DBGI 10-K & 10-Q changes, risk factors and insider trading
Digital Brands Group, Inc. · Nasdaq · Retail-Apparel & Accessory Stores · CIK 1668010 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have received capital funding to continue the business operations”
New heading “If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock.”
Removed heading “We have historically incurred net losses and experienced negative cash flows from operations.”
Removed heading “Adverse macroeconomic and geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results of operations and financial condition.”
Removed heading “Our sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.”
Largest changes
“If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock.”see in full comparison
“Our sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.”see in full comparison
“The U.S. has established free trade laws and regulations that set certain duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where our supplies may be sourced could have a material adverse effect on our business and financial results. In recent years, the U.S. …”see in full comparison
“Adverse macroeconomic and geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results of operations and financial condition.”see in full comparison
“We have historically incurred net losses and experienced negative cash flows from operations.”see in full comparison
“Challenging macroeconomic conditions, including as a result of geopolitical events, changes to international trade policies, public health crises, disruptions in global supply chains, and changes in inflation and interest rates, may negatively impact our costs from our suppliers and consumer demand for our products, as well as sales cycles, and in turn may materially affect the Company’s business, results of operations and financial condition. Such economic factors and uncertainties are beyond the Company’s control and the Company has no comparative advantage in forecasting their effects.”see in full comparison
Full comparison: every changed paragraph (24)
We have received capital funding to continue the business operations
We have historically incurred
net losses and experienced negative cash flows from operations.
The
Company has historically incurred net losses and experienced negative cash flows from operations. As of December 31, 2024,2025, we had a working
capital deficit of $16.1$5.45 million. However, the Company has successfully obtained substantial capital funding, which, we believe,which provides the necessary
liquidity to support ourits ongoing operations.operations and allows it to continue as a going concern.
With
this funding, we believe we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial performance.
performance, althoughWhile additional funding may be required in the future to support expansion.expansion, we are confident in our ability to secure capital on acceptable
terms as needed.
WeWhile
willwe continue to monitor our financial position and capital needsneeds, goingour forward.recent funding strengthens our ability to operate effectively, respond
to competitive pressures, and achieve long-term profitability. Additionally, we remain mindful of any debt financing covenants
that may
restrict our ability to incur additional debt, pay dividends, or engage in certain transactions.
Adverse macroeconomic and
geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results
of operations and financial condition.
Challenging macroeconomic conditions,
including as a result of geopolitical events, changes to international trade policies, public health crises, disruptions in global supply
chains, and changes in inflation and interest rates, may negatively impact our costs from our suppliers and consumer demand for our products,
as well as sales cycles, and in turn may materially affect the Company’s business, results of operations and financial condition.
Such economic factors and uncertainties are beyond the Company’s control and the Company has no comparative advantage in forecasting
their effects.
The U.S. has established free
trade laws and regulations that set certain duties and tariffs for qualifying imports and exports, subject to compliance with the applicable
classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade
restrictions, tariffs or taxes on imports from countries where our supplies may be sourced could have a material adverse effect on our
business and financial results. In recent years, the U.S. and Chinese governments have imposed a series of significant incremental retaliatory
tariffs to certain imported products. Further, the U.S. administration recently has begun to enact additional or enhanced tariffs in various
jurisdictions relevant to our business. Implementation of tariffs or other restrictive trade measures by the United States and potentially
reciprocally by other countries subject to such to tariffs remains highly uncertain. If the actual and potential tariffs and reciprocal
tariffs are implemented as currently proposed, our results of operations could be materially negatively impacted, both directly and indirectly
through negative effects to our supply chain, as a result of increased costs, decreased demand and other adverse economic impacts, and
we may not be able to successfully mitigate or offset such impacts. Depending upon their implementation and duration, as well as our ability
to mitigate their impact, these tariffs and any other future regulatory actions implemented on a broader range of products or raw materials
could materially affect our business, including in the form of increased cost of goods sold, decreased margins, increased pricing for
customers, reduced sales and disruption in our supply chain. Furthermore, additional trade restrictions could be adopted with little to
no advance notice, and we may not be able to effectively mitigate the adverse impacts from such measures, which could further increase
the cost of our products, disrupt our supply chain and impair our ability to effectively operate and compete in the countries where we
do business. The Company is closely monitoring this evolving situation but there can be no assurance that the Company will be able to
mitigate the impacts of any trade measures, which could be material to the Company’s business operations or harm the Company’s
competitive position.
These
and other factors beyond our control could result in our third-party suppliers and manufacturers being unable to fill our orders in a
timely manner. If we experience significant increased demand, or we lose or need to replace an existing third- party supplier and manufacturer
as a result of adverse economic conditions or other reasons, we may not be able to secure additional manufacturing capacity when required
or on terms that are acceptable to us, or at all, or manufacturers may not be able to allocate sufficient capacity to us in order to
meet our requirements. In addition, even if we are able to find new third-party suppliers or manufacturers, we may encounter delays in
production and added costs as a result of the time it takes to train our manufacturers on our methods, products and quality control standards.
Moreover, it is possible that we will experience defects, errors, or other problems with their work that will materially affect our operations
and we may have little or no recourse to recover damages for these losses. Any delays, interruption or increased costs in the supply
of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for
our products and result in lower net revenues and net income both in the short and long term.
