UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
For
the fiscal year ended December 31, 2025
For
the transition period from ____________ to ____________
Commission
file number: 001-40400
DIGITAL
BRANDS GROUP, INC.
(Exact
name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400
Lavaca Street
Austin,
TX78701
(Address
of principal executive offices, including zip code)
(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 Nasdaq Capital Markets
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate
by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
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 the definitions 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 June 30, 2025, the aggregate market value of the common stock
held by non-affiliates of the registrant, based on the closing price of the shares of common stock on June 30, 2025, was approximately
$40,197,117.
As
of April 15, 2026, the Company had 16,629,371
shares of common stock, $0.0001 par
value, issued and outstanding.
Documents
Incorporated by Reference: None.
DIGITAL
BRANDS GROUP, INC.
FORM
10-K
TABLE
OF CONTENTS
PART I
Item 1. Business 2
Item 1A. Risk Factors 15
Item 1B. Unresolved Staff Comments 34
Item 1C. Cybersecurity 34
Item 2. Properties 35
Item 3. Legal Proceedings 36
Item 4. Mine Safety Disclosures 36
PART II
Item 6. Reserved 38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50
Item 8. Financial Statements and Supplementary Data 50
Item 9A. Controls and Procedures 50
Item 9B. Other Information 51
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 51
PART III
Item 10. Directors, Executive Officers and Corporate Governance 52
Item 11. Executive Compensation 56
Item 14. Principal Accountant Fees and Services 61
PART IV
Item 15. Exhibits and Financial Statement Schedules 62
i
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except
for historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), which involve risks and uncertainties. These forward-looking statements can be identified by
the use of forward- looking terminology, including the terms “believe,” “estimate,” “project,” “aim,”
“anticipate,” “expect,” “seek,” “predict,” “contemplate,” “continue,”
“possible,” “intend,” “may,” “plan,” “forecast,” “future,” “might,”
“will,” “could,” would” or “should” or, in each case, their negative, or other variations or
comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of
places throughout this Annual Report on Form 10-K and include statements regarding our intentions, beliefs or current expectations concerning,
among other things, our results of operations, financial condition, liquidity, prospects, growth strategies, the industry in which we
operate and potential acquisitions. We derive many of our forward- looking statements from our operating budgets and forecasts, which
are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult
to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual
results. All forward-looking statements are based upon information available to us on the date of this Annual Report on Form 10-K.
By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that
may or may not occur in the future. We caution you that forward- looking statements are not guarantees of future performance and that
our actual results of operations, financial condition and liquidity, and the stability of the industry in which we operate may differ
materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K. In addition,
even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent
with the forward-looking statements contained in this Annual Report on Form 10-K, those results or developments may not be indicative
of results or developments in subsequent periods.
Important
factors that could cause our results to vary from expectations include, but are not limited to:
● the potential for additional impairments of intangible assets;
● our lack of combined operating history;
● the impact of a potentially moderate or severe economic recession;
● the highly fragmented and competitive nature of our industry;
● loss of any of our executives and managers;
● quarterly variations in our operating results;
● disruptions in the manufacturing and supply chains;
● our exposure to claims arising from our acquired operations;
● the potential for asset impairments when we acquire businesses;
● disruptions in our information technology systems;
Other
sections of this Annual Report on Form 10-K include additional factors that could adversely impact our business and financial performance.
In light of these risks, uncertainties and assumptions, the forward-looking events described in this Annual Report on Form 10-K may not
occur. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible
for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements. We qualify all of our forward-looking statements by these cautionary statements.
Estimates
and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation
to update or to review any estimate and/or forward- looking statement because of new information, future events or other factors. Estimates
and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks
and uncertainties described above, the estimates and forward-looking statements discussed in this Annual Report on Form 10-K might not
occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to,
but not limited to, the factors mentioned above.
Because
of these uncertainties, you should not place undue reliance on these forward-looking statements when making an investment decision.
PART
I
References
in this Annual Report on Form 10-K to “we,” “us,” “Digital Brands Group,” “DBG,” “Company,”
or “our company” are to Digital Brands Group, Inc., a Nevada corporation, and its consolidated subsidiaries, Bailey 44,
LLC (“Bailey”), MOSBEST, LLC (“Stateside”) and SUNNYSIDE, LLC (“Sundry”). References to “management”
or our “management team” are to our executive officers and directors.
