Digital Brands Group, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, who serve as our principal executive officer and principal financial and accounting officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. In making this evaluation, our management considered the material weakness in our internal control over financial reporting described below. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of such date. We have initiated various remediation efforts, including the hiring of additional financial personnel/consultants with the appropriate public company and technical accounting expertise and other actions that are more fully described below. As such remediation efforts 47 Table of Contents are still ongoing, we have concluded that the material weaknesses have not been fully remediated. Our remediation efforts to date have included the following: ● We have made an assessment of the basis of accounting, revenue recognition policies and accounting period cutoff procedures. In some cases, we made the necessary adjustments to convert the basis of accounting from cash basis to accrual basis. In all cases we have done the required analytical work to ensure the proper cutoff of the financial position and results of operations for the presented accounting periods. ● We have made an assessment of the current accounting personnel, financial reporting and information system environments and capabilities. Based on our preliminary findings, we have found these resources and systems lacking and have concluded that these resources and systems will need to be supplemented and/or upgraded. We are in the process of identifying a single, unified accounting and reporting system that can be used by the Company and Bailey, with the goal of ensuring consistency and timeliness in reporting, real time access to data while also ensuring ongoing data integrity, backup and cyber security procedures and processes. ● We engaged external consultants with public company and technical accounting experience to facilitate accurate and timely accounting closes and to accurately prepare and review the financial statements and related footnote disclosures. We plan to retain these financial consultants until such time that the internal resources of the Company have been upgraded and the required financial controls have been fully implemented. The actions that have been taken are subject to continued review, implementation and testing by management, as well as audit committee oversight. While we have implemented a variety of steps to remediate these weaknesses, we cannot assure you that we will be able to fully remediate them, which could impair our ability to accurately and timely meet our public company reporting requirements. Notwithstanding the assessment that our internal controls over financial reporting are not effective and that material weaknesses exist, we believe that we have employed supplementary procedures to ensure that the financial statements contained in this filing fairly present our financial position, results of operations and cash flows for the reporting periods covered herein in all material respects. Limitations on Effectiveness of Controls and Procedures Our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Management believes that the material weakness set forth above did not have an effect on our financial results. Changes in Internal Control over Financial Reporting No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 48 Table of Contents ITEM 9B. OTHER INFORMATION None. ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the names, ages and titles of our directors, director nominees, executive officers and key personnel: Executive Officers and Directors The following table sets forth certain information with respect to our executive officers and directors as of December 31, 2021. ​ ​ Name Age Position Executive Officers and Directors ​ ​ ​ ​ John “Hil” Davis ​ 49 ​ President, Chief Executive Officer and a Director Laura Dowling ​ 42 ​ Chief Marketing Officer Reid Yeoman ​ 39 ​ Chief Financial Officer Mark T. Lynn ​ 37 ​ Director Trevor Pettennude ​ 54 ​ Director Jameeka Aaron ​ 41 ​ Director Huong “Lucy” Doan ​ 53 ​ Director ​ Board Composition Our board of directors may establish the authorized number of directors from time to time by resolution. No current or pending member of our board of directors or Compensation Committee serves as a member of the board of directors or the compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Executive Officers John Hilburn Davis IV, “Hil ”, has served as our President and Chief Executive Officer since March 2019 and a Director since November 2020. He joined DSLTD to overhaul its supply chain in March 2018. Prior to that, Mr. Davis founded two companies, BeautyKind and J.Hilburn. He founded and was CEO of BeautyKind from October 2013 to January 2018. He also founded and was CEO of J.Hilburn from January 2007 to September 2013, growing it from $0 to $55 million in revenues in six years. From 1998 to 2006 Mr. Davis worked as an equity research analyst covering consumer luxury publicly traded companies at Thomas Weisel Partners, SunTrust Robinson Humphrey and Citadel Investment Group. He graduated from Rhodes College in 1995 with a BA in Sociology and Anthropology. On December 16, 2021, Mr. Davis filed for personal bankruptcy through the filing of a Chapter 7 bankruptcy petition in Texas federal court. Laura Dowling has served as our Chief Marketing Officer since February 2019. Prior to that she was the Divisional Vice President of Marketing & PR, North America at Coach from February 2016 to August 2018. At Coach Ms. Dowling led a team of 25 and was held accountable for $45 million profit and loss. From August 2011 to February 2016, she was the Director of Marketing & PR at Harry Winston and from March 2009 to August 2011 she was the Director of Wholesale Marketing at Ralph Lauren. Ms. Dowling holds both 49 Table of Contents a Masters degree (2002) and Bachelors degree (2001) in Communications & Media Studies with a Minor in French from Fordham University. Reid Yeoman has served as our Chief Financial Officer since October 2019. Mr. Yeoman is a finance professional with a core Financial Planning & Analysis background at major multi-national Fortune 500 companies — including Nike & Qualcomm. He has a proven track record of driving growth and expanding profitability with retail. From November 2017 to September 2019, Mr. Yeoman served as CFO/ COO at Hurley — a standalone global brand within the Nike portfolio — where he managed the full profit and loss/Balance Sheet, reporting directly to Nike and oversaw the brand’s logistics and operations. He is a native Californian and graduated with an MBA from UCLA’s Anderson School of Management in 2013 and a BA from UC Santa Barbara in 2004. Nonemployee Board Members Mark T. Lynn has been a director of our company since inception and served as our Co-Chief Executive Officer from September 2013 to the October 2018. Prior to joining us, until September 2011 he was Co-Founder of WINC, a direct-to-consumer e-commerce company which was then the fastest growing winery in the world, backed by Bessemer Venture Partners. Prior to Club W, Mr. Lynn co-founded a digital payments company that was sold in 2011. He holds a digital marketing certificate from Harvard Business School’s Executive Education Program. Trevor Pettennude is a seasoned financial services executive. In 2013, Mr. Pettennude became the CEO of 360 Mortgage Group, where he oversees a team of 70 people generating over $1 billion of annual loan volume. He is also the founder and principal of Banctek Solutions, a global merchant service company which was launched in 2009 and which processes over $300 million of volume annually. Jameeka Green Aaron became a director of our company in May 2021. Ms. Aaron is the Chief Information Security Officer at Auth0. Ms Aaron is responsible for the holistic security and compliance of Auth0’s platform, products, and corporate environment. Auth0 provides a platform to authenticate, authorize, and secure access for applications, devices, and users. Prior to her current role Ms. Aaron was the Chief Information Officer Westcoast Operations at United Legwear and Apparel. Her 20+ years of experience include serving as the Director of North American Technology and Director of Secure Code and Identity and Access Management at Nike, and as Chief of Staff to the CIO of Lockheed Martin Space Systems Company. Ms. Aaron is also a 9-year veteran of the United States Navy. Ms. Aaron’s dedication to service has extended beyond her military career. She is committed to advancing women and people of color in Science, Technology, Engineering, and Mathematics (STEM) fields she is an alumni of the U.S. State Department’s TechWomen program and the National Urban League of Young Professionals. Ms. Aaron currently sits on the board of the California Women Veterans Leadership Council, is an advisor for U.C. Riverside Design Thinking Program, and is a member of Alpha Kappa Alpha Sorority, Inc. Born in Stockton, California, Ms. Aaron holds a bachelor’s degree in Information Technology from the University of Massachusetts, Lowell. Ms. Aaron’s extensive corporate and leadership experience qualifies her to serve on our board of directors. Huong “Lucy” Doan is a seasoned finance and strategy executive who brings expertise working with some of the world’s best-known brands. Since 2018, Ms. Doan serves as advisor to CEOs and founders of high-growth DTC, ecommerce and retail brands, in apparel and consumer products. In this capacity, she provides strategic guidance to successfully scale businesses while driving profitability, with focus on operational excellence and capital resource planning. In 2019, she became a board member of Grunt Style, a patriotic apparel brand. Prior, Ms. Doan spent 20 years in senior executive roles at Guitar Center, Herbalife International, Drapers & Damons, and Fox Television, where she built high performance teams to drive execution of business plans and growth strategies. Committees of the Board of Directors Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which operates pursuant to a charter adopted by our board of directors. The board of directors may also establish other committees from time to time to assist our company and the board of directors. The composition and functioning of all of our committees will comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, NasdaqCM and SEC rules and regulations, if applicable. Each committee’s charter is available on our website at www.digitalbrandsgroup.co. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website. 50 Table of Contents Audit committee Trevor Pettennude, Jameeka Green Aaron and Hong Doan serve on the audit committee, which is chaired by Trevor Pettennude. Our board of directors has determined that each are “independent” for audit committee purposes as that term is defined by the rules of the SEC and NasdaqCM, and that each has sufficient knowledge in financial and auditing matters to serve on the audit committee. Our Board of directors has designated Trevor Pettennude as an “audit committee financial expert,” as defined under the applicable rules of the SEC. The audit committee’s responsibilities include: ● appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm; ● pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; ● reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements; ● reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us; ● coordinating the oversight and reviewing the adequacy of our internal control over financial reporting; ● establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns; ● recommending, based upon the audit committee’s review and discussions with management and our independent registered public accounting firm, whether our audited financial statements shall be included in our Annual Report on Form 10-K; ● monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters; ● preparing the audit committee report required by SEC rules to be included in our annual proxy statement; ● reviewing all related person transactions for potential conflict of interest situations and approving all such transactions; and ● reviewing quarterly earnings releases. Compensation committee Trevor Pettennude, Jameeka Green Aaron and Hong Doan serve on the compensation committee, which is chaired by Jameeka Green Aaron. Our board of directors has determined that each member of the compensation committee is “independent” as defined in the applicable NasdaqCM rules. The compensation committee’s responsibilities include: ● annually reviewing and recommending to the board of directors the corporate goals and objectives relevant to the compensation of our Chief Executive Officer; ● evaluating the performance of our Chief Executive Officer in light of such corporate goals and objectives and based on such evaluation: (i) recommending to the board of directors the cash compensation of our Chief Executive Officer, and (ii) reviewing and approving grants and awards to our Chief Executive Officer under equity-based plans; ● reviewing and recommending to the board of directors the cash compensation of our other executive officers; ● reviewing and establishing our overall management compensation, philosophy and policy; 51 Table of Contents ● overseeing and administering our compensation and similar plans; ● reviewing and approving the retention or termination of any consulting firm or outside advisor to assist in the evaluation of compensation matters and evaluating and assessing potential and current compensation advisors in accordance with the independence standards identified in the applicable NasdaqCM rules; ● retaining and approving the compensation of any compensation advisors; ● reviewing and approving our policies and procedures for the grant of equity-based awards; ● reviewing and recommending to the board of directors the compensation of our directors; and ● preparing the compensation committee report required by SEC rules, if and when required, to be included in our annual proxy statement. None of the members of our compensation committee has at any time during the prior three years been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee. Nominating and corporate governance committee Trevor Pettennude, Jameeka Green Aaron and Hong Doan serve on the nominating and corporate governance committee, which is chaired by Hong Doan. Our board of directors has determined that each member of the nominating and corporate governance committee is “independent” as defined in the applicable NasdaqCM rules. The nominating and corporate governance committee’s responsibilities include: ● developing and recommending to the board of directors’ criteria for board and committee membership; ● establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by stockholders; and ● reviewing the composition of the board of directors to ensure that it is composed of members containing the appropriate skills and expertise to advise us. Involvement in Certain Legal Proceedings There are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations. On December 16, 2021, Mr. Davis filed for personal bankruptcy through the filing of a Chapter 7 bankruptcy petition in Texas federal court. Except for Mr. Davis, none of our directors and officers has been affiliated with any company that has filed for bankruptcy within the last ten years. We are not aware of any proceedings to which any of our officers or directors, or any associate of any such officer or director, is a party adverse to us or any of our or has a material interest adverse to us or any of our subsidiaries. Code of Conduct The Company’s Code of Conduct applies to all of its employees, officers and directors, including those officers responsible for financial reporting. The Code of Conduct is available on its website at www.digitalbrandsgroup.co. Information contained on or accessible through such website is not a part of this Annual Report, and the inclusion of the website address in this Annual Report is an inactive textual reference only. The Company intends to disclose any amendments to the Code of Business Conduct and Ethics, or any waivers of its requirements, on its website to the extent required by the applicable rules and exchange requirements. 