the corresponding fiscal period in 2024.
General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses related to Bailey’s operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.
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.
In addition, going forward, the amortization of the identifiable intangibles acquired in the acquisitions will be included in operating expenses. Interest Expense Interest expense consists primarily of interest related to our debt outstanding to our senior lender, convertible debt, and other interest bearing liabilities. Stateside Net Revenue Stateside sells its products directly to customers.
In addition, the amortization of the identifiable intangibles acquired in the acquisitions is included in operating expenses. Interest Expense Interest expense consists primarily of interest related to our debt outstanding to our senior lender, convertible debt, and other interest bearing liabilities. Stateside Net Revenue Stateside sells its products directly to customers.
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.
Sales and marketing expenses as a percentage of revenue was 198% in 2025 as compared to 25% in 2024. Other Operating Expenses (income) Other operating expenses included distribution expenses, impairment and change in fair value of contingent consideration.
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 decrease in gross margin was primarily attributable to a decrease in sales. Our gross margin was 14.3% for the year ended December 31, 2025 compared to 31.5% for year ended December 31, 2024. The decrease in gross margin was due to corresponding decrease in the ecommerce revenue and write down of Sundry’s inventory.
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”).
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, LLC (“Sundry”). 38 Business Overview Our Company Digital Brands Group is a curated collection of lifestyle apparel brands, including Bailey 44, DSTLD, Stateside, and Sundry, that offers a variety of apparel products through direct-to-consumer and wholesale distribution channels.
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.
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.
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.
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.
Ability to Expand Operating Margins Our ability to expand operating margins will be impacted by our ability to leverage (1) fixed general and administrative costs, (2) variable sales and marketing costs, (3) elimination of redundant costs as we acquire and integrate brands, (4) cross marketing and cross merchandising brands in our portfolio, and (4) drive customer retention and customer lifetime value.
Ability to Expand Gross Margins Our overall profitability will be impacted by our ability to expand gross margins through effective sourcing and leveraging buying power of finished goods and shipping costs, as well as pricing power over time. 42 Ability to Expand Operating Margins Our ability to expand operating margins will be impacted by our ability to leverage (1) fixed general and administrative costs, (2) variable sales and marketing costs, (3) elimination of redundant costs as we acquire and integrate brands, (4) cross marketing and cross merchandising brands in our portfolio, and (4) drive customer retention and customer lifetime value.
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.
Cash Flows provided by Investing Activities Our cash provided by investing activities was $0 in the year ended December 31, 2025 and December 31, 2024. Cash Flows Provided by Financing Activities Cash provided by financing activities was $23.4 million for the year ended December 31, 2025 compared to $6.3 million for the corresponding fiscal period in 2024.
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.
The increase in cash used in operating activities was primarily driven by a higher net loss of $28.3 million in 2025 compared to $13.1 million in 2024, partially offset by non-cash adjustments of $6.6 million and favorable changes in operating assets and liabilities of $5.8 million.
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.
In 2024, the Company recorded a $3.2 million increase in the change in fair value of contingent consideration pertaining to the Norwest waiver for Bailey and H&J Settlement. Other Income (Expense) Other income (expense) was $(1.3) million in the year ended December 31, 2025 as compared to $3.0 million in the year ended December 31, 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”). 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.
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.
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.
The increase was primarily due to accrued legal contingencies, partially offset by a decrease due to lower consulting and professional fees, as well as other cost cutting measures across our Company, as all brands achieved operational synergies in 2025.
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.
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.
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.
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.
We believe that by leveraging a physical footprint to acquire customers and increase brand awareness, we can use digital marketing to focus on retention and a very tight, disciplined high value new customer acquisition strategy, especially targeting potential customers lower in the sales funnel.
With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens our ability to efficiently acquire and retain customers while also driving high customer lifetime value. 39 We believe that by leveraging a physical footprint to acquire customers and increase brand awareness, we can use digital marketing to focus on retention and a very tight, disciplined high value new customer acquisition strategy, especially targeting potential customers lower in the sales funnel.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations. We currently have $3.5 million in notes outstanding pursuant to our Bailey acquisition. We are currently unable to repay or refinance borrowings so any such action by these lenders could force us into bankruptcy or liquidation.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations. 41 We currently have $3.5 million in notes outstanding pursuant to our Bailey acquisition.
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.
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.
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.
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.
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.