ITEM 1. BUSINESS
Recent
Developments
During
2025, the Company entered into several strategic agreements to expand its collegiate apparel and marketing platform, including arrangements
with AAA Tuscaloosa (University of Alabama), LLC, Traffic Holdco, LLC, Buffalo Sports Properties / Learfield, The Grove Collective, LLC,
and MavDB Consulting LLC.
Effective
July 16, 2025, the Company entered into Exclusive Private Label Manufacturing Agreements with AAA Tuscaloosa, LLC and Traffic Holdco,
LLC. Under these agreements, the Company manufactures collegiate-branded apparel for distribution through university channels and related
platforms. In connection with these arrangements, the Company agreed to issue common stock with total equity commitments of approximately
$3.0 million for AAA and a minimum of $9.0 million for Traffic Holdco over three-year terms. The shares are issued in exchange for services
including licensing access, marketing, distribution, and compliance support and are accounted for in accordance with ASC 718. The Company
records prepaid assets for the fair value of shares issued, which are amortized over the respective agreement terms. Both agreements
include make-whole provisions (through March 2027) requiring the Company to issue additional shares or cash if the fair value of shares
delivered falls below the guaranteed commitment; accordingly, the awards are liability-classified and remeasured at fair value each reporting
period through earnings.
Effective
December 3, 2025, the Company entered into a Marketing and Sponsorship Agreement with Buffalo Sports Properties, LLC, a Learfield property,
for the University of Colorado athletic program. Under the agreement, the Company receives sponsorship, media, and NIL marketing benefits
in exchange for annual consideration of $550,000, consisting of $350,000 in equity and $200,000 in cash, over a three-year term. The
equity component is accounted for under ASC 718 and is subject to an 18-month make-whole provision (through June 2027), resulting in
liability classification and periodic fair value remeasurement. The cash component is recorded as prepaid sponsorship expense and amortized
over the period the related services are received. The agreement also includes variable and fixed NIL-related funding arrangements, which
are recognized as expense as incurred or when the related activities occur.
Effective
November 19, 2025, the Company entered into an Exclusive Private Label Manufacturing Agreement with The Grove Collective, LLC. In connection
with the agreement, the Company issued shares of common stock with an aggregate fair value of approximately $2.9 million, representing
a total equity commitment of $3.0 million. The shares vested immediately and are accounted for as consideration for services, including
marketing and distribution support. The Company recorded a prepaid asset for the fair value of the shares issued, which is being amortized
over the three-year term. For the year ended December 31, 2025, approximately $0.1 million of marketing expense was recognized, with
the remaining balance recorded as prepaid expense.
On
March 12, 2025, the Company entered into a Vendor Agreement with MavDB Consulting LLC to provide capital markets advisory and consulting
services, including investor introductions and strategic advisory support. In connection with the agreement, the Company agreed to pay
a one-time fee of approximately $2.5 million. The costs associated with this agreement are recognized as expense as the related services
are performed.
As
of December 31, 2025, no make-whole payments were required under any of the above agreements, as the fair value of shares issued exceeded
the respective contractual commitments.
On
October 2, 2024, the Company received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market
LLC (“Nasdaq”) notifying the Company that the Staff has determined to delist the Company’s common stock from Nasdaq
at the opening of business on October 11, 2024, based on the Company’s failure to maintain a minimum bid price of $1 per share
per Listing Rule 5550(a)(2), unless the Company requests an appeal of such determination by October 9, 2024. The Company submitted the
appeal request to Nasdaq on October 9, 2024. Nasdaq granted a hearing of the appeal to be held on December 3, 2024. On November 20, 2024,
the Company received notice from the Staff of Nasdaq that the Company no longer satisfied the $35,000,000 market value of listed securities
requirement, or the alternative $2,500,000 stockholders’ equity requirement, as set forth in Listing Rule 5550(b), and that such
failure would serve as an additional basis for the delisting of the Company’s securities from Nasdaq. In the Company’s Amendment
No. 1 to its Quarterly Report on Form 10-Q/A for the period ended September 30, 2024 (the “Q3 Report”), filed with the SEC
on November 15, 2024, the Company reported stockholders’ equity of $19,046 and, therefore, no longer complied with the Rule. On
December 16, 2024, the Staff of Nasdaq notified the Company that the Nasdaq Hearings Panel (the “Panel”) determined to delist
the Company’s common stock and trading of the Company’s securities was suspended on Nasdaq at the open of trading on December
18, 2024. Immediately after the delisting of the Company’s common stock, the Company’s common stock began being quoted on
the OTC Pink Market under its existing symbol, “DBGI”. The Panel reached its decision because the Company was in violation
of Listing Rules 5550(a)(2), 5550(b)(1), and 5635, the Bid Price, Shareholders’ Equity, and Shareholder Approval Rules, respectively.
