Digital Brands Group, Inc 10-Q for FY2022 Q2

Digital Brands Group, Inc. (DBGI)

10-Q 2022-08-15 For: 2022-06-30

Added on April 07, 2026

About this 10-Q

Digital Brands Group, Inc filed this 10-Q on August 15, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.74M; up 272.6% from $1M a year earlier
Net loss: $9.53M; compared with a net loss of $10.7M a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Delaware		46-1942864
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	DBGI	The Nasdaq Stock Market LLC
Warrants, each exercisable to purchase one share of common stock	DBGIW	The Nasdaq Stock Market LLC


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒


PART I. FINANCIAL INFORMATION		3


ITEM 1.	Condensed Consolidated Financial Statements – Unaudited	3

	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	4

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Six Months ended June 30, 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	24

ITEM 4.	Controls and Procedures	25

PART II. OTHER INFORMATION		27

ITEM 1.	Legal Proceedings	27

ITEM 1A.	Risk Factors	27

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

ITEM 3.	Defaults upon Senior Securities	28

ITEM 4.	Mine Safety Disclosures	28

ITEM 5.	Other Information	28

ITEM 6.	Exhibits	29

SIGNATURES		31


	June 30,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	802,724	$	528,394
Accounts receivable, net		190,056		89,394
Due from factor, net		929,989		985,288
Inventory		2,883,613		2,755,358
Prepaid expenses and other current assets		813,681		417,900
Total current assets		5,620,063		4,776,334
Deferred offering costs		367,696		367,696
Property, equipment and software, net		65,235		97,265
Goodwill		18,264,822		18,264,822
Intangible assets, net		11,765,688		12,841,313
Deposits		137,794		137,794
Right of use asset		201,681		—
Total assets	$	36,422,979	$	36,485,224

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	7,003,333	$	6,562,690
Accrued expenses and other liabilities		3,698,717		2,237,145
Deferred revenue		221,363		276,397
Due to related parties		250,598		277,635
Contingent consideration liability		19,300,716		12,179,476
Convertible notes, current		100,000		100,000
Accrued interest payable		1,801,303		1,110,679
Note payable - related party		154,489		299,489
Venture debt, net of discount		6,251,755		6,001,755
Loan payable, current		1,489,335		2,502,000
Promissory note payable		3,500,000		3,500,000
Right of use liability, current portion		201,681		—
Total current liabilities		43,973,290		35,047,266
Convertible note payable, net		5,986,068		5,501,614
Loan payable		298,900		713,182
Derivative liability		1,044,939		2,294,720
Warrant liability		—		18,223
Total liabilities		51,303,197		43,575,005

Commitments and contingencies (Note 11)

Stockholders’ deficit:
Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares issued and outstanding as of both June 30, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par, 200,000,000 shares authorized, 52,874,188 and 13,001,690 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		5,287		1,300
Additional paid-in capital		68,185,315		58,612,873
Accumulated deficit		(83,070,820)		(65,703,954)
Total stockholders’ deficit		(14,880,218)		(7,089,781)
Total liabilities and stockholders’ deficit	$	36,422,979	$	36,485,224


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net revenues		3,739,001		1,003,529	$	7,171,411	$	1,411,934
Cost of net revenues		1,567,922		608,944		3,526,833		1,224,886
Gross profit		2,171,079		394,585		3,644,578		187,048
Operating expenses:
General and administrative		4,990,232		7,192,460		9,601,467		9,099,978
Sales and marketing		1,705,291		923,283		2,745,863		1,094,103
Distribution		221,925		69,864		424,773		133,442
Change in fair value of contingent consideration		5,920,919		3,050,901		7,121,240		3,050,901
Total operating expenses		12,838,367		11,236,508		19,893,343		13,378,424
Loss from operations		(10,667,288)		(10,841,923)		(16,248,765)		(13,191,376)
Other income (expense):
Interest expense		(2,203,599)		(897,920)		(3,771,476)		(1,572,964)
Other non-operating income (expenses)		3,336,963		(57,775)		2,653,375		(57,213)
Total other income (expense), net		1,133,364		(955,695)		(1,118,101)		(1,630,177)
Income tax benefit (provision)		—		1,100,120		—		1,100,120
Net loss	$	(9,533,924)	$	(10,697,498)	$	(17,366,866)	$	(13,721,433)

