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, 2023. 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 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. 50 Table of Contents ● We have made an assessment on significant judgments and estimates, including impairment of long-lived assets and inventory valuation. We plan to take the steps as noted above to have the proper resources to conduct proper analyses on areas requiring judgments and estimates. 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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION N o n e . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 51 Table of Contents 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, 2023. ​ ​ Name Age Position Executive Officers and Directors ​ ​ ​ ​ John Hilburn Davis IV ​ 51 ​ President and Chief Executive Officer Reid Yeoman ​ 41 ​ Chief Financial Officer Mark T. Lynn ​ 39 ​ Director Trevor Pettennude ​ 56 ​ Director Jameeka Aaron ​ 43 ​ Director Huong “Lucy” Doan ​ 54 ​ 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. 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 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 WINC, 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. 52 Table of Contents 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, 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. 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; 53 Table of Contents ● 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; ● 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. 54 Table of Contents 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. 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 2023, 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 2023. 55 Table of Contents 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, 2023 and 2022. 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 ​ Bonus ​ Awards ​ Awards ​ Total John “Hil” Davis ​ 2023 ​ $ 249,000 ​ $ — ​ $ — ​ $ — ​ $ 249,000 President and Chief Executive Officer 2022 ​ $ 350,000 ​ $ — ​ $ — ​ $ — ​ $ 350,000 Reid Yeoman 2023 ​ $ 250,000 (1) $ — ​ $ — ​ $ — ​ $ 250,000 Chief Financial Officer 2022 ​ $ 250,000 ​ $ — ​ $ — ​ $ — ​ $ 250,000 (1) This amount represents the amount of salary Mr. Yeoman was entitled to receive under his agreement with the Company. Such amount has not yet been paid to Mr. Yeoman. Executive Officer Outstanding Equity Awards at Fiscal Year-End The following table provides certain information concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive officers that were outstanding as of December 31, 2023. The number of shares of common stock referred to in this “Executive Compensation” section gives effect to the one-for-100 reverse stock split that we effectuated on November 3, 2022, unless the context clearly indicates otherwise. On August 21, 2023, the Board of Directors approved a one - for - 25 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Option Awards ​ ​ ​ Stock Awards ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity ​ Incentive ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incentive ​ Plan ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Plan ​ Awards: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Awards: ​ Market or ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ Payout ​ ​ ​ ​ ​ ​ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of ​ Value ​ ​ ​ ​ ​ ​ Incentive ​ ​ ​ ​ ​ ​ ​ ​ Market ​ Unearned ​ of ​ ​ ​ ​ ​ ​ Plan ​ ​ ​ ​ ​ ​ Number of ​ Value of ​ Shares, ​ Unearned ​ ​ ​ ​ ​ ​ Awards: ​ ​ ​ ​ ​ ​ Shares or ​ Shares ​ Units or ​ Shares, ​ ​ Number of ​ Number of ​ Number of ​ ​ ​ ​ ​ ​ Units of ​ or ​ Other ​ Units or ​ ​ Securities ​ Securities ​ Securities ​ ​ ​ ​ ​ ​ Stock ​ Units of ​ Rights ​ Other ​ ​ Underlying ​ Underlying ​ Underlying ​ ​ ​ ​ ​ ​ That Have ​ Stock That ​ That ​ Rights ​ ​ Unexercised ​ Unexercised ​ Unexercised ​ Option Exercise ​ Option ​ Not ​ Have ​ Have ​ That Have ​ ​ Options(#) ​ Options(#) ​ Unearned ​ Price ​ Expiration ​ Vested ​ Not ​ Not ​ Not Name ​ Exercisable ​ Unexercisable ​ Options (#) ​ ($) ​ Date ​ (#) ​ Vested ​ Vested ​ Vested John “Hil” Davis 858 756 101 $ 10,547 May-31 — — — — Reid Yeoman 70 54 36 ​ $ 9,908 May-31 — — — — ​ 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- 56 Table of Contents 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 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 interests of these directors with our stockholders. On the effective date of the previous offerings, each of our director nominees was 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 1,320 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, 1,093 grants (as adjusted for the Reverse Stock Split) have been made under the 2020 Plan and 227 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. 