On
January 21, 2025, the Company entered into a five-year marketing services agreement with MavDB Consulting LLC for services including
content production, social media marketing, and student athlete engagement. As consideration, the Company issued pre-funded warrants
to purchase 2,068,965 shares of common stock at $0.01 per share, exercisable immediately and expiring five years from issuance, subject
to a 4.99% beneficial ownership limitation (adjustable to 9.99% upon 61 days’ notice). The issuance was made in reliance on Section
4(a)(2) of the Securities Act.
On
January 22, 2025, the Company issued a promissory note in the principal amount of $260,000 (purchase price $200,000 after a $60,000 original
issue discount) to an accredited investor, maturing April 22, 2025, with default interest at 16% per annum.
Reverse
Stock Split
In
December 2024, following the approval of shareholders, we completed a one-for-50 (1-for-50) reverse stock split (the “Reverse Stock
Split”). As a result of the Reverse Stock Split, every fifty (50) shares of the Company’s Pre-Reverse Stock Split common
stock was combined and automatically became one (1) share of common stock. The Reverse Stock Split did not (i) change the authorized
number of shares, (ii) change the par value of the common stock, or (iii) modify any voting rights of the common stock.
Also,
at the effective time of the Reverse Stock Split, the number of shares of common stock issuable upon exercise of warrants (including
public warrants under the trading symbol “DBGIW”), preferred stock, and other convertible securities, as well as any commitments
to issue securities, that provide for adjustments in the event of a reverse stock split will be appropriately adjusted pursuant to their
applicable terms for the Reverse Stock Split. If applicable, the conversion price for each outstanding share of preferred stock and the
exercise price for each outstanding warrant will be increased, pursuant to their terms, in inverse proportion to the 1-for-50 split ratio
such that upon conversion or exercise, the aggregate conversion price for conversion of preferred stock and the aggregate exercise price
payable by the warrant holder to the Company for shares of common stock subject to such warrant will remain approximately the same as
the aggregate conversion or exercise price, as applicable, prior to the Reverse Stock Split.
Completion
of offering Common Stock and Pre-Funded Warrants
On
February 13, 2025, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited
investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering
(the “Offering”) 11,365,340 units (the “Units”), including (i) 125,535 units consisting of one share of common
stock, par value $0.0001 per share (the “Common Stock”) and two warrants to purchase one share of Common Stock each (the
“Share Unit Warrants”), at a purchase price per unit equal to $0.66, and (ii) 11,239,805 units consisting of a pre-funded
warrant to purchase one share of Common Stock (“Pre-Funded Warrants”), immediately exercisable at an exercise price of $0.0001
per share, and two warrants to purchase one share of Common Stock each (the “PFW Unit Warrants, and collectively with the Share
Unit Warrants, the “Warrants”), at a purchase price per unit equal to $0.6599. The Warrants may be exercised for an aggregate
of 22,730,680 shares of Common Stock at an exercise price equal to $0.66 per share, subject to adjustment for stock splits and similar
events. The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers and
customary indemnification rights and obligations of the parties. The Offering closed on February 18, 2025.