In addition, even if we are able to find new third-party suppliers or manufacturers, we may encounter delays in production and added costs as a result of the time it takes to train our manufacturers on our methods, products and quality control standards. Moreover, it is possible that we will experience defects, errors, or other problems with their work that will materially affect our operations and we may have little or no recourse to recover damages for these losses. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower net revenues and net income both in the short and long term.
The
market price of our common stock has in the past and could in the future be extremely volatile. From May 2021 to MarchDecember 31, 2025, the
high and low prices of our common stock as quoted on the Nasdaq Capital Market (through December 17, 2024) and the OTC Pink
(beginning on December 18, 2024)NasdaqCM was $746,250 and $1.03,$1.12, respectively (as appropriately adjusted for
the Reverse1-for-100 Stock, Splits1-for-25 and 1-for-50 reverse stock splits effectuated by the Company in November 2022, August 2023 December 2024, respectively).
The future market price of our common stock may be significantly affected by factors, such as:
If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock.
On January 17, 2023, Digital Brands Group, Inc. (the “Company”) was notified by the Nasdaq Hearings Panel (the “Panel”) that the Company has evidenced compliance with all applicable requirements for continued listing on The NasdaqCM, including the $2.5 million stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b). The Company remained subject to a “Panel Monitor,” as that term is defined by Nasdaq Listing Rule 5815(d)(4)(A), through January 17, 2024.
There can be no assurance that we will successfully regain our Nasdaq listing. As our Common Stock and warrants are currently traded on the OTC marketplace, and as of the date of filing these financial statements, the company has not yet returned to NasdaqCM, our stockholders may experience reduced liquidity and increased difficulty in obtaining accurate price quotations. Additionally, the ability to issue additional securities for financing or other purposes, or to secure necessary funding in the future, may be materially and adversely affected due to the absence of a national securities exchange listing.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. A material weakness is defined in the standards established by the Public Company Accounting Oversight Board (United States) as a deficiency, or an acquisition of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We intend to begin the process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation, which process is time consuming, costly and complex. If we fail to increase and maintain the number and expertise of our staff for our accounting and finance functions and to improve and maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results accurately and prevent fraud. In addition, we cannot be certain that any such steps we undertake will successfully remediate the material weaknesses or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause our stock price to decline. As a result of such failures, we could also become subject to investigations by Nasdaq, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition and divert financial and management resources. Even if we are able to report our consolidated financial statements accurately and timely, if we do not make all the necessary improvements to address the material weaknesses, continued disclosure of our material weaknesses will be required in future filings with the SEC, which could reduce investor confidence in our reported results and our cause our stock price to decline.
Provisions
in our sixth amended and restated certificatearticles of incorporation and bylaws and under DelawareNevada law could discourage a takeover that stockholders
may consider favorable.
Our
sixth amended and restated certificatearticles of incorporation and amended and restated bylaws may discourage, delay or prevent a merger or
acquisition that a stockholder may consider favorable because they, among other things:
As a Nevada corporation, we are also subject to the “acquisition of controlling interest” statutes contained in Sections 78.378 through 78.3793 of the NRS. Under Nevada law, an acquiring person who acquires a controlling interest in an “issuing corporation” may not exercise voting rights on any control shares unless such voting rights are conferred by a majority vote of the disinterested stockholders at a special or annual meeting. Additionally, Nevada’s business combination statutes prohibit an “interested stockholder” from entering into a “combination” with a Nevada corporation for three years after becoming an interested stockholder unless certain conditions are met, including board approval of the transaction. Our board of directors and disinterested stockholders could rely on these provisions to prevent or delay an acquisition of us.
As
a Delaware corporation, we are also subject to the Delaware anti-takeover provisions contained in Section 203 of the Delaware General
Corporation Law. Under Delaware law, a corporation may not engage in a business acquisition with any holder of 15% or more of its capital
stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.
Our board of directors could rely on this provision to prevent or delay an acquisition of us.
Our
sixth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole
and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable
judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our
sixth amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative
forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject
matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter
jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for the following types
of actions or proceedings under Delaware statutory or common law:
Our
sixth amended and restated certificate of incorporation further provides that unless the Company consents in writing to the selection
of an alternative forum, the U.S. federal district courts have exclusive jurisdiction of the resolution of any complaint asserting a
cause of action arising under the Securities Act. The enforceability of similar exclusive federal forum provisions in other companies’
organizational documents has been challenged in legal proceedings, and while the Delaware Supreme Court has ruled that this type of exclusive
federal forum provision is facially valid under Delaware law, there is uncertainty as to whether other courts would enforce such provisions
and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
This
exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim
for which the federal courts have exclusive jurisdiction.
Any
person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to
have consented to this exclusive forum provision of our sixth amended and restated certificate of incorporation. This choice of forum
provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or
any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively,
if a court were to find this choice of forum provision in our sixth amended and restated certificate of incorporation to be inapplicable
or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. Additional
costs associated with resolving an action in other jurisdictions could materially adversely affect our business, financial condition
and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Prepaid Marketing Expenses and Liability-Classified Share-Based Awards”
Removed heading “Basis of Presentation and Principles of Consolidation”
Removed heading “Business Acquisitions”
Removed heading “Revenue Recognition”
Removed heading “Accounts Receivable and Expected Credit Loss”
Removed heading “Net Loss from Continuing Operations”
Largest changes
Other operating expenses included distribution expenses, impairment and change in fair value of contingent consideration. Other operating expenses weresee in full comparison$2.3$6.3 million in20242025 as compared togainexpenses of$9.7$2.3 million in2023,2024, an increase in expenses of$12$4.0 million. In2024,2025, there was$1.3$5.7 million in impairment charges onBailey’sgoodwill andStateside’sintangibleassets.assets, comprising $3.2 million of goodwill impairment (Bailey and Stateside), $1.3 million of Stateside brand name impairment, and $1.2 million of OpenDaily technology asset impairment. In2023,2024, the Company recorded a$10.7$3.2 million increase in the change in fair value of contingent consideration pertaining to the Norwest waiver for Bailey and H&J Settlement.