Weighted average common shares outstanding - basic and diluted		35,822,250		5,435,023		24,591,052		3,062,774
Net loss per common share - basic and diluted	$	(0.27)	$	(1.97)	$	(0.71)	$	(4.48)


	Series Seed			Series A			Series A-2			Series A-3			Series CF			Series B						Additional				Total
	Preferred Stock			Preferred Stock			Preferred Stock			Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity (Deficit)
Balances at December 31, 2020	20,714,518	$	2,071	5,654,072	$	565	5,932,742	$	593	9,032,330	$	904	836,331	$	83	20,754,717	$	2,075	664,167	$	66	$	27,481,995	$	(33,345,997)	$	(5,857,645)
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—	—		—		36,976		—		36,976
Net loss	—		—	—		—	—		—	—		—	—		—	—		—	—		—		—		(3,023,935)		(3,023,935)
Balances at March 31, 2021	20,714,518	$	2,071	5,654,072	$	565	5,932,742		593	9,032,330		904	836,331		83	20,754,717		2,075	664,167		66		27,518,971		(36,369,932)		(8,844,604)
Conversion of preferred stock into common stock	(20,714,518)		(2,071)	(5,654,072)		(565)	(5,932,742)		(593)	(9,032,330)		(904)	(836,331)		(83)	(20,754,717)		(2,075)	4,027,181		403		5,888		—		—
Issuance of common stock in public offering	—		—	—		—	—		—	—		—	—		—	—		—	2,409,639		241		9,999,761		—		10,000,002
Offering costs	—		—	—		—	—		—	—		—	—		—	—		—	—		—		(2,116,957)		—		(2,116,957)
Exercise of over-allotment option, net of offering costs	—		—	—		—	—		—	—		—	—		—	—		—	361,445		36		1,364,961		—		1,364,997
Conversion of debt into common stock	—		—	—		—	—		—	—		—	—		—	—		—	1,135,153		114		2,680,175		—		2,680,289
Conversion of related party notes and payables into common stock	—		—	—		—	—		—	—		—	—		—	—		—	152,357		15		257,500		—		257,515
Common stock and warrants issued in connection with note	—		—	—		—	—		—	—		—	—		—	—		—	20,000		2		73,956		—		73,958
Common stock issued in connection with business combination	—		—	—		—	—		—	—		—	—		—	—		—	2,192,771		219		8,025,323		—		8,025,542
Exercise of warrants	—		—	—		—	—		—	—		—	—		—	—		—	31,881		3		145,693		—		145,696
Common stock issued pursuant to consulting agreement	—		—	—		—	—		—	—		—	—		—	—		—	50,000		5		182,995		—		183,000
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—	—		—		3,801,553		—		3,801,553
Net loss	—		—	—		—	—		—	—		—	—		—	—		—	—		—		—		(10,697,498)		(10,697,498)
Balances at June 30, 2021	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	11,044,594		1,104	$	51,939,819	$	(47,067,430)	$	4,873,493