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 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 57 Table of Contents 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. 58 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. 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 outstanding 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. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The table below sets forth information regarding the projected beneficial ownership of our common stock as of April [•], 2024 by the following individuals or groups: ● each person or entity who is known by us to own beneficially more than 5% of our outstanding stock; ● each of our executive officers; ● each of our directors and director nominees; and ● 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. 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 59 Table of Contents 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. The applicable percentage ownership in the following table is based on 1,698,568 shares of our common stock outstanding as of April 15, 2024. After giving effect to the exercise of the Pre-Funded Warrants and excludes as of such date: 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 78701. ​ ​ ​ ​ ​ ​ Number of ​ ​ Shares ​ Percentage of ​ ​ Beneficially ​ Shares Name of Beneficial Owner ​ Owned ​ Outstanding Executive Officers and Directors ​ ​ ​ ​ John “Hil” Davis(1) 908 * Reid Yeoman(2) 46 * Mark Lynn(3) 134 * Trevor Pettenude(4) 33 * Jameeka Aaron(5) 6 * Huong “Lucy” Doan(6) 8 * All executive officers, directors and director nominees as a group (6 persons) (7) 1,135 * * Less than one percent. (1) Represents options exercisable at $1,000 per share. (2) Represents options to acquire up to 38 shares of common stock, exercisable at $1,000 per share and options to acquire up to 8 shares of common stock, exercisable at $8,200 per share. (3) Includes options to acquire up to 128 shares of common stock exercisable between $3,900 and $8,200 per share. (4) Includes options to acquire up to 30 shares of common stock exercisable between $3,900 and $8,200 per share. (5) Represents options exercisable at $1,000 per share. (6) Represents options exercisable at $8,900 per share. (7) Includes options to acquire up to 1,076 shares of common stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE As of December 31, 2023 and 2022, the Company made net repayments for amounts due to related parties totaling $130,205 and $170,000, respectively. As of December 31, 2023 and December 31, 2022, amounts due to related parties were $400,012 and $556,217, respectively. The advances are unsecured, non-interest bearing and due on demand. Amounts due to related parties consist of current and former executives, and a board member. As of December 31, 2023 and 2022, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $104,568 and $104,568, respectively, and accrued salary and expense reimbursements of $87,221 and $100,649, respectively, to current officers. In October 2022, the Company received advances from a director, Trevor Pettennude, totaling $325,000. The advances are unsecured, non-interest bearing and due on demand. As of December 31, 2023 and 2022, the amounts $175,000 and $325,000, respectively, were outstanding . 60 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 Macias Gini & O’Connell LLP and dbb mckennon , in the fiscal years ended December 31, 2023 and 2022, respectively. All fees described below were approved by the Board: ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended ​ ​ December 31, ​ ​ 2023 2022 Audit fees (1) ​ $ 351,099 ​ $ 252,000 Audit related fees ​ — ​ 90,810 Tax fees ​ — ​ — All other fees (2) ​ 21,160 ​ 18,488 Total fees ​ $ 372,259 ​ $ 361,298 (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. 61 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 62 Table of Contents Exhibit 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 12, 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 SEC on January 20, 2022). 2.7 ​ Amended and Restated Membership Interest Purchase Agreement, dated June 17, 2022, by and among Digital Brands Group, Inc. and Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (incorporated by reference to Exhibit 2.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on June 23, 2022). 2.8 ​ Second Amended and Restated Membership Interest Purchase Agreement, dated October 13, 2022, by and among Digital Brands Group, Inc. and Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (incorporated by reference to Exhibit 2.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 18, 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 ​ Certificate of Designation of Series A Preferred Stock, dated August 31, 2022 (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 31, 2022). 