The
Company offered Pre-Funded Warrants to those Purchasers whose purchase of Common Stock in the Offering would have resulted in the Purchaser,
together with its affiliates and certain related parties, beneficially owning more than 4.99% (or at the election of the Purchaser, 9.99%)
of our Common Stock immediately following the consummation of the Offering in lieu of the Common Stock that would otherwise result in
ownership in excess of 4.99% (or at the election of the purchaser, 9.99%) of the outstanding Common Stock of the Company. The Pre-Funded
Warrants may be exercised commencing on the issuance date and do not expire. The Pre-Funded Warrants are exercisable for cash; provided,
however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement
registering, or no current prospectus available for, the issuance or resale of the Common Stock issuable upon exercise of the Pre-Funded
Warrants. The exercise of the Pre-Funded Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise
thereof, if upon such exercise the holder of the Pre-Funded Warrants, its affiliates and any other persons or entities acting as a group
together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a Purchaser prior to the issuance
of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable
upon exercise of the Pre-Funded Warrant held by the applicable holder, provided that the holder may increase or decrease the beneficial
ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot be waived
The
Warrants may be exercised commencing on the issuance date and expire one year from issuance. The Warrants are exercisable for cash at
an exercise price of $0.66 per share; provided, however that they may be exercised on a cashless exercise basis if, at the time of exercise,
there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the Common
Stock issuable upon exercise of the Warrants. The exercise of the Warrants will be subject to a beneficial ownership limitation, which
will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities
acting as a group together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a Purchaser
prior to the issuance of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance
of Common Stock issuable upon exercise of the Warrants held by the applicable holder, provided that the holder may increase or decrease
the beneficial ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot
be waived.
At
the closing of the Offering, the Company issued warrants to RBW Capital Partners LLC, acting through Dawson James Securities, Inc. (the
“Placement Agent”), for the purchase of 568,267 shares of Common Stock at an exercise price of $0.759 per share (the “Placement
Agent Warrants”), which is equal to 115% of the price per Unit. The Placement Agent Warrants are exercisable at any time commencing
six (6) months from the date of commencement of sales in the Offering and expiring five (5) years from the commencement of sales in the
Offering. During the aforementioned six (6) month period, the Placement Agent Warrant may not be sold, transferred, assigned, pledged,
or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective
economic disposition of the Placement Agent Warrant pursuant to FINRA Rule 5110(e)(1)(A).
The
Common Stock, Pre-Funded Warrants, Common Stock issuable upon exercise of the Pre-Funded Warrants, Warrants, Common Stock issuable upon
exercise of the Warrants, Placement Agent Warrants, and Common Stock issuable upon exercise of the Placement Agent Warrants were offered
pursuant to a registration statement on Form S-1 (File No. 333-284508), as filed with the Securities and Exchange Commission (the “Commission”)
on January 27, 2025, as amended, and was declared effective on February 11, 2025 (the “Registration Statement”).
The
Placement Agent acted as the exclusive placement agent for the Offering pursuant to a Placement Agency Agreement dated February 13, 2025
(the “Placement Agency Agreement”) by and between the Company and the Placement Agent. The Placement Agency Agreement contains
customary conditions to closing, representations and warranties of the Company, and termination rights of the parties, as well as certain
indemnification obligations of the Company and ongoing covenants for the Company.
The
Offering resulted in gross proceeds to the Company of approximately $7,500,000, before deducting placement agent fees and commissions
and other offering expenses, and excluding proceeds to the Company, if any, that may result from the future exercise of the Pre-Funded
Warrants or Warrants issued in the Offering. As compensation to the Placement Agent, as the exclusive placement agent in connection with
the Offering, the Company paid to the Placement Agent a cash fee of 8.0% of the aggregate gross proceeds raised in the Offering (which
amount shall not include any additional proceeds the Company may receive from the exercise of the Warrants, or the Pre-Funded Warrants,
issued in this Offering) and reimbursement of up to $150,000 for expenses of legal counsel and other actual out-of-pocket expenses.
National
Securities Exchange
[open]
Our
Company
Digital
Brands Group is a curated collection of lifestyle brands that offers a variety of apparel products through direct-to-consumer and wholesale
distribution. 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 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
portfolio currently consists of five brands that leverage our three channels: our websites, wholesale and royalty (license revenue).
We
believe that successful apparel brands sell in all revenue channels. However, each channel offers different margin structures and requires
different customer acquisition and retention strategies. We were founded as a digital-first retailer that has strategically expanded
into select wholesale and direct retail channels. We strive to strategically create omnichannel strategies for each of our brands that
blend physical and online channels to engage consumers in the channel of their choosing. Our products are sold direct-to-consumers principally
through our websites and our own showrooms, but also through our wholesale channel, primarily in specialty stores and select department
stores. With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens
our ability to efficiently acquire and retain customers while also driving high customer lifetime value.
