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 September 30, 2023

☐ 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)

Securities registered pursuant to Section 12(b) of the Act:


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

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 November 14, 2023 the Company had 857,859 shares of common stock, $0.0001 par value, issued and outstanding.

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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 September 30, 2023, and December 31, 2022	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023, and 2022	4

	Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2023, and 2022	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023, and 2022	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	31

ITEM 4.	Controls and Procedures	31

PART II. OTHER INFORMATION		33

ITEM 1.	Legal Proceedings	33

ITEM 1A.	Risk Factors	34

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

ITEM 3.	Defaults upon Senior Securities	39

ITEM 4.	Mine Safety Disclosures	39

ITEM 5.	Other Information	40

ITEM 6.	Exhibits	41

SIGNATURES		43

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PART I – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

DIGITAL BRANDS GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,067,259	$	1,275,616
Accounts receivable, net		419,125		583,368
Due from factor, net		258,825		839,400
Inventory		4,710,327		5,122,564
Prepaid expenses and other current assets		1,194,544		766,901
Assets per discontinued operations, current		—		241,544
Total current assets		7,650,080		8,829,393
Property, equipment and software, net		98,170		104,512
Goodwill		8,973,501		8,973,501
Intangible assets, net		10,701,764		12,906,238
Deposits		106,547		193,926
Right of use asset		207,745		102,349
Assets per discontinued operations		—		2,628,136
Total assets	$	27,737,807	$	33,738,055

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	8,273,340	$	8,016,173
Accrued expenses and other liabilities		4,781,632		3,936,920
Due to related parties		336,250		555,217
Contingent consideration liability		—		12,098,475
Convertible note payable, net		100,000		2,721,800
Accrued interest payable		1,888,014		1,561,795
Loan payable, current		1,878,023		1,829,629
Promissory note payable, net		4,899,018		9,000,000
Right of use liability, current portion		203,401		102,349
Liabilities per discontinued operations, current		—		1,071,433
Total current liabilities		22,359,678		40,893,791
Loan payable		150,000		150,000
Right of use liability		6,784		—
Liabilities per discontinued operations		—		147,438
Total liabilities		22,516,462		41,191,229

Commitments and contingencies

Stockholders’ equity (deficit):
Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares issued and outstanding as of both September 30, 2023 and December 31, 2022		—		—
Series A convertible preferred stock, $0.0001 par, 6,800 shares designated, 6,300 shares issued and outstanding as of both September 30, 2023 and December 31, 2022		1		1
Series C convertible preferred stock, $0.0001 par, 5,671 shares designated, 5,671 and 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		1		—
Common stock, $0.0001 par, 1,000,000,000 shares authorized, 578,090 and 317,502 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		58		18
Additional paid-in capital		115,496,683		96,294,123
Accumulated deficit		(110,275,397)		(103,747,316)
Total stockholders’ equity (deficit)		5,221,345		(7,453,174)
Total liabilities and stockholders’ equity (deficit)	$	27,737,807	$	33,738,055

See the accompanying notes to the unaudited condensed consolidated financial statements

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DIGITAL BRANDS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
			Restated				Restated
Net revenues	$	3,257,332	$	2,658,844	$	12,127,135	$	7,937,406
Cost of net revenues		1,554,044		1,700,547		6,094,532		5,252,943
Gross profit		1,703,288		958,298		6,032,603		2,684,464

Operating expenses:
General and administrative		3,735,527		2,979,915		12,115,590		11,053,536
Sales and marketing		1,151,377		1,022,331		3,188,054		3,252,418
Distribution		238,546		97,737		750,945		522,510
Change in fair value of contingent consideration		—		(702,885)		(10,698,475)		6,418,355
Total operating expenses		5,125,450		3,397,098		5,356,114		21,246,820

Income (loss) from operations		(3,422,162)		(2,438,800)		676,489		(18,562,356)

Other income (expense):
Interest expense		(1,956,080)		(2,271,548)		(4,907,567)		(6,002,160)
Other non-operating income (expenses)		(57,752)		(23,690)		(734,501)		2,629,685
Total other income (expense), net		(2,013,832)		(2,295,238)		(5,642,068)		(3,372,475)

Income tax benefit (provision)		—		—		—		—
Net loss from continuing operations		(5,435,994)		(4,734,038)		(4,965,579)		(21,934,831)
Income (loss) from discontinued operations, net of tax		—		(160,433)		(1,562,503)		(326,507)
Net loss	$	(5,435,994)	$	(4,894,471)	$	(6,528,082)	$	(22,261,338)

