0001668010--12-312021Q220714518002071451820714518144814135654072565407202000000020000000059327425932742018867925188679250903233090323300020000002000000083633183633102071451720714517020714517207145172071451793614400000.064P5DP5D0.663333us-gaap:ValuationTechniqueOptionPricingModelMember1100120false0001668010srt:MinimumMemberdbgi:CommonStockWarrantsMemberus-gaap:MeasurementInputRiskFreeInterestRateMember2020-06-300001668010srt:MaximumMemberdbgi:CommonStockWarrantsMemberus-gaap:MeasurementInputRiskFreeInterestRateMember2020-06-300001668010dbgi:CommonStockWarrantsMemberus-gaap:MeasurementInputPriceVolatilityMember2020-06-300001668010dbgi:CommonStockWarrantsMemberus-gaap:MeasurementInputExpectedTermMember2020-06-300001668010dbgi:CommonStockWarrantsMemberus-gaap:MeasurementInputExpectedDividendRateMember2020-06-3000016680102021-05-310001668010us-gaap:RetainedEarningsMember2020-04-012020-06-300001668010dbgi:BaileyMemberus-gaap:SeriesBPreferredStockMember2020-01-012020-06-300001668010us-gaap:RetainedEarningsMember2020-01-012020-03-310001668010dbgi:PromissoryNotePayableMemberus-gaap:CommonStockMember2021-04-012021-04-300001668010dbgi:HAndJAcquisitionMemberus-gaap:CommonStockMember2021-05-182021-05-180001668010dbgi:April2021FinancingMember2021-04-012021-04-300001668010dbgi:BaileyMemberus-gaap:SeriesBPreferredStockMember2021-01-012021-06-300001668010dbgi:SeriesCFConvertiblePreferredStockMember2021-01-012021-06-300001668010dbgi:SeriesA3ConvertiblePreferredStockMember2021-01-012021-06-300001668010dbgi:SeriesA3ConvertiblePreferredStockMember2020-01-012020-03-310001668010us-gaap:PreferredStockMemberus-gaap:IPOMember2021-05-182021-05-1800016680102021-05-122021-05-120001668010us-gaap:AdditionalPaidInCapitalMember2021-06-300001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001668010us-gaap:AdditionalPaidInCapitalMember2021-03-310001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100016680102021-03-310001668010us-gaap:AdditionalPaidInCapitalMember2020-12-310001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001668010us-gaap:RetainedEarningsMember2020-06-300001668010us-gaap:AdditionalPaidInCapitalMember2020-06-300001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001668010us-gaap:RetainedEarningsMember2020-03-310001668010us-gaap:AdditionalPaidInCapitalMember2020-03-310001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100016680102020-03-310001668010us-gaap:RetainedEarningsMember2019-12-310001668010us-gaap:AdditionalPaidInCapitalMember2019-12-310001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001668010us-gaap:FairValueInputsLevel2Member2021-06-300001668010us-gaap:FairValueInputsLevel3Member2020-12-310001668010us-gaap:SeriesBPreferredStockMember2021-03-310001668010us-gaap:SeriesAPreferredStockMember2021-03-310001668010us-gaap:CommonStockMember2021-03-310001668010dbgi:SeriesSeedPreferredStockMember2021-03-310001668010dbgi:SeriesCFConvertiblePreferredStockMember2021-03-310001668010dbgi:SeriesA3ConvertiblePreferredStockMember2021-03-310001668010dbgi:SeriesA2ConvertiblePreferredStockMember2021-03-310001668010us-gaap:SeriesBPreferredStockMember2020-12-310001668010us-gaap:CommonStockMember2020-12-310001668010us-gaap:SeriesBPreferredStockMember2020-06-300001668010us-gaap:SeriesAPreferredStockMember2020-06-300001668010us-gaap:CommonStockMember2020-06-300001668010dbgi:SeriesSeedPreferredStockMember2020-06-300001668010dbgi:SeriesCFConvertiblePreferredStockMember2020-06-300001668010dbgi:SeriesA3ConvertiblePreferredStockMember2020-06-300001668010dbgi:SeriesA2ConvertiblePreferredStockMember2020-06-300001668010us-gaap:SeriesBPreferredStockMember2020-03-310001668010us-gaap:SeriesAPreferredStockMember2020-03-310001668010us-gaap:CommonStockMember2020-03-310001668010dbgi:SeriesSeedPreferredStockMember2020-03-310001668010dbgi:SeriesCFConvertiblePreferredStockMember2020-03-310001668010dbgi:SeriesA3ConvertiblePreferredStockMember2020-03-310001668010dbgi:SeriesA2ConvertiblePreferredStockMember2020-03-310001668010us-gaap:SeriesAPreferredStockMember2019-12-310001668010us-gaap:CommonStockMember2019-12-310001668010dbgi:SeriesSeedPreferredStockMember2019-12-310001668010dbgi:SeriesCFConvertiblePreferredStockMember2019-12-310001668010dbgi:SeriesA3ConvertiblePreferredStockMember2019-12-310001668010dbgi:SeriesA2ConvertiblePreferredStockMember2019-12-310001668010us-gaap:CommonStockMemberus-gaap:IPOMember2021-05-180001668010dbgi:BaileyMemberus-gaap:SeriesBPreferredStockMember2020-06-300001668010dbgi:OmnibusIncentiveStockPlan2020Memberus-gaap:IPOMember2021-01-012021-06-3000016680102021-04-300001668010us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2021-06-282021-06-280001668010srt:MinimumMemberus-gaap:PropertyPlantAndEquipmentMember2021-01-012021-06-300001668010srt:MaximumMemberus-gaap:PropertyPlantAndEquipmentMember2021-01-012021-06-300001668010us-gaap:SoftwareDevelopmentMember2021-01-012021-06-300001668010srt:MinimumMemberus-gaap:PropertyPlantAndEquipmentMember2020-01-012020-12-310001668010srt:MaximumMemberus-gaap:PropertyPlantAndEquipmentMember2020-01-012020-12-310001668010us-gaap:SoftwareDevelopmentMember2020-01-012020-12-310001668010us-gaap:LeaseholdImprovementsMember2021-06-300001668010us-gaap:FurnitureAndFixturesMember2021-06-300001668010us-gaap:ComputerEquipmentMember2021-06-300001668010us-gaap:LeaseholdImprovementsMember2020-12-310001668010us-gaap:FurnitureAndFixturesMember2020-12-310001668010us-gaap:ComputerEquipmentMember2020-12-310001668010dbgi:PromissoryNotePayableMember2021-04-012021-04-300001668010dbgi:ConnvertibleDebt2020RegulationCfOfferingMemberus-gaap:ConvertibleDebtMember2020-01-012020-12-310001668010dbgi:ConvertibleDebt2020RegulationDOfferingMember2020-01-012020-12-310001668010dbgi:ConvertibleDebt2020RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2020-01-012020-06-300001668010us-gaap:IPOMember2021-05-132021-05-130001668010us-gaap:PreferredStockMember2021-05-180001668010us-gaap:SeriesAPreferredStockMember2021-06-300001668010dbgi:UndesignatedPreferredStockMember2021-06-300001668010dbgi:SeriesSeedPreferredStockMember2021-06-300001668010dbgi:SeriesCFConvertiblePreferredStockMember2021-06-300001668010dbgi:SeriesBConvertiblePreferredStockMember2021-06-300001668010dbgi:SeriesA3ConvertiblePreferredStockMember2021-06-300001668010dbgi:SeriesA2ConvertiblePreferredStockMember2021-06-300001668010us-gaap:SeriesAPreferredStockMember2020-12-310001668010dbgi:UndesignatedPreferredStockMember2020-12-310001668010dbgi:SeriesSeedPreferredStockMember2020-12-310001668010dbgi:SeriesCFConvertiblePreferredStockMember2020-12-310001668010dbgi:SeriesBConvertiblePreferredStockMember2020-12-310001668010dbgi:SeriesA3ConvertiblePreferredStockMember2020-12-310001668010dbgi:SeriesA2ConvertiblePreferredStockMember2020-12-3100016680102021-04-012021-04-300001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001668010us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001668010dbgi:LawsuitsAgainstBaileysRelatedToPriorServicesRenderedMember2021-03-012021-03-310001668010dbgi:ReinbursementOfInvestmentMember2020-12-212020-12-210001668010dbgi:LawsuitsAgainstBaileysRelatedToPriorServicesRenderedMember2020-08-012020-08-310001668010dbgi:NonPaymentOfTradePayablesMember2020-03-252020-03-250001668010dbgi:NonPaymentOfTradePayablesMember2020-02-282020-02-280001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMemberdbgi:SecondaryFollowOnPublicOfferingAfterSeptember302021Member2017-03-012017-03-310001668010us-gaap:SecuredDebtMemberdbgi:VentureDebtMember2017-03-310001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMember2017-03-310001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMember2021-06-300001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMember2020-12-310001668010dbgi:RetailSiteLeaseVacatedMember2021-06-3000016680102021-01-012022-06-300001668010dbgi:PromissoryNotePayableMemberus-gaap:NotesPayableToBanksMember2021-04-012021-06-300001668010dbgi:PromissoryNotePayableMemberus-gaap:NotesPayableToBanksMember2021-01-012021-06-300001668010dbgi:PromissoryNotePayableMemberus-gaap:NotesPayableToBanksMember2020-04-012020-06-300001668010dbgi:PromissoryNotePayableMemberus-gaap:NotesPayableToBanksMember2020-01-012020-06-300001668010us-gaap:TradeNamesMember2021-06-300001668010dbgi:NotePayableChiefExecutiveOfficerMemberus-gaap:NotesPayableOtherPayablesMembersrt:ChiefExecutiveOfficerMember2021-01-012021-06-3000016680102021-02-012021-02-280001668010dbgi:HarperJonesLlcMemberus-gaap:CustomerRelationshipsMember2021-05-182021-05-180001668010us-gaap:CustomerRelationshipsMember2021-01-012021-06-300001668010us-gaap:CustomerRelationshipsMember2021-06-300001668010dbgi:AdvancesMember2021-06-300001668010dbgi:AccruedSalaryMember2021-06-300001668010dbgi:ExpenseReimbursementsMember2020-12-310001668010dbgi:AdvancesMember2020-12-310001668010dbgi:PromissoryNotePayableMemberus-gaap:NotesPayableToBanksMember2021-06-300001668010dbgi:ConvertibleDebt2020RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2021-06-300001668010dbgi:ConnvertibleDebt2020RegulationCfOfferingMemberus-gaap:ConvertibleDebtMember2021-06-300001668010dbgi:NotePayableChiefExecutiveOfficerMemberus-gaap:NotesPayableOtherPayablesMembersrt:ChiefExecutiveOfficerMember2021-06-300001668010dbgi:BaileyMemberdbgi:PromissoryNotePayableMemberus-gaap:NotesPayableToBanksMember2021-06-300001668010dbgi:PromissoryNotePayableMember2021-06-300001668010dbgi:HarperJonesLlcMember2021-06-300001668010dbgi:EconomicInjuryDisasterLoanMember2021-06-300001668010dbgi:BaileyMemberdbgi:PaycheckProtectionProgramCaresActMember2021-05-310001668010dbgi:PromissoryNotePayableMember2021-05-310001668010dbgi:HarperJonesLlcMember2021-05-310001668010dbgi:BaileyMemberdbgi:PaycheckProtectionProgramCaresActMember2021-02-280001668010dbgi:EconomicInjuryDisasterLoanMember2020-06-250001668010dbgi:BaileyMemberdbgi:PaycheckProtectionProgramCaresActMember2020-04-300001668010dbgi:PaycheckProtectionProgramCaresActMember2020-04-300001668010us-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-06-300001668010us-gaap:CommonStockMemberus-gaap:IPOMember2021-05-182021-05-180001668010dbgi:DebtConvertedIntoCommonStockMemberdbgi:ConvertibleDebt2020RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2021-04-012021-04-010001668010dbgi:DebtConvertedIntoCommonStockMemberdbgi:ConvertibleDebt2019RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2021-04-012021-04-010001668010srt:ChiefExecutiveOfficerMember2021-06-300001668010us-gaap:CommonStockMember2021-05-180001668010us-gaap:CommonStockMember2020-12-310001668010us-gaap:CommonStockMember2021-06-300001668010us-gaap:CommonStockMember2021-06-300001668010dbgi:OmnibusIncentiveStockPlan2020Memberus-gaap:IPOMember2021-06-300001668010dbgi:OmnibusIncentiveStockPlan2020Member2021-06-300001668010us-gaap:OverAllotmentOptionMember2021-05-130001668010dbgi:PromissoryNotePayableMember2021-04-300001668010dbgi:CommonStockWarrantsMemberus-gaap:IPOMember2021-06-300001668010dbgi:CommonStockWarrantsMemberus-gaap:IPOMember2021-05-130001668010dbgi:CommonStockWarrantsVentureDebtLenderMember2021-04-300001668010dbgi:CommonStockWarrantsMember2020-06-300001668010dbgi:CommonStockWarrantsFundingPlatformPreferredStockRaiseMember2020-06-3000016680102020-06-3000016680102019-12-310001668010dbgi:HarperJonesLlcMemberus-gaap:IPOMember2021-05-182021-05-180001668010dbgi:Bailey44LlcMember2020-02-120001668010us-gaap:FairValueInputsLevel3Member2021-06-300001668010dbgi:HarperJonesLlcMember2021-06-300001668010dbgi:ConsultingAgreementMember2021-06-300001668010us-gaap:FairValueInputsLevel3Member2021-01-012021-06-300001668010us-gaap:FairValueInputsLevel2Member2021-01-012021-06-300001668010dbgi:Bailey44LlcMemberdbgi:PromissoryNotePayableMember2020-02-122020-02-120001668010dbgi:HarperJonesLlcMember2021-01-012021-06-300001668010dbgi:HarperJonesLlcMember2021-05-180001668010dbgi:Bailey44LlcMemberus-gaap:SeriesBPreferredStockMember2020-02-122020-02-120001668010dbgi:HarperJonesLlcMemberus-gaap:IPOMember2021-05-180001668010dbgi:Bailey44LlcMemberus-gaap:SeriesBPreferredStockMember2020-02-120001668010us-gaap:StockOptionMember2021-01-012021-06-300001668010dbgi:CommonStockWarrantsMember2021-01-012021-06-300001668010us-gaap:StockOptionMember2020-01-012020-06-300001668010dbgi:SeriesSeedPreferredStockConvertibleToCommonStockMember2020-01-012020-06-300001668010dbgi:SeriesPreferredStockConvertibleToCommonStockMember2020-01-012020-06-300001668010dbgi:SeriesCfPreferredStockConvertibleToCommonStockMember2020-01-012020-06-300001668010dbgi:SeriesBPreferredStockConvertibleToCommonStockMember2020-01-012020-06-300001668010dbgi:SeriesA3PreferredStockConvertibleToCommonStockMember2020-01-012020-06-300001668010dbgi:SeriesA2PreferredStockConvertibleToCommonStockMember2020-01-012020-06-300001668010dbgi:PreferredStockWarrantsMember2020-01-012020-06-300001668010dbgi:CommonStockWarrantsMember2020-01-012020-06-300001668010dbgi:ConvertibleDebt2020RegulationDOfferingMember2021-04-012021-06-300001668010srt:ManagementMemberus-gaap:IPOMember2021-05-182021-05-180001668010us-gaap:SellingAndMarketingExpenseMember2021-01-012021-06-300001668010us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100016680102021-01-012021-03-310001668010us-gaap:PropertyPlantAndEquipmentMember2021-06-300001668010us-gaap:PropertyPlantAndEquipmentMember2020-12-3100016680102021-08-160001668010us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2021-06-2800016680102021-05-180001668010us-gaap:SubsequentEventMember2021-07-012021-07-310001668010us-gaap:CommonStockMember2021-05-012021-05-3100016680102020-03-250001668010dbgi:LawsuitsAgainstBaileysRelatedToPriorServicesRenderedMemberdbgi:NonPaymentOfTradePayablesMember2020-09-242020-09-240001668010us-gaap:NoteWarrantMember2020-01-012020-12-310001668010us-gaap:NoteWarrantMember2021-01-012021-06-300001668010us-gaap:NoteWarrantMember2020-01-012020-06-300001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMember2017-03-012017-03-310001