3.3 ​ Certificate of Designation of Series A Convertible Preferred Stock, dated September 29, 2022 (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 5, 2022). 3.4 ​ Certificate of Correction of Series A Convertible Preferred Stock, dated October 3, 2022 (incorporated by reference to Exhibit 3.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 5, 2022). 3.5 ​ Certificate of Amendment of Certificate of Incorporation of Digital Brands Group, Inc. dated October 13, 2022 (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 18, 2022). 3.6 ​ Certificate of Amendment of Certificate of Incorporation of Digital Brands Group, Inc. dated October 21, 2022 (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 26, 2022). 3.7 ​ 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). 3.8 ​ Amendment No. 1 to the Amended and Restated Bylaws of Digital Brands Group, Inc., as amended (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 12, 2022). 3.9 ​ Amendment No. 2 to the Amended and Restated Bylaws of Digital Brands Group, Inc., as amended (incorporated by reference to Exhibit 3.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 31, 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). 63 Table of Contents Exhibit Number Description ​ ​ ​ 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). 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 Promissory Note, dated July 22, 2022, by Digital Brands Group, Inc. in favor each Investor (incorporated by reference to Exhibit 10.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on July 27, 2022). 4.6 ​ Form of Warrant, dated July 22, 2022, by Digital Brands Group, Inc. in favor each Investor (incorporated by reference to Exhibit 10.3 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on July 27, 2022). 4.7 ​ Form of Promissory Note, dated July 28, 2022, by Digital Brands Group, Inc. in favor the New Investor (incorporated by reference to Exhibit 10.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 2, 2022). 4.8 ​ Form of Warrant, dated July 28, 2022, by Digital Brands Group, Inc. in favor the New Investor (incorporated by reference to Exhibit 10.3 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 2, 2022). 4.9 ​ Form of Promissory Notes issued to each of the Sellers, Jenny Murphy and Elodie Crichi (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 18, 2022). 4.10 ​ Registration Rights Agreement, dated August 30, 2021, by and between Digital Brands Group, Inc. and Moise Emquies (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 31, 2021). 4.11 ​ Registration Rights Agreement, dated August 27, 2021, by and between Digital Brands Group, Inc. and Oasis Capital, LLC (Note) (incorporated by reference to Exhibit 4.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 31, 2021). 4.12 ​ Registration Rights Agreement, dated August 27, 2021, by and between Digital Brands Group, Inc. and Oasis Capital, LLC (ELOC) (incorporated by reference to Exhibit 4.3 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 31, 2021). 4.13 ​ Joinder and Amendment to Registration Rights 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 4.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 6, 2021). 4.14 ​ 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 4.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on November 19, 2021). 4.15 ​ Registration Rights Agreement, dated April 8, 2022, by and among Digital Brands Group, Inc. and certain Investors (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on April 12, 2022). 4.16 ​ Registration Rights Agreement, dated July 22, 2022, by and among Digital Brands Group, Inc. and certain Investors (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on July 27, 2022). 4.17 ​ Registration Rights Agreement, dated September 29, 2022, by and among Digital Brands Group, Inc. and the Investor (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 5, 2022). 4.18 ​ Underwriter’s Warrants issued to Alexander Capital L.P. on May 5, 2022 (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on May 10, 2022) 4.19 ​ Underwriter’s Warrants issued to Revere Securities, LLC (incorporated by reference to Exhibit 4.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on May 10, 2022) 4.20 ​ Form of Class B Warrant (incorporated by reference to Exhibit 4.27 to the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on November 29, 2022 (File no. 333-268213)). 4.21 ​ Form of Class C Warrant (incorporated by reference to Exhibit 4.28 to the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on November 29, 2022 (File no. 333-268213)). 4.22 ​ Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.29 to the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on November 29, 2022 (File no. 333-268213)). 4.23 ​ Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.30 to the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on November 29, 2022 (File no. 333-268213)). 