Balances at December 31, 2021	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	13,001,690	$	1,300	$	58,612,873	$	(65,703,954)	$	(7,089,781)
Conversion of notes and derivative liability into common stock	—		—	—		—	—		—	—		—	—		—	—		—	873,901		87		1,201,495		—		1,201,582
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—	—		—		139,093		—		139,093
Net loss	—		—	—		—	—		—	—		—	—		—	—		—	—		—		—		(7,832,942)		(7,832,942)
Balances at March 31, 2022	—		—	—		—	—		—	—		—	—		—	—		—	13,875,591		1,387		59,953,461		(73,536,896)		(13,582,048)
Issuance of common stock in public offering	—		—	—		—	—		—	—		—	—		—	—		—	37,389,800		3,739		9,343,711		—		9,347,450
Offering costs	—		—	—		—	—		—	—		—	—		—	—		—	—		—		(1,930,486)		—		(1,930,486)
Conversion of notes and derivative liability into common stock	—		—	—		—	—		—	—		—	—		—	—		—	1,608,797		161		600,629		—		600,790
Warrants issued in connection with note	—		—	—		—	—		—	—		—	—		—	—		—	—		—		98,241		—		98,241
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	—		—	—		—		119,759		—		119,759
Net loss																							—		(9,533,924)		(9,533,924)
Balances at June 30, 2022	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—	52,874,188	$	5,287	$	68,185,315	$	(83,070,820)	$	(14,880,218)


	Fair Value Measurements
	as of June 30, 2022 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	—	$	—	$	—	$	—
Contingent consideration		—		—		19,300,716		19,300,716
Derivative liability		—		—		1,044,939		1,044,939
	$	—	$	—	$	20,345,655	$	20,345,655


	Fair Value Measurements
	as of December 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	—	$	18,223	$	—	$	18,223
Contingent consideration		—		—		12,179,476		12,179,476
Derivative liability		—		—		2,294,720		2,294,720
	$	—	$	18,223	$	14,474,196	$	14,492,419


	Contingent
	Consideration
	Liability
Outstanding as of December 31, 2021	$	12,179,476
Change in fair value		7,121,240
Outstanding as of June 30, 2022	$	19,300,716


	Derivative
	Liability
Outstanding as of December 31, 2021	$	2,294,720
Conversion of underlying notes into common stock		(369,393)
Change in fair value		(880,388)
Outstanding as of June 30, 2022	$	1,044,939


	Gross		Accumulated		Carrying
	Amount		Amortization		Value
Amortized:
Customer relationships	$	6,453,750	$	(2,524,982)	$	3,928,768
		6,453,750		(2,524,982)		3,928,768

Indefinite-lived:
Brand name	$	7,836,920		—		7,836,920
	$	14,290,670	$	(2,524,982)	$	11,765,688


	Common	Weighted
	Stock	Average
	Warrants	Exercise Price
Outstanding - December 31, 2021	3,580,116	$	4.12
Granted	2,753,276		0.73
Exercised	—		—
Forfeited	—		—
Outstanding - June 30, 2022	6,333,392	$	4.12
Exercisable at June 30, 2022	4,837,799	$	3.37


Exhibit Number		Description of Exhibit

2.1		Membership Interest Purchase Agreement dated October 14, 2020 among D. Jones Tailored Collection, LTD and Digital Brands Group (formerly known as Denim.LA, Inc.) (incorporated by reference to our Current Report on Form 1-U (File No. 24R-00032), filed with the Commission on November 18, 2020)
2.2		First Amendment to Membership Interest Purchase Agreement dated December 31, 2020 among D. Jones Tailored Collection, LTD and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 2.2 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 13, 2021)
2.3		Agreement and Plan of Merger with Bailey 44, LLC dated February 11, 2020 among Bailey 44, LLC, Norwest Venture Partners XI, and Norwest Venture Partners XII, LP and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to exhibit 7.1 of our Current Report on Form 1-U, filed with the Commission on February 13, 2020)
2.4		Second Amendment to Membership Interest Purchase Agreement Dated May 10, 2021 among D. Jones Tailored Collection, LTD and Digital Brands Group (formerly known as Denim. LA, Inc.) (incorporated by reference to Exhibit 2.4 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 2.1 of our Regulation A Offering Statement on Form 1-A (Commission File No. 024-10535), filed with the Commission on March 23, 2016)
3.2		Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 13, 2021)
3.3		Form of Sixth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 12, 2021)
3.4		Bylaws of the Registrant (incorporated by reference to exhibit 2.2 of our Regulation A Offering Statement on Form 1-A (Commission File No. 024-10535), filed with the Commission on March 23, 2016)
3.5		Form of Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.5 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 12, 2021)
4.1		Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 27, 2021)
4.2		Form of Warrant Agency Agreement, including Form of Warrant Certificate (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 27, 2021)
4.3		Form of Underwriter’s Warrants (incorporated by reference to Exhibit 1.1 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
4.4		Form of Lender’s Warrants (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 27, 2021)
4.5		Form of Series Seed Preferred Stock Purchase Agreement (incorporated by reference to Exhibit 4.5 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 13, 2021)
4.6		Form of Series A Preferred Stock Subscription Agreement (incorporated by reference to exhibit 4 of our Form 1-A/A (Commission File No. 024-10718), filed with the Commission on March 23, 2016)
4.7		Form of Series A-2 Preferred Stock Subscription Agreement (incorporated by reference to exhibit 4.1 of our Form 1-A/A (Commission File No. 024-10718), filed with the Commission on August 8, 2017)
4.8		Form of Series A-3 Preferred Stock Subscription Agreement (incorporated by reference to exhibit 4 of our Form 1-A/A (Commission File No. 024-10718), filed with the Commission on September 13, 2018)