These synergies included the elimination of its warehouse, office, fulfillment and redundancies in headcount General and administrative expenses as a percentage of revenue were 131% in 2025 compared to 75% in 2024, reflecting the significant revenue decline relative to the largely fixed cost base.
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.
General and Administrative Expenses General and administrative expenses increased by $1.0 million for the year ended December 31, 2025 to $9.7 million compared to $8.7 million in 2024.
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.
Results of Operations Year ended December 31, 2025 compared to year ended December 31, 2024 The following table presents our results of operations for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Net revenues $ 7,380,921 $ 11,555,656 Cost of net revenues 6,326,300 7,911,536 Gross profit 1,054,621 3,644,120 General and administrative 9,674,699 8,652,361 Sales and marketing 14,596,126 2,896,698 Other operating expenses 6,317,573 2,295,843 Operating loss (29,533,777 ) (10,200,782 ) Other expenses 1,281,219 (3,024,851 ) Loss before provision for income taxes (28,252,558 ) (13,106,589 ) Provision for income taxes - 119,044 Net loss from continuing operations (28,252,558 ) (13,106,589 ) Net loss $ (28,252,558 ) $ (13,106,589 ) 47 Net Revenues Net revenues decreased by $4.2 million to $7.4 million for the year ended December 31, 2025, compared to $11.6 million in the corresponding fiscal period in 2024.
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.
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. The Company requires significant capital to meet its obligations as they become due.
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.
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. 49 Contractual Obligations and Commitments As of December 31, 2025, we have $6.1 million in outstanding principal on debt, primarily our promissory notes due to the Bailey44 Sellers, the March 2023 Notes, PPP and merchant advances.
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.
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.
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.
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.
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.
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.
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.
Net Loss Our net loss increased by $15.2 million to a loss of $28.3 million for the year ended December 31, 2025 compared to a loss of $13.1 million for the corresponding fiscal period in 2024 primarily due to the higher operating expenses and lower gross profit. 48 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 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.
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. Avo also offers larger discounts when the customer bundles multiple products to their cart, which allows Avo to leverage its shipping and fulfillment costs.
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.
Sales and Marketing Expenses Sales and marketing expenses increased by $11.7 million for the year ended December 31, 2025 to $14.6 million compared to $2.9 million in 2024.
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.
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.
Our customer’s annual spend and brand relevance will be driven by the cadence and success of new product launches. Ability to Expand Gross Margins Our overall profitability will be impacted by our ability to expand gross margins through effective sourcing and leveraging buying power of finished goods and shipping costs, as well as pricing power over time.
Our customer’s annual spend and brand relevance will be driven by the cadence and success of new product launches.
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.
Other operating expenses were $6.3 million in 2025 as compared to expenses of $2.3 million in 2024, an increase in expenses of $4.0 million.
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.
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. 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.
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.
Cash inflows in 2025 included $11.4 million from the issuance of Series D Convertible Preferred Stock, $6.6 million from proceeds for the issuance of pre-funded warrants, $5.8 million from the exercise of warrants, and $0.2 million from the issuance of notes, loans and merchant advances, partially offset by note, loan and notes payable repayments of $0.7 million.
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.
The inventory balances as of December 31, 2025 and 2024 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress. Goodwill Impairment We are required to assess our goodwill for impairment at least annually for each reporting unit that carries goodwill.
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.
The Company may also pursue additional equity or debt financings as needed. There can be no assurance as to the availability or terms upon which such financing might be available. The Bailey sellers’ promissory note of $3,500,000 matured on December 8, 2025 and remains in default; management is in active discussions with the lender regarding repayment or extension.
Removed
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.
Added
In 2025, the Company launched its collegiate name, image and likeness (NIL) apparel program, entering into multi-year agreements with AAA Tuscaloosa (University of Alabama), Traffic Holdco, The Grove Collective (Ole Miss), and Learfield/Buffalo Sports Properties (University at Buffalo). Our complementary brand portfolio provides us with the unique opportunity to cross merchandise our brands.
Removed
With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens our ability to efficiently acquire and retain customers while also driving high customer lifetime value.
Added
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, 2025, we had an aggregate principal amount of debt outstanding of approximately $6.1 million.
Removed
Actual results could differ from those estimates. Business Acquisitions We record our acquisitions under the acquisition method of accounting, under which most of the assets acquired and liabilities assumed are initially recorded at their respective fair values and any excess purchase price is reflected as goodwill.