“The Company requires significant capital to meet its obligations as they become due. Management believes its existing cash resources and planned operations—including revenues expected from its collegiate apparel program, continued cost reduction measures, and the potential release of $5,744,174 in restricted cash currently held pursuant to the Series D offering—will be sufficient to fund operations for at least twelve months from the date of issuance of these financial statements. The Company may also pursue additional equity or debt financings as needed. …”see in full comparison
“Prepaid Marketing Expenses and Liability-Classified Share-Based Awards”see in full comparison
Full comparison: every changed paragraph (46)
Unless
otherwise indicated by the context, references to “DBG” refer to Digital Brands Group, Inc. solely, and references to the
“Company,” “our,” “we,” “us” and similar terms refer to Digital Brands Group, Inc., together
with its wholly-owned subsidiaries Bailey 44, LLC (“Bailey”), MOSBEST, LLC (“Stateside”) and SunnysideSUNNYSIDE, LLC (“Sundry”).
Digital
Brands Group is a curated collection of lifestyle apparel brands, including Bailey 44, DSTLD, Stateside, Sundry and ACE Studios,Sundry, that offers
a variety
of apparel products through direct-to-consumer and wholesale distribution.distribution channels. In 2025, the Company launched its collegiate name,
image and likeness (NIL) apparel program, entering into multi-year agreements with AAA Tuscaloosa (University of Alabama), Traffic Holdco,
The Grove Collective (Ole Miss), and Learfield/Buffalo Sports Properties (University at Buffalo). Our complementary brand portfolio provides
us with
the unique opportunity to cross merchandise our brands. We aim for our customers to wear our brands head to toe and to capture
what we
call “closet share” by gaining insight into their preferences to create targeted and personalized content specific
to their
cohort. Operating our brands under one portfolio provides us with the ability to better utilize our technological, human capital
and and
operational capabilities across all brands. As a result, we have been able to realize operational efficiencies and continue to identify
additional cost saving opportunities to scale our brands and overall portfolio.
Our
quarterly operating results vary due to the seasonality of our individual brands, and are historically stronger in the second half of
the calendar year.year
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Basis
of Presentation and Principles of Consolidation
Our
accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”).
Prepaid Marketing Expenses and Liability-Classified Share-Based Awards
The Company enters into long-term marketing, licensing, manufacturing, and sponsorship arrangements with third-party service providers under which it may issue common stock or equity-linked instruments in exchange for future services, including distribution, licensing access, product specification support, and marketing and promotional activities. These arrangements are accounted for as share-based payments to nonemployees in accordance with ASC 718, Compensation—Stock Compensation.
Where share-based consideration is determined to be in exchange for distinct goods or services, including those received from a customer, the Company accounts for such transactions as the purchase of services. The Company recognizes a prepaid marketing or service asset measured at the grant-date fair value of the share-based consideration issued, representing the value of services to be received over the contractual term. Such prepaid assets are amortized on a straight-line basis over the period in which the related services are received, which generally corresponds to the contractual service period.
Certain share-based arrangements include make-whole provisions that require the Company to deliver a fixed monetary value using a variable number of shares, or, in certain cases, cash. These provisions result in liability classification under ASC 718 and ASC 480, Distinguishing Liabilities from Equity, as the Company has an obligation to settle a fixed dollar amount rather than a fixed number of shares.
Liability-classified share-based awards are initially measured at fair value on the grant date and subsequently remeasured at fair value at each reporting date until settlement. Changes in fair value are recognized in earnings in the period of change. Compensation cost is recognized over the requisite service period, with cumulative adjustments recorded for changes in fair value.
The Company evaluates features within these arrangements, including make-whole provisions, under ASC 815, Derivatives and Hedging, to determine whether such features should be accounted for separately as derivatives. The Company has concluded that these features qualify for the scope exception applicable to share-based payment arrangements and therefore are not accounted for as freestanding or embedded derivatives. Accordingly, no bifurcation is required.
The fair value of liability-classified share-based awards is estimated using a Monte Carlo simulation model. This valuation technique incorporates significant assumptions, including the Company’s stock price, expected volatility, risk-free interest rate, expected term, and other market-based inputs. Due to the use of significant unobservable inputs, these measurements are classified within Level 3 of the fair value hierarchy.
Separately, certain contractual marketing investment commitments represent best-efforts obligations and do not create a present obligation or identifiable asset. Accordingly, such costs are expensed as incurred in accordance with ASC 720, Advertising Costs.
Inventory
Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for DSTLD and first-in, first-out method for Bailey, Stateside and Sundry. The inventory balances as of December 31, 2025 and 2024 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress.
