Digital Brands Group, Inc 8-K, filed Nov 14, 2024

Digital Brands Group, Inc. (DBGI)

8-K 2024-11-14 For: 2024-11-14

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Added on April 07, 2026

About this 8-K

Digital Brands Group, Inc filed this 8-K on November 14, 2024.

Items reported

Item 2.02: Financial results
Item 9.01: Financial statements and exhibits

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☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Exhibit No.		Description
99.1		Press release of the Company dated November 14, 2024
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	DIGITAL BRANDS GROUP, INC.

Dated: November 14, 2024	By:	/s/ John Hilburn Davis IV
	Name:	John Hilburn Davis IV
	Title:	President and Chief Executive Officer

●	Net revenues were $2.4 million compared to $3.3 million a year ago

		○	The majority of the decline in revenue is associated with the Company dropping its largest wholesale account due to single-digit gross margins before the required additional expenses to manage the account.

		○	This account was net negative in cash contribution. So while we lost revenue, we increased profitability

		○	Net revenues were negatively impacted by limited digital advertising spend, which resulted in low e-commerce revenue

●	Gross profit margins were 46.0% compared to 52.3% a year ago

		○	The biggest factor in the decline is the fixed costs associated with gross margins including warehouse rent and labor expenses, pattern makers and sewers expenses and some design members expenses

		○	Gross profit margins were negatively impacted by lower digital revenue associated with limited digital advertising revenue in the quarter

		○	Gross profit was $1.1 million compared to $1.7 million a year ago

●	G&A expenses decreased $1.3 million to $2.4 million compared to $3.7 million a year ago

		○	G&A included $1.6 million in non-cash expenses

		○	G&A expenses declined sequentially by over $500,000 from Q2 2024

●	Sales & Marketing expenses were $655,000 compared to $1.2 million a year ago

		○	Sales and marketing expenses ratio was 26.9% compared to 35.3% a year ago

		○	The majority of the sales and marketing expense was the marketing team

		○	We have outsourced our sales and marketing to VAYNERCOMMERCE

●	Net loss was $3.5 million compared to a net loss of $5.4 million a year ago, which includes $1.6M in non-cash expenses

		○	Starting in Q1 next year, interest expenses will decline to $105,000 a quarter due to the completion of the amortization at year end

		○	This amortization change in our interest expense will result in a benefit of approximately $3.1 million to our net earnings in fiscal 2025

●	Net loss per diluted share was $1.63 per diluted share compared to a net loss per diluted share of $14.55 a year ago

	Three Months Ended						Nine Months Ended
	September, 30						September, 30
	2024			2023			2024			2023
Net revenues	$	2,440,801		$	3,257,332		$	9,413,457		$	12,127,135
Cost of net revenues		1,319,214			1,554,044			5,012,457			6,094,532
Gross profit		1,121,587			1,703,288			4,401,000			6,032,603

Operating expenses:
General and administrative		2,429,040			3,735,527			6,347,460			12,115,590
Sales and marketing		655,833			1,151,377			1,979,173			3,188,054
Distribution		180,879			238,546			745,412			750,945
Impairment of intangible assets		600,000			-			600,000			-
Change in fair value of contingent considerartion		-			-			-			(10,698,475	)
Total operating expenses		3,865,752			5,125,450			9,672,045			5,356,114

Income (loss) from operations		(2,744,165	)		(3,422,162	)		(5,271,045	)		676,489

Other income (expense):
Interest expense		(742,557	)		(1,956,080	)		(2,487,172	)		(4,907,567	)
Other non-operating income (expenses)		(54,515	)		(57,752	)		22,765			(734,501	)
Total other income (expense), net		(797,072	)		(2,013,832	)		(2,464,407	)		(5,642,068	)

Income tax benefit (provision)		-			-			-			-
Net income (loss) from continuing operations		(3,541,237	)		(5,435,994	)		(7,735,452	)		(4,965,579	)
(Loss) from discontinued operations, net of tax		-			-			-			(1,562,503	)
Net income (loss)	$	(3,541,237	)	$	(5,435,994	)	$	(7,735,452	)	$	(6,528,082	)

Weighted average common shares outstanding - basic and diluted		2,171,823			373,498			2,061,252			283,678
Net loss per common share - basic and diluted	$	(1.63	)	$	(14.55	)	$	(3.75	)	$	(17.50	)