52 Table of Contents Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than 10% of the Company’s common stock to file with the SEC reports showing initial ownership of and changes in ownership of the Company’s common stock and other registered equity securities. Based solely upon our review of the copies of such forms or written representations from certain reporting persons received by us with respect to fiscal year 2021, the Company believes that its directors and executive officers and persons who own more than 10% of a registered class of its equity securities have complied with all applicable Section 16(a) filing requirements for fiscal year 2021. ITEM 11. EXECUTIVE COMPENSATION Compensation of Named Executive Officers The summary compensation table below shows certain compensation information for services rendered in all capacities for the fiscal years ended December 31, 2021 and 2020. Other than as set forth herein, no executive officer’s salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal ​ ​ ​ Option Stock ​ Name and Principal Position ​ Year ​ Salary(1) ​ Bonus ​ Awards ​ Awards(2) ​ Total John “Hil” Davis ​ 2021 ​ $ 350,000 ​ $ — ​ $ 3,704,483 ​ $ 233,184 ​ $ 4,287,667 President and Chief Executive Officer 2020 ​ $ 222,500 ​ $ — ​ $ — ​ $ — ​ $ 222,500 Laura Dowling 2021 ​ $ 300,000 ​ $ — ​ $ 691,135 ​ $ — ​ $ 991,135 Chief Marketing Officer 2020 ​ $ 258,231 ​ $ — ​ $ — ​ $ — ​ $ 258,231 Reid Yeoman 2021 ​ $ 250,000 ​ $ — ​ $ 221,163 ​ $ — ​ $ 471,163 Chief Financial Officer 2020 ​ $ 225,000 ​ $ — ​ $ — ​ $ — ​ $ 225,000 ​ (1) 2021 salaries represent gross pay per the respective employment contracts, not actual salaries paid to officer during 2021. (2) Upon closing of the IPO, 127,278 shares of common stock were issued to the CEO as conversion of an outstanding note payable and related accrued interest, accrued compensation and other consideration. As of a result of the transaction, the Company recorded an additional $233,184 in stock compensation expense, which is included in general and administrative expenses in the condensed consolidated statements of operations. Employment Agreements In December 2020, we entered into an offer letter with Mr. Davis, our Chief Executive Officer and a member of our board. The offer letter provides for an annual base salary of $350,000 effective October 1, 2020, and for Mr. Davis to be appointed to our board effective November 30, 2020. Effective January 1, 2021, Mr. Davis is also eligible to receive an annual bonus with a target of 175%, and with a range from 0% to a maximum of 225%, of his base salary based upon achievement of Company and individual goals. He is also eligible to participate in employee benefit plans that we offer to our other senior executives. In the event of a termination of his employment after June 30, 2021, Mr. Davis is eligible for severance benefits as may be approved by the Board. Mr. Davis is subject to our recoupment, insider trading and other company policies, a perpetual non-disclosure of confidential information covenant, a non-disparagement covenant and a non-solicitation of employees covenant. Mr. Davis’ offer letter also provided for an option grant exercisable for up to 2,144,000 shares of our common stock to him at a per share exercise price equal to the IPO price, of which 75% of the options vested on the effective date of the IPO and 25% of the options vest in accordance with the vesting schedule provided in the Company’s 2020 Stock Plan. Mr. Davis is an at- will employee and does not have a fixed employment term. In December 2020, we entered into an offer letter with Ms. Dowling, our Chief Marketing Officer. The offer letter provides for an annual base salary of $300,000 effective upon the closing of the IPO. Effective January 1, 2021, Ms. Dowling is also eligible to receive an annual bonus with a target of 100%, and with a range from 0% to a maximum of 125%, of her base salary based upon achievement of Company and individual goals. She is also eligible to participate in employee benefit plans that we offer to our other senior executives. In the event of a termination of her employment after June 30, 2021, Ms. Dowling is eligible for severance benefits as may be approved by the Board. Ms. Dowling is subject to our recoupment, insider trading and other company policies, a perpetual non-disclosure of 53 Table of Contents confidential information covenant, a non- disparagement covenant and a non-solicitation of employees covenant. Ms. Dowling’s offer letter also provided for an option grant exercisable for up to 288,000 shares of our common stock to her at a per share exercise price equal to the IPO price, of which 75% of the options vested on the effective date of the IPO and 25% of the options vest in accordance with the vesting schedule provided in the Company’s 2020 Stock Plan. Ms. Dowling is an at-will employee and does not have a fixed employment term. In December 2020, we entered into an offer letter with Mr. Yeoman, our Chief Financial Officer. The offer letter provides for an annual base salary of $250,000 effective upon the closing of the IPO. Effective January 1, 2021, Mr. Yeoman is also eligible to receive an annual bonus with a target of 50%, and with a range from 0% to a maximum of 75%, of his base salary based upon achievement of Company and individual goals. He is also eligible to participate in employee benefit plans that we offer to our other senior executives. In the event of a termination of his employment after June 30, 2021, Mr. Yeoman is eligible for severance benefits as may be approved by the Board. Mr. Yeoman is subject to our recoupment, insider trading and other company policies, a perpetual non-disclosure of confidential information covenant, a non- disparagement covenant and a non-solicitation of employees covenant. Mr. Yeoman’s offer letter also provided for an option grant 128,000 shares of our common stock to him at a per share exercise price equal to the IPO price, of which 75% of the options vested on the effective date of the IPO and 25% of the options vest in accordance with the vesting schedule provided in the Company’s 2020 Stock Plan. Mr. Yeoman is an at-will employee and does not have a fixed employment term. Compensation of Directors No obligations with respect to compensation for non-employee directors have been accrued or paid for any periods presented. Going forward, our board of directors believes that attracting and retaining qualified non-employee directors will be critical to the future value growth and governance of our company. Our board of directors also believes that any compensation package for our non-employee directors should be equity-based to align the interest of these directors with our stockholders. On the effective date of the previous offerings, each of our director nominees were granted options to purchase 20,000 shares of common stock at a per share exercise price equal to the price of the shares of common stock per the offering. The options will vest over a one year period of time. We may in the future grant additional options to our non-employee directors although there are no current plans to do so. We do not currently intend to provide any cash compensation to our non- employee directors. Directors who are also our employees will not receive any additional compensation for their service on our board of directors. 2020 Incentive Stock Plan We have adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 3,300,000 shares of our common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan. The 2020 Plan administrator may grant awards to any employee, director, and consultants of the company and its subsidiaries. To date, 2,732,000 grants have been made under the 2020 Plan and 568,000 shares remain eligible for issuance under the Plan. The 2020 Plan is currently administered by the Compensation Committee of the Board as the Plan administrator. The 2020 Plan administrator has the authority to determine, within the limits of the express provisions of the 2020 Plan, the individuals to whom awards will be granted, the nature, amount and terms of such awards and the objectives and conditions for earning such awards. The Board may at any time amend or terminate the 2020 Plan, provided that no such action may be taken that adversely affects any rights or obligations with respect to any awards previously made under the 2020 Plan without the consent of the recipient. No awards may be made under the 2020 Plan after the tenth anniversary of its effective date. Awards under the 2020 Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock Units, performance share or Unit awards, other stock-based awards and cash-based incentive awards. Stock Options The 2020 Plan administrator may grant to a participant options to purchase our common stock that qualify as incentive stock options for purposes of Section 422 of the Internal Revenue Code (“incentive stock options”), options that do not qualify as incentive stock 54 Table of Contents options (“non-qualified stock options”) or a combination thereof. The terms and conditions of stock option grants, including the quantity, price, vesting periods, and other conditions on exercise will be determined by the 2020 Plan administrator. The exercise price for stock options will be determined by the 2020 Plan administrator in its discretion, but non-qualified stock options and incentive stock options may not be less than 100% of the fair market value of one share of our company’s common stock on the date when the stock option is granted. Additionally, in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of our stock on the date of grant, the exercise price may not be less than 110% of the fair market value of one share of common stock on the date the stock option is granted. Stock options must be exercised within a period fixed by the 2020 Plan administrator that may not exceed ten years from the date of grant, except that in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of our stock on the date of grant, the exercise period may not exceed five years. At the 2020 Plan administrator’s discretion, payment for shares of common stock on the exercise of stock options may be made in cash, shares of our common stock held by the participant or in any other form of consideration acceptable to the 2020 Plan administrator (including one or more forms of “cashless” or “net” exercise). Stock Appreciation Rights The 2020 Plan administrator may grant to a participant an award of SARs, which entitles the participant to receive, upon its exercise, a payment equal to (i) the excess of the fair market value of a share of common stock on the exercise date over the SAR exercise price, times (ii) the number of shares of common stock with respect to which the SAR is exercised. The exercise price for a SAR will be determined by the 2020 Plan administrator in its discretion; provided, however, that in no event shall the exercise price be less than the fair market value of our common stock on the date of grant. Restricted Shares and Restricted Units The 2020 Plan administrator may award to a participant shares of common stock subject to specified restrictions (“restricted shares”). Restricted shares are subject to forfeiture if the participant does not meet certain conditions such as continued employment over a specified forfeiture period and/or the attainment of specified performance targets over the forfeiture period. The 2020 Plan administrator also may award to a participant Units representing the right to receive shares of common stock in the future subject to the achievement of one or more goals relating to the completion of service by the participant and/or the achievement of performance or other objectives (“restricted Units”). The terms and conditions of restricted share and restricted Unit awards are determined by the 2020 Plan administrator. Performance Awards The 2020 Plan administrator may grant performance awards to participants under such terms and conditions as the 2020 Plan administrator deems appropriate. A performance award entitles a participant to receive a payment from us, the amount of which is based upon the attainment of predetermined performance targets over a specified award period. Performance awards may be paid in cash, shares of common stock or a combination thereof, as determined by the 2020 Plan administrator. Other Stock-Based Awards The 2020 Plan administrator may grant equity-based or equity-related awards, referred to as “other stock- based awards,” other than options, SARs, restricted shares, restricted Units, or performance awards. The terms and conditions of each other stock-based award will be determined by the 2020 Plan administrator. Payment under any other stock-based awards will be made in common stock or cash, as determined by the 2020 Plan administrator. Cash-Based Awards The 2020 Plan administrator may grant cash-based incentive compensation awards, which would include performance-based annual cash incentive compensation to be paid to covered employees. The terms and conditions of each cash-based award will be determined by the 2020 Plan administrator. 55 Table of Contents 2013 Stock Plan Eligibility and Administration Our employees, outside directors and consultants are eligible to receive nonstatutory options or the direct award or sale of shares under our 2013 Stock Plan, while only our employees are eligible to receive grants of ISOs under our 2013 Stock Plan. A person who owns more than 10% of the total combined voting power of all classes of our outstanding stock, of the outstanding common stock of our parent or subsidiary, is not eligible for the grant of an ISO unless the exercise prices is at least 110% of the fair market value of a share on the grant date and such ISO is not exercisable after five years from the grant date. The 2013 Stock Plan may be administered by a committee of the board of directors, and if no committee is appointed, then the board of directors. The board of directors has the authority to make all determinations and interpretations under, prescribe all forms for use with, and adopt rules for the administration of, the 2013 Stock Plan, subject to its express terms and conditions. The number of shares authorized by the 2013 Stock Plan is 1,196,356 shares. Shares Available and Termination In the event that shares previously issued under the 2013 Stock Plan are reacquired, such shares will be added to the available shares for issuance under the 2013 Stock Plan. In the event that shares that would have otherwise been issuable under the 2013 Stock Plan were withheld in payment of the purchase price, exercise price, or withholding taxes, such shares will remain available for issuance under the 2013 Stock Plan. In the event that an outstand option or other right is cancelled or expired, the shares allocable to the unexcised portion of the option or other right will be added to the number of shares available under the 2013 Stock Plan. The 2013 Stock Plan will terminate automatically 10 years after the later of (i) the date when the board of directors adopted the 2013 Stock Plan or (ii) the date when the board of directors approved the most recent increase in the number of shares reserved under the 2013 Stock Plan that was also approved by our stockholders. Awards The 2013 Stock Plan provides for the grant of shares of common stock and options, including ISO intended to qualify under Code Section 422 and nonstatutory options which are not intended to qualify. All awards under the 2013 Stock plan will be det forth in award agreements, which will detail the terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. As of December 31, 2021, there were options to purchase 1,163,103 shares of our common stock at a weighted average exercise price of $2.34 per share. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth information regarding beneficial ownership of our capital stock by: a. each person or entity who is known by us to own beneficially more than 5% of our outstanding stock; b. each of our executive officers; c. each of our directors and director nominees; and d. all of our directors, director nominees and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the securities in question. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table below have sole voting and investment power with respect to all shares of our common stock held by them. 56 Table of Contents Shares of common stock issuable pursuant to a stock option, warrant or convertible note that is currently exercisable or convertible, or is exercisable or convertible within 60 days after the date of determination of ownership, are deemed to be outstanding and beneficially owned for purposes of computing the percentage ownership of the holder of the stock option, warrant or convertible note but are not treated as outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address for each officer, director and director nominee in the following table is c/o Digital Brands Group, Inc., 1400 Lavaca Street, Austin, TX 787. ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ Shares ​ Percentages of ​ ​ Beneficially ​ Shares Name of Beneficial Owner ​ Owned ​ Outstanding Executive Officers and Directors ​ ​ ​ ​ ​ John "Hil" Davis(1) 1,713,641 12.4 % Laura Dowling(2) 334,667 2.4 % Reid Yeoman(3) 114,000 0.8 % Mark Lynn(4) 507,386 3.7 % Trevor Pettenude(5) 328,625 2.4 % Jameeka Aaron(6) 15,000 * ​ Huong "Lucy" Doan(7) 20,000 * ​ All executive officers, directors and director nominees 3,033,319 21.9 % as a group (7 persons)(8) ​ ​ ​ ​ ​ ​ ​ Additional 5% Stockholders ​ Drew Jones(9) 2,192,771 15.8 % 2736 Routh Street ​ Dallas, Texas 75201 ​ Moise Emquies 1,046,462 7.5 % Norwest Venture Partners XI, LP 664,151 4.8 % Norwest Venture Partners XII, LP 664,151 4.8 % ​ * Less than one percent. (1) Represents options exercisable at $4.00 per share. (2) Represents options to acquire up to 300,000 shares of common stock, exercisable at $4.00 per share and options to acquire up to 34,667 shares of common stock, exercisable at $3.28 per share. (3) Represents options to acquire up to 96,000 shares of common stock, exercisable at $4.00 per share and options to acquire up to 18,000 shares of common stock, exercisable at $3.28 per share. (4) Includes options to acquire up to 321,011 shares of common stock exercisable between $1.56 and $3.28 per share. (5) Includes options to acquire up to 74,880 shares of common stock exercisable between $1.56 and $3.28 per share. (6) Represents options exercisable at $4.00 per share. (7) Represents options exercisable at $3.56 per share. (8) Includes options to acquire up to 2,452,558 shares of common stock exercisable between $1.56 and $4.00. (9) Represents shares issued to D. Jones Tailored Collection, Ltd., a Texas limited partnership, an entity controlled by Drew Jones. 57 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans We have adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 3,300,000 shares of our common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan. The 2020 Plan administrator may grant awards to any employee, director, and consultants of the company and its subsidiaries. To date, 2,732,000 grants have been made under the 2020 Plan and 588,000 shares remain eligible for issuance under the Plan. The 2020 Plan is currently administered by the Compensation Committee of the Board as the Plan administrator. The 2020 Plan administrator has the authority to determine, within the limits of the express provisions of the 2020 Plan, the individuals to whom awards will be granted, the nature, amount and terms of such awards and the objectives and conditions for earning such awards. The Board may at any time amend or terminate the 2020 Plan, provided that no such action may be taken that adversely affects any rights or obligations with respect to any awards previously made under the 2020 Plan without the consent of the recipient. No awards may be made under the 2020 Plan after the tenth anniversary of its effective date. Awards under the 2020 Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock Units, performance share or Unit awards, other stock-based awards and cash-based incentive awards. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE On the effective date of the IPO, we granted stock options to acquire up to an aggregate of 2,672,000 shares to our Chief Executive Officer, Chief Marketing Officer and Chief Financial Officer at a per share exercise price equal to the initial public offering price of the shares. DBG uses Banctek Solutions, a registered independent sales organization (ISO) of FirstData as its back- end payment processor. Trevor Pettennude is majority owner of Banctek Solutions. We started to use Banctek Solutions services prior to Mr. Pettennude’s involvements with DBG. Total expenses for the years ended December 31, 2021 and 2020 were approximately $14,000 and $25,000 respectively, and included in sales and marketing in the consolidated statements of operations. As of December 31, 2021 and 2020, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $104,568 and $194,568 respectively, and accrued salary and expense reimbursements of $126,706 and $246,885 respectively, to current officers. Upon closing of the IPO, 25,080 shares of common stock were issued to directors as conversion of balances owed. The current CEO, Hil Davis, previously advanced funds to the Company for working capital. These prior advances were converted to a note payable totaling $115,000. Upon closing of the IPO, 127,278 shares of common stock were issued to the CEO as conversion of the outstanding note payable and related accrued interest, accrued compensation and other consideration. As of a result of the transaction, the Company recorded an additional $233,184 in stock compensation expense, which is included in general and administrative expenses in the consolidated statements of operations. A portion of the net proceeds of the IPO were used to pay salary and expenses to Laura Dowling, our Chief Marketing Officer, and Mark Lynn, a director. In addition, each of Mark Lynn, John “Hil” Davis, and Trevor Pettennude converted certain amounts owed to them into shares of common stock at the effective date of the IPO at a 30% discount to the IPO price as part of the debt conversion. As of December 31, 2021, H&J had an outstanding note payable of $299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12% per annum. At the time of the Stateside acquisition, Moise Emquies was a member of the Board of Directors of the Company. The Stateside acquisition was unanimously approved by all of the members of the Company’s Board of Directors (other than Moise Emquies who recused himself). 58 Table of Contents Policies and Procedures for Related Person Transactions Our board of directors intends to adopt a written related person policy to set forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we are to be a participant, the amount involved exceeds $100,000 and a related person had or will have a direct or indirect material interest, including purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. Director Independence Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has determined that Trevor Pettennude, Jameeka Aaron, and Huong “Lucy” Doan, do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of Nasdaq. In making these determinations, our board of directors considered the current and prior relationships that each non- employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table provides information regarding the fees billed to us by dbb mckennon , in the fiscal years ended December 31, 2021 and 2020. All fees described below were approved by the Board: ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended ​ ​ December 31, ​ ​ 2021 2020 Audit fees (1) ​ $ 241,398 ​ $ 119,540 Audit related fees ​ 62,418 ​ 24,454 Tax fees ​ — ​ — All other fees (2) ​ 85,703 ​ 81,250 Total fees ​ $ 389,519 ​ $ 225,244 ​ ​ ​ ​ ​ ​ ​ ​ (1) Audit fees includes fees associated with the annual audits of our financial statements, quarterly reviews of our financial statements, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements. (2) Includes audit fees paid for pre-acquisition audits of the Company’s subsidiaries and other targets. Pre-Approval Policy Our audit committee is responsible for approving or pre-approving all auditing services (including comfort letters and statutory audits) and all permitted non-audit services by the independent auditor and pre-approve the related fees. Pursuant to its charter, the audit committee delegated to each of its members, acting singly, the authority to pre-approve any audit services if the need for consideration of a pre-approval request arises between regularly scheduled meetings, with such approval presented to the audit committee at its next scheduled meeting or as soon as practicable thereafter. 59 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (1) Financial Statements For a list of the financial information included herein, see Index to the Financial Statements on page F-1. (2) Financial Statement Schedules Schedules have been omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto. (3) Exhibits The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Exhibits Number Description 2.1 Membership Interest Purchase Agreement dated October 14, 2020 among D. Jones Tailored Collection, LTD and Digital Brands Group (formerly known as Denim.LA, Inc.) (incorporated by reference to Exhibit 2.1 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 2.2 First Amendment to Membership Interest Purchase Agreement dated December 31, 2020 among D. Jones Tailored Collection, LTD and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 2.2 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 2.3 Agreement and Plan of Merger with Bailey 44, LLC dated February 11, 2020 among Bailey 44, LLC, Norwest Venture Partners XI, and Norwest Venture Partners XII, LP and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 2.3 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 2.4 Second Amendment to Membership Interest Purchase Agreement Dated May 10, 2021 among D. Jones Tailored Collection, LTD and Digital Brands Group (formerly known as Denim. LA, Inc.) (incorporated by reference to Exhibit 2.4 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 2.5 Membership Interest Purchase Agreement, dated August 30, 2021, by and between Moise Emquies and Digital Brands Group, Inc. (incorporated by reference to Exhibit 2.5 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 2.6 Membership Interest Purchase Agreement, dated January 18, 2022, by and among Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies, Sunnyside, LLC, and George Levy as the Sellers’ representative (incorporated by reference to Exhibit 1.1 of Digital Brands Group Inc.’s Form 8-K filed with the ESC on January 20, 2022). 3.1 Sixth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 3.2 Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.5 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.2 Warrant Agency Agreement, including Form of Warrant Certificate (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on May 18, 2021). 4.3 Representative’s Warrant Agreement (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on May 18, 2021). 60 Table of Contents 4.4 Form of Lender’s Warrants (incorporated by reference to Exhibit 4.4 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.5 Form of Series Seed Preferred Stock Purchase Agreement (incorporated by reference to Exhibit 4.5 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.6 Form of Series A Preferred Stock Subscription Agreement (incorporated by reference to Exhibit 4.6 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.7 Form of Series A-2 Preferred Stock Subscription Agreement (incorporated by reference to Exhibit 4.7 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.8 Form of Series A-3 Preferred Stock Subscription Agreement (incorporated by reference to Exhibit 4.8 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.9 Form of Series CF Preferred Stock Purchase Agreement (incorporated by reference to Exhibit 4.9 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.10 Form of 2019 Regulation D Convertible Note (incorporated by reference to Exhibit 4.10 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022) 4.11 Form of 2020 Regulation D Convertible Note (incorporated by reference to Exhibit 4.11 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 4.12* Description of Securities 10.1 Form of Indemnification Agreement between the Registrant and each of its directors and officers (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.2 Form of Option Agreement with each of John “Hil” Davis, Laura Dowling and Reid Yeoman (incorporated by reference to Exhibit 10.2 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.3 Amendment No. 7 to Senior Credit Agreement, dated as of April 1, 2021 between bocm3- DSTLD-Senior Debt, LLC, bocm3-DSTLD-Senior Debt 2, LLC, Stockholders and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.3 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.4# Form of Board of Directors Agreement, entered into by each of the Director Nominees (incorporated by reference to Exhibit 10.4 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.5 Original Issue Discount Promissory Note by Digital Brands Group, Inc. in favor of Target Capital 2, LLC in the aggregate amount of $1,000,000 dated as of April 8, 2021 (incorporated by reference to Exhibit 10.5 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.6# Consulting Agreement dated as of April 8, 2021 between Alchemy Advisory LLC and Digital Brands Group, Inc. (incorporated by reference to Exhibit 10.6 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.7# 2013 Stock Plan (incorporated by reference to Exhibit 10.7 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.8 Senior Credit Agreement dated March 10, 2017 among bocm3-DSTLD-Senior Debt, LLC, Stockholders and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.8 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.9 Amendment No. 1 to Senior Credit Agreement, dated as of July 1, 2017 among bocm3-DSTLD- Senior Debt, LLC, Stockholders and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.9 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.10 Amendment No. 2 to Credit Agreement, Security Agreement and Management, dated as of March 30, 2018 among bocm3-DSTLD-Senior Debt, LLC, Stockholders, bocm3-DSTLD- Senior Debt 2, LLC and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.10 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.11 Limited Waiver and Amendment No. 3 to Senior Credit Agreement, dated as of April 30, 2018 among bocm3-DSTLD-Senior Debt, LLC, Stockholders, bocm3-DSTLD-Senior Debt 2, LLC and Digital Brands Group (formerly 61 Table of Contents known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.11 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.12 Amendment No. 4 to Senior Credit Agreement, dated as of February 28, 2019 among bocm3- DSTLD-Senior Debt, LLC, Stockholders, bocm3-DSTLD-Senior Debt 2, LLC and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.12 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.13 Amendment No. 5 to Senior Credit Agreement and Security Agreement, dated as of February 7, 2020 among bocm3-DSTLD-Senior Debt, LLC, Stockholders, bocm3-DSTLD- Senior Debt 2, LLC and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.13 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.14 Amendment No. 6 to Senior Credit Agreement, dated as of September 9, 2020 among bocm3- DSTLD-Senior Debt, LLC, Stockholders, bocm3-DSTLD-Senior Debt 2, LLC and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.14 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.15 Amendment No. 7 to Senior Credit Agreement, dated as of April 1, 2021 between bocm3- DSTLD-Senior Debt, LLC, bocm3-DSTLD-Senior Debt 2, LLC, Stockholders and Digital Brands Group (formerly known as Denim.LA, Inc) (incorporated by reference to Exhibit 10.15 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.16 Promissory Note, dated April 10, 2020, between Digital Brands Group (formally known as Denim.LA, Inc.) and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.16 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.17 Loan dated June 25, 2020, between Digital Brands Group and The Small Business Administration, an Agency of the U.S. Government (incorporated by reference to Exhibit 10.17 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.18 Promissory Note, dated April 5, 2020, between JPMorgan Chase Bank, N.A. and Bailey 44, LLC (incorporated by reference to Exhibit 10.18 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.19 Lease Agreement between 3926 Magazine Street Properties, LLC and Harper & Jones LLC, dated June 22, 2018 (incorporated by reference to Exhibit 10.19 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.20 Lease Agreement between Crosby 2100, LTD. and Harper & Jones LLC, dated April 4, 2018 (incorporated by reference to Exhibit 10.20 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.21 Amendment to Lease Agreement between Crosby 2100, LTD. and Harper & Jones LLC, dated December 23, 2020 (incorporated by reference to Exhibit 10.21 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.22 Lease Agreement between Pasha & Sina, Inc. and Harper & Jones LLC, dated February 27, 2019 (incorporated by reference to Exhibit 10.22 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.23 Lease Agreement between 850-860 South Los Angeles Street LLC and Bailey 44, LLC, dated April 27, 2016 (incorporated by reference to Exhibit 10.23 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.24 Lease Agreement between 850-860 South Los Angeles Street LLC and Bailey 44, LLC, dated April 16, 2018 (incorporated by reference to Exhibit 10.24 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.25 Lease Agreement among 45th Street, LLC, Sister Sam, LLC and Bailey 44, LLC dated January 17, 2013 (incorporated by reference to Exhibit 10.25 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.26 Amendment to Lease Agreement among 45th Street, LLC, Sister Sam, LLC and Bailey 44, LLC dated February 20, 2018 (incorporated by reference to Exhibit 10.26 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.28 Secured Promissory Note to Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP of Bailey 44, LLC (incorporated by reference to Exhibit 10.28 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 62 Table of Contents 10.31 Securities Purchase Agreement, dated August 27, 2021, by and between Digital Brands Group, Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.31 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.32 Senior Secured Convertible Promissory Note, dated August 27, 2021, by Digital Brands Group, Inc. in favor of Oasis Capital, LLC (incorporated by reference to Exhibit 10.32 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.33 Equity Purchase Agreement, dated August 27, 2021, by and between Digital Brands Group, Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.33 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.34 Amended and Restated Securities Purchase Agreement, dated October 1, 2021, by and among Digital Brands Group, Inc., Oasis Capital, LLC and FirstFire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.34 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.35 Senior Secured Convertible Promissory Note, dated October 1, 2021, by Digital Brands Group, Inc. in favor of FirstFire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.35 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.36 Security Agreement, dated August 27, 2021, by and between Digital Brands Group, Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.36 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.37 Joinder and Amendment to Security Agreement, dated October 1, 2021, by and among Digital Brands Group, Inc., Oasis Capital, LLC and FirstFire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.37 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.38 Registration Rights Agreement, dated August 27, 2021, by and between Digital Brands Group, Inc. and Oasis Capital, LLC (incorporated by reference to Exhibit 10.38 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.39 Amendment to Registration Rights Agreement, dated November 16, 2021, by and among Digital Brands Group, Inc., Oasis Capital, LLC and FirstFire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.39 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.40 Securities Purchase Agreement, dated November 16, 2021, by and among Digital Brands Group, Inc., Oasis Capital, LLC and FirstFire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.40 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.41 Senior Secured Convertible Promissory Note, dated November 16, 2021, by Digital Brands Group, Inc. in favor of FirstFire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.41 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.42 Waiver by FirstFire Global Opportunities Fund, LLC, dated November 16, 2021 (incorporated by reference to Exhibit 10.42 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 10.43 Waiver by Oasis Capital, LLC, dated November 16, 2021 (incorporated by reference to Exhibit 10.43 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 21.1 List of Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333-261865), filed with the SEC on January 6, 2022). 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 Interactive Data Files. 