Business
Acquisitions
We
record our acquisitions under the acquisition method of accounting, under which most of the assets acquired and liabilities assumed are
initially recorded at their respective fair values and any excess purchase price is reflected as goodwill. We utilize management estimates
and, in some instances, independent third-party valuation firms to assist in determining the fair values of assets acquired, liabilities
assumed and contingent consideration, if any. Such estimates and valuations require us to make significant assumptions, including projections
of future events and operating performance.
The
fair value of customer relationships, backlog and trade names/trademarks acquired in our acquisitions are determined using various valuation
methods, based on a number of significant assumptions.
We
determine which assets have finite lives and then determine the estimated useful life of finite assets.
The
expected useful life of customer relationships is established as three years, which is the period over which these assets are expected
to reasonably contribute to future cash flows. We expect to amortize such customer relationships using the straight-line method.
The
estimated fair values are subject to change during the measurement period, which is limited to one year subsequent to the acquisition
date.
Revenue
Recognition
Revenues
are recognized when performance obligations are satisfied through the transfer of promised goods to our customers. Control transfers
upon shipment of product and when the title has been passed to the customers. This includes the transfer of legal title, physical possession,
the risks and rewards of ownership, and customer acceptance. We provide the customer the right of return on the product and revenue is
adjusted based on an estimate of the expected returns based on historical rates. We consider the sale of products as a single performance
obligation. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued
expenses. Revenue is deferred for orders received for which associated shipments have not occurred.
Accounts
Receivable and Expected Credit Loss
We
carry our accounts receivable at invoiced amounts less allowances for customer credit losses and other deductions to present the net
amount expected to be collected on the financial asset. All receivables are expected to be collected within one year of the consolidated
balance sheet. We do not accrue interest on the trade receivables. Management evaluates the ability to collect accounts receivable based
on a combination of factors. Receivables are determined to be past due based on individual credit terms. An allowance for credit losses
is maintained based on the length of time receivables are past due, historical collections, or the status of a customer’s financial
position. Receivables are written off in the year deemed uncollectible after efforts to collect the receivables have proven unsuccessful.
We do not have any off balance sheet cried exposure related to our customers.
We
periodically review accounts receivable, estimate an allowance for bad debts, and simultaneously record the appropriate expense in the
statement of operations. Such estimates are based on general economic conditions, the financial conditions of customers, and the amount
and age of past due accounts. Past due accounts are written off against that allowance only after all collection attempts have been exhausted
and the prospects for recovery are remote. Recovering of accounts receivable previously written off are recorded as income when received.
The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes
to mitigate credit risk.
In
addition, going forward, the amortization of the identifiable intangibles acquired in the acquisitions will be
is included in operating
expenses.
General
and administrative expenses decreasedincreased by $5.6$1.0 million for the year ended December 31, 20242025 to $9.7 million compared to $8.7 million compared to $14.3 millionin
in 2023.2024. The decrease in general and administrative expensesincrease was primarily due to accrued legal contingencies, partially offset by a decrease due to lower consulting and professional
fees, as well as
other cost cutting measures across our company,Company, as all brands achieved operational synergies in 2024.2025. These synergies
included the elimination of its warehouse, office, fulfillment and redundancies in headcount.headcount General
and administrative expenses as a percentage of revenue were 131% in 2025 compared to 75% in 2024, reflecting the significant revenue
decline relative to the largely fixed cost base.
General
and administrative expenses as a percentage of revenue was 75% in 2024 as compared to 96% in 2023.
Sales
and marketing expenses decreasedincreased by $1.1$11.7 million for the year ended December 31, 20242025 to $14.6 million compared to $2.9 million compared to $4 million in 2023.2024.
The decreaseincrease in sales and marketing expenses was primarily duedriven toby decreasedthe spendingamortization onof advertisingprepaid marketing assets under multi-year marketing
and sponsorship agreements entered into during 2025, including collegiate NIL program agreements with AAA Tuscaloosa, Traffic Holdco,
The Grove Collective, and otherLearfield, cost-cuttingas well as cash-based marketing agreements with MavDB Consulting, Velora Marketing, i2i Marketing,
efforts.and Candlelight Ventures.
Other
operating expenses included distribution expenses, impairment and
change in fair value of contingent consideration. Other operating expenses
were $2.3$6.3 million in 20242025 as compared to gainexpenses of $9.7$2.3 million
in 2023,2024, an increase in expenses of $12$4.0 million. In 2024,2025, there was $1.3
$5.7 million in impairment charges on Bailey’sgoodwill and Stateside’s intangible assets.assets,
comprising $3.2 million of goodwill impairment (Bailey and Stateside), $1.3 million of Stateside brand name impairment, and $1.2 million
of OpenDaily technology asset impairment. In 2023,2024, the Company recorded a $10.7$3.2 million
increase in the change in fair value of contingent
consideration pertaining to the Norwest waiver for Bailey and H&J Settlement.
Other
ExpensesIncome (Expense)
Other income (expense) was $(1.3) million in the year ended December 31, 2025 as compared to $3.0 million in the year ended December 31, 2024. During the year ended December 31, 2025, the Company recorded a change in the fair value of share based liability of $(1.7) million.
Net Loss
Other
expenses decreased by $3.2 million to $3.0 million in the year ended December 31, 2024 compared to $6.2 million in the corresponding
fiscal period in 2023. The decrease in other expenses in 2023 was primarily due to lower interest expense in 2024 compared to 2023.