We
believe that by leveraging a physical footprint to acquire customers and increase brand awareness, we can use digital marketing to focus
on retention and a very tight, disciplined high value new customer acquisition strategy, especially targeting potential customers lower
in the sales funnel. Building a direct relationship with the customer as the customer transacts directly with us allows us to better
understand our customer’s preferences and shopping habits. Our substantial experience as a company originally founded as a digitally
native-first retailer gives us the ability to strategically review and analyze the customer’s data, including contact information,
browsing and shopping cart data, purchase history and style preferences. This in turn has the effect of lowering our inventory risk and
cash needs since we can order and replenish product based on the data from our online sales history, replenish specific inventory by
size, color and SKU based on real times sales data, and control our mark-down and promotional strategies versus being told what mark
downs and promotions we have to offer by the department stores and boutique retailers.
We
define “closet share” as the percentage (“share”) of a customer’s clothing units that (“of closet”)
she or he owns in her or his closet and the amount of those units that go to the brands that are selling these units. For example, if
a customer buys 20 units of clothing a year and the brands that we own represent 10 of those units purchased, then our closet share is
50% of that customer’s closet, or 10 of our branded units divided by 20 units they purchased in entirety. Closet share is a similar
concept to the widely used term wallet share, it is just specific to the customer’s closet. The higher our closet share, the higher
our revenue as higher closet share suggests the customer is purchasing more of our brands than our competitors.
We
have strategically expanded into an omnichannel brand offering these styles and content not only on-line but at selected wholesale and
retail storefronts. We believe this approach allows us opportunities to successfully drive Lifetime Value (“LTV”) while increasing
new customer growth. We define Lifetime Value or LTV as an estimate of the average revenue that a customer will generate throughout their
lifespan as our customer. This value/revenue of a customer helps us determine many economic decisions, such as marketing budgets per
marketing channel, retention versus acquisition decisions, unit level economics, profitability and revenue forecasting.
In
April of 2024, we entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb
of Dallas. We opened the store in April 2024 The Company closed the store in October 2024 to focus on its e-commerce strategy with VaynerCommerce,
a digital marketing agency.
We
intend to continue to actively pursue acquisitions to increase and tighten customer cohorts and increase our ability to create more customized
content and personalized looks and styles for each customer cohort. We believe that customers want and trust brands that can deliver
customized content and personalized looks and styles. We expect this should result in higher customer loyalty, higher lifetime value,
higher average order value and lower customer acquisition cost.
Organizational
Structure
We
operate the brands on a decentralized basis with an emphasis on brand level execution supported by corporate coordination. The brand’s
executive teams will continue to operate and leverage relationships with customers and suppliers, including designing and producing product
and developing marketing plans including social media, email and digital communications.
We
consolidate marketing and tech contracts as we have done with Bailey’s contracts, which has provided significant cost savings.
We review the fabric mills and factories used by each brand to see if we can consolidate or cross utilize these mills and factories,
which will drive increased volumes, lower production costs and higher gross margins. We are also consolidating production into a few
factories in Europe from China and the U.S., which lowers our average production cost per unit.
We
leverage the Digital Brands Group marketing and data analytics team to create cross-marketing campaigns based on the customer data respective
to each brand’s customer base. As an example, the Digital Brands Group’s marketing and data team reviews the customer data
across all our portfolio brands and will work with each brand to identify the new customers from our other portfolio brands that they
can target and what styles and looks should be created for each of those customer cohorts. The brand level employees then execute the
looks and styles and create the customized customer communication based on the information and data from the Digital Brands Group marketing
and data teams.
Certain
administrative functions are centralized on a regional and, in certain circumstances, a national basis following, including but not limited
to accounting support functions, corporate strategy and acquisitions, human resources, information technology, insurance, marketing,
data analytics and customer cross-merchandising, advertising buys, contract negotiations, safety, systems support and transactional processing.
Principal
Products and Services
Bailey
— Brand Summary
In
February 2020, we acquired Bailey. Bailey delivers distinct high-quality, well-fitting, on-trend contemporary apparel using an entry
contemporary price point. Bailey combines beautiful, luxe fabrics and on-trend designs to offer clean, sophisticated ready-to-wear separates
that easily transition from day to night and for date night. Bailey offers fashionable staples with timeless design features, making
them wearable for any occasion — the majority of products are tops, sweaters and dresses.