63 Table of Contents 104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document ​ ​ ​ ​ *Filed herewith. # Indicates management contract or compensatory plan or arrangement. ​ ITEM 16. FORM 10-K SUMMARY None. ​ 64 Table of Contents SIGNATURES ​ Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ DIGITAL BRANDS GROUP, INC. By: /s/ John Hilburn Davis IV March 31, 2022 Name: John Hilburn Davis IV Title: Director, President and Chief Executive Officer ​ Name Position Date /s/ John Hilburn Davis IV Director, President and Chief Executive Officer March 31, 2022 John Hilburn Davis IV (Principal Executive Officer) /s/ Reid Yeoman ​ Chief Financial Officer ​ March 31, 2022 Reid Yeoman ​ (Principal Financial and Accounting Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Mark T. Lynn Director March 31, 2022 Mark T. Lynn /s/ Trevor Pettennude Director March 31, 2022 Trevor Pettennude /s/ Jameeka Aaron Green Director March 31, 2022 Jameeka Aaron Green /s/ Huong “Lucy” Doan Director March 31, 2022 Huong “Lucy” Doan ​ ​ ​ ​ ​ ​ ​ ​ ​ 65 Table of Contents ​ DIGITAL BRANDS GROUP, INC. FINANCIAL STATEMENTS DECEMEMBER 31, 2021 AND 2020 ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 3501 ) F-3 CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICI) F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 ​ ​ ​ F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ The Board of Directors and Stockholders Digital Brands Group, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Digital Brands Group, Inc. and subsidiaries (collectively, the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s net losses from inception, negative cash flow from operations, and lack of liquidity raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. ​ /s/ dbb mckennon We have served as the Company’s auditor since 2018 Newport Beach, California ​ March 31, 2022 ​ F-2 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 528,394 ​ $ 575,986 Accounts receivable, net ​ 89,394 ​ 35,532 Due from factor, net ​ 985,288 ​ 210,033 Inventory, net ​ 2,755,358 ​ 1,163,279 Prepaid expenses and other current assets ​ 417,900 ​ 23,826 Total current assets ​ 4,776,334 ​ 2,008,656 Deferred offering costs ​ 367,696 ​ 214,647 Property, equipment and software, net ​ 97,265 ​ 62,313 Goodwill ​ 18,264,822 ​ 6,479,218 Intangible assets, net ​ 12,841,313 ​ 7,494,667 Deposits ​ 137,794 ​ 92,668 Total assets ​ $ 36,485,224 ​ $ 16,352,169 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ DEFICIT ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ Accounts payable ​ $ 6,562,690 ​ $ 5,668,703 Accrued expenses and other liabilities ​ 2,237,145 ​ 1,245,646 Deferred revenue ​ 276,397 ​ 1,667 Due to related parties ​ 277,635 ​ 441,453 Contingent consideration liability ​ ​ 12,179,476 ​ ​ — Convertible notes, current ​ 100,000 ​ 700,000 Accrued interest payable ​ 1,110,679 ​ 737,039 Note payable - related party ​ 299,489 ​ 137,856 Venture debt, net of discount ​ 6,001,755 ​ 5,854,326 Loan payable, current ​ 2,502,000 ​ 992,000 Promissory note payable ​ 3,500,000 ​ 4,500,000 Total current liabilities ​ 35,047,266 ​ 20,278,690 Convertible note payable, net ​ 5,501,614 ​ 1,215,815 Loan payable ​ 713,182 ​ 709,044 Derivative liability ​ 2,294,720 ​ — Warrant liability ​ 18,223 ​ 6,265 Total liabilities ​ 43,575,005 ​ 22,209,814 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 12) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' deficit: ​ ​ ​ ​ Series Seed convertible preferred stock, $ 0.0001 par, no shares and 20,714,518 shares, authorized, issued and outstanding at December 31, 2021 and 2020 , respectively ​ — ​ 2,071 Series A convertible preferred stock, $ 0.0001 par, no shares and 14,481,413 shares authorized, no shares and 5,654,072 shares issued and outstanding at December 31, 2021 and 2020, respectively ​ — ​ 565 Series A-2 convertible preferred stock, $ 0.0001 par, no shares and 20,000,000 shares authorized, no shares and 5,932,742 shares issued and outstanding at December 31, 2021 and 2020, respectively ​ — ​ 593 Series A-3 convertible preferred stock, $ 0.0001 par, no shares and 18,867,925 shares authorized, no shares and 9,032,330 shares issued and outstanding at December 31, 2021 and 2020, respectively ​ — ​ 904 Series CF convertible preferred stock, $ 0.0001 par, no shares and 2,000,000 shares authorized, no shares and 836,331 shares issued and outstanding at December 31, 2021 and 2020, respectively ​ — ​ 83 Series B convertible preferred stock, $ 0.0001 par, no shares and 20,714,517 shares authorized, no shares and 20,714,517 shares issued and outstanding at December 31, 2021 and 2020, respectively ​ — ​ 2,075 Undesignated preferred stock, $ 0.0001 par, 10,000,000 shares and 936,144 shares authorized, 0 shares issued and outstanding as of both December 31, 2021 and 2020 ​ — ​ — Common stock, $ 0.0001 par, 200,000,000 and 110,000,000 shares authorized, 13,001,690 and 664,167 shares issued and outstanding as of both December 31, 2021 and 2020, respectively ​ ​ 1,300 ​ ​ 66 Additional paid-in capital ​ 58,612,873 ​ 27,481,995 Accumulated deficit ​ ( 65,703,954 ) ​ ( 33,345,997 ) Total stockholders’ deficit ​ ( 7,089,781 ) ​ ( 5,857,645 ) Total liabilities and stockholders’ deficit ​ $ 36,485,224 ​ $ 16,352,169 ​ See the accompanying notes to the consolidated financial statements ​ F-3 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2021 2020 Net revenues ​ $ 7,584,859 ​ $ 5,239,437 Cost of net revenues ​ 4,689,200 ​ 4,685,755 Gross profit ​ 2,895,659 ​ 553,682 Operating expenses: ​ ​ ​ ​ General and administrative ​ 17,779,903 ​ 7,149,210 Sales and marketing ​ 3,810,583 ​ 576,469 Distribution ​ 489,371 ​ 342,466 Loss on disposal of property and equipment ​ ​ — ​ ​ 848,927 Impairment of intangible assets ​ ​ 3,400,000 ​ ​ 784,500 Change in fair value of contingent consideration ​ ​ 8,764,460 ​ ​ — Total operating expenses ​ 34,244,317 ​ 9,701,572 Loss from operations ​ ( 31,348,658 ) ​ ( 9,147,890 ) Other income (expense): ​ ​ ​ ​ Interest expense ​ ( 3,663,921 ) ​ ( 1,599,518 ) Other non-operating income (expenses) ​ 1,554,502 ​ 32,754 Total other income (expense), net ​ ( 2,109,419 ) ​ ( 1,566,764 ) Income tax benefit (provision) ​ 1,100,120 ​ ( 13,641 ) Net loss ​ $ ( 32,357,957 ) ​ $ ( 10,728,295 ) ​ ​ ​ ​ ​ Weighted average common shares outstanding - basic and diluted ​ 7,689,215 ​ 664,167 Net loss per common share - basic and diluted ​ $ ( 4.21 ) ​ $ ( 16.15 ) ​ See the accompanying notes to the consolidated financial statements ​ ​ F-4 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series Seed ​ Series A ​ Series A-2 ​ Series A-3 ​ Series CF ​ Series B ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Common Stock ​ Paid-in ​ Subscription ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Receivable Deficit Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances at December 31, 2019 20,714,518 ​ $ 2,071 5,654,072 ​ $ 565 5,932,742 ​ $ 593 8,223,036 ​ $ 823 126,641 ​ $ 12 — ​ $ — 664,167 ​ $ 66 ​ $ 15,486,050 ​ $ ( 22,677 ) ​ $ ( 22,617,702 ) ​ $ ( 7,150,199 ) Stock-based compensation — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — ​ 144,775 ​ — ​ — ​ 144,775 Issuance of Series CF preferred stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 709,690 ​ ​ 71 ​ — ​ ​ — ​ — ​ ​ — ​ ​ 309,679 ​ ​ — ​ ​ — ​ ​ 309,750 Issuance of Series A-3 preferred stock — ​ — — ​ — — ​ — 809,294 ​ 81 — ​ — — ​ — — ​ — ​ 428,845 ​ 22,677 ​ — ​ 451,603 Issuance of Series B preferred stock — ​ — — ​ — — ​ — — ​ — — ​ — 20,754,717 ​ 2,075 — ​ — ​ 10,997,925 ​ — ​ — ​ 11,000,000 Offering costs — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — ​ ( 69,470 ) ​ — ​ — ​ ( 69,470 ) Fair value of warrant issuances - venture debt — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — ​ 184,191 ​ — ​ — ​ 184,191 Net loss — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — ​ — ​ — ​ ( 10,728,295 ) ​ ( 10,728,295 ) Balances at December 31, 2020 20,714,518 ​ ​ 2,071 5,654,072 ​ ​ 565 5,932,742 ​ ​ 593 9,032,330 ​ ​ 904 836,331 ​ ​ 83 20,754,717 ​ ​ 2,075 664,167 ​ ​ 66 ​ ​ 27,481,995 ​ ​ — ​ ​ ( 33,345,997 ) ​ ​ ( 5,857,645 ) Conversion of preferred stock into common stock ( 20,714,518 ) ​ ( 2,071 ) ( 5,654,072 ) ​ ​ ( 565 ) ( 5,932,742 ) ​ ( 593 ) ( 9,032,330 ) ​ ( 904 ) ( 836,331 ) ​ ( 83 ) ( 20,754,717 ) ​ ( 2,075 ) 4,027,181 ​ 403 ​ 5,888 ​ — ​ — ​ — Issuance of common stock in public offering — ​ — — ​ — — ​ — — ​ — — ​ — — ​ — 2,409,639 ​ 241 ​ 9,999,761 ​ — ​ — ​ 10,000,002 Offering costs — ​ ​ — — ​ ​ — — ​ ​ — — ​ ​ — — ​ ​ — — ​ ​ — — ​ ​ — ​ ​ ( 2,116,957 ) ​ ​ — ​ ​ — ​ ​ ( 2,116,957 ) Exercise of over-allotment option, net of offering costs ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 361,445 ​ ​ 36 ​ ​ 1,364,961 ​ ​ — ​ ​ — ​ ​ 1,364,997 Conversion of debt into common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 1,135,153 ​ ​ 114 ​ ​ 2,680,175 ​ ​ — ​ ​ — ​ ​ 2,680,289 Conversion of related party notes and payables into common stock ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 152,357 ​ ​ 15 ​ ​ 257,500 ​ ​ — ​ ​ — ​ ​ 257,515 Common stock issued in connection with business combination ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 3,294,309 ​ ​ 329 ​ ​ 11,428,409 ​ ​ — ​ ​ — ​ ​ 11,428,738 Exercise of warrants ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 386,881 ​ ​ 39 ​ ​ 1,768,007 ​ ​ — ​ ​ — ​ ​ 1,768,046 Common stock issued pursuant to consulting agreements ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 241,459 ​ ​ 24 ​ ​ 595,476 ​ ​ — ​ ​ — ​ ​ 595,500 Issuance of common stock pursuant to equity line of credit ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 126,356 ​ ​ 13 ​ ​ 367,683 ​ ​ — ​ ​ — ​ ​ 367,696 Common stock and warrants issued in connection with notes ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 130,000 ​ ​ 13 ​ ​ 501,645 ​ ​ — ​ ​ — ​ ​ 501,658 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 72,743 ​ ​ 7 ​ ​ 4,278,330 ​ ​ — ​ ​ — ​ ​ 4,278,337 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 32,357,957 ) ​ ​ ( 32,357,957 ) Balances at December 31, 2021 — ​ $ — — ​ $ — — ​ $ — — ​ $ — — ​ $ — — ​ $ — 13,001,690 ​ $ 1,300 ​ $ 58,612,873 ​ $ — ​ $ ( 65,703,954 ) ​ $ ( 7,089,781 ) ​ See the accompanying notes to the consolidated financial statements ​ ​ F-5 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2021 2020 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 32,357,957 ) ​ $ ( 10,728,295 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Depreciation and amortization ​ 1,220,736 ​ 603,857 Amortization of loan discount and fees ​ 1,382,222 ​ 241,878 Stock-based compensation ​ 4,800,337 ​ 144,775 Fees incurred in connection with debt financings ​ ​ 560,309 ​ ​ — Change in fair value of warrant liability ​ ​ 11,958 ​ ​ ( 2,353 ) Change in fair value of derivative liability ​ ( 910,204 ) ​ — Change in fair value of contingent consideration ​ ​ 8,764,460 ​ ​ — Deferred income tax benefit ​ ​ ( 1,100,120 ) ​ ​ — Impairment of intangible assets ​ ​ 3,400,000 ​ ​ 784,500 Gain on forgiveness of PPP loans ​ ​ ( 407,994 ) ​ ​ — Loss on disposal of property and equipment ​ — ​ 848,927 Change in credit reserve ​ ​ 36,893 ​ ​ ( 207,666 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ 150,288 ​ 1,947 Due from factor, net ​ ( 399,701 ) ​ 1,616,939 Inventory ​ ( 911,293 ) ​ 3,202,350 Prepaid expenses and other current assets ​ ​ ( 151,917 ) ​ ​ 168,589 Accounts payable ​ 456,690 ​ 673,263 Accrued expenses and other liabilities ​ 834,489 ​ ( 591,028 ) Deferred revenue ​ 4,882 ​ ( 13,564 ) Due to related parties ​ ( 63,550 ) ​ 178,026 Accrued interest ​ 461,113 ​ 1,016,268 Net cash used in operating activities ​ ( 14,218,359 ) ​ ( 2,061,587 ) Cash flows from investing activities: ​ ​ ​ ​ ​ Cash acquired (consideration) pursuant to business combination ​ ( 5,936,757 ) ​ ​ 106,913 Purchase of property, equipment and software ​ ​ ( 43,179 ) ​ ​ ( 864 ) Deposits ​ ( 31,117 ) ​ ​ 98,835 Net cash provided by (used in) investing activities ​ ( 6,011,053 ) ​ 204,884 Cash flows from financing activities: ​ ​ ​ ​ Proceeds from related party advances ​ — ​ 22,856 Repayments to factor ​ ( 41,200 ) ​ ( 1,931,369 ) Proceeds from venture debt ​ — ​ 1,050,000 Issuance of loans payable ​ 2,779,910 ​ 1,701,044 Repayments of promissory notes and loans payable ​ ​ ( 2,006,628 ) ​ ​ — Issuance of convertible notes payable ​ 8,433,650 ​ 1,250,308 Proceeds from initial public offering ​ 10,000,002 ​ — Exercise of over-allotment option with public offering, net ​ 1,364,997 ​ — Exercise of warrants ​ ​ 1,768,046 ​ ​ — Proceeds from sale of Series A-3 preferred stock ​ ​ — ​ ​ 428,926 Subscription receivable from Series A-3 preferred stock ​ ​ — ​ ​ 22,677 Proceeds from sale of Series CF preferred stock ​ ​ — ​ ​ 309,750 Offering costs ​ ( 2,116,957 ) ​ ( 461,972 ) Net cash provided by financing activities ​ 20,181,820 ​ 2,392,220 Net increase in cash and cash equivalents ​ ( 47,592 ) ​ 535,517 Cash and cash equivalents at beginning of year ​ 575,986 ​ 40,469 F-6 Table of Contents Cash and cash equivalents at end of year ​ $ 528,394 ​ $ 575,986 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ Cash paid for income taxes ​ $ — ​ $ — Cash paid for interest ​ $ 902,089 ​ $ — ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities: ​ ​ ​ ​ Conversion of preferred stock into common stock ​ $ 6,291 ​ $ — Conversion of related party notes and payables into common stock ​ $ 257,515 ​ $ — Conversion of debt into common stock ​ $ 2,680,289 ​ $ — Derivative liability in connection with convertible note ​ $ 3,204,924 ​ $ — Common shares issued pursuant to equity line of credit ​ $ 367,696 ​ $ — Conversion of contingent consideration into common stock ​ $ 73,500 ​ $ — Venture debt issued in exchange of forgiveness of accrued interest ​ $ — ​ $ 209,211 Warrants issued for offering costs ​ $ — ​ $ 918 Warrants issued with venture debt ​ $ — ​ $ 184,191 Issuance of promissory note payable in acquisition ​ $ — ​ $ 4,500,000 Issuance of Series B preferred stock in acquisition ​ $ — ​ $ 11,000,000 ​ See the accompanying notes to the consolidated financial statements ​ F-7 Table of Contents DIGITAL BRANDS GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: NATURE OF OPERATIONS Digital Brands Group, Inc. (the “Company” or “DBG”), was organized on September 17, 2012 under the laws of Delaware as a limited liability company under the name Denim.LA LLC. The Company converted to a Delaware corporation on January 30, 2013 and changed its name to Denim.LA, Inc. Effective December 31, 2020, the Company changed its name to Digital Brands Group, Inc. (DBG). On February 12, 2020, Denim.LA, Inc. entered into an Agreement and Plan of Merger with Bailey 44, LLC (“Bailey”), a Delaware limited liability company. On the acquisition date, Bailey 44 , LLC became a wholly owned subsidiary of the Company. See Note 4. On May 18, 2021, the Company closed its acquisition of Harper & Jones, LLC (“H&J”) pursuant to its Membership Interest Stock Purchase Agreement with D. Jones Tailored Collection, Ltd. to purchase 100 % of the issued and outstanding equity of Harper & Jones, LLC. On the acquisition date, H&J became a wholly owned subsidiary of the Company. See Note 4. On August 30, 2021, the Company closed its acquisition of Mosbest, LLC dba Stateside (“Stateside”) pursuant to its Membership Interest Purchase Agreement with Moise Emquies to purchase 100 % of the issued and outstanding equity of Stateside. On the acquisition date, Stateside became a wholly owned subsidiary of the Company. See Note 4. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a pandemic. As the global spread of COVID-19 continues, DBG remains first and foremost focused on a people-first approach that prioritizes the health and well-being of its employees, customers, trade partners and consumers. To help mitigate the spread of COVID-19, DBG has modified its business practices in accordance with legislation, executive orders and guidance from government entities and healthcare authorities (collectively, “COVID-19 Directives”). These directives include the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines. The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, and the imposition of protective public safety measures. Reverse Stock Split On May 12, 2021, the Board of Directors approved a one -for-15.625 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s preferred stock (see Note 8). Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios. Initial Public Offering On May 13, 2021, the Company’s registration statement on Form S-1 relating to its initial public offering of its common stock (the “IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). Further to the IPO, which closed on May 18, 2021, the Company issued and sold 2,409,639 shares of common stock at a public offering price of $ 4.15 per share. Additionally, the Company issued warrants to purchase 2,771,084 shares, which includes 361,445 warrants sold upon the partial exercise of the over-allotment option. The aggregate net proceeds to the Company from the IPO, were $ 8.6 million after deducting underwriting discounts and commissions of $ 0.8 million and direct offering expenses of $ 0.6 million. Concurrent with this offering, the Company acquired H&J (see Note 4). The Company incurred an additional $ 0.6 million in offering costs related to the IPO that were not paid directly out of the proceeds from the offering. F-8 Table of Contents NOTE 2: GOING CONCERN The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated profits since inception, has sustained net losses of $ 32,357,957 and $ 10,728,295 for the years ended December 31, 2021 and 2020, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2021 and 2020. The Company has historically lacked liquidity to satisfy obligations as they come due and as of December 31, 2021, and the Company had a working capital deficit of $ 30,270,932 . These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company expects to continue to generate operating losses for the foreseeable future. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty. Management Plans In August 2021, the Company entered into an equity line of credit agreement which the investor is committed to purchase up to $ 17,500,000 of the Company’s common stock (see Note 8). The Company plans to utilize multiple drawdowns on this agreement, subject to satisfying a registration rights agreement and other restrictions, some of which is out of the Company’s control. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through the equity line of credit agreement, if available. Through the issuance date of these consolidated financial statements, the Company has not been able to drawdown on the agreement and has received no financings from the agreement. The Company may pursue secondary 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. ​ NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). Principles of Consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Bailey, H&J and Stateside from the dates of acquisition. All inter-company transactions and balances have been eliminated on consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Equivalents and Concentration of Credit Risk The Company considers all highly liquid securities with an original maturity of less than three months to be cash equivalents. As of December 31, 2021 and 2020, the Company did not hold any cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits of $ 250,000 . Fair Value of Financial Instruments FASB guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or F-9 Table of Contents liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued expenses, due to related parties, related party note payable, and convertible debt. The carrying value of these assets and liabilities is representative of their fair market value, due to the short maturity of these instruments. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ as of December 31, 2021 Using: ​ Level 1 Level 2 Level 3 Total Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrant liability ​ $ — ​ $ 18,223 ​ $ — ​ $ 18,223 Contingent consideration ​ — ​ — ​ 12,179,476 ​ 12,179,476 Derivative liability ​ ​ — ​ ​ — ​ ​ 2,294,720 ​ ​ 2,294,720 ​ ​ $ — ​ $ 18,223 ​ $ 14,474,196 ​ $ 14,492,419 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ as of December 31, 2020 Using: ​ Level 1 Level 2 Level 3 Total Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrant liability ​ $ — ​ $ — ​ $ 6,265 ​ $ 6,265 ​ ​ $ — ​ $ — ​ $ 6,265 ​ $ 6,265 ​ Warrant Liability Certain of the Company’s common stock warrants are carried at fair value. As of December 31, 2020, the fair value of the Company’s common stock warrant liabilities was measured under the Level 3 hierarchy using the Black-Scholes pricing model as the Company’s underlying common stock had no observable market price (see Note 10). The warrant liability was valued using a market approach. Upon the IPO, the warrant liabilities were valued using quoted prices of identical assets in active markets, and was reclassified under the Level 2 hierarchy. Changes in common stock warrant liability during the year ended December 31, 2021 are as follows: ​ ​ ​ ​ ​ ​ Warrant ​ ​ Liability Outstanding as of December 31, 2020 ​ $ 6,265 Change in fair value ​ 11,958 Outstanding as of December 31, 2021 ​ $ 18,223 ​ F-10 Table of Contents Contingent Consideration The Company records a contingent consideration liability relating to stock price guarantees included in its acquisition and consulting agreements. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the contingent consideration liability related to the Company’s business combinations is valued using the Monte Carlo simulation model. The Monte Carlo simulation inputs include the stock price, volatility of common stock, timing of settlement and resale restrictions and limits. The fair value of the contingent consideration is then calculated based on guaranteed equity values at settlement as defined in the acquisition agreements. Changes in contingent consideration liability during the year ended December 31, 2021 are as follows: ​ ​ ​ ​ ​ ​ Contingent ​ ​ Consideration ​ ​ Liability Balance as of December 31, 2020 ​ $ — Initial recognition in connection with acquisition of Harper & Jones ​ 3,421,516 Stock price guarantee per consulting agreement ​ 67,000 Conversion into shares ​ ​ ( 73,500 ) Change in fair value ​ 8,764,460 Outstanding as of December 31, 2021 ​ $ 12,179,476 ​ Derivative Liability In connection with the Company’s convertible notes with Oasis Capital, LLC (“Oasis”) and FirstFire Global Opportunities Fund, LLC (“FirstFire”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the year ended December 31, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ Derivative ​ Liability Outstanding as of December 31, 2020 ​ $ — Initial fair value on issuance of convertible note ​ 3,204,924 Change in fair value ​ ( 910,204 ) Outstanding as of December 31, 2021 ​ $ 2,294,720 ​ Change in fair value of the derivative liability is included in other non-operating income (expense), net in the consolidated statements of operations. ​ 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 and Stateside. The inventory balances as of December 31, 2021 and 2020 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. Property, Equipment, and Software Property, equipment, and software are recorded at cost. Depreciation/amortization is recorded for property, equipment, and software using the straight-line method over the estimated useful lives of assets. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. The balances at December 31, 2021 and 2020 consist of software with three ( 3 ) year lives, property and F-11 Table of Contents equipment with three ( 3 ) to ten ( 10 ) year lives, and leasehold improvements which are depreciated over the shorter of the lease life or expected life. Depreciation and amortization charges on property, equipment, and software are included in general and administrative expenses and amounted to $ 92,213 and $ 283,024 for the years ended December 31, 2021 and 2020, respectively. ​ Business Combinations The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. Goodwill represents the excess of the purchase price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. Intangible assets are established with business combinations and consist of brand names and customer relationships. Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. The estimated useful lives of amortizable intangible assets are as follows: ​ ​ ​ ​ Customer relationships 3 years ​ Contingent Consideration The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair in the consolidated statement of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. The contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid in capital in the stockholders’ equity section of the Company’s consolidated balance sheets. Impairment of Long-Lived Assets The Company reviews its long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. Goodwill Goodwill and identifiable intangible assets that have indefinite useful lives are not amortized, but instead are tested annually for impairment and upon the occurrence of certain events or substantive changes in circumstances. The annual goodwill impairment test allows for the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An entity may choose to perform the qualitative assessment on none, some or all of its reporting units or an entity may bypass the qualitative assessment for any reporting unit and proceed directly to step one of the quantitative impairment test. If it is determined, on the basis of qualitative factors, that the fair value of a reporting unit is, more likely than not, less than its carrying value, the quantitative impairment test is required. F-12 Table of Contents The quantitative impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the first quarter every year. In the first quarter of 2021, management performed its annual qualitative impairment test. The Company determined no factors existed to conclude that it is more likely than not that the fair value of the reporting unit was less than its carrying amount. As such, no goodwill impairment was recognized as of December 31, 2021. Indefinite-Lived Intangible Assets Indefinite-lived intangible assets established in connection with business combinations consist of the brand name. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may, pertaining to Bailey44, not be recoverable. As such, the Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $ 784,500 in the consolidated statements of operations. At December 31, 2021, management determined that certain events and circumstances occurred, primarily the continued reduction in revenues partially as a result of COVID-19, that indicated that the carrying value of the Company’s brand name asset may pertaining to Bailey44 not be recoverable. As such, the Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $ 3,400,000 in the consolidated statements of operations. Convertible Instruments U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. Accounting for Preferred Stock ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity. Management is required to determine the presentation for the preferred stock as a result of the redemption and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the F-13 Table of Contents preferred stock is more akin to equity, and accordingly, liability accounting is not required by the Company. The Company has presented preferred stock within stockholders’ equity. Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock. The discount is not amortized. Revenue Recognition Revenues are recognized when performance obligations are satisfied through the transfer of promised goods to the Company’s 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. The Company provides 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. The Company considers 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. The reserve for returns totaled $ 33,933 and $ 5,229 as of December 31, 2021 and 2020, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. Cost of Revenues Cost of revenues consists primarily of inventory sold and related freight-in. Shipping and Handling The Company recognizes shipping and handling billed to customers as a component of net revenues, and the cost of shipping and handling as distribution costs. Total shipping and handling billed to customers as a component of net revenues was approximately $ 23,000 and $ 3,900 for the years ended December 31, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $ 423,000 and $ 246,000 , respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2021 and 2020 amounted to approximately $ 240,000 and $ 146,000 , respectively. The amounts are included in sales and marketing expense. Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At December 31, 2021 and 2020, the Company did not have any derivative instruments that were designated as hedges. Stock Option and Warrant Valuation Stock option and warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model. For warrants and stock options issued to non- employees, the Company accounts for the expected life based on the contractual life of the warrants and stock options. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of options grants. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The number of stock award forfeitures are recognized as incurred. F-14 Table of Contents Stock-Based Compensation The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company used the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. Deferred Offering Costs The Company complies with the requirements of ASC 340, Other Assets and Deferred Costs, with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed. As of December 31, 2020, the Company had capitalized $ 214,647 in deferred offering costs. Upon completion of the IPO in May 2021, all capitalized deferred offering costs were charged to additional paid-in capital. As of December 31, 2021, the Company capitalized $ 367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). Segment Information In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. As of September 30, 2021 our operating segments included: DSTLD, Bailey, H&J and Stateside. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale, in store and online channels, allowing us to execute on our omni-channel strategy. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into one reportable segment. All of the operating segments have met the aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments. Income Taxes The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. Net Loss per Share Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding F-15 Table of Contents during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of December 31, 2021 and 2020, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Convertible notes ​ 4,791,192 ​ — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,580,116 914,539 Preferred stock warrants — 806,903 Stock options 3,895,103 1,163,103 Total potentially dilutive shares 12,266,411 65,809,254 ​ The potentially dilutive shares pertaining to the Company’s outstanding convertible notes was calculated based on the assumed conversion abilities as of December 31, 2021. The ultimate number of shares for which the notes can convert into is indeterminable. All shares of preferred stock were convertible into shares of common stock at a ratio of 15.625 :1 per share. Upon the closing of the IPO, all 62,924,710 shares of preferred stock converted into an aggregate of 4,027,181 shares of common stock according to their respective terms. Additionally, all preferred stock warrants converted into 51,642 common stock warrants at the same ratio as the underlying preferred stock conversion. Concentrations The Company utilized two vendors that made up 40 % of all inventory purchases during the year ended December 31, 2021 and three vendors that made up 100 % of all inventory purchases during the year ended December 31, 2020. The loss of one of these vendors, may have a negative short-term impact on the Company’s operations; however, we believe there are acceptable substitute vendors that can be utilized longer-term. Recent Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to early adopt this ASU and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures. In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02: Leases (Topic 842). The new guidance generally requires an entity to recognize on its balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The new standard requires a modified retrospective transition for existing leases to each prior reporting period presented. The Company has elected to utilize the extended adoption period available to the Company as an emerging growth company and has not currently adopted this standard. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial position, results of operations and cash flows once adopted. F-16 Table of Contents Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances. NOTE 4: BUSINESS COMBINATIONS Bailey 44 On February 12, 2020, the Company acquired 100 % of the membership interests of Bailey. The purchase price consideration included (i) an aggregate of 20,754,717 shares of Series B Preferred Stock of the Company (the “Parent Stock”) and (ii) a promissory note in the principal amount of $ 4,500,000 . Of the shares of Parent Stock issued in connection with the Merger, 16,603,773 shares were delivered on the effective date of the Merger (the “Initial Shares”) and 4,150,944 shares were held back solely, and only to the extent necessary, to satisfy any indemnification obligations of Bailey or the Holders pursuant to the terms of the Merger Agreement (the “Holdback Shares”). DBG agreed that if at that date which is one year from the closing date of the IPO, the product of the number of shares of Parent Stock issued under the Merger multiplied by the sum of the closing price per share of the common stock of the Company on such date, plus Sold Parent Stock Gross Proceeds (as that term is defined in the Merger Agreement), does not exceed the sum of $ 11,000,000 less the value of any Holdback Shares cancelled further to the indemnification provisions of the Merger Agreement, then the Company shall issue to the Holders pro rata an additional aggregate number of shares of common stock of the Company equal to the valuation shortfall at a per share price equal to the then closing price per share of the common stock of the Company. ​ ​ ​ ​ ​ Series B preferred stock $ 11,000,000 Promissory note payable ​ 4,500,000 Purchase price consideration ​ $ 15,500,000 ​ ​ ​ ​ ​ ​ Purchase Price ​ ​ Allocation Cash and cash equivalents ​ $ 106,913 Accounts receivable, net ​ 37,479 Due (to) from factor, net ​ ( 312,063 ) Inventory ​ 3,303,660 Prepaid expenses ​ 165,856 Deposits ​ 187,493 Property, equipment and software, net ​ 1,215,748 Goodwill ​ 6,479,218 Intangible assets ​ 8,600,000 Accounts payable ​ ( 3,397,547 ) Accrued expenses and other liabilities ​ ( 886,757 ) Purchase price consideration ​ $ 15,500,000 ​ As of December 31, 2021, the Company has a contingent consideration liability of $ 7,935,016 based on the valuation shortfall as noted above. See Note 3. F-17 Table of Contents Harper & Jones On May 18, 2021, the Company closed its acquisition of H&J pursuant to its previously disclosed Membership Interest Stock Purchase Agreement (as amended, the “Purchase Agreement”) with D. Jones Tailored Collection, Ltd. (the “Seller”), to purchase 100 % of the issued and outstanding equity of Harper & Jones LLC. The purchase price consideration included (i) an aggregate of 2,192,771 shares of the Company’s common stock and (ii) $ 500,000 financed from the proceeds of the IPO. Pursuant to the H&J Purchase Agreement, the Seller, as the holder of all of the outstanding membership interests of H&J, exchanged all of such membership interests for a number of common stock of the Company equal to the lesser of (i) $ 9.1 million at a per share price equal to the initial public offering price of the Company’s shares offered pursuant to its initial public offering or (ii) the number of Subject Acquisition Shares; “Subject Acquisition Shares” means the percentage of the aggregate number of shares of the Company’s common stock issued pursuant to the Agreement, which is the percentage that Subject Seller Dollar Value is in relation to Total Dollar Value. “Subject Seller Dollar Value” means $ 9.1 million. If, at the one year anniversary of the closing date of the Company’s IPO, the product of the number of shares of the Company’s common stock issued at the closing of the acquisition multiplied by the average closing price per share of the shares of the Company’s common stock as quoted on the NasdaqCM for the thirty ( 30 ) day trading period immediately preceding such date does not exceed the sum of $ 9.1 million less the value of any shares of the Company’s common stock cancelled further to any indemnification claims made against the Seller then the Company shall issue to Seller an additional aggregate number of shares of the Company’s common stock equal to the valuation shortfall at a per share price equal to the then closing price per share of the Company’s common stock as quoted on the NasdaqCM. The Company evaluated the acquisition of H&J pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: ​ ​ ​ ​ ​ Cash $ 500,000 Common stock ​ 8,025,542 Contingent consideration ​ 3,421,516 Purchase price consideration ​ $ 11,947,058 ​ The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: ​ ​ ​ ​ ​ ​ ​ Purchase Price ​ Allocation Cash and cash equivalents ​ $ 24,335 Accounts receivable, net ​ 49,472 Inventory ​ 77,159 Prepaid expenses ​ 69,715 Deposits ​ 4,416 Property, equipment and software, net ​ 83,986 Goodwill ​ 9,681,548 Intangible assets ​ 3,936,030 Accounts payable ​ ( 51,927 ) Accrued expenses and other liabilities ​ ( 107,957 ) Deferred revenue ​ ( 269,848 ) Due to related parties ​ ( 1,361 ) Loan payable ​ ( 148,900 ) Note payable - related party ​ ( 299,489 ) Deferred tax liability ​ ( 1,100,120 ) Purchase price consideration ​ $ 11,947,058 ​ F-18 Table of Contents The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years . The brand name is indefinite-lived. The Company used the relief of royalty approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The Company recorded an initial contingent consideration liability at a fair value of $ 3,421,516 based on the valuation shortfall noted above. As of December 31, 2021, the H&J contingent consideration was valued at $ 4,244,460 . See Note 3. The results of H&J have been included in the consolidated financial statements since the date of acquisition. H&J’s net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $ 1,860,000 and $ 390,000 , respectively. Stateside On August 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with Moise Emquies pursuant to which the Company acquired all of the issued and outstanding membership interests of MOSBEST, LLC, a California limited liability company (“Stateside” and such transaction, the “Stateside Acquisition”). Pursuant to the MIPA, Moise Emquies, as the holder of all of the outstanding membership interests of Stateside, exchanged all of such membership interests for $ 5.0 million in cash and 1,101,538 shares of the Company’s common stock (the “Shares”), which number of Shares was calculated in accordance with the terms of the MIPA. Of such amount, $ 375,000 in cash and a number of Shares equal to $ 375,000 , or 82,615 shares (calculated in accordance with the terms of the MIPA), is held in escrow to secure any working capital adjustments and indemnification claims. The MIPA contains customary representations, warranties and covenants by Moise Emquies. The Company evaluated the acquisition of Stateside pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: ​ ​ ​ ​ ​ Cash $ 5,000,000 Common stock ​ 3,403,196 Purchase price consideration ​ $ 8,403,196 ​ The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: ​ ​ ​ ​ ​ ​ ​ Purchase Price ​ Allocation Cash and cash equivalents ​ $ 32,700 Accounts receivable, net ​ 154,678 Due from factor, net ​ 371,247 Inventory ​ 603,625 Prepaid expenses ​ 7,970 Deposits ​ 9,595 Goodwill ​ 2,104,056 Intangible assets ​ 5,939,140 Accounts payable ​ ( 374,443 ) Accrued expenses and other liabilities ​ ( 445,372 ) Purchase price consideration ​ $ 8,403,196 ​ F-19 Table of Contents The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years . The brand name is indefinite-lived. The Company used the relief of royalty and income approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. Per the terms of the MIPA, a working capital adjustment of $ 493,791 was recorded during the fourth quarter. Net amounts due to the seller are $ 396,320 at December 31, 2021 (Note 7). The results of Stateside have been included in the consolidated financial statements since the date of acquisition. Stateside’s net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $ 1,695,000 and $ 285,000 , respectively. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Bailey, H&J and Stateside acquisitions had occurred as of January 1, 2020. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The following unaudited pro forma financial information includes incremental property and equipment depreciation and intangible asset amortization as a result of the acquisitions. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2021 ​ 2020 Net revenues ​ $ 11,834,601 ​ $ 12,989,493 Net loss ​ $ ( 33,259,224 ) ​ $ ( 12,761,206 ) Net loss per common share ​ $ ( 4.33 ) ​ $ ( 19.21 ) ​ ​ NOTE 5: DUE FROM FACTOR The Company, via its subsidiaries, Bailey and Stateside, assigns a portion of its trade accounts receivable to third- party factoring companies, who assumes the credit risk with respect to the collection of non-recourse accounts receivable. The Company may request advances on the net sales factored at any time before their maturity date, and up to 50 % of eligible finished goods inventories based on the terms of one of our agreements that terminated in 2021. The factor charges a commission on the net sales factored for credit and collection services. For one factoring company, interest on advances is charged as of the last day of each month at a rate equal to the LIBOR rate plus 2.5 % for Bailey. For Stateside, should total commission and fees payable be less than $ 30,000 in a single year, then the factor shall charge the difference between the actual fees in said year and $ 30,000 to the Company. Interest on advances is charged as of the last day of each month at a rate equal to the greater of either, (a) the Chase Prime Rate + ( 2.0 )% or (b) ( 4.0 )% per annum. For another factoring company, interest is charged at one-thirty- third (1/33) of one percent per day, such rate to increase or decrease in accordance with changes in the “Prime Rate”, which such prime rate to be deemed to be 4.25 % on the date of the agreement. Advances are collateralized by a security interest in substantially all of the companies’ assets. Due to/from factor consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Outstanding receivables: ​ ​ Without recourse ​ $ 579,295 ​ $ 151,158 With recourse ​ 361,584 ​ 42,945 Advances ​ 121,617 ​ 56,246 Credits due customers ​ ( 77,208 ) ​ ( 40,316 ) ​ ​ $ 985,288 ​ $ 210,033 ​ F-20 Table of Contents ​ NOTE 6: GOODWILL AND INTANGIBLE ASSETS The Company recorded $ 6,479,218 in goodwill from the Bailey business combination in February 2020, $ 9,681,548 in goodwill from the H&J business combination in May 2021 and $ 1,610,265 in goodwill from the Stateside business combination in August 2021. In the fourth quarter of 2021, the Company recorded an additional $ 493,791 in Stateside goodwill based on the final purchase price allocation. The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Accumulated Carrying ​ ​ Amount ​ Amortization ​ Value Amortized: ​ ​ ​ Customer relationships ​ $ 6,453,750 ​ $ ( 1,449,357 ) ​ $ 5,004,393 ​ ​ 6,453,750 ​ ( 1,449,357 ) ​ 5,004,393 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indefinite-lived: ​ ​ ​ Brand name ​ $ 7,836,920 ​ — ​ 7,836,920 ​ ​ $ 14,290,670 ​ $ ( 1,449,357 ) ​ $ 12,841,313 ​ Due to the effects of COVID-19 and revenue levels not recovering as quickly as anticipated and related uncertainty which affected Bailey’s results and near-term demand for its products, the Company determined that there were indications for further impairment analysis in both 2020 and 2021. ​ During the years ended December 31, 201 and 2020, the Company recorded impairment losses of $ 3,400,000 and $ 784,500 for the intangible asset as management determined circumstances existed that indicated the carrying value may not be recoverable. The impairment analysis was based on the relief from royalty method using projected revenue estimates and discounts rates believed to be appropriate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. The discount rate, revenue assumptions and terminal growth rate of our reporting unit were the material assumptions utilized in the model used to estimate the fair value of the Bailey unit. The analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. The long-range plan reflects management judgment, which includes observation of expected industry trends. The Company recorded amortization expense of $ 1,128,524 and $ 320,833 during the years ended December 31, 2021 and 2020, respectively, which is included in general and administrative expenses in the consolidated statements of operations. Future amortization expense at December 31, 2020 is as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ ​ 2022 ​ 2,151,250 2023 ​ 1,830,417 2024 ​ 1,022,726 ​ ​ $ 5,004,393 ​ ​ F-21 Table of Contents NOTE 7: LIABILITIES AND DEBT Accrued Expenses and Other Liabilities The Company accrued expenses and other liabilities line in the consolidated balance sheets is comprised of the following as of December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Accrued expenses ​ $ 213,740 ​ $ 92,074 Reserve for returns ​ 33,933 ​ 5,229 Payroll related liabilities ​ 1,204,665 ​ 843,704 Sales tax liability ​ 268,723 ​ 196,410 Due to seller ​ ​ 396,320 ​ ​ — Other liabilities ​ 119,764 ​ 108,230 ​ ​ $ 2,237,145 ​ $ 1,245,646 ​ Due to seller represents amounts to the seller owed pursuant the Stateside Acquisition after certain purchase price adjustments were made in the fourth quarter of 2021. Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of December 31, 2021 and 2020, payroll related labilities included approximately $ 262,000 and $ 152,000 in estimated penalties associated with accrued payroll taxes. Venture Debt In March 2017, the Company entered into a senior credit agreement with an outside lender for up to $ 4,000,000 , dependent upon the achievement of certain milestones. Through various amendments to the agreement, the credit agreement has been increased to approximately $ 6,000,000 . The loan bears interest at 12.5 % per annum, compounded monthly, plus fees currently at $ 5,000 per month. In March 2021, the Company and the lender agreed to extend the maturity date of the credit agreement to December 31, 2022, with certain payments due as follows. If the Company consummated a follow on public offering on or before July 31, 2021, the Company was required to make a $3,000,000 payment on the loan within five business days after such public offering. In addition, if the Company consummated an additional follow-on offering thereafter on or before September 30, 2021, the Company was required to make another $ 3,000,000 payment on the loan within five business days after such public offering. If the Company did not consummate the initial follow on offering or, if the Company did not consummate the aforementioned second follow-on offering by September 30, 2021, the Company was required to make a $ 300,000 payment on the loan by September 30, 2021. As of the filing date of these financial statements, the Company and the lender agreed to defer the September 30, 2021 payment to the maturity date of the loan, December 31, 2022. As of the filing date, of these financial statements, all defaults were cured and there are no additional expected defaults in the next twelve months. The Company’s credit agreement contains negative covenants that, subject to significant exceptions, limit its ability, among other things to make restricted payments, pledge assets as security, make investments, loans, advances, guarantees and acquisitions, or undergo other fundamental changes. A breach of any of these covenants could result in a default under the credit facility and permit the lender to cease making loans to the Company. If for whatever reason the Company has insufficient liquidity to make scheduled payments under the Company’s credit facility or to repay such indebtedness by the schedule maturity date, the Company would seek the consent of the Company’s senior lender to modify such terms. Although the Company’s senior lender has previously agreed to seven prior modifications of the Company’s credit agreement, there is no assurance that the senior lender will agree to any such modification and could then declare an event of default. Upon the occurrence of an event of default under the credit agreement, the lender could elect to declare all amounts outstanding thereunder to be immediately due and payable. The Company has pledged all of its assets as collateral under the Company’s credit facility. If the lender accelerates the repayment of borrowings, the Company may not have sufficient assets to repay them and the Company could experience a material adverse effect on its financial condition and results of operations. Repayment is accelerated upon a change in control, as defined in the agreement. The loan is senior to all other debts and obligations of the Company, is collateralized by all assets of the Company, and shares of the Company’s common stock pledged by officers of the Company. F-22 Table of Contents As of December 31, 2021 and 2020, the gross loan balance was $ 6,001,755 .During 2020, the gross balance increased by $ 1,459,211 resulting from cash disbursed to the Company and considerations for outstanding interest. The lender was also granted warrants to purchase common stock representing 1 % of the fully diluted capitalization of the Company for each $ 1,000,000 of principal loaned under the agreement, which was increased to 1.358 % during 2019. During the year ended December 31, 2020, the Company granted 493,462 common stock warrants, to the lender with an exercise price of $ 2.50 per share and a ten -year contractual life. The warrants were valued at $ 184,191 . The relative fair value of the warrants is initially recorded as a discount to the note, which were amortized over its term of the then existing note prior to amendment. See Note 10 for further detail. For the years ended December 31, 2021 and 2020, $ 147,389 and $ 241,878 of these loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $ 0 and $ 147,389 as of December 31, 2021 and 2020, respectively. Interest expense for the years ended December 31, 2021 and 2020 was $ 825,219 and $ 770,277 , respectively. Effective interest rate on the loan for the years ended December 31, 2021 and 2020 was 13.7 % and 14.6 %, respectively. Convertible Debt 2020 Regulation CF Offering During the year ended December 31, 2020, the Company received gross proceeds of $ 450,308 from a Regulation CF convertible debt offering. In 2021, the Company received additional gross proceeds of $ 473,650 . Interest was 6 % per annum and the debt was due October 30, 2022. Upon closing of the IPO, the outstanding principal and accrued and unpaid interest of $ 16,942 was converted into 319,661 shares of common stock based on the terms of the notes. Total issuances costs were $ 69,627 , which was recognized as a debt discount and was amortized in 2021 through the date of IPO when such debt converted. During the year ended December 31, 2021, $ 27,894 of the debt discount was amortized to interest expense. 2020 Regulation D Offering Concurrently with the offering above, in 2021 and 2020 the Company received gross proceeds of $ 55,000 and $ 800,000 , respectively, from a Regulation D convertible debt offering. The debt accrued interest at a rate of 14 % per annum with a maturity date of nine months from the date of issuance. The debt was contingently convertible and contains both automatic and optional conversions. The debt converted automatically upon an initial public offering of at least $ 10,000,000 in gross proceeds at a price per share equal to 50 % of the IPO price. Issuance costs on the aggregate funds totaled $ 100,000 . In addition, the Company issued 512 warrants to purchase common stock in connection with the notes. The issuance costs and warrants are recognized as a debt discount and were amortized in 2021 through the date of IPO when such debt converted. The fair value of the warrants was determined to be negligible. Upon closing of the IPO, $ 755,000 in outstanding principal and approximately $ 185,000 of the accrued and unpaid interest was converted into 453,437 shares of common stock. As of December 31, 2021, there was $ 100,000 remaining in outstanding principal that was not converted into equity. During the year ended December 31, 2021, $ 100,000 of the debt discount was amortized to interest expense. The Company recorded an additional $ 132,609 in default interest expense upon conversion of these notes. 2019 Regulation D Offering For the year ended December 31, 2019, the Company received gross proceeds of $ 799,280 from a Regulation D convertible debt offering. The debt accrued interest at a rate of 12 % per annum with a maturity date of thirty-six months from the date of issuance. The debt was contingently convertible and contained both automatic and optional conversions. The debt converted automatically upon an initial public offering at $ 2.19 per share. If, prior to maturity there is a change in control event, the holders of a majority of the debt could vote to convert two times the value of the principle, with accrued interest being eliminated, at 1) the fair market value of the company’s common stock at the time of such conversion, 2) $ 2.19 per share, 3) dividing the valuation cap ($ 9,000,000 ) by the pre-money fully diluted capitalization. Upon closing of the IPO, the outstanding principal was converted into 362,055 shares of common stock. F-23 Table of Contents Convertible Promissory Notes On August 27, 2021, the Company entered into a Securities Purchase Agreement with Oasis Capital, LLC (“Oasis Capital”) further to which Oasis Capital purchased a senior secured convertible note (the “Oasis Note”), with an interest rate of 6 % per annum, having a face value of $ 5,265,000 for a total purchase price of $ 5,000,000 , secured by all assets of the Company. The Oasis Note, in the principal amount of $ 5,265,000 , bears interest at 6 % per annum and is due and payable 18 months from the date of issuance, unless sooner converted. The Oasis Note is convertible at the option of Oasis Capital into shares of the Company’s common stock at a conversion price (the “ Oasis Conversion Price”) which is the lesser of (i) $ 3.601 , and (ii) 90 % of the average of the two lowest volumed weighted average prices (“VWAPs’) during the five consecutive trading day period preceding the delivery of the notice of conversion. Oasis Capital is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $ 500,000 . If the Oasis Conversion Price set forth in any conversion notice is less than $ 3.00 per share, the Company, at its sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of its common stock. On October 1, 2021, the Company entered into an Amended and Restated Securities Purchase Agreement with FirstFire Global Opportunities Fund, LLC (“FirstFire”) and Oasis Capital further to which FirstFire purchased a Senior Secured Convertible Promissory Note (the “First FirstFire Note”), with an interest rate of 6 % per annum, having a face value of $ 1,575,000 for a total purchase price of $ 1,500,000 , secured by all assets of the Company. The First FirstFire Note, in the principal amount of $ 1,575,000 , bears interest at 6 % per annum and is due and payable 18 months from the date of issuance, unless sooner converted. The First FirstFire Note is convertible at the option of FirstFire into shares of the Company’s common stock at a conversion price (the “First FirstFire Conversion Price”) which is the lesser of (i) $ 3.952 , and (ii) 90 % of the average of the two lowest volume-weighted average prices during the five consecutive trading day period preceding the delivery of the notice of conversion. FirstFire is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $ 500,000 . If the First FirstFire Conversion Price set forth in any conversion notice is less than $ 3.00 per share, we, at our sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of the Company’s common stock. In connection with the issuance of the First FirstFire Note, the Company, Oasis Capital and FirstFire amended the Security Agreement to grant FirstFire a similar security interest in substantially all of our assets to secure the obligations under the First FirstFire Note. The Company, Oasis Capital and FirstFire also amended the Registrations Right Agreement (“RRA”) to join FirstFire as a party thereto and to include the shares of the Company’s common stock issuable under the First FirstFire