4.24 ​ Registration Rights Agreement, dated December 29, 2022, by and among Digital Brands Group, Inc. and the Investors (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 4, 2023). 64 Table of Contents Exhibit Number Description ​ ​ ​ 4.25 ​ Registration Rights Agreement, dated December 30, 2022, by and among Digital Brands Group, Inc. and Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 4, 2023). 4.26 ​ Form of Common Warrant (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 11, 2023). 4.27 ​ Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 11, 2023). 4.28 ​ Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.3 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 11, 2023). 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# ​ 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). 10.4# ​ 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). 10.5# ​ 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). 10.6 ​ 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). 10.7 ​ 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). 10.8 ​ 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). 10.9 ​ 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). 10.10 ​ 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). 10.11 ​ 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). 10.12 ​ 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). 10.13 ​ 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). 10.14 ​ 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). 10.15 ​ 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). 65 Table of Contents Exhibit Number Description ​ ​ ​ 10.16 ​ 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). 10.17 ​ 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). 10.18 ​ 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). 10.19 ​ 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). 10.20 ​ 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). 10.21 ​ 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). 10.22 ​ 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). 10.23 ​ 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). 10.24 ​ 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). 10.25 ​ Registration Rights Agreement, dated April 8, 2022, by among Digital Brands Group, Inc. and the Investors (incorporated by reference to Exhibit 4.1 of Digital Brands Group Inc.’s Current Report on Form 8-K, filed with the SEC on April 12, 2022). 10.26 ​ Securities Purchase Agreement, dated April 8, 2022, by among Digital Brands Group, Inc. and the Investors (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Current Report on Form 8-K, filed with the SEC on April 12, 2022). 10.27 ​ Form of Warrant, dated April 8, 2022, by Digital Brands Group, Inc. in favor of the Investors (incorporated by reference to Exhibit 10.3 of Digital Brands Group Inc.’s Current Report on Form 8-K, filed with the SEC on April 12, 2022). 10.28+ ​ Agreement for the Purchase and Sale of Future Receipts, dated March 21, 2022, between Digital Brands Group, Inc. and Advantage Platform Services Inc. d/b/a Advantage Capital Funding (incorporated by reference to Exhibit 10.45 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333- 264347), filed with the SEC on May 5, 2022). 10.29+ ​ Agreement for the Purchase and Sale of Future Receipts, dated March 29, 2022, between Digital Brands Group, Inc. and Advantage Platform Services Inc. d/b/a Advantage Capital Funding (incorporated by reference to Exhibit 10.46 of Digital Brands Group Inc.’s Registration Statement on Form S-1/A (Reg. No. 333- 264347), filed with the SEC on May 5, 2022). 10.30 ​ First Amendment to Securities Purchase Agreement, dated July 28, 2022, by and among Digital Brands Group, Inc. and certain Investors (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on August 2, 2022). 10.31 ​ Securities Purchase Agreement, dated September 29, 2022, by and among Digital Brands Group, Inc. and the investor thereto (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on October 5, 2022). 10.32 ​ Form of Securities Purchase Agreement, by and between Digital Brands Group, Inc. and the purchasers party thereto (incorporated by reference to Exhibit 10.38 to the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on November 29, 2022 (File no. 333-268213)). 66 Table of Contents Exhibit Number Description ​ ​ ​ 10.33 ​ Securities Purchase Agreement, dated December 29, 2022, by and among Digital Brands Group, Inc. and the Investors (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 4, 2023). 10.34 ​ Form of Promissory Note, dated December 29, 2022, by Digital Brands Group, Inc. in favor each Investor (incorporated by reference to Exhibit 10.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 4, 2023). 