Bailey’s
full seasonal collections of dresses, tops, jumpsuits, bottoms, sets, jackets and rompers retail at price points between $90 and $350.
We believe that we can create more compelling price points as we leverage our direct-to-consumer expertise. As we increase the direct-to-consumer
revenue mix, we believe we will have opportunities to increase our margins, which will mostly be passed along to the customer with lower
price points.
With
our acquisition of Bailey 44, LLC, we view the following as tangible near term growth opportunities:
● International expansion and licensing opportunities in select categories.
Stateside
— Brand Summary
We
acquired Stateside in August 2021. Stateside is a collection of elevated American basics influenced by the evolution of the classic T-shirt.
All garments are designed and produced in Los Angeles from the finest fabrics. All knitting, dyeing, cutting and sewing is sourced and
manufactured locally in Los Angeles.
Stateside
is known for delivering high quality, luxury T-shirts, tops and bottoms. Stateside is primarily a wholesale brand with very limited online
revenue. Their T-shirt prices range from $68 to $94, their other tops range from $98 to $130, and their bottoms from $80 to $144.
With
our acquisition of Stateside, we view the following as tangible near-term growth opportunities:
Sundry — Brand
Summary
We
acquired Sundry in December 2022. Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters,
skirts, shorts, athleisure bottoms and other accessory products. Sundry’s products are coastal casual and consist of soft, relaxed
and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice
Beach in Southern California. The products are designed and mostly produced in Los Angeles from the finest fabrics. The majority of the
knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles, with some sweaters made overseas.
Sundry
is known for delivering high quality novelty and resort style T-shirts, tops and bottoms. Sundry is mostly a wholesale brand with meaningful
online revenue. Their T-shirt prices range from $68 to $98, their other tops range from $98 to $198, and their bottoms range from $80
to $228.
With
our acquisition of Sundry, we view the following as tangible near-term growth opportunities:
DSTLD
— Brand Summary
DSTLD
focuses on minimalist design, superior quality, and only the essential wardrobe pieces. We deliver casual luxury rooted in denim; garments
that are made with exhaustive attention to detail from the finest materials for a closet of timeless, functional staples. Our brand name
“DSTLD” is derived from the word ‘distilled,’ meaning to extract only the essentials. As such, DSTLD boasts a
line of key wardrobe pieces in a fundamental color palette of black, white, grey, and denim.
Our
denim prices generally range from $75 to $95; similar quality brands produced at the same factories wholesale for approximately $95 to
$125 and retail for $185 to $350. Our t-shirts and tops range from $30 to $90, while similar quality brands produced at the same factories
wholesale for approximately $25 to $75 and retail for $60 to $250. Our casual pants range from $85 to $109, with similar quality brands
produced at the same factories wholesaling for approximately $85 to $115 and retailing for $175 to $250.
Avo
— Brand Summary
Avo is a collegiate licensed loungewear brand that offers t-shirts,
tanks, fleece sweats, shorts, and other loungewear products. Avo eliminates the wholesale mark-up, so its products have a sharper price
point. Avo works directly with the colleges and universities to design and create compelling products that feature student-athletes, fraternities
and sororities in our digital ads, emails, SMS and website photos. Avo has raised over $17 million for student athletes since it was launched
in April 2025. Avo leverages the Company’s current design and supply chain infrastructure, so we use similar or the same fabrics
and contractors for Avo that we do for our other brands. We currently have ten universities on the website, and expect to announce significantly
more universities over the next few months.
Avo
launched in late August 2024 as an everyday essentials brand. In April 2025, Avo pivoted to a collegiate licensed model, which
launched at the University of Alabama through Yea Alabama. Since April 2025, Avo has added 9 universities to its offering and
expects to add significantly more over the next few months. Prices for t-shirts and tanks range from $30 to $58 based on the fabric
quality, gender and style (such as hoodies vs crew necks). The women’s softest fleece are $68 and we are launching a new
fleece product for men and women that will arrange from $68 to $88 based on style and gender. Other product prices will range from
$48 for shorts to $98 for quarter zips, polos or sweaters. Avo pays a royalty rate to each university based on the
university’s royalty rates. Avo focuses on supporting female student athletes. Avo also works directly with the Greek life at
these universities.