	Nine Months Ended
	September 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(7,735,452	)	$	(6,528,082	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,057,638			2,485,166
Amortization of loan discount and fees		2,220,549			1,956,355
Impairment of intangible assets		600,000			-
Loss on extinguishment of debt		-			689,100
Loss on disposition of bussiness		-			1,523,940
Stock-based compensation		169,262			308,511
Shares issued for services		312,634			1,656,417
Change in credit reserve		(151,611	)		354,282
Change in fair value of contigent consideration		-			(10,698,475	)
Discontinued operation		-			7,666
Non-cash lease expense		817,077			-
Changes in operating assets and liabilities:
Accounts receivable, net		(201,501	)		153,479
Due from factor		51,153			72,220
Inventory		(190,918	)		514,955
Prepaid expenses and other current assets		(76,637	)		(366,615	)
Accounts payable		(1,287,018	)		182,242
Accrued expenses and other liabilities		477,945			1,088,763
Deferred revenue		-			(183,782	)
Accrued interest payable		106,701			326,219
Due to related parties		26,909
Lease liabilities		(490,000	)		-
Net cash used in operating activities		(3,293,269	)		(6,457,639	)
Cash flows from investing activities:
Cash disposed		-			(18,192	)
Purchase of property, equipment and software		(23,801	)		(27,855	)
Deposits		(77,280	)		87,378
Net cash provided by (used in) investing activities		(101,081	)		41,331
Cash flows from financing activities:
Repayments from related party advances					(218,967	)
Advances from factor		-			154,073
Issuance of loans and note payable		790,977			5,799,989
Repayments of convertible notes and loan payable		(2,484,248	)		(8,840,092	)
Insurance for common stock for cash		5,356,194			-
Exercise of Warrants		-			1,167,566
Issuance of common stock in public offering		-			10,000,003
Offering costs		-			(1,854,622	)
Net cash provided by financing activities		3,662,923			6,207,950
Net change in cash and cash equivalents		268,573			(208,357	)
Cash and cash equivalents at beginning of period		20,773			1,275,616
Cash and cash equivalents at end of period	$	289,346		$	1,067,259

	September 30,			December 31,
	2024			2023
ASSETS
Current assets:
Cash and cash equivalents	$	289,346		$	20,773
Accounts receivable, net		276,334			74,833
Due from factor, net		438,269			337,811
Inventory		5,040,518			4,849,600
Prepaid expenses and other current assets		353,307			276,670
Total current assets		6,397,774			5,559,687
Property, equipment and software, net		79,310			55,509
Goodwill		8,973,501			8,973,501
Intangible assets, net		7,324,579			9,982,217
Deposits		152,711			75,431
Right of use asset		365,246			689,688
Total assets	$	23,293,121		$	25,336,033

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,251,884		$	7,538,902
Accrued expenses and other liabilities		5,236,437			4,758,492
Due to related parties		426,921			400,012
Convertible note payable, net		100,000			100,000
Accrued interest payable		2,053,102			1,996,753
Loan payable, current		2,743,508			2,325,842
Promissory note payable, net		4,730,740			4,884,592
Right of use liability, current portion		899,726			1,210,814
Total current liabilities		22,442,318			23,215,407
Loan payable		150,000			150,000
Right of use liability, non current portion		313,723			-
Deferred tax liability		368,034			368,034
Total liabilities		23,274,075			23,733,441

Commitments and contingencies

Stockholders’ equity:
Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares issued and outstanding as of both September 30, 2024 and December 31, 2023					-
Series A convertible preferred stock, $0.0001 par, 6,300 shares designated, 6,300 shares issued and outstanding as of both Septemebr 30, 2024 and December 31, 2023		1			1
Series C convertible preferred stock, $0.0001 par, 1,643 and 4,786 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		1			1
Common stock, $0.0001 par, 1,000,000,000 shares authorized, 3,769,859 and 1,114,359 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		373			110
Additional paid-in capital		121,748,573			115,596,929
Accumulated deficit		(121,729,902	)		(113,994,449	)
Total stockholders’ equity		19,046			1,602,592
Total liabilities and stockholders’ equity	$	23,293,121		$	25,336,033