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMemberdbgi:SecondaryFollowOnPublicOfferingPriorToSeptember302021Member2017-03-012017-03-310001668010us-gaap:SecuredDebtMemberdbgi:AmendedVentureDebtMemberdbgi:FollowOnPublicOfferingMember2017-03-012017-03-310001668010us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001668010dbgi:SeriesCFConvertiblePreferredStockMember2020-04-012020-06-300001668010us-gaap:SeriesBPreferredStockMember2020-01-012020-03-310001668010dbgi:ConvertibleDebt2020RegulationDOfferingMember2021-01-012021-06-300001668010dbgi:ConvertibleDebt2020RegulationDOfferingMember2021-06-300001668010dbgi:ConvertibleDebt2020RegulationDOfferingMember2020-12-310001668010dbgi:ConnvertibleDebt2020RegulationCfOfferingMember2020-12-310001668010dbgi:ConnvertibleDebt2020RegulationCfOfferingMember2020-01-012020-12-310001668010dbgi:ConsultingAgreementMember2021-01-012021-06-3000016680102021-05-182021-05-180001668010us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-3100016680102020-01-012020-03-3100016680102020-04-012020-06-300001668010us-gaap:IPOMember2021-05-182021-05-180001668010us-gaap:NoteWarrantMember2019-01-012019-12-310001668010us-gaap:NoteWarrantMember2018-01-012018-12-310001668010dbgi:PaycheckProtectionProgramCaresActMember2020-04-012020-04-300001668010dbgi:ConvertibleDebt2019RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2019-01-012019-12-310001668010dbgi:ConvertibleDebt2019RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2019-12-310001668010dbgi:ConnvertibleDebt2020RegulationCfOfferingMemberus-gaap:ConvertibleDebtMember2021-01-012021-06-300001668010dbgi:ConvertibleDebt2020RegulationDOfferingMemberus-gaap:ConvertibleDebtMember2021-01-012021-06-3000016680102020-12-310001668010us-gaap:SeriesBPreferredStockMember2021-04-012021-06-300001668010us-gaap:SeriesAPreferredStockMember2021-04-012021-06-300001668010dbgi:SeriesSeedPreferredStockMember2021-04-012021-06-300001668010dbgi:SeriesCFConvertiblePreferredStockMember2021-04-012021-06-300001668010dbgi:SeriesA3ConvertiblePreferredStockMember2021-04-012021-06-300001668010dbgi:SeriesA2ConvertiblePreferredStockMember2021-04-012021-06-300001668010us-gaap:CommonStockMember2021-04-012021-06-300001668010us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001668010dbgi:CommonStockWarrantsMember2021-06-300001668010dbgi:PreferredStockWarrantsMember2020-12-310001668010dbgi:CommonStockWarrantsMember2020-12-310001668010dbgi:CommonStockWarrantsMemberus-gaap:IPOMember2021-05-132021-05-1300016680102021-05-012021-05-310001668010dbgi:CommonStockWarrantsVentureDebtLenderMember2021-04-012021-04-300001668010dbgi:CommonStockWarrantsMemberus-gaap:OverAllotmentOptionMember2021-01-012021-06-300001668010dbgi:CommonStockWarrantsMemberus-gaap:IPOMember2021-01-012021-06-300001668010dbgi:CommonStockWarrantsMember2020-01-012020-06-300001668010dbgi:CommonStockWarrantsFundingPlatformPreferredStockRaiseMember2020-01-012020-06-300001668010dbgi:PreferredStockWarrantsMember2021-01-012021-06-300001668010dbgi:CommonStockWarrantsMember2021-01-012021-06-3000016680102021-04-012021-06-3000016680102021-06-3000016680102020-01-012020-06-300001668010us-gaap:NoteWarrantMember2019-12-310001668010srt:ChiefExecutiveOfficerMember2021-01-012021-06-300001668010us-gaap:IPOMember2021-05-130001668010dbgi:HarperJonesLlcMember2021-05-182021-05-180001668010dbgi:Bailey44LlcMember2020-02-122020-02-1200016680102021-01-012021-06-30iso4217:USDiso4217:USDxbrli:sharesxbrli:sharesxbrli:puredbgi:itemdbgi:Y

