DBGIW Digital Brands Group Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): November 14, 2024

 

DIGITAL BRANDS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		001-40400		46-1942864
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification Number)

 

1400 Lavaca Street, Austin, TX 78701

(Address of principal executive offices) (Zip Code)

 

(209) 651-0172

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions.

 

☐	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))

 

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		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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the 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. ☐

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On November 14, 2024, Digital Brands Group, Inc., a Delaware corporation (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2024. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. The information contained in any website is not a part of this Current Report on Form 8-K.

 

In accordance with General Instruction B.2 of Form 8-K, the information included in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

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)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	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

 

 

 

Exhibit 99.1

 

 

Digital Brands Group Reports Third Quarter 2024 Financial Results

 

Austin, TX— Digital Brands Group, Inc. (“DBG”) (NASDAQ: DBGI), a curated collection of luxury lifestyle, digital-first brands, today reported financial results for its third quarter ended September 30, 2024.

 

“Our third quarter was the last quarter we significantly focused on paying down debt and liabilities given the soft macro economy and the overhang of the election. Starting in October this year, we transitioned from cleaning up the balance sheet to focusing on increasing top line growth. As we stated in our press release yesterday, we partnered with VAYNERCOMMERCE to drive digital revenue, which we announced is already working”.

 

“This was the first step in a multi-step growth strategy, coupled with the launch of AVO. New initiatives include investing in other digital channels and platforms, content creation, influencer partnerships, and monthly limited-edition capsules of online only products with special pricing, fabrics and designs. “

 

“In addition to this, the Company will also benefit by an increase of over $4.5 million in earnings associated with amortized non-cash expenses concluding at the end of 2024 plus a Sundry wholesale price increase,” said Hil Davis, CEO of Digital Brands Group.

 

Results for the Third Quarter

 

	●	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

 

Conference Call and Webcast Details Updated

 

Management will host a conference call on Thursday, November 14, 2024 at 5:00 p.m. ET to discuss the results. The live conference call can be accessed by dialing 877-545-0523 from the U.S. or internationally. The conference I.D. code is 288336 or referencing Digital Brands or via the web by using the following link: https://www.webcaster4.com/Webcast/Page/3044/51655

 

Forward-looking Statements

 

Certain statements included in this release are “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting DBG and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding DBG’s plans, objectives, projections and expectations relating to DBG’s operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. DBG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of DBG to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel and accessories; disruption to DBGs distribution system; the financial strength of DBG’s customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; DBG’s response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers; manufacturing and product innovation; increasing pressure on margins; DBG’s ability to implement its business strategy; DBG’s ability to grow its wholesale and direct-to-consumer businesses; retail industry changes and challenges; DBG’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that DBG’s facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; DBG’s ability to properly collect, use, manage and secure consumer and employee data; stability of DBG’s manufacturing facilities and foreign suppliers; continued use by DBG’s suppliers of ethical business practices; DBG’s ability to accurately forecast demand for products; continuity of members of DBG’s management; DBG’s ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; DBG’s ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; adverse or unexpected weather conditions; DBG’s indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent DBG from fulfilling its financial obligations; and climate change and increased focus on sustainability issues. More information on potential factors that could affect DBG’s financial results is included from time to time in DBG’s public reports filed with the SEC, including DBG’s Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

 

 

DIGITAL BRANDS GROUP, INC

STATEMENT OF OPERATIONS

 

		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	)

 

The accompanying notes are an integral part of these financial statements.

 

 

DIGITAL BRANDS GROUP, INC

STATEMENTS OF CASH FLOW

 

		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

 

The accompanying notes are an integral part of these financial statements.

 

 

DIGITAL BRANDS GROUP, INC

STATEMENT OF BALANCE SHEETS

 

		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

 

The accompanying notes are an integral part of these financial statements.

 

 

About Digital Brands Group

 

We offer a wide variety of apparel through numerous brands on a both direct-to-consumer and wholesale basis. We have created a business model derived from our founding as a digitally native-first vertical brand. We focus on owning the customer’s “closet share” by leveraging their data and purchase history to create personalized targeted content and looks for that specific customer cohort.

 

Digital Brands Group, Inc. Company Contact

Hil Davis, CEO

Email: invest@digitalbrandsgroup.co

Phone: (800) 593-1047

 

SOURCE Digital Brands Group, Inc.

 

Related Links

 

https://www.digitalbrandsgroup.co

 

https://ir.digitalbrandsgroup.co

 

 

 

v3.24.3

Cover	Nov. 14, 2024
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 14, 2024
Entity File Number	001-40400
Entity Registrant Name	DIGITAL BRANDS GROUP, INC.
Entity Central Index Key	0001668010
Entity Tax Identification Number	46-1942864
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	1400 Lavaca Street
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78701
City Area Code	(209)
Local Phone Number	651-0172
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common Stock, par value $0.0001
Title of 12(b) Security	Common Stock, par value $0.0001
Trading Symbol	DBGI
Security Exchange Name	NASDAQ
Warrants, each exercisable to purchase one share of Common Stock
Title of 12(b) Security	Warrants, each exercisable to purchase one share of Common Stock
Trading Symbol	DBGIW
Security Exchange Name	NASDAQ

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