Note as registrable securities. On November 16, 2021, the Company entered into a Securities Purchase Agreement with FirstFire further to which FirstFire purchased a Senior Secured Convertible Promissory Note (the “Second FirstFire Note” and together with the First FirstFire Note, the “FirstFire Notes”), with an interest rate of 6 % per annum, having a face value of $ 2,625,000 for a total purchase price of $ 2,500,000 . The Second FirstFire Note is convertible at the option of FirstFire into shares of the Company’s common stock at a conversion price (the “Second FirstFire Conversion Price”) which is the lesser of (i) $ 4.28 , and (ii) 90 % of the average of the two lowest volume-weighted average prices during the five consecutive trading day period preceding the delivery of the notice of conversion. FirstFire is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $ 500,000 . If the Second FirstFire Conversion Price set forth in any conversion notice is less than $ 3.29 per share, the Company, at its sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of its common stock. In addition, the Company entered into an amendment to the RRA, dated November 16, 2021. The RRA, as amended, provides that the Company shall file a registration statement registering the shares of common stock issuable upon conversion of the FirstFire Notes, and the Waiver Shares by November 30, 2021 and use best efforts to cause such registration statement to be effective with the SEC no later than 120 days from the date of the FirstFire Note. The Company filed such registration statement in December 2021 and it became effective in January 2022. The Company evaluated the terms of the conversion features of the Oasis and FirstFire Notes as noted above in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are not indexed to the Company’s common stock and that the conversion features meet the definition of a liability. The notes contain an indeterminate number of shares to settle with conversion options outside of the Company’s control. Therefore, the Company bifurcated the conversion feature and accounted for it as a separate derivative liability. Upon issuance of the Oasis and FirstFire Notes, the Company recognized a F-24 Table of Contents derivative liability at an aggregate fair value of $ 3,204,924 , which is recorded as a debt discount and will amortized over the life of the note. The following is a summary of the Oasis and FirstFire Notes for the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unamorized Convertible Note ​ ​ Principal ​ Debt Discount ​ Payable, Net Balance, December 31, 2020 ​ $ — ​ $ — ​ $ — Issuance of Oasis note, net of issuance costs ​ 5,265,000 ​ ( 715,000 ) ​ 4,550,000 Issuance of FirstFire First note, net of issuance costs ​ 1,575,000 ​ ( 315,000 ) ​ 1,260,000 Issuance of Second FirstFire note, net of issuance costs ​ 2,625,000 ​ ( 530,000 ) ​ 2,095,000 Derivative liability in connection with notes ​ — ​ ( 3,204,924 ) ​ ( 3,204,924 ) Amortization of debt discount ​ — ​ 801,538 ​ 801,538 Balance, December 31, 2021 ​ $ 9,465,000 ​ $ ( 3,963,386 ) ​ $ 5,501,614 ​ The original issue discount and issuance costs for the Oasis and FirstFire Notes totaled $ 1,560,000 , which were recognized as a debt discount and will be amortized over the life of the notes. During the year ended December 31, 2021, the Company amortized $ 801,538 of debt discount to interest expense. As of December 31, 2021, the net balance of the Oasis and FirstFire Notes, after unamortized debt discount of $ 3,963,386 , was $ 5,501,614 . Interest expense for the year ended December 31, 2021 was $ 148,613 . Loan Payable — PPP and SBA Loan In April 2020, the Company and Bailey each entered into a loan with a lender in an aggregate principal amount of $ 203,994 and $ 1,347,050 , respectively, pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In February 2021, Bailey entered into an 2nd Round PPP Loan for a principal amount of $ 1,347,050 . In May 2021, the Company entered into an 2 nd Round PPP loan for a principal amount of $ 204,000 .The PPP Loans are evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loans bear interest at a fixed rate of one percent ( 1 %) per annum, with the first six months of interest deferred, has an initial term of two years , and is unsecured and guaranteed by the Small Business Administration. The Company may apply to the Lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the applicable forgiveness period, calculated in accordance with the terms of the CARES Act. The Note provides for customary events of default including, among other things, cross-defaults on any other loan with the lender. The PPP Loans may be accelerated upon the occurrence of an event of default. The loan proceeds were used for payroll and other covered payments including general operating costs. In December 2021, the Company received notification that both its PPP Loans of $ 203,994 and $ 204,000 were approved for full forgiveness. As such, $ 407,994 was recorded as other non-operating income in the consolidated financial statements. The Bailey PPP Loans have been submitted for forgiveness and is expected to be forgiven in part based on current information available; however, formal forgiveness has not yet occurred as of the date of these financial statements. The CARES Act additionally extended COVID relief funding for qualified small businesses under the Economic Injury Disaster Loan (EIDL) assistance program. On June 25, 2020 the Company was notified that their EIDL application was approved by the Small Business Association (SBA). Per the terms of the EIDL agreement, the Company received total proceeds of $ 150,000 . The Loan matures in thirty years from the effective date of the Loan and has a fixed interest rate of 3.75 % per annum. As of December 31, 2021, Harper & Jones had an outstanding loan under the EIDL program of $ 148,900 . Loan Payable In May 2021, H&J entered into a loan payable with a bank and received proceeds of $ 75,000 . The line bears interest at 7.76 % and matures in December 2025. As of December 31, 2021, the outstanding balance was $ 72,269 . In December 2021, H&J entered into a merchant advance loan for a principal amount of $ 153,860 and received proceeds of $ 140,000 . The loan bears interest at 9.9 % and matures in June 2023. As of December 31, 2021, the outstanding balance was $ 149,962 . F-25 Table of Contents Note Payable – Related Party As of December 31, 2021, H&J had an outstanding note payable of $ 299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12 % per annum. Promissory Note Payable As noted in Note 4, the Company issued a promissory note in the principal amount of $ 4,500,000 to the Bailey Holders pursuant to the Bailey acquisition. In February 2021, the maturity date of the agreement was extended from December 31, 2020 to July 31, 2021. Upon the IPO closing in May 2021, the Company repaid $ 1,000,000 of the outstanding principal on this note in May 2021. In August 2021, the maturity date was further extended to December 31, 2022. The Company is required to make prepayments of $ 2,000,000 to $ 4,000,000 if the Company completes a secondary public offering. If a public offering is not consummated before October 31, 2021 and June 30, 2022, the Company shall repay 10 % of the outstanding principal at each date. The Company did not make any payments in October 2021, and the Company and the lender agreed to defer these payments to the maturity date of the loan, December 31, 2022. The note incurs interest at 12 % per annum. As of December 31, 3021, $ 3,500,000 remained outstanding. Interest expense was $ 494,000 and $ 472,500 for the years ended December 31, 2021 and 2020, respectively, all of which was accrued and unpaid as of December 31, 2021. In April 2021, the Company entered into a promissory note in the principal amount of $ 1,000,000 . The Company received $ 810,000 in proceeds, net of issuance costs and original issue discount. Additionally, the Company issued 120,482 warrants to the lender, which was recorded as a debt discount at the time of the loan. The fair value of the warrants and shares recorded as a debt discount was $ 73,958 . Upon the closing of the IPO, the note was repaid in full. The entire debt discount of $ 263,958 was amortized to interest expense upon repayment of the note. ​ NOTE 8: STOCKHOLDERS’ DEFICIT Amended and Restated Certificate of Incorporation On May 18, 2021, the Company filed a Sixth Amended and Restated Certificate of Incorporation (the “Restated Certificate”) with the Secretary of State of the State of Delaware in connection with the Company’s IPO. The Company’s board of directors and stockholders previously approved the Restated Certificate to be effective immediately prior to the closing of the IPO. The Restated Certificate amends and restates the Company’s amended and restated certificate of incorporation, as amended, in its entirety to, among other things: (i) increase the authorized number of shares of common stock to 200,000,000 shares; (ii) authorize 10,000,000 shares of preferred stock that may be issued from time to time by the Company’s board of directors in one or more series; (iii) provide that directors may be removed from office only for cause by the affirmative vote of the holders of at least 66 2/3% in voting power of the Company’s outstanding capital stock then entitled to vote in an election of directors; (iv) eliminate the ability of the Company’s stockholders to take action by written consent in lieu of a meeting; and (v) designate the Court of Chancery of the State of Delaware to be the sole and exclusive forum for certain legal actions and proceedings against the Company. The Restated Certificate also effected a 1-for-15.625 reverse stock split approved by the Company’s Board of Directors as described above. Convertible Preferred Stock Prior to the IPO, the Company designated its preferred stock as 20,714,518 shares of Series Seed Preferred Stock, 14,481,413 shares of Series A Preferred Stock, 20,000,000 shares of Series A-2 Preferred Stock, 2,000,000 shares of Series CF Preferred Stock, 18,867,925 shares of Series A-3 Preferred Stock, 20,754,717 shares of Series B Preferred Stock and with 936,144 shares of preferred stock undesignated. The preferred stock were subject to an optional conversion right, where the preferred stock is convertible into fully paid and non-assessable shares of common stock at a 15.625 :1 rate, with certain dilution protections. During the year ended December 31, 2020, the Company issued 809,294 shares of Series A-3 Preferred Stock at a price of $ 0.53 and 709,690 shares of Series CF Preferred Stock at price per share of $ 0.52 . In 2020, the also Company issued 20,754,717 shares of F-26 Table of Contents Series B Preferred Stock to the Bailey Holders pursuant to the Bailey acquisition at a price per share of $ 0.53 for a total fair value of $ 11,000,000 . See Note 4. As of December 31, 2020, 20,714,518 shares of Series Seed Preferred Stock were issued and outstanding , 5,654,072 shares of Series A Preferred Stock were issued and outstanding , 5,932,742 shares of Series A-2 Preferred Stock were issued and outstanding , 836,331 shares of Series CF Preferred Stock were issued and outstanding , 9,032,330 shares of Series A-3 Preferred Stock were issued and outstanding , and 20,754,717 shares Series B Preferred Stock, all respectively. Upon the closing of the Company’s IPO on May 18, 2021, all then-outstanding shares of Preferred Stock converted into an aggregate of 4,027,181 shares of common stock according to their terms. Common Stock The Company had 200,000,000 shares of common stock authorized with a par value of $ 0.0001 as of December 31, 2021. Common stockholders have voting rights of one vote per share . The voting, dividend, and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers, and preferences of preferred stockholders. Equity Line of Credit On August 27, 2021 (“Execution Date”), the Company entered into an equity line of credit arrangement with Oasis Capital. Specifically, the Company entered into an equity purchase agreement (the “EPA”), pursuant to which Oasis Capital is committed to purchase up to $ 17,500,000 of the Company’s common stock over the 24-month term of the EPA. The Company is not obligated to request any portion of the $ 17,500,000 . As of December 31, 2021, the Company has not drawn down any portion of this commitment, leaving the entire $ 17,500,000 available under the equity line of credit, and for which the Company has agreed, pursuant to a registration rights agreement (the “Oasis Equity RRA”), to register the shares of common stock issuable further to the equity line of credit with the SEC before any such issuances. The actual number of shares that the Company may issue pursuant to the equity line of credit is not determinable as it is based on the market price of the Company’s common stock from time to time and the number of shares desired to put to Oasis Capital. During the 24-month term of the investment agreement, the Company may request a drawdown on the equity line of credit by delivering a “put notice” to Oasis Capital stating the dollar amount of shares the Company intends to sell to Oasis Capital. The Company may make either an Option 1 or Option 2 request to Oasis Capital. Under Option 1, the purchase price Oasis Capital is required to pay for the shares is the lesser of (i) the lowest traded price of the common stock on the Nasdaq Capital Market on the Clearing Date, which is the date on which Oasis Capital receives the put shares as DWAC shares in its brokerage account, or (ii) the average of the three lowest closing sale prices of our Common Stock on the Nasdaq Capital Market during the period of twelve consecutive trading days immediately preceding the Clearing Date. The maximum amount the Company may request in an Option 1 request is $ 500,000 . Under Option 2, the purchase price Oasis Capital is required to pay for the shares is the lesser of (i) 93 % of the one (1) lowest traded price of our common stock on the Nasdaq Capital Market during the period of five (5) consecutive trading days immediately preceding the put date, or (ii) 93 % of the VWAP on the Clearing Date, or (iii) 93 % of the closing bid price of the Company’s common stock on the Nasdaq Capital Market on the Clearing Date. The maximum amount the Company may request in an Option 2 request is $ 2,000,000 . The Company is unable to drawdown on the EPA until the lowest traded price of the common stock in the five (5) trading days immediately preceding the respective put date exceeds $3.00. 2021 Transactions There were no shares of common stock issued during 2020. F-27 Table of Contents On May 13, 2021, the Company’s registration statement on Form S-1 relating to the IPO was declared effective by the SEC. In the IPO, which closed on May 18, 2021, the Company issued and sold 2,409,639 shares of common stock at a public offering price of $ 4.15 per share. Additionally, the Company issued warrants to purchase 2,771,084 shares, which includes 361,445 warrants sold upon the partial exercise of the over-allotment option. The aggregate net proceeds to the Company from the were $ 8.6 million after deducting underwriting discounts and commissions of $ 0.8 million and direct offering expenses of $ 0.6 million. Upon the closing of the Company’s IPO on May 18, 2021, all then-outstanding shares of Preferred Stock converted into an aggregate of 4,027,181 shares of common stock according to their terms. Upon closing of the Company’s IPO, the Company converted outstanding principal totaling $ 2,680,289 and certain accrued and unpaid interest of the Company’s convertible debt into an aggregate of 1,135,153 shares of common stock. See Note 7. Upon closing of the Company’s IPO, certain officers and directors converted balances due totaling $ 257,515 into 152,357 shares of common stock and recorded $ 233,184 in compensation expense for the shares issued in excess of accrued balances owed. See Note 9. In connection with the H&J and Stateside acquisitions, the Company issued 2,192,771 and 1,101,538 shares of common stock to the respective sellers. See Note 4. Pursuant to a consulting agreement, the Company issued 50,000 shares of common stock with a guaranteed equity value of $ 250,000 . In connection with the agreement, the Company recorded a contingent consideration liability of $ 67,000 . See Note 3. An additional 41,459 shares were issued upon settlement of the contingent liability. In May 2021, an aggregate of 31,881 warrants were exercised for shares of common stock for proceeds of $ 145,696 . In July 2021, warrant holders exercised 355,000 warrants for proceeds of $ 1,622,350 . On June 28, 2021, the Company’s underwriters purchased 361,445 shares of common stock at a public offering price of $ 4.15 per share pursuant to the exercise of the remaining portion of their over-allotment option. The Company received net proceeds of approximately $ 1.4 million after deducting underwriting discounts and commissions of $ 0.1 million. In connection with the execution of the Oasis Capital EPA, the Company issued Oasis Capital 126,354 shares of common stock (the “Commitment Shares”). Upon nine months from the Execution Date, Oasis may return a portion of the Commitment Shares. As of December 31, 2021, the Company recorded the fair value of the Commitment Shares of $ 367,696 as deferred offering costs as no financings under the related EPA have occurred. ​ In connection with the Second FirstFire Note, in November 2021 the Company issued (a) 30,000 additional shares of common stock to FirstFire and (b) 100,000 additional shares of common stock to Oasis Capital, as set forth in the waivers and consents (the “Waivers”), dated November 16, 2021 executed by each of FirstFire and Oasis Capital (collectively, the “Waiver Shares”). The Company recorded interest expense of $ 427,700 pertaining to the fair value of the Waiver Shares issued. ​ In December 2021, the Company issued 150,000 shares of common stock pursuant to a consulting agreement. The fair value of $ 339,000 was based on the value of the Company’s common stock on the date of grant and is included in general and administrative expenses in the consolidated statements of operations. NOTE 9: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable As of December 31 2021 and 2020, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaled $ 104,568 and $ 194,568 respectively, and accrued salary and expense reimbursements of $ 126,706 and $ 246,885 respectively, to current officers. Upon closing of the IPO, 25,080 shares of common stock were issued to directors as conversion of balances owed. The current CEO, Hil Davis, previously advanced funds to the Company for working capital. These prior advances were converted to a note payable totaling $ 115,000 . Upon closing of the IPO, 127,278 shares of common stock were issued to the CEO as conversion of the outstanding note payable and related accrued interest, accrued compensation and other consideration. As of a result of the F-28 Table of Contents transaction, the Company recorded an additional $ 233,184 in stock compensation expense, which is included in general and administrative expenses in the consolidated statements of operations. As of December 31, 2021, H&J had an outstanding note payable of $ 299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12 % per annum. ​ NOTE 10: SHARE-BASED PAYMENTS Common Stock Warrants During the year ended December 31, 2020, the Company granted 493,462 common stock warrants to the venture debt lender with an exercise price of $ 2.50 per share. The warrants were valued at $ 184,191 using the below range of inputs using the Black-Scholes model. During the Company’s Series A-3 Preferred Stock raise, the Company granted 2,603 common stock warrants at an exercise price of $ 8.28 per share to a funding platform in the year ended December 31, 2020. The warrants are fully vested with an exercise price of $ 8.28 per share, expiring in five years . The warrants contain a put option for the Company to redeem the warrants in cash in a change-in-control transaction, equal to the Black-Scholes value immediately prior to the fundamental event. The warrants also include other down-round and anti-dilution features if shares of common stock are issued or granted at a lesser value than the strike price which may also require additional warrants to be issued, such that the aggregate value of the strike price remains the same. As the warrants include a put option and embody an obligation for the Company to redeem these warrants in cash upon a contingent event, they are presented as a liability in the consolidated balance sheets. The volatility rate of 100 % was used as it is a floor volatility as defined by the warrants. As of December 31, 2021 and 2020, the Company remeasured the fair value of the warrants to be $ 18,223 and $ 6,265 , respectively, and recorded a gain (loss) due to the change in fair value of ($ 11,958 ) and $ 2,353 , respectively. ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 - 100 % Expected Life (years) 5 - 10 ​ ​ For valuing the warrants noted above, the Company uses the same assumptions used for valuing employee options as noted below in the Stock Plan section, with the exception of the useful life which is either the contractual life or the estimated life. In connection with the Regulation D offerings in 2020, the Company issued 512 warrants to purchase common stock in connection with the notes at an exercise price of $ 2.50 per share. The issuance costs and warrants are recognized as a debt discount and will be amortized over the life of the notes. In connection with the IPO, the Company issued 2,409,639 warrants and an additional 361,445 warrants to purchase common stock per the over-allotment option. Each warrant will have an exercise price of $ 4.57 per share (equal to 110 % of the offering price of the common stock), will be exercisable upon issuance and will expire five years from issuance. On May 13, 2021, pursuant to the IPO Underwriting Agreement, the Company issued warrants to the underwriters to purchase up to an aggregate of 120,482 shares of common stock with an exercise price of $ 5.19 per share. The warrants may be exercised beginning on November 13, 2021 and will expire five years from issuance. In connection with the Company’s April 2021 note financing, the Company issued warrants to the lender to purchase up to 120,482 shares of common stock. The warrants have an exercise price of $ 4.15 per share and are exercisable immediately after issuance. In May 2021, an aggregate of 31,881 warrants were exercised for shares of common stock for proceeds of $ 145,696 . In July 2021, warrant holders exercised 355,000 warrants for proceeds of $ 1,622,350 . F-29 Table of Contents A summary of information related to common stock warrants for the year ended December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Common Weighted ​ ​ Stock ​ Average ​ ​ Warrants ​ Exercise Price Outstanding - December 31, 2019 417,962 ​ $ 2.81 Granted 496,577 ​ 2.52 Exercised ​ — ​ ​ — Forfeited ​ — ​ ​ — Outstanding - December 31, 2020 ​ 914,539 ​ $ 2.66 Granted ​ 3,012,048 ​ ​ 4.58 Conversion of preferred stock warrants upon IPO ​ 51,642 ​ ​ 7.66 Exercised ( 386,881 ) ​ 4.57 Forfeited ( 11,232 ) ​ 7.66 Outstanding - December 31, 2021 3,580,116 ​ $ 4.12 Exercisable at December 31, 2020 ​ 914,539 ​ $ 2.66 Exercisable at December 31, 2021 3,580,116 ​ $ 4.12 ​ Preferred Stock Warrants A summary of information related to preferred stock warrants for the year ended December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Preferred Weighted ​ ​ Stock ​ Average ​ ​ Warrants ​ Exercise Price Outstanding - December 31, 2019 806,903 ​ $ 0.49 Outstanding - December 31, 2020 ​ 806,903 ​ $ 0.49 Converted to common stock warrants upon IPO ​ ( 806,903 ) ​ ​ 0.49 Exercised — ​ — Forfeited — ​ — Outstanding – December 31, 2021 — ​ $ — Exercisable at December 31, 2021 — ​ $ — ​ Upon the IPO, all outstanding preferred stock warrants converted into common stock warrants at a ratio of 15.625 :1. ​ Stock Options 2020 Incentive Stock Plan The Company has adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 3,300,000 shares of the Company’s common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan. The 2020 Plan administrator may grant awards to any employee, director, consultant or other person providing services to us or our affiliates. During 2021, 2,732,000 options were granted to executives and directors at an exercise price from $ 3.85 to $ 4.15 per share. As of December 31, 2021, 568,000 options were available for future issuance. ​ 2013 Incentive Stock Plan ​ The Company has adopted the 2013 Stock Plan, as amended and restated (the “Plan”), which provides for the grant of shares of stock options, stock appreciation rights, and stock awards (performance shares) to employees, non-employee directors, and non-employee consultants. The number of shares authorized by the Plan was 1,196,356 shares as December 31, 2021 and 2020. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of the grant and generally have a term often years. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award. Stock options comprise all of the awards granted since the Plan’s inception. Shares available for grant under the Plan amounted to 33,253 and as of December 31, 2021 and 2020. Vesting generally occurs over a period of immediately to four years . ​ F-30 Table of Contents A summary of information related to stock options under our 2013 and 2020 Stock Plan for the years ended December 31, 2021 and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Options ​ Exercise Price Outstanding - December 31, 2019 1,084,215 ​ $ 2.50 Granted 91,688 ​ 0.94 Exercised — ​ — Forfeited ( 12,800 ) ​ $ 3.28 Outstanding - December 31, 2020 ​ 1,163,103 ​ $ 2.34 Granted ​ 2,732,000 ​ ​ 4.15 Exercised ​ — ​ ​ — Forfeited ​ — ​ ​ — Outstanding - December 31, 2021 3,895,103 ​ $ 3.62 Exercisable at December 31, 2020 ​ 880,955 ​ $ 2.34 Exercisable at December 31, 2021 3,164,624 ​ $ 3.59 ​ ​ ​ ​ ​ ​ Weighted average duration (years) to expiration of outstanding options at December 31, 2021 8.00 ​ ​ The assumptions utilized for option grants during the years ended December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2021 ​ 2020 Risk Free Interest Rate 0.34 % - 0.85 % 0.42 % - 0.51 % Expected Dividend Yield 0.00 % 0.00 % Expected Volatility 58.00 % 58.00 % Expected Life (years) 5.18 6.25 ​ ​ The total grant-date fair value of the options granted during the years ended December 31, 2021 was $ 4,696,605 and $ 46,253 , respectively. During the year ended December 31, 2021 and 2020, $ 3,325,897 and $ 144,775 was recorded to general and administrative expenses, and $ 551,948 and $ 0 , was recorded to sales and marketing expense in the consolidated statements of operations, all respectively. Total unrecognized compensation cost related to non-vested stock option awards as of December 31, 2021 amounted to $ 1,057,036 and will be recognized over a weighted average period of 2.28 years. ​ NOTE 11: LEASE OBLIGATIONS In April 2021, the Company entered into a lease agreement for operating space in Los Angeles, California. The lease expires in June 2023 and has monthly base rent payments of $ 17,257 . The lease required a $ 19,500 deposit. Bailey leases office and warehouse facilities in Vernon, California. The lease expires in February 2023 and has monthly base rent payments of $ 32,921 per month. H&J leases office and showroom facilities in Dallas and Houston, Texas, and New Orleans, Louisiana. The leases expire at various dates through June 2022 with base rents ranging from $ 3,400 to $ 6,500 . Stateside leases office and showroom facilities in Los Angeles, California. The leases expire at various dates through November 2022 with base rents ranging from $ 3,100 to $ 9,000 . Total rent expense for the years ended December 31, 2021 was $ 816,790 and $ 541,146 , respectively. F-31 Table of Contents NOTE 12: CONTINGENCIES On February 28, 2020, a Company vendor filed a lawsuit against the Company’s non-payment of trade payables totaling $ 123,000 . Such amounts, including expected interest, are included in accounts payable, net of payments made to date, in the consolidated balance sheets and the Company does not believe it is probable that losses in excess of such trade payables will be incurred.The matter was settled and final payment was made in full in January 2022. On March 25, 2020, a Bailey’s product vendor filed a lawsuit against Bailey for non-payment of trade payables totaling $ 492,390 . Approximately the same amount was held in accounts payable for this vendor in the accompanying consolidated balance sheets and the Company does not believe it is probable that losses in excess of such trade payables will be incurred. The Company and product vendor have entered into a settlement, which will require the Company make ten monthly payments of approximately $ 37,000 , starting in May 2021. Upon completion of the payment schedule, any remaining amounts will be forgiven. If the Company fails to meet its obligations based on the prescribed time frame, the full amount will be due with interest, less payments made. On December 21, 2020, a Company investor filed a lawsuit against DBG for reimbursement of their investment totaling $ 100,000 . Claimed amounts are included in short-term convertible note payable in the accompanying consolidated balance sheets and the Company does not believe it is probable that losses in excess of such short-term note payable will be incurred. The Company is actively working to resolve this matter. In August 2020 and March 2021, two lawsuits were filed against Bailey’s by third-party’s related to prior services rendered. The claims (including fines, fees, and legal expenses) total an aggregate of $ 96,900 . One matter was settled in February 2022 and the other matter is being actively worked on to achieve settlement. On September 24, 2020 a Bailey’s product vendor filed a lawsuit against Bailey’s non-payment of trade payables totaling approximately $ 481,000 and additional damages of approximately $ 296,000 . Claimed amounts for trade payables are included in accounts payable in the accompanying consolidated balance sheets, net of payments made. In December 2021, the Company reached a settlement; however, the settlement terms were not met and the Company received a judgement of $ 469,000 . All claims above, to the extent management believes it will be liable, have been included in accounts payable and accrued expenses and other liabilities in the consolidated balance sheet as of December 31, 2021. Except as may be set forth above the Company is not a party to any legal proceedings, and the Company is not aware of any claims or actions pending or threatened against us. In the future, the Company might from time to time become involved in litigation relating to claims arising from its ordinary course of business, the resolution of which the Company does not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. ​ NOTE 13: INCOME TAXES Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets using accelerated depreciation methods for income tax purposes, share-based compensation expense, and for net operating loss carryforwards. As of December 31, 2021 and 2020, the Company had net deferred tax assets before valuation allowance of $ 13,103,268 and $ 9,128,614 , respectively. The following table presents the deferred tax assets and liabilities by source: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Deferred tax assets: ​ ​ ​ ​ Net operating loss carryforwards ​ $ 13,108,371 ​ $ 9,134,447 Stock-based compensation ​ — ​ 40,467 Deferred tax liabilities: ​ ​ Depreciation timing differences ​ ( 5,103 ) ​ ( 5,103 ) Unamortized debt issuance costs ​ — ​ ( 41,198 ) Valuation allowance ​ ( 13,103,268 ) ​ ( 9,128,614 ) Net deferred tax assets ​ $ — ​ $ — ​ F-32 Table of Contents The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due, cumulative losses through December 31, 2021, and no history of generating taxable income. Therefore, valuation allowances of $ 13,103,268 and $ 9,128,614 were recorded as of December 31, 2021 and 2020, respectively. Valuation allowance increased by $ 3,974,654 and $ 3,081,497 during the years ended December 31, 2021 and 2020, respectively. Deferred tax assets were calculated using the Company’s combined effective tax rate, which it estimated to be approximately 28.0 %. The effective rate is reduced to 0 % for 2021 and 2020 due to the full valuation allowance on its net deferred tax assets. The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. At December 31, 2021 and 2020, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of approximately $ 46,896,000 and $ 32,680,000 , for which losses from 2018 forward can be carried forward indefinitely. The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense. The Company is not presently subject to any income tax audit in any taxing jurisdiction, though all tax years from 2018 on remain open to examination. The Company recorded a tax benefit of $1,100,200 for the year ended December 31, 2021 related to a full release of its valuation allowance pertaining to the acquisition of H&J (see Note 4). The acquisition of H&J created a deferred tax liability position, and those deferred tax liabilities can be used as a source of income for the Company’s existing deferred tax assets. A $ 13,641 provision for income taxes has been recognized for the year ended December 31, 2020. ​ NOTE 14: SUBSEQUENT EVENTS ​ On January 18, 2022 the Company entered into entered into a Membership Interest Purchase Agreement (the “Agreement”) with Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (“Sellers”), Sunnyside, LLC, a California limited liability company (“Sundry”), and George Levy as the Sellers’ representative, pursuant to which the Company will acquire all of the issued and outstanding membership interests of Sundry (such transaction, the “Acquisition”). Pursuant to the Agreement, Sellers, as the holders of all of the outstanding membership interests of Sundry, will exchange all of such membership interests for (i) $ 7.5 million of shares of the Company’s common stock at the volume-weighted average (rounded to the nearest $ 0.0001 ) of the closing price of the Company’s common stock on the Nasdaq Capital Market (“NasdaqCM”) during the thirty ( 30 ) trading day period immediately prior to the closing, but in no event at a price less than $ 1.59 ; and (ii) $ 34.0 million in cash, $ 20.0 million of which will be paid at the closing and the balance of which will be evidenced by promissory notes due December 31, 2022 (“Seller Notes”); provided, however, that if the audited aggregate net revenue of Sundry for the year ended December 31, 2021 (the “Audited Net Revenue”) times 1.5 is greater than $ 34.0 million, the Company will pay the difference in cash pro rata to the Sellers and if the Audited Net Revenue times 1.5 is less than $ 34.0 million, the Seller Notes will be reduced pro rata for such difference. A portion of the purchase price will be paid to certain employees of Sundry who have a contractual right to receive a portion of the consideration payable in the Acquisition (“Payees”). Of the $ 34.0 million in cash payable in the Acquisition, $ 2.0 million will be held in escrow to cover possible indemnification claims. If the Seller Notes, plus all unpaid interest thereunder, are not repaid in full on or prior to March 31, 2022, then on March 31, 2022, the Company will issue an additional $ 2.5 million of shares of common stock pro rata to the Sellers and the Payees. If the Seller Notes, plus all unpaid interest thereunder remain outstanding after March 31, 2022 and are not repaid in full on or prior to June 30, 2022, then on June 30, 2022, the Company will issue an additional $ 2.5 million of shares of common stock pro rata to the Sellers and the Payees. If the Seller Notes, plus all unpaid interest thereunder remain outstanding after June 30, 2022 and are not repaid in full on or prior to September 30, 2022, then on September 30, 2022, the Company will issue an additional $ 2.5 million of shares of common stock pro rata to the Sellers and the Payees. Any shares issued on either March 31, June 30 or September 30, 2022 shall be issued at the closing price of the Company’s common stock as quoted on the NasdaqCM as of the date immediately preceding the date of issuance but in no event at a price less than $ 1.59 . F-33 Table of Contents The Agreement contains customary representations, warranties and covenants by the Company, the Sellers and Sundry. The closing of the Acquisition is subject to customary closing conditions and financing and there is no assurance that we will be able to complete the Acquisition. In February and March 2022, Oasis converted an aggregate of $ 482,646 in outstanding principal pursuant to the Oasis Note into 473,901 shares of common stock. In March 2022, FirstFire converted an aggregate of $ 406,112 in outstanding principal pursuant to the FirstFire Notes into 400,000 shares of common stock. ​ ​ F-34 Table of Contents ​ F-35