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 001-40400

DIGITAL BRANDS GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

46-1942864

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1400 Lavaca Street

Austin, TX 78701

(Address of principal executive offices, including zip code)

Tel: (209) 651-0172

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if this registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 

As of August 16, 2021 the Company had 11,399,594 shares of common stock, $0.0001 par value, issued and outstanding

Table of Contents

DIGITAL BRANDS GROUP, NC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

3

ITEM 1.

Condensed Consolidated Financial Statements – Unaudited

3

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020

4

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020

5

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

6

Notes to Condensed Consolidated Financial Statements

7

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

ITEM 3

Quantitative and Qualitative Disclosures about Market Risk

37

ITEM 4.

Controls and Procedures

37

PART II. OTHER INFORMATION

38

ITEM 1.

Legal Proceedings

38

ITEM 1A.

Risk Factors

39

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

ITEM 3.

Defaults upon Senior Securities

40

ITEM 4.

Mine Safety Disclosures

40

ITEM 5.

Other Information

40

ITEM 6.

Exhibits

41

SIGNATURES

43

2

Table of Contents

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:

 

  

 

  

Cash and cash equivalents

$

4,075,921

$

575,986

Accounts receivable, net

 

346,390

 

35,532

Due from factor, net

 

6,859

 

210,033

Inventory

 

1,165,152

 

1,163,279

Prepaid expenses

 

849,434

 

23,826

Total current assets

 

6,443,756

 

2,008,656

Deferred offering costs

 

 

214,647

Property, equipment and software, net

 

119,817

 

62,313

Goodwill

 

16,160,766

 

6,479,218

Intangible assets, net

 

11,175,794

 

7,494,667

Deposits

 

116,199

 

92,668

Total assets

$

34,016,332

$

16,352,169

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

6,307,071

$

5,668,703

Accrued expenses and other liabilities

 

1,615,622

 

1,245,646

Deferred revenue

 

172,470

 

1,667

Due to related parties

 

252,635

 

441,453

Contingent consideration liability

6,539,417

Convertible notes, current

 

100,000

 

700,000

Accrued interest payable

 

801,031

 

737,039

Note payable - related party

 

299,489

 

137,856

Venture debt, current

 

300,000

 

5,854,326

Loan payable, current

 

1,712,000

 

992,000

Promissory note payable

 

3,500,000

 

4,500,000

Total current liabilities

 

21,599,735

 

20,278,690

Convertible notes

 

 

1,215,815

Loan payable

 

1,762,639

 

709,044

Venture debt, net of discount

5,701,755

Warrant liability

 

78,710

 

6,265

Total liabilities

 

29,142,839

 

22,209,814

Commitments and contingencies (Note 12)

 

  

 

  

Stockholders' equity (deficit):

 

  

 

  

Series Seed convertible preferred stock, $0.0001 par, no shares and 20,714,518 shares, authorized, issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

2,071

Series A convertible preferred stock, $0.0001 par, no shares and 14,481,413 shares authorized, no shares and 5,654,072 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively

 

 

565

Series A-2 convertible preferred stock, $0.0001 par, no shares and 20,000,000 shares authorized, no shares and 5,932,742 shares issued and outstanding at June 30, 2021, and December 31,2020,respectively

 

 

593

Series A-3 convertible preferred stock, $0.0001 par, no shares and 18,867,925 shares authorized, no shares and 9,032,330 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively

 

 

904

Series CF convertible preferred stock, $0.0001 par, no shares and 2,000,000 shares authorized, no shares and 836,331 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively

 

 

83

Series B convertible preferred stock, $0.0001 par, no shares and 20,714,517 shares authorized, no shares and 20,714,517 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively

 

 

2,075

Undesignated preferred stock, $0.0001 par, 10,000,000 shares and 936,144 shares authorized, 0 shares issued and outstanding as of both June 30,2021 and December 31, 2020

 

 

Common stock, $0.0001 par, 200,000,000 and 110,000,000 shares authorized, 11,044,594 and 664,167 shares issued and outstanding as of both June 30, 2021 and December 31, 2020, respectively

1,104

66

Additional paid-in capital

 

51,939,819

 

27,481,995

Accumulated deficit

 

(47,067,430)

 

(33,345,997)

Total stockholders' equity (deficit)

 

4,873,493

 

(5,857,645)

Total liabilities and stockholders' equity (deficit)

$

34,016,332

$

16,352,169

See the accompanying notes to the unaudited condensed consolidated financial statements

3

Table of Contents

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

$

1,003,529

$

664,017

$

1,411,934

$

3,240,702

Cost of net revenues

 

608,944

 

932,362

 

1,224,886

 

2,155,155

Gross profit (loss)

 

394,585

 

(268,345)

 

187,048

 

1,085,547

Operating expenses:

 

  

 

  

 

  

 

  

General and administrative

 

7,192,460

 

1,426,388

 

9,099,978

 

3,901,431

Sales and marketing

 

923,283

 

124,370

 

1,094,103

 

442,246

Distribution

 

69,864

 

75,246

 