Weighted average common shares outstanding - basic and diluted		373,498		21,150		283,673		13,649

Net loss from continuing per common share - basic and diluted	$	(14.55)	$	(223.83)	$	(17.50)	$	(1,607.05)

See the accompanying notes to the unaudited condensed consolidated financial statements

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DIGITAL BRANDS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)


	Series A Convertible			Series B			Series C Convertible						Additional				Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Deficit
Balances at December 31, 2021	—	$	—	—	$	—	—	$	—	5,201	$	1	$	58,614,172	$	(65,703,954)	$	(7,089,781)
Conversion of notes into common stock	—		—	—		—	—		—	350		—		1,201,582		—		1,201,582
Stock-based compensation	—		—	—		—	—		—	—		—		139,093		—		139,093
Net loss	—		—	—		—	—		—	—		—		—		(7,832,942)		(7,832,942)
Balances at March 31, 2022	—	$	—	—	$	—	—	$	—	5,550		1		59,954,847		(73,536,896)		(13,582,048)
Issuance of common stock in public offering	—		—	—		—	—		—	14,956		1		9,347,449		—		9,347,450
Offering costs	—		—	—		—	—		—	-		—		(1,930,486)		—		(1,930,486)
Conversion of notes and derivative liability into common stock	—		—	—		—	—		—	644		—		600,790		—		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	—		—	—		—	—		—	21,150		2		68,190,600		(83,070,820)		(14,880,218)
Common stock issued pursuant to consulting agreement	—		—	—		—	—		—	30		—		123,000		—		123,000
Issuance of Series A preferred stock	—		—	—		—	—		—	—		—		25,000		—		25,000
Conversion of venture debt into Series A convertible preferred stock	6,300		1	—		—	—		—	—		—		6,299,999		—		6,300,000
Warrants issued in connection with note	—		—	—		—	—		—	—		—		692,299		—		692,299
Stock-based compensation	—		—	—		—	—		—	—		—		110,093		—		110,093
Net loss	—		—	—		—	—		—	—		—		—		(4,894,471)		(4,894,471)
Balances at September 30, 2022	6,300		1	—		—	—		—	21,180		2		75,440,991		(87,965,292)		(12,524,298)

Balances at December 31, 2022	6,300	$	1	—	$	—	—	$	—	178,758	$	18	$	96,294,123	$	(103,747,316)	$	(7,453,174)
Issuance of common stock pursuant to private placement, net of offering costs	—		—	—		—	—		—	51,086		5		4,463,071		—		4,463,076
Shares issued for services	—		—	—		—	—		—	4,756		—		499,337		—		499,338
Shares and warrants issued with notes	—		—	—		—	—		—	4,400		—		658,494		—		658,494
Stock-based compensation	—		—	—		—	—		—	—		—		105,594		—		105,594
Net loss	—		—	—		—	—		—	—		—		—		(6,136,349)		(6,136,349)
Balances at March 31, 2023	6,300		1	—		—	—		—	238,999		24		102,020,619		(109,883,665)		(7,863,021)
Conversion of notes into preferred stock	—		—	—		—	5,761		1	—		—		5,759,177		—		5,759,177
Issuance of Series B preferred stock	—		—	1		—	—		—	—		—		25,000		—		25,000
Issuance of common stock pursuant to disposition	—		—	—		—	—		—	78,103		8		1,357,035		—		1,357,043
Stock-based compensation	—		—	—		—	—		—	—		—		101,500		—		101,500
Net income	—		—	—		—	—		—	—		—		—		5,044,261		5,044,262
Balances at June 30, 2023	6,300	$	1	1	$	—	5,761	$	1	317,102	$	32		109,263,331		(104,839,403)		4,423,961
Cancellation of Series B preferred stock	—		—	(1)		—	—		—	—		—		(25,000)		—		(25,000)
Issuance of common stock pursuant to private placement, net of offering costs	—		—	—		—	—		—	32,000		3		3,832,302		—		3,832,305
Common stock issued for services	—		—	—		—	—		—	105,174		11		1,157,079		—		1,157,090
Exercise of warrants	—		—	—		—	—		—	123,814		12		1,167,554		—		1,167,566
Stock-based compensation	—		—	—		—	—		—	—		—		101,417		—		101,417
Net loss	—		—	—		—	—		—	—		—		—		(5,435,994)		(5,435,994)
Balances at September 30, 2023	6,300	$	1	—	$	—	5,761	$	1	578,090	$	58	$	115,496,683	$	(110,275,397)	$	5,221,345