Sales
and Distribution
DSTLD
and Avo products are sold primarily direct-to-consumer, via our website. By selling direct-to-consumer, we are able to eliminate the wholesale mark-up and offer
sharper pricing to the customer. At some universities, Avo does sell through the university’s bookstores, at which point are margins are much
lower as we do not add a wholesale mark-up. Avo believes this channel is a marketing channel that has a slight profit and creates a physical
touch point with the customer.
Bailey
products are distributed through wholesale and direct-to-consumer channels. The wholesale channel includes premium department stores,
select independent boutiques and third-party online stores.
Stateside
and Sundry products are distributed through wholesale and direct-to-consumer channels includes premium department stores and national
chains, select independent boutiques and third-party online stores.
We
do not have material terms or arrangements with our third-party distributors. As is customary in the wholesale side of the retail apparel
industry, we work with the wholesale buyers for every product collection and season to develop a purchase order based on quantities,
pricing, profit margin and any future mark- down agreements. Historically, these factors are driven by the wholesale buyer’s belief
of how well they think the product will sell at their stores. For example, if the collection is considered very strong by the wholesale
buyer, we usually achieve higher quantities, higher margins and lower future markdown guarantees. Conversely, when the wholesale buyer
considers the collection to be weak, we experience lower quantities, lower margins and higher mark-down guarantees.
Our
direct-to-consumer channels include our own website. Old season stock is sold through selected off- price retailers, with additional
sales generated through specifically cut product for select off-price retailers.
All
of our DSTLD, Avo, Bailey and Stateside and Sundry sellable product is stored at our corporate warehouse and distribution center in Los
Angeles, CA, which also houses our corporate office. In addition to storing product, we also receive and process new product deliveries,
process and ship outbound orders, and process and ship customer returns in this same facility.
We
offer free shipping and returns above to all our customers in the United States once they achieve a cart size amount of $50 for all brands
but Avo and $99 for Avo. We also offer customers the option to upgrade to 2-Day or Overnight Shipping for an additional cost.
Design
and Development
Our
products are designed at the headquarters of each brand, which are in Los Angeles, CA. Each brand’s design efforts are supported
by well-established product development and production teams. The continued collaboration between design and merchandising ensures we
respond to consumer preferences and market trends with new innovative product offerings while maintaining our core fashion foundation.
In-house design and production teams in Los Angeles perform development of the sample line, allowing for speed to market, flexibility
and quality of fit.
We
analyze trends, markets, and social media feedback along and utilize historical data and industry tools to identify essential styles
and proper replenishment timing and quantities.
We
rely on a limited number of suppliers to provide our finished products, so we can aggregate pricing power. As we continue to increase
our volumes, we will source additional factories to spread out our risks.
While
we have developed long-standing relationships with a number of our suppliers and manufacturing sources and take great care to ensure
that they share our commitment to quality and ethics, we do not have any long-term term contracts with these parties for the production
and supply of our fabrics and products. We require that all of our manufacturers adhere to a vendor code of ethics regarding social and
environmental sustainability practices. Our product quality and sustainability team partners with leading inspection and verification
firms to closely monitor each supplier’s compliance with applicable laws and our vendor code of ethics.
Currently,
our Bailey, DSTLD, Avo and Stateside and Sundry products are shipped from our suppliers to our distribution center in Los Angeles, CA
which currently handles all our warehousing, fulfillment, outbound shipping and returns processing. Our Sundry products will be shipped
from our suppliers to our distribution center in Los Angeles, CA which will handle all our warehousing, fulfillment, outbound shipping
and returns processing. During 2025, we will review maintaining our own distribution centers versus using a third-party solution.
Product
Suppliers: Sourcing and Manufacturing
We
work with a variety of apparel manufacturers in North America, Asia and Europe. We only work with full package suppliers, which supply
fabric, trims, along with cut/sew/wash services, only invoicing us for the final full cost of each garment. This allows us the ability
to maximize cash flows and optimize operations. We do not have long-term written contracts with manufacturers, though we have long-standing
relationships with a diverse base of vendors.
We
do not own or operate any manufacturing facilities and rely solely on third-party contract manufacturers operating primarily in Europe,
United States, and the Asia Pacific region for the production of our products depending on the brand. All of our contract manufacturers
are evaluated for quality systems, social compliance and financial strength by our internal teams prior to being selected and on an ongoing
basis. Where appropriate, we strive to qualify multiple manufacturers for particular product types and fabrications.