133,442

 

213,681

Change in fair value of contingent consideration

3,050,901

3,050,901

Total operating expenses

 

11,236,508

 

1,626,004

 

13,378,424

 

4,557,358

Loss from operations

 

(10,841,923)

 

(1,894,349)

 

(13,191,376)

 

(3,471,811)

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(897,920)

 

(373,957)

 

(1,572,964)

 

(688,932)

Other non-operating income (expenses)

 

(57,775)

 

 

(57,213)

 

Total other income (expense), net

 

(955,695)

 

(373,957)

 

(1,630,177)

 

(688,932)

Income tax benefit (provision)

 

1,100,120

 

709

 

1,100,120

 

(13,381)

Net loss

$

(10,697,498)

$

(2,267,597)

$

(13,721,433)

$

(4,174,124)

Weighted average common shares outstanding -

 

  

 

  

 

  

 

  

basic and diluted

 

5,435,023

 

664,167

 

3,062,774

 

664,167

Net loss per common share - basic and diluted

$

(1.97)

$

(3.41)

$

(4.48)

$

(6.28)

See the accompanying notes to the unaudited condensed consolidated financial statements

4

Table of Contents

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)

 

Balances at December 31, 2019

 

20,714,518

$

2,071

 

5,654,072

$

565

 

5,932,742

$

593

 

8,223,036

$

823

 

126,641

$

12

 

$

 

664,167

$

66

$

15,486,050

$

(22,677)

$

(22,617,702)

$

(7,150,199)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,932

 

 

 

49,932

Issuance of Series A-3 preferred stock for cash

 

 

 

 

 

 

 

809,294

 

81

 

 

 

 

 

 

 

428,845

 

(117,614)

 

 

311,312

Issuance of Series B preferred stock for cash

 

 

 

 

 

 

 

 

 

 

 

20,754,717

 

2,075

 

 

 

10,997,925

 

 

 

11,000,000

Offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,690)

 

 

 

(31,690)

Fair value of warrant issuances - venture debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,421

 

 

 

58,421

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,906,527)

 

(1,906,527)

Balances at March 31, 2020

20,714,518

$

2,071

5,654,072

$

565

5,932,742

$

593

9,032,330

$

904

126,641

$

12

20,754,717

$

2,075

664,167

$

66

$

26,989,483

$

(140,291)

$

(24,524,229)

$

2,331,249

Stock-based compensation

49,932

-

-

49,932

Issuance of Series CF preferred stock for cash

709,690

71

286,447

-

-

286,518

Issuance of Series A-3 preferred stock for cash

126,837

-

126,837

Net loss

 

 

 

 

 

 

-

(2,267,597)

(2,267,597)

Balances at June 30, 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

$

27,325,862

$

(13,454)

$

(26,791,826)

$

526,939

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

See the accompanying notes to the unaudited condensed consolidated financial statements

5

Table of Contents

DIGITAL BRANDS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six Months Ended

June 30, 

    

2021

    

2020

Cash flows from operating activities:

Net loss

$

(13,721,433)

$

(4,174,124)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Depreciation and amortization

 

291,661

 

318,057

Amortization of loan discount and fees

 

580,684

 

69,710

Stock-based compensation

 

4,021,529

 

99,864

Fees incurred in connection with debt financings

132,609

Change in fair value of warrant liability

 

72,445

 

Change in fair value of contingent consideration

3,050,901

Deferred income tax benefit

(1,100,120)

Change in credit reserve

 

9,748

 

(58,132)

Changes in operating assets and liabilities:

Accounts receivable, net

 

(261,386)

 

12,399

Due from factor, net

 

139,629

 

(67,361)

Inventory

 

75,287

 

639,006

Prepaid expenses

(688,893)

(40,165)

Accounts payable

 

575,513

 

1,410,476

Accrued expenses and other liabilities

 

262,019

 

(770,907)

Deferred revenue

 

(99,045)

 

(15,231)

Accrued compensation - related party

 

(88,550)

 

(28,807)

Accrued interest

 

151,465

 

446,854

Net cash used in operating activities

 

(6,595,937)

 

(2,158,361)

Cash flows from investing activities:

 

  

Cash acquired (consideration) pursuant to business combination

 

(475,665)

106,913

Issuance of related party receivable

(20,000)

Purchase of property, equipment and software

(10,276)

Deposits