See the accompanying notes to the unaudited condensed consolidated financial statements

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DIGITAL BRANDS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(6,528,082)	$	(22,261,338)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,485,166		1,669,782
Amortization of loan discount and fees		1,956,355		4,610,234
Loss on extinguishment of debt		689,100		—
Loss on disposition of business		1,523,940		—
Stock-based compensation		308,511		491,945
Shares issued for services		1,656,417		—
Change in credit reserve		354,282		(26,429)
Change in fair value of contingent consideration		(10,698,475)		6,418,355
Discontinued operations		7,666		—
Fees incurred in connection with debt financings		—		48,245
Change in fair value of warrant liability		—		(18,223)
Change in fair value of derivative liability		—		(794,477)
Forgiveness of Payroll Protection Program		—		(1,760,755)
Changes in operating assets and liabilities:
Accounts receivable, net		153,479		(289,061)
Due from factor, net		72,220		433,671
Inventory		514,955		100,006
Prepaid expenses and other current assets		(366,615)		(522,434)
Accounts payable		182,242		382,943
Accrued expenses and other liabilities		1,088,763		1,715,221
Deferred revenue		(183,782)		119,977
Accrued interest		326,219		992,482
Net cash used in operating activities		(6,457,638)		(8,689,857)
Cash flows from investing activities:
Cash disposed		(18,192)		—
Purchase of property, equipment and software		(27,855)		(5,533)
Deposits		87,378		—
Net cash provided by (used in) investing activities		41,331		(5,533)
Cash flows from financing activities:
Proceeds (repayments) from related party advances		(218,967)		(162,692)
Advances (repayments) from factor		154,073		(60,735)
Proceeds from venture debt		—		237,500
Issuance of loans and note payable		5,799,989		248,858
Repayments of convertible and promissory notes		(8,840,092)		(3,068,750)
Issuance of convertible notes payable		—		3,751,250
Exercise of warrants		1,167,566		—
Issuance of common stock in public offering		10,000,003		9,347,450
Offering costs		(1,854,622)		(1,930,486)
Net cash provided by financing activities		6,207,950		8,362,395
Net change in cash and cash equivalents		(208,357)		(332,995)
Cash and cash equivalents at beginning of period		1,275,616		528,394
Cash and cash equivalents at end of period	$	1,067,259	$	195,399
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—	$	—
Cash paid for interest	$	1,176,305	$	318,576
Supplemental disclosure of non-cash investing and financing activities:
Conversion of notes into common stock	$	—	$	1,802,372
Conversion of notes into preferred stock	$	5,759,177	$	—
Right of use asset	$	467,738	$	152,387
Warrants issued in connection with note	$	—	$	790,540
Derivative liability in connection with convertible note	$	—	$	559,957
Conversion of related party notes and payables into preferred and common stock	$	—	$	25,000
Conversion of venture debt into preferred stock	$	—	$	6,300,000

See the accompanying notes to the unaudited condensed consolidated financial statements

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NOTE 1: NATURE OF OPERATIONS

Digital Brands Group, Inc. (the “Company” or “DBG”), was organized on September 17, 2012 under the laws of Delaware as a limited liability company under the name Denim.LA LLC. The Company converted to a Delaware corporation on January 30, 2013 and changed its name to Denim.LA, Inc. Effective December 31, 2020, the Company changed its name to Digital Brands Group, Inc. (DBG).

The Company is a curated collection of lifestyle brands, including Bailey 44, DSTLD, Harper & Jones, Stateside and ACE Studios, that offers a variety of apparel products through direct-to-consumer and wholesale distribution.

On February 12, 2020, Denim.LA, Inc. entered into an Agreement and Plan of Merger with Bailey 44, LLC (“Bailey”), a Delaware limited liability company. On the acquisition date, Bailey 44, LLC became a wholly owned subsidiary of the Company.

On May 18, 2021, the Company closed its acquisition of Harper & Jones, LLC (“H&J”) pursuant to its Membership Interest Stock Purchase Agreement with D. Jones Tailored Collection, Ltd. to purchase 100% of the issued and outstanding equity of Harper & Jones, LLC. On the acquisition date, H&J became a wholly owned subsidiary of the Company.