Net
Loss from Continuing Operations
Our
net loss from continuing operations increased by $4.5$15.2 million to a loss of $13.2$28.3 million for the year ended December 31, 20242025 compared
to a loss of $8.7 $13.1
million for the corresponding fiscal period in 20232024 primarily due to the impairmenthigher operating expenses and lower gross profit.
The Company requires significant capital to meet its obligations as they become due. Management believes its existing cash resources and planned operations—including revenues expected from its collegiate apparel program, continued cost reduction measures, and the potential release of $5,744,174 in restricted cash currently held pursuant to the Series D offering—will be sufficient to fund operations for at least twelve months from the date of issuance of these financial statements. The Company may also pursue additional equity or debt financings as needed. There can be no assurance as to the availability or terms upon which such financing might be available. The Bailey sellers’ promissory note of $3,500,000 matured on December 8, 2025 and remains in default; management is in active discussions with the lender regarding repayment or extension.
In 2025, the Company completed an offering consisting of several equity offerings generating aggregate net financing proceeds of approximately $23.8 million, including the February 2025 S-1 offering ($6.6 million net), the Series D Convertible Preferred Stock offering ($11.4 million net), and warrant exercises ($6.3 million).
As
of December 31, 2024, we had cash of $164,431, but we had a working capital deficit of $16.1 million. The Company requires significant
capital to meet its obligations as they become due. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through
its operations. The Company may pursue secondary equity offerings or debt financings to provide working capital and satisfy debt obligations.
There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If
the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans.
In
February 2025, the Company completed an offering consisting of the sale of common stock, warrants and pre-funded warrants for gross proceeds
of $7,500,000, before deducting placement agent fees and commissions and other offering expenses.
The
following table presents selected captions from our condensed statement of cash flows for the years ended December 31, 20242025 and 20232024:
Our
For the year ended December 31, 2025, net cash used in operating activities
was increased$15.9 bymillion, $0.1 millioncompared to $6.1$6.2 million for the year ended December 31, 2024 as compared to cash
used of $6 million for the corresponding fiscal period in 2023.2024. The increase in net cash used in operating activities was
primarily driven
by a higher net loss of $28.3 million in 2025 compared to $13.1 million in 2024, partially offset by a increase in non-cash adjustments
of $5.4$6.6 million and lesser cash provided byfavorable changes
in our operating assets and liabilities comparedof to$5.8 2023.million.
Our
cash provided by investing activities was $0 in the year ended December 31, 20242025 asand comparedDecember to31, $0.1 million for the corresponding fiscal
period in 2023.2024.
Cash
provided by financing activities was $6.3$23.4 million for the year ended
December 31, 20242025 compared ofto $4.7$6.3 million for the corresponding
fiscal period in 2023.2024. Cash inflows in 2025 included $11.4 million from
the issuance of Series D Convertible Preferred Stock, $6.6 million from proceeds for the issuance of pre-funded warrants, $5.8 million
from the exercise of warrants, and $0.2 million from the issuance of notes, loans and merchant advances, partially offset by note, loan
and notes payable repayments of $0.7 million. Cash inflows in 2024 included $9.4 million in equity proceeds after offering costs including
proceeds from the
exercise of warrants, $0.8 million from the issuance of notes, loans and merchant advances, partially offset by note,
loan and notes
payable repayments of $3.9 million. Cash inflows in 2023 were primarily related to $8.1 million in equity proceeds after offering costs,
$1.1 million from exercise of warrants, $5.6 million from convertible notes and loans and advances from factor, partially offset by note
repayments and related party advances of $10.3 million.
What changed in the latest 10-Q
Risk Factors
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
Operating expenses totaledsee in full comparison$7.5$7.8 million for the three months endedMarchJune31,30, 2026, compared to$2.9$2.7 million for the corresponding period in 2025, and $15.3 million for the six months ended June 30, 2026 compared to $5.6 million for the corresponding period in 2025. The$4.6increase ismillionattributableincreaseprincipallywas primarily driven by higher sales and marketing expense reflectingto amortization of prepaid marketingassetsarising from the Company’s collegiate apparelname,andimagename-image-likeness agreements, which is recorded within sales andlikenessmarketing(“NIL”) agreements (AAA Tuscaloosa, Traffic Holdco, Grove Collective, Learfield/Buffalo Sports)expenses and totaled $2.8 million and $5.3 million for the three and six months ended June 30, 2026, respectively, together with the impairment of the remaining MavDB Consultingagreement,prepaidallbalance ofwhich$764,424wererecognized inenteredtheintosecondduring 2025.quarter.
Our cash used in operating activities wassee in full comparison$4.7$10.3 million for thethreesix months endedMarchJune31,30, 2026, compared tocash used in operating activities of$4.5 million for the correspondingfiscalperiod in 2025. Thechangeincreaseinreflectsnetthecash used inhigher operatingactivities was primarily driven by higher netlossinfor2026the(period, partly offset by non-cashadjustmentschargesincludingfor amortization of prepaid marketing, the$3.9impairmentmillionofchangethe MavDB prepaid balance and changes in the fair value of share-based paymentliability), and changes in operating assets and liabilities compared to the prior period, higher operational losses, including increased sales and marketing expenses, and lower non-cash charges in 2025.liabilities.
Three and Six Months Endedsee in full comparisonMarchJune31,30, 2026 compared to Three and Six Months EndedMarchJune31,30, 2025.