4.9		Form of Series CF Preferred Stock Purchase Agreement (incorporated by reference to Exhibit 4.9 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 13, 2021)
4.10		Form of 2019 Regulation D Convertible Note (incorporated by reference to Exhibit 4.10 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
4.11		Form of 2020 Regulation D Convertible Note (incorporated by reference to Exhibit 4.11 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
10.1		Form of Indemnification Agreement between the Registrant and each of its directors and officers (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 13, 2021)
10.2		Form of Option Agreement with each of John “Hil” Davis, Laura Dowling and Reid Yeoman (incorporated by reference to Exhibit 10.5 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
10.3		Amendment No. 7 to Senior Credit Agreement, dated as of April 1, 2021 between bocm3-DSTLD-Senior Debt, LLC, bocm3-DSTLD-Senior Debt 2, LLC, Stockholders and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.15 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 27, 2021)
10.4		Form of Board of Directors Agreement, entered into by each of the Director Nominees (incorporated by reference to Exhibit 10.27 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on April 13, 2021)
10.5		Original Issue Discount Promissory Note by Digital Brands Group, Inc. in favor of Target Capital 2, LLC in the aggregate amount of $1,000,000 dated as of April 8, 2021 (incorporated by reference to Exhibit 10.29 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
10.6		Consulting Agreement dated as of April 8, 2021 between Alchemy Advisory LLC and Digital Brands Group, Inc. (incorporated by reference to Exhibit 10.30 to our Registration Statement on Form S-1/A (Commission File No. 333-255193), filed with the Commission on May 11, 2021)
Exhibit 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 104		The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL.


Bailey	$	10,698,475
Harper & Jones		8,602,241
	$	19,300,716


	June 30,		December 31,
	2022		2021
Raw materials	$	433,616	$	292,167
Work in process		258,626		242,673
Finished goods		2,191,371		2,220,519
Inventory	$	2,883,613	$	2,755,358


	June 30,		December 31,
	2022		2021
Outstanding receivables:
Without recourse	$	517,994	$	579,295
With recourse		220,098		361,584
Advances		264,053		121,617
Credits due customers		(72,156)		(77,208)
	$	929,989	$	985,288


	DIGITAL BRANDS GROUP, INC.

August 15, 2022	By:	/s/ John Hilburn Davi, IV
		John Hilburn Davis, IV, Chief Executive Officer


August 15, 2022	By:	/s/ Reid Yeoman
		Reid Yeoman, Chief Financial Officer

Date: August 15, 2022	By:	/s/ John Hilburn Davis
		John Hilburn Davis
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 15, 2022	By:	/s/ Reid Yeoman
		Reid Yeoman
		Chief Financial Officer
		(Principal Financial Officer)