What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-04-17 compared with 2022-03-31 · 38 added, 16 removed, 248 unchanged (18% of the section changed)

Recent Development

We have been involved in a dispute with the former owners of H&J regarding our obligation to “true up” their ownership interest in our company further to that membership interest purchase agreement dated May 10, 2021 whereby we acquired all of the outstanding membership interests of H&J (as amended, the “H&J Purchase Agreement”).

Further to the H&J Purchase Agreement, we agreed that if, at May 18, 2022, the one year anniversary of the closing date of our initial public offering, the product of the number of shares of our common stock issued at the closing of such acquisition multiplied by the average closing price per share of our shares of common stock

as quoted on the NasdaqCM for the thirty (30) day trading period immediately preceding such date plus the gross proceeds, if any, of shares of our stock issued to such sellers and sold by them during the one year period from the closing date of the offering does not exceed the sum of $9.1 million, less the value of any shares of common stock cancelled further to any indemnification claims or post-closing adjustments under the H&J Purchase Agreement, then we shall issue to the subject sellers an additional aggregate number of shares of common stock equal to any such valuation shortfall at a per share price equal to the then closing price per share of our common stock as quoted on the NasdaqCM.

We did not honor our obligation to issue such shares and the former owner of H&J have claimed that they were damaged as a result.

As part of a proposed settlement with such holders, we have tentatively agreed to the following:

(i) to transfer all membership interests of H&J back to the original owners, (ii) to pay such owners the sum of $229,000, (iii) issue the former owners of H&J an aggregate of $1,400,000 worth of our common stock to be issued on May 16, 2023 based on the lower of (a) the stock closing price per share on May 15, 2023, and (b) the average common stock closing price based on the average of the 5 trading days preceding May 16, 2023, with the closing price on May 9, 2023.

Such tentative terms are to be memorialized in definitive purchase agreements and as such there is no assurance that such arrangements will be finalized.

Digital Brands Group is a curated collection of lifestyle brands that offers a variety of apparel products through direct-to-consumer and wholesale distribution.

3 unchanged sentences

As a result, we have been able to realize operational efficiencies and continue to identify additional cost saving opportunities to scale our brands and overall portfolio.

Our portfolio consists of four significant brands that leverage our three channels:

Our portfolio currently consists of four brands that leverage our three channels:

our websites, wholesale and our own stores.

10 unchanged sentences

Stateside is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

● ACE STUDIOS offers stylish high-quality garments without the luxury retail markup valuing customer experience over labels.

ACE STUDIOS is primarily a digital direct-to-consumer brand.

● Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products.

Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.

Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

We believe that successful apparel brands sell in all revenue channels.

21 unchanged sentences

We consolidate marketing and tech contracts as we have done with Bailey’s contracts, which has provided significant cost savings.

We review the fabric mills and factories used by each brand to see if we can consolidate or cross utilize these mills and factories, which

will drive increased volumes, lower production costs and higher gross margins.

As an example, we are utilizing DSTLD’s denim mills and factories to develop denim products for Bailey’s and Harper & Jones.

We review the fabric mills and factories used by each brand to see if we can consolidate or cross utilize these mills and factories, which will drive increased volumes, lower production costs and higher gross margins.

We are also consolidating production into a few factories in Europe from China and the U.S., which lowers our average production cost per unit.

25 unchanged sentences

Their T-shirt prices range from $68 to $94, their other tops range from $98 to $130, and their bottoms from $80 to $144.

Sunnyside — Brand Summary

We acquired Sundry in December 2022.

Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products.

The products are designed and mostly produced in Los Angeles from the finest fabrics.

The majority of the knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles, with some sweaters made overseas.

Sundry is known for delivering high quality novelty and resort style T-shirts, tops and bottoms.

Sundry is mostly a wholesale brand with meaningful online revenue.

Their T-shirt prices range from $68 to $98, their other tops range from $98 to $198, and their bottoms from $80 to $228.

With our acquisition of Sundry, we view the following as tangible near-term growth opportunities:

● Increase online revenues significantly as we cross market their customer base with the customer bases from our other brands, especially on the Bailey Shop.

● Increase gross margin dollars by updating the product line and driving increased volume through the wholesale and online channels.

● Launch a new product category for 2024 in women’s athleisure.

We believe athleisure is one of the largest product categories in womenswear, with high repeat spend and closet share.