“During the three months ended March 31, 2026, holders exercised 1,275,577 pre-funded warrants previously issued in connection with the MavDB Consulting LLC marketing services agreement, and the Company issued the related shares of common stock. In addition, holders exercised an aggregate of 4,464,604 common stock purchase warrants originally issued in connection with the February 2025 Offering, including 2,365,968 warrants exercised pursuant to warrant exchange agreements entered into on February 16, 2026. …”see in full comparison
“Effective January 26, 2026, the Company entered into a Marketing and Sponsorship Agreement with Learfield in connection with the University of Colorado athletic program. Under the agreement, the Company is required to provide annual consideration consisting of cash and equity in exchange for sponsorship, media and marketing rights. The equity component is accounted for in accordance with ASC 718 and, as of March 31, 2026, no shares had been issued under the arrangement. …”see in full comparison
“Effective March 12, 2026, the Company entered into a consulting agreement with Athlete Capital Sports LLC pursuant to which the Company agreed to issue shares with an aggregate value of approximately $3.0 million in exchange for consulting and advisory services to be provided over a three-year term. As of March 31, 2026, no shares had been issued under the agreement. The Company recorded a prepaid consulting asset with a corresponding accrued liability/stock payable and amortizes the prepaid balance over the contractual service period. …”see in full comparison
Full comparison: every changed paragraph (36)
As of June 30, 2026, we had an aggregate principal amount of debt outstanding of approximately $17.4 million, including $11.2 million payable under our secured payment obligation to RallyTown, LLC. We believe this amount of indebtedness may limit our ability to obtain additional financing on acceptable terms, requires us to dedicate a portion of any cash flow from operations to debt service, and may restrict our flexibility in planning for changes in our business. In addition, subsequent to June 30, 2026 we issued a convertible promissory note in the principal amount of $3.5 million for gross proceeds of $3.0 million.
As
of March 31, 2026, we had an aggregate principal amount of debt outstanding of approximately $6.4 million. We believe this amount of
indebtedness may be considered significant for a company of our size and current revenue base. Our substantial debt could have important
consequences to us. For example, it could:
During the six months ended June 30, 2026, the Company continued to expand its collegiate apparel, marketing and name-image-likeness platform, entering into agreements covering additional universities and issuing common stock as consideration under several of those arrangements.
Effective January 26, 2026, the Company entered into a Marketing and Sponsorship Agreement with Learfield College, LLC relating to Vanderbilt University, providing for equity consideration of $925,000 over four contract years through June 30, 2029, together with cash and trade consideration. In May 2026 the Company issued 3,108 shares of common stock in satisfaction of the equity consideration.
Effective March 12, 2026, the Company entered into a consulting agreement with Athlete Capital Sports LLC, and in May 2026 issued 23,511 shares of common stock in settlement of the related stock payable. On May 1, 2026 the Company entered into an Exclusive Private Label Manufacturing Agreement with The Battle’s End, LLC, the marketing agent for Florida State University athletics, with stock consideration of $1,050,000.
During the six months ended June 30, 2026, holders exercised pre-funded warrants resulting in the issuance of 46,497 shares of common stock and exercised 203,613 common stock purchase warrants issued in connection with the February 2025 offering. On June 15, 2026 the Company placed a hold on 179,690 pre-funded warrants pending their expected cancellation, and on June 17, 2026 240,851 warrants issued under the February 2026 inducement expired unexercised.
During the six months ended June 30, 2026, holders converted 1,250 shares of Series D Preferred Stock into 14,082 shares of common stock. In June 2026 the Company sold 36,335 shares under its at-the-market program for net proceeds of $1,677,052, and issued a promissory note to 1800 Diagonal Lending LLC in the principal amount of $238,050 for cash proceeds of $200,000.
During
the three months ended March 31, 2026, the Company continued to expand its collegiate apparel, marketing and strategic advisory platform
through existing arrangements with AAA Tuscaloosa (University of Alabama), LLC, Traffic Holdco, LLC, Buffalo Sports Properties / Learfield,
The Grove Collective, LLC and MavDB Consulting LLC.
Effective
January 26, 2026, the Company entered into a Marketing and Sponsorship Agreement with Learfield in connection with the University of
Colorado athletic program. Under the agreement, the Company is required to provide annual consideration consisting of cash and equity
in exchange for sponsorship, media and marketing rights. The equity component is accounted for in accordance with ASC 718 and, as of
March 31, 2026, no shares had been issued under the arrangement. The Company recorded a prepaid marketing asset with a corresponding
stock payable liability and amortizes the prepaid balance over the related service period. The agreement includes a make-whole provision;
however, no make-whole adjustment had been triggered as of March 31, 2026 because no shares had been issued.
Effective
March 12, 2026, the Company entered into a consulting agreement with Athlete Capital Sports LLC pursuant to which the Company agreed
to issue shares with an aggregate value of approximately $3.0 million in exchange for consulting and advisory services to be provided
over a three-year term. As of March 31, 2026, no shares had been issued under the agreement. The Company recorded a prepaid consulting
asset with a corresponding accrued liability/stock payable and amortizes the prepaid balance over the contractual service period. The
agreement includes a make-whole provision that may result in variability in settlement; however, because no shares had been issued as
of March 31, 2026, no derivative liability was recognized.