Added
We are currently unable to repay or refinance borrowings so any such action by these lenders could force us into bankruptcy or liquidation.
Removed
We utilize management estimates and, in some instances, independent third-party valuation firms to assist in determining the fair values of assets acquired, liabilities assumed and contingent consideration, if any. Such estimates and valuations require us to make significant assumptions, including projections of future events and operating performance.
Added
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Removed
The fair value of customer relationships, backlog and trade names/trademarks acquired in our acquisitions are determined using various valuation methods, based on a number of significant assumptions. We determine which assets have finite lives and then determine the estimated useful life of finite assets.
Added
In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.
Removed
The expected useful life of customer relationships is established as three years, which is the period over which these assets are expected to reasonably contribute to future cash flows. We expect to amortize such customer relationships using the straight-line method.
Added
We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.
Removed
The estimated fair values are subject to change during the measurement period, which is limited to one year subsequent to the acquisition date. Revenue Recognition Revenues are recognized when performance obligations are satisfied through the transfer of promised goods to our customers. Control transfers upon shipment of product and when the title has been passed to the customers.
Added
However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Removed
This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. We provide the customer the right of return on the product and revenue is adjusted based on an estimate of the expected returns based on historical rates. We consider the sale of products as a single performance obligation.
Added
Actual results could differ from those estimates. Prepaid Marketing Expenses and Liability-Classified Share-Based Awards The Company enters into long-term marketing, licensing, manufacturing, and sponsorship arrangements with third-party service providers under which it may issue common stock or equity-linked instruments in exchange for future services, including distribution, licensing access, product specification support, and marketing and promotional activities.
Removed
Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses. Revenue is deferred for orders received for which associated shipments have not occurred.
Added
These arrangements are accounted for as share-based payments to nonemployees in accordance with ASC 718, Compensation—Stock Compensation . Where share-based consideration is determined to be in exchange for distinct goods or services, including those received from a customer, the Company accounts for such transactions as the purchase of services.
Removed
Accounts Receivable and Expected Credit Loss We carry our accounts receivable at invoiced amounts less allowances for customer credit losses and other deductions to present the net amount expected to be collected on the financial asset. All receivables are expected to be collected within one year of the consolidated balance sheet. We do not accrue interest on the trade receivables.
Added
The Company recognizes a prepaid marketing or service asset measured at the grant-date fair value of the share-based consideration issued, representing the value of services to be received over the contractual term. Such prepaid assets are amortized on a straight-line basis over the period in which the related services are received, which generally corresponds to the contractual service period.
Removed
Management evaluates the ability to collect accounts receivable based on a combination of factors. Receivables are determined to be past due based on individual credit terms. An allowance for credit losses is maintained based on the length of time receivables are past due, historical collections, or the status of a customer’s financial position.
Added
Certain share-based arrangements include make-whole provisions that require the Company to deliver a fixed monetary value using a variable number of shares, or, in certain cases, cash.
Removed
Receivables are written off in the year deemed uncollectible after efforts to collect the receivables have proven unsuccessful. We do not have any off balance sheet cried exposure related to our customers. We periodically review accounts receivable, estimate an allowance for bad debts, and simultaneously record the appropriate expense in the statement of operations.
Added
These provisions result in liability classification under ASC 718 and ASC 480, Distinguishing Liabilities from Equity , as the Company has an obligation to settle a fixed dollar amount rather than a fixed number of shares.
Removed
Such estimates are based on general economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Past due accounts are written off against that allowance only after all collection attempts have been exhausted and the prospects for recovery are remote. Recovering of accounts receivable previously written off are recorded as income when received.
Added
Liability-classified share-based awards are initially measured at fair value on the grant date and subsequently remeasured at fair value at each reporting date until settlement. Changes in fair value are recognized in earnings in the period of change.
Removed
The decrease in other expenses in 2023 was primarily due to lower interest expense in 2024 compared to 2023.
Added
Compensation cost is recognized over the requisite service period, with cumulative adjustments recorded for changes in fair value. 43 The Company evaluates features within these arrangements, including make-whole provisions, under ASC 815, Derivatives and Hedging , to determine whether such features should be accounted for separately as derivatives.
Removed
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.
Added
The Company has concluded that these features qualify for the scope exception applicable to share-based payment arrangements and therefore are not accounted for as freestanding or embedded derivatives. Accordingly, no bifurcation is required. The fair value of liability-classified share-based awards is estimated using a Monte Carlo simulation model.
Removed
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.

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