10.35 ​ Form of Securities Purchase Agreement, dated as of January 11, 2023, by and among the Company and the purchasers party thereto (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 11, 2023). 10.36 ​ Form of Registration Rights Agreement, dated as of January 11, 2023, by and among the Company and the purchasers party thereto (incorporated by reference to Exhibit 10.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 11, 2023). 10.37 ​ Form of Warrant, dated December 29, 2022, by Digital Brands Group, Inc. in favor each Investor (incorporated by reference to Exhibit 10.3 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on January 4, 2023). 10.38 ​ Form of Securities Purchase Agreement, dated April 7, 2023, by and among Digital Brands Group, Inc. and the Investors (incorporated by reference to Exhibit 10.1 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on April 13, 2023). 10.39 ​ Form of Promissory Note, dated April 7, 2023, by Digital Brands Group, Inc. in favor each Investor (incorporated by reference to Exhibit 10.2 of Digital Brands Group Inc.’s Form 8-K filed with the SEC on April 13, 2023). 10.40* ​ 30% OID Promissory Note, dated October 1, 2023, issued by Digital Brands Group, Inc. in favor of Erinn Thomas- Mackey. 10.41* ​ 30% OID Promissory Note, dated October 1, 2023, issued by Digital Brands Group, Inc. in favor of Gary Carr. 10.42* ​ 30% OID Promissory Note, dated October 1, 2023, issued by Digital Brands Group, Inc. in favor of Mohsen Khorassani. 10.43* ​ 30% OID Promissory Note, dated October 1, 2023, issued by Digital Brands Group, Inc. in favor of 622 Capital, LLC. 10.44* ​ 30% OID Promissory Note, dated October 1, 2023, issued by Digital Brands Group, Inc. in favor of Dragon Dynamic Catalytic Bridge Sac Fund. 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 (Reg. No. 333-269463), filed with the SEC on January 30, 2023). 23.1* ​ Consent of Macias Gini & O’Connell LLP. 23.2* ​ Consent of dbbmckennon. 31.1* ​ Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) 31.2* ​ Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) 32.1** ​ Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 32.2** ​ Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 101.INS* ​ Inline XBRL Instance 101.SCH* ​ Inline XBRL Taxonomy Extension Schema 101.CAL* ​ Inline XBRL Taxonomy Extension Calculation 101.LAB* ​ Inline XBRL Taxonomy Extension Labels 101.PRE* ​ Inline XBRL Taxonomy Extension Presentation 104 ​ Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) * Filed herewith. ** Furnished herewith # Indicates management contract or compensatory plan or arrangement. ​ ITEM 16. FORM 10-K SUMMARY None. SIGNATURES ​ Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly 67 Table of Contents 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 April 15, 2024 Name: John Hilburn Davis IV Title: President and Chief Executive Officer ​ Name Position Date /s/ John Hilburn Davis IV Director, President and Chief Executive Officer April 15, 2024 John Hilburn Davis IV (Principal Executive Officer) /s/ Reid Yeoman ​ Chief Financial Officer ​ April 15, 2024 Reid Yeoman ​ (Principal Financial and Accounting Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Mark T. Lynn Director April 15, 2024 Mark T. Lynn /s/ Trevor Pettennude Director April 15, 2024 Trevor Pettennude /s/ Jameeka Aaron Green Director April 15, 2024 Jameeka Aaron Green /s/ Huong “Lucy” Doan Director April 15, 2024 Huong “Lucy” Doan ​ ​ ​ ​ 68 Table of Contents DIGITAL BRANDS GROUP, INC. FINANCIAL STATEMENTS DECEMBER 31, 2023 AND 2022 ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB IS: 324 ) F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB IS: 3501 ) F-3 CONSOLIDATED BALANCE SHEETS F-4 CONSOLIDATED STATEMENTS OF OPERATIONS F-5 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT ) F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 ​ ​ ​ F-1 Table of Contents Report of Independent Registered Public Accounting Firm (PCAOB ID 324) To the Board of Directors and Shareholders of Digital Brands Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Digital Brands Group, Inc. and Subsidiaries (collectively, the “Company”) as of December 31, 2023, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2023, and the related consolidated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s recurring net losses since 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 financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit 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 entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Macias Gini & O’Connell LLP We have served as the Company’s auditor since 2023. Irvine, California April 15, 2024 ​ F-2 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 sheet of Digital Brands Group, Inc. and subsidiaries (collectively, the