UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ____________ to ____________
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
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☐ | Smaller reporting company | ||
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| Emerging growth company |
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As of August 16, 2021 the Company had
DIGITAL BRANDS GROUP, NC.
FORM 10-Q
TABLE OF CONTENTS
2
PART I – FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
DIGITAL BRANDS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, |
| December 31, | |||
2021 | 2020 | |||||
ASSETS | ||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
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Due from factor, net |
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Inventory |
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Prepaid expenses |
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Total current assets |
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Deferred offering costs |
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Property, equipment and software, net |
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Goodwill |
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Intangible assets, net |
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Deposits |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses and other liabilities |
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Deferred revenue |
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Due to related parties |
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Contingent consideration liability | | — | ||||
Convertible notes, current |
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Accrued interest payable |
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Note payable - related party |
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Venture debt, current |
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Loan payable, current |
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Promissory note payable |
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Total current liabilities |
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Convertible notes |
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Loan payable |
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Venture debt, net of discount | | — | ||||
Warrant liability |
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Total liabilities |
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Commitments and contingencies (Note 12) |
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Stockholders' equity (deficit): |
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Series Seed convertible preferred stock, $ |
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Series A convertible preferred stock, $ |
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Series A-2 convertible preferred stock, $ |
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Series A-3 convertible preferred stock, $ |
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Series CF convertible preferred stock, $ |
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Series B convertible preferred stock, $ |
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Undesignated preferred stock, $ |
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Common stock, $ | | | ||||
Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity (deficit) |
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Total liabilities and stockholders' equity (deficit) | $ | | $ | |
See the accompanying notes to the unaudited condensed consolidated financial statements
3
DIGITAL BRANDS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Net revenues | $ | | $ | | $ | | $ | | ||||
Cost of net revenues |
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Gross profit (loss) |
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Operating expenses: |
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General and administrative |
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Sales and marketing |
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Distribution |
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Change in fair value of contingent consideration | | — | | — | ||||||||
Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense |
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Other non-operating income (expenses) |
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Total other income (expense), net |
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Income tax benefit (provision) |
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Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average common shares outstanding - |
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basic and diluted |
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Net loss per common share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( |
See the accompanying notes to the unaudited condensed consolidated financial statements
4
DIGITAL BRANDS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
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 | Subscription | Accumulated | Stockholders' | |||||||||||||||||||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Receivable |
| Deficit |
| Equity (Deficit) | ||||||||||||
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Balances at December 31, 2019 |
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| — | $ | — |
| | $ | | $ | | $ | ( | $ | ( | $ | ( | |||||||||||
Stock-based compensation |
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Issuance of Series A-3 preferred stock for cash |
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Issuance of Series B preferred stock for cash |
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Offering costs |
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Fair value of warrant issuances - venture debt |
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Net loss |
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Balances at March 31, 2020 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | — | — | | - | - | | |||||||||||||||||||||||||||||
Issuance of Series CF preferred stock for cash | — | — | — | — | — | — | — | — | | | — | — | — | — | | - | - | | |||||||||||||||||||||||||||||
Issuance of Series A-3 preferred stock for cash | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | | - | | |||||||||||||||||||||||||||||
Net loss | — | — |
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| — | — | — | - | ( | ( | |||||||||||||||||||||||
Balances at June 30, 2020 |
| | $ | |
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| | $ | | $ | | $ | ( | $ | ( | $ | | |||||||||||
Balances at December 31, 2020 |
| | $ | |
| $ | |
| $ | |
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| | $ | | $ | | $ | — | $ | ( | $ | ( | |||||||||||||
Stock-based compensation |
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Net loss |
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Balances at March 31, 2021 |
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Conversion of preferred stock into common stock |
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Issuance of common stock in public offering |
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Offering costs |
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Exercise of over-allotment option, net of offering costs | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Conversion of debt into common stock | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Conversion of related party notes and payables into common stock | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Common stock and warrants issued in connection with note | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Common stock issued in connection with business combination | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Exercise of warrants | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Common stock issued pursuant to consulting agreement | — | — | — | — | — | — | — | — | — | — | — | — | | | | — | — | | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | — | — | | — | — | | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Balances at June 30, 2021 |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| | $ | | $ | | $ | — | $ | ( | $ | |
See the accompanying notes to the unaudited condensed consolidated financial statements
5
DIGITAL BRANDS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended | ||||||
June 30, | ||||||
| 2021 |
| 2020 | |||
Cash flows from operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of loan discount and fees |
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Stock-based compensation |
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Fees incurred in connection with debt financings | | — | ||||
Change in fair value of warrant liability |
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Change in fair value of contingent consideration | | — | ||||
Deferred income tax benefit | ( | — | ||||
Change in credit reserve |
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Changes in operating assets and liabilities: | ||||||
Accounts receivable, net |
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Due from factor, net |
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Inventory |
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Prepaid expenses | ( | ( | ||||
Accounts payable |
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Accrued expenses and other liabilities |
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Deferred revenue |
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Accrued compensation - related party |
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Accrued interest |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Cash acquired (consideration) pursuant to business combination |
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Issuance of related party receivable | — | ( | ||||
Purchase of property, equipment and software | ( | — | ||||
Deposits |