On August 30, 2021, the Company closed its acquisition of Mosbest, LLC dba Stateside (“Stateside”) pursuant to its Membership Interest Purchase Agreement with Moise Emquies to purchase 100% of the issued and outstanding equity of Stateside. On the acquisition date, Stateside became a wholly owned subsidiary of the Company.

On December 30, 2022, the Company closed its previously announced acquisition of Sunnyside, LLC dba Sundry (“Sundry”) pursuant to its Second Amended and Restated Membership Interest Purchase Agreement with Moise Emquies to purchase 100% of the issued and outstanding equity of Sundry. On the acquisition date, Sundry became a wholly owned subsidiary of the Company.

On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby contemporaneously with the parties’ execution of the Settlement Agreement (i) the Company agreed to make an aggregate cash payment of $229,000 to D. Jones Tailored Collection, Ltd. (“D. Jones”), (ii) the Company issued 1,952,580 shares of common stock to D. Jones, and (iii) the Company assigned and transferred one hundred percent (100%) of the Company’s membership interest in H&J to D. Jones. The H&J Settlement was accounted for a business disposition.

NOTE 2: GOING CONCERN

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated profits since inception, has sustained net losses of $6,528,082 and $22,261,338 for the nine months ended September 30, 2023 and 2022, respectively, and has incurred negative cash flows from operations for the nine months ended September 30, 2023 and 2022. The Company has historically lacked liquidity to satisfy obligations as they come due and as of September 30, 2023, and the Company had a working capital deficit of $14,709,598. These factors, among others, arise substantial doubt about the Company’s ability to continue as a going concern. The Company expects to continue to generate operating losses for the foreseeable future. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty.

The Company’s ability to continue as a going concern for the next 12 months from the date the financial statements were available to be issued is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing. Through the date the financial statements were available to be issued, the Company has been primarily financed through the issuance of capital stock and debt. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations. No assurance can be given that the Company will be successful in these efforts.

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NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”).

Reverse Stock Split

On October 21, 2022, the Board of Directors approved a one-for-100 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s preferred stock. The reverse stock split became effective as of November 3, 2022. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

On August 21, 2023, the Board of Directors approved a one-for-25 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s preferred stock. The reverse stock split became effective as of August 22, 2023. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheet as of September 30, 2023, the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022, statements of changes in stockholders’ equity (deficit) and of cash flows for the nine months ended September 30, 2023 and 2022 have been prepared by the Company, pursuant to the rules and regulations of the SEC for the interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the consolidated results for the interim periods presented and of the consolidated financial condition as of the date of the interim consolidated balance sheet. The results of operations are not necessarily indicative of the results expected for the year ended December 31, 2023.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with SEC on April 17, 2023.

Principles of Consolidation

These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Bailey, H&J and Stateside from the dates of acquisition. All inter-company transactions and balances have been eliminated on consolidation. As of June 21, 2023, the Company no longer consolidated the assets, liabilities, revenues and expenses of H&J (see Note 4).

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, inventory, impairment of long-lived assets, contingent consideration and derivative liabilities. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

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Reclassification of Previously Issued Financial Statements

Certain prior year accounts have been reclassified to conform with current year presentation pertaining to cost of net revenue and general and administrative expenses. The Company has reclassified $916,693 in general and administrative expenses per previously reported financial statements to net revenues in the accompanying consolidated statements of operations for the nine months ended September 30, 2022. The reclassified costs from general and administrative expense to cost of net revenues are primarily personnel and warehouse related costs. The reclassification had no effect on the reported results of operations.

Certain prior year accounts have been reclassified to conform with current year presentation regarding income (loss) from discontinued operations. H&J’s assets and liabilities as of December 31, 2022 have also been reclassified on the consolidated balance sheet. See Note 4.

Cash and Equivalents and Concentration of Credit Risk

The Company considers all highly liquid securities with an original maturity of less than three months to be cash equivalents. As of September 30, 2023 and December 31, 2022, the Company did not hold any cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits of $250,000.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued expenses, due to related parties, related party note payable, and convertible debt. The carrying value of these assets and liabilities is representative of their fair market value, due to the short maturity of these instruments.

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values:

Fair Value Measurements

as of September 30, 2023 Using:

Level 1

Level 2

Level 3

Total

Liabilities:

Contingent consideration

—


	Fair Value Measurements
	as of December 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Contingent consideration	$	—	$	—	$	12,098,475	$	12,098,475
	$	—	$	—	$	12,098,475	$