All
of our garments are produced according to each brand’s specifications, and we require that all manufacturers adhere to strict regulatory
compliance and standards of conduct. The vendors’ factories are monitored by each brand’s production team to ensure quality
control, and they are monitored by independent third-party inspectors we employ for compliance with local manufacturing standards and
regulations on an annual basis. We also monitor our vendors’ manufacturing facilities regularly, providing technical assistance
and performing in-line and final audits to ensure the highest possible quality.
We
source our products from a variety of domestic and international manufacturers. When deciding which factory to source a specific product
from, we take into account the following factors:
● Cost of garment
● Retail price for end consumer
● Production time
● Minimum order quantity
● Shipping/delivery time
● Payment terms
By
taking all of these into consideration, we can focus on making sure we have access to in-demand and high quality products available for
sale to our customers at competitive price points and sustainable margins for our business.
Marketing
We
believe marketing is a critical element in creating brand awareness and an emotional connection, as well as driving new customer acquisition
and retention. Each brand has its own in-house marketing department, which creates and produces marketing initiatives specific to each
marketing channel and based on the specific purpose, such as acquisition, retention or brand building.
Our
goal at the brand and the portfolio level is to increase brand awareness and reach, customer engagement, increase new customer conversion
and repurchase rates and average order size. We utilize a multi-pronged marketing strategy to connect with our customers and drive traffic
to our online platform, comprised of the following:
Customer
Acquisition Marketing
Paid
Social Media Marketing: This is our primary customer acquisition channel, and it is composed almost entirely of paid Facebook and
Instagram marketing. We believe our core customers rely on the opinions of their peers, often expressed through social media. Social
media platforms are viral marketing platforms that allow our brands to communicate directly with our customers while also allowing customers
to interact with us and provide feedback on our products and service. We make regular posts highlighting new products, brand stories,
and other topics and images we deem “on brand”. By being a verified brand, our followers can shop products directly from
our posts. We are also able to link to products in the stories feature.
Affiliate
Marketing: With select online publications and influencers, we’ve sought to establish CPA or revenue sharing agreements. We
believe these agreements are effective in incentivizing influencers or media to push our product and allowing us to only pay partners
based on performance.
Marketing: We utilize email marketing to build awareness and drive repeat purchases. We believe this can be the most personalized
customer communication channel for our brands, and therefore should continue to be one of our highest performing channels. We use an
email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails, with the main goal
of driving increased site traffic and purchases. We maintain a database through which we track and utilize key metrics such as customer
acquisition cost, lifetime value per customer, cost per impression and cost per click.
Retargeting:
We engage the services of certain retargeting engines that allow us to dynamically target our visitors on third-party websites via
banner/content ads.
Content
Marketing: We use content marketing platforms that allow us to serve up native ads in the form of articles promoting our brand story
and specific products.
Search
Engine Optimization: This is the process of maximizing the number of visitors to our website by increasing our rankings in the search
results on internet search engines. This is done by optimizing our onsite content, by making sure our pages, titles, tags, links, and
blog content is structured to increase our search results on certain keywords, and our offsite content, which is the number of external
websites linking to our website, usually through press articles and other advertising channels.
Advertising: We also intend to utilize print advertisements in magazines or billboards in major metropolitan areas to drive increased
site traffic and brand awareness.
Video
/ Blog Content: We plan to offer videos and blog posts as a way to engage and educate the customer on our brands, how to wear different
looks and styles, and create confidence and trust between our brands and customers. Videos and blog posts will include interviews with
our designers, a behind-the- scenes look at how products are made, features of other artists or creatives, and photo shoots.
and Influencer Marketing
and influencer marketing is one of our largest initiatives. On a weekly basis, we reach out to and receive requests from tastemakers
in fashion, lifestyle, and photography. We have developed a certain set of criteria for working with influencers (for example, engagement
level, aesthetic, audience demographic) that have enabled us to garner impactful impressions. Our focus is not on the size of an account,
but on creating organic relationships with influencers who are excited to tell our story. While most of our collaborations are compensated
solely through product gifts, we also offer an affiliate commission of up to 20% through the influencer platforms.
Public
Relations