During
the three months ended March 31, 2026, holders exercised 1,275,577 pre-funded warrants previously issued in connection with the MavDB
Consulting LLC marketing services agreement, and the Company issued the related shares of common stock. In addition, holders exercised
an aggregate of 4,464,604 common stock purchase warrants originally issued in connection with the February 2025 Offering, including 2,365,968
warrants exercised pursuant to warrant exchange agreements entered into on February 16, 2026. In consideration for such exercises, the
Company issued 9,634,032 new common stock purchase warrants exercisable at $0.66 per share and expiring on June 17, 2026. To the extent
a holder would have exceeded applicable beneficial ownership limitations, pre-funded warrants were issued in lieu of common stock purchase
warrants.
During
the three months ended March 31, 2026, holders also converted 1,250 shares of Series D Preferred Stock into 563,284 shares of the Company’s
common stock.
For
the three months ended MarchJune 31,30, 2026 and 2025, we generated net revenues of $1.3$1.2 million and $1.9$2.3 million, respectively, and reported
net losslosses of $11.4$9.0 million and $2.1 million, respectively. AsFor notedthe insix ourmonths unauditedended condensedJune consolidated30, financial2026 statements,and as of
March 31, 2026,2025, we hadgenerated annet accumulatedrevenues
of deficit$2.5 million and $4.1 million, respectively, and reported net losses of $166.8$20.4 million.million and $4.2 million, respectively.
Three
and Six Months Ended MarchJune 31,30, 2026 compared to Three and Six Months Ended MarchJune 31,30, 2025.
The
following table presents our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025:
Net revenues decreased by $1.1 million to $1.2 million for the three months ended June 30, 2026, compared to $2.3 million in the corresponding period of 2025, and decreased by $1.6 million to $2.5 million for the six months ended June 30, 2026, compared to $4.1 million in the corresponding period of 2025. The decrease was driven primarily by lower wholesale shipments across the Company’s brands.
The Company expects wholesale revenue to benefit in the remainder of 2026 from its collegiate apparel programs, including the college bookstore distribution arrangement announced in July 2026, and has issued revenue guidance for the third quarter of 2026 of $8.5 million to $11.0 million.
Net
revenues decreased by $0.6 million to $1.3 million for the three months ended March 31, 2026, compared to $1.9 million in the corresponding
fiscal period in 2025. The decrease was primarily associated with lower wholesale activity period over period, partially offset by the
Company’s continued investment in its direct-to-consumer brand portfolio. The Company expects revenue growth in subsequent periods
through its expanded NIL and licensing partnerships, including the recently announced Penn State NIL agreement and Sundry / TJX licensing
arrangement. However, the Company continues to experience pressure on gross margins
due to the operational costs required to support and manage these programs and related wholesale relationships.
The
Company expects this decline in wholesale revenue to be offset in the remainder of 2025 as a result of the Company’s second largest
wholesale account’s anticipated doubling of the number of its domestic retail doors from 50 to 100 and expansion of its international
doors.
Our gross profit decreased by $0.4 million to $324,265 for the three months ended June 30, 2026, from $711,552 for the corresponding period in 2025, and decreased by $1.2 million to $369,646 for the six months ended June 30, 2026, from $1,584,007 for the corresponding period in 2025.
Our gross margin was approximately 27% for the three months ended June 30, 2026, compared to 32% for the three months ended June 30, 2025, and 15% for the six months ended June 30, 2026 compared to 38% for the corresponding period in 2025. The compression reflects lower revenue against fixed costs of production together with a higher proportion of off-price wholesale shipments.
Our
gross profit decreased by $0.8 million for the three months ended March 31, 2026 to $45,381 from a gross profit of $0.9 million for the
corresponding fiscal period in 2025. The decrease in gross profit was primarily attributable to a decrease in revenue combined with higher
cost of goods sold relative to revenue, reflecting product mix and inventory positioning.
Our
gross margin was approximately 3% for the three months ended March 31, 2026, compared to 47% for the three months ended March 31, 2025.
The compression in gross margin reflects the lower revenue base relative to cost of goods sold during the period. The Company expects
gross margins to recover as revenues increase, leveraging fixed costs, a higher mix of e-commerce revenue, and improved wholesale account
mix.
The
Company expects gross margins to expand as revenues increase and leverage fixed costs, with a higher mix of e-commerce and collegiate
revenue, which as higher
gross margins and the mix of wholesale accounts withcarry higher gross margins.margins than off-price wholesale.
Operating
expenses totaled $7.5$7.8 million for the three months ended MarchJune 31,30, 2026, compared to $2.9$2.7 million for the corresponding period in 2025,
and $15.3 million for the six months ended June 30, 2026 compared to $5.6 million for the corresponding period in 2025.
The $4.6increase
is millionattributable increaseprincipally was primarily driven by higher sales and marketing expense reflectingto amortization of prepaid marketing assets
arising from the Company’s collegiate apparel name,and imagename-image-likeness
agreements, which is recorded within sales and likenessmarketing (“NIL”) agreements (AAA Tuscaloosa, Traffic Holdco, Grove Collective,
Learfield/Buffalo Sports)expenses and totaled $2.8 million and $5.3 million for the three and six months
ended June 30, 2026, respectively, together with the impairment of the remaining MavDB Consulting agreement,prepaid allbalance of which$764,424 wererecognized
in enteredthe intosecond during 2025.quarter.
Other
expense was $4.0$1.5 million for the three months ended MarchJune 31,30, 2026, compared to $0.1 million for the three months ended
June March 31,30, 2025.