DSTLD — Brand Summary

27 unchanged sentences

Since all the product is custom made, there is no old stock to sell off.

Stateside products are distributed through wholesale and direct-to-consumer channels.

Stateside and Sundry products are distributed through wholesale and direct-to-consumer channels includes premium department stores and national chains, select independent boutiques and third-party online stores.

DSTLD products have historically been sold solely direct-to-consumer, via our website.

11 unchanged sentences

Old season stock is sold through selected off- price retailers, with additional sales generated through specifically cut product for select off-price retailers.

All of our DSTLD, Bailey and Stateside sellable product is stored at our corporate warehouse and distribution center in Vernon, CA, which also houses our corporate office.

All of our DSTLD, Bailey, Stateside and Sundry sellable products are stored at our corporate warehouse and distribution center in Vernon, CA, which also houses our corporate office.

In addition to storing product, we also receive and process new product deliveries, process and ship outbound orders, and process and ship customer returns in this same facility.

17 unchanged sentences

Our product quality and sustainability team partners with leading inspection and verification firms to closely monitor each supplier’s compliance with applicable laws and our vendor code of ethics.

Currently, our Bailey, DSTLD and Stateside products are shipped from our suppliers to our distribution center in Vernon, CA which currently handles all our warehousing, fulfillment, outbound shipping and returns processing.

Currently, our Bailey, DSTLD and Stateside and Sundry products are shipped from our suppliers to our distribution center in Los Angeles, CA which currently handles all our warehousing, fulfillment, outbound shipping and returns processing.

Our Sundry products will be shipped from our suppliers to our distribution center in Los Angeles, CA which will handle all our warehousing, fulfillment, outbound shipping and returns processing.

In 2023, we will review maintaining our own distribution centers versus using a third-party solution.

For Harper & Jones, finished product is shipped to either the Company’s headquarters in Dallas Texas, or directly to one of their showroom locations.

Product Suppliers:

39 unchanged sentences

We believe this can be the most personalized customer communication channel for our brands, and therefore should continue to be one of our highest performing channels.

We use an email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails, with the main goal of

driving increased site traffic and purchases.

We use an email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails,

with the main goal of driving increased site traffic and purchases.

We maintain a database through which we track and utilize key metrics such as customer acquisition cost, lifetime value per customer, cost per impression and cost per click.

15 unchanged sentences

We expect our pop ups to generate a small to break even profit, which is more than offset by any potential marketing costs to acquire those customers in another marketing channel.

As we grow the entire DBG portfolio, we will test “pop up” locations for specific brands, and also develop a multi-line pop up that incorporate our other brands into the “pop-up”.

As we grow the entire DBG portfolio, we will test “pop up” locations for specific brands, and also develop a multi-line pop up that incorporates our other brands into the “pop-up”.

We believe this strategy should be cost effective given the number of store closures from COVID-19.

5 unchanged sentences

Our focus is not on the size of an account, but on creating organic relationships with influencers who are excited to tell our story.

While most of our collaborations are compensated solely through product gifts, we also offer an affiliate commission of up to 20% through the influencer platform reward Style, which is the parent company of LiketoKnow.it, the first influencer platform to make Instagram shoppable (users receive an email directly to their inbox with complete outfit details when they “Like” a photo with LiketoKnow.it technology).

While most of our collaborations are compensated solely through product gifts, we also offer an affiliate commission of up to 20% through the influencer platform reward Style, which is the parent company of LiketoKnow.it, the first influencer platform to make Instagram shopable (users receive an email directly to their inbox with complete outfit details when they “Like” a photo with LiketoKnow.it technology).

Retail Locations

9 unchanged sentences

We may utilize outside agencies from time to time.

We plan to visit the major fashion, tech, and news outlets in New York City on a quarterly basis to keep them up to date

on our latest launches and any relevant company developments.

We plan to visit the major fashion, tech, and news outlets in New York City on a quarterly basis to keep them up to date on our latest launches and any relevant company developments.

We also plan to host local Los Angeles press at our office space.

8 unchanged sentences

Customers will earn reward points that can be used to purchase products.

We will also use loyalty point multipliers to create customer purchases, especially, which is a strategy beauty retailers have effectively used.

We will also use loyalty point multipliers to create customer purchases, especially, which is a strategy beauty retailer have effectively used.

Our business depends on our ability to create consumer demand for our brands and products.

31 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business