The increaseFor the six months ended June 30, 2026 other expense was primarily$5.5 drivenmillion, bycompared ato $3.9$0.2 million non-cash charge for the changecorresponding
period in 2025. The movement is driven principally by changes in the fair value of the Company’s share-based payment liabilityliabilities,
arisingwhich fromproduced thea make-wholecharge provisionsof $1.8 million in the collegiatesecond apparelquarter NILand agreements.a Interestcharge expenseof remained consistent at approximately
$0.1$5.6 million infor boththe periods.six-month period.
Our net loss was $9.0 million for the three months ended June 30, 2026, compared to a net loss of $2.1 million for the three months ended June 30, 2025, and $20.4 million for the six months ended June 30, 2026, compared to $4.2 million for the corresponding period in 2025.
Our
net loss was $11.4 million for the three months ended March 31, 2026 compared to a net loss of $2.1 million for the three months ended
March 31, 2025. The increase in net loss was primarily driven by (i) the $3.9 million non-cash charge for the change in fair value of
the share-based payment liability, (ii) higher sales and marketing expense from amortization of prepaid marketing assets, and (iii) lower
gross profit from reduced revenue.
The
Company requires significant capital to meet its obligations as they
become due. Management believes its existing cash resources and planned operations — including revenues expected from its
collegiate collegiate
apparel program,program and continued cost reduction measures will— together with sales of equity securities under the Company’s
at-the-market facility and equity line of credit, may not be sufficient to fund operations for at least twelve months from
the date of issuance
of these financial statements, and substantial doubt exists about the Company’s ability to continue as a going
concern. These plans depend in part on factors that are not within the Company’s control, including equity
market conditions; see Note 2 to the condensed consolidated financial statements. The Company may also pursue additional
equity or debt
financings as needed. There can be no assurance as to the availability or terms upon which such financing might be available.
The Bailey sellers’ promissory note of $3,500,000 matured on December 8, 2025 and remains in default; management is in active discussions
with the lender regarding repayment or extension.
The
following table presents selected captions from our condensed consolidated statements of cash flows for the threesix months ended MarchJune 31, 2026,30,
2026 and
2025:
Our
cash used in operating activities was $4.7$10.3 million for the threesix months ended MarchJune 31,30, 2026, compared to cash used in operating activities
of $4.5 million for the corresponding fiscal
period in 2025. The changeincrease inreflects netthe cash used inhigher operating activities was primarily driven
by higher net loss infor 2026the (period, partly offset by non-cash adjustmentscharges includingfor amortization of
prepaid marketing, the $3.9impairment millionof changethe MavDB prepaid balance and changes in the fair value of share-based payment liability),
and changes in operating assets and liabilities compared to the prior period, higher operational losses, including increased sales and
marketing expenses, and lower non-cash charges in 2025.liabilities.
Net
cash used in investing activities was approximately $0.3$0.2 million and $0 duringfor the threesix months ended MarchJune 31,30, 20262026, compared to nil for the corresponding
period in 2025, and March 31, 2025,
respectively, primarily related to the purchasepurchases of a vehicleproperty and payment of security deposit for Texas lease during the three months
ended March 31, 2026.equipment.
Cash provided by financing activities was $4.2 million for the six months ended June 30, 2026, compared to $6.6 million for the corresponding period in 2025, and comprised proceeds from warrant exercises, net proceeds of $1,677,052 from sales under the at-the-market program and $200,000 from the issuance of a promissory note, partly offset by repayments of merchant advances and other borrowings and a $70,000 payment applied to the RallyTown secured payment obligation.
Cash
provided by financing activities was $2.4 million for the three months ended March 31, 2026, compared to $6.6 million for the three months
ended March 31, 2025. Cash inflows in 2026 included approximately $2.6 million from the exercise of warrants offset by payment of loan.
Cash inflows in 2025 primarily consists of $6.6 million in net proceeds from issuance of common stock and pre funded warrants.
As
of MarchJune 31,30, 2026, we had $6.1$17.4 million in outstanding principal on debt, primarilyconsisting principally of our secured
payment obligation to RallyTown, LLC of $11.2 million, our promissory notesnote due to the Bailey sellers,sellers of $3.5 million, a U.S.
Small Business
Administration Associationloan, (“SBA”)a Paycheck Protection Program (PPP)note, loans,merchant cash advances and merchantthe advances.1800 AsideDiagonal fromLending note. The RallyTown obligation
is payable in monthly installments of $400,000 commencing August 1, 2026 and bears interest at 10% per annum. We also have operating lease
obligations in respect of our remaining
non-currentRound SBARock, obligations,Texas allfacility outstandingwith loansfuture haveminimum maturitypayments datesof through$6.1 2025.million.
Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. See Note 3 to the accompanying unaudited condensed consolidated financial statements, which disclosure is incorporated herein by reference.
DBGI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (1 insider, 2 trade dates, 688,460 shares, about $747.8K) and open-market sales in 0 filings. Net open-market shares: 688,460 (purchases minus sales); net value about $747.8K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-10 | Davis John Hilburn Iv |
Open-market purchase | 618,333 | $1.13 | $698.7K |
| 2026-06-02 | Davis John Hilburn Iv |
Open-market purchase | 70,127 | $0.70 | $49.1K |
Well-known investors holding DBGI (13F)
None of the 59 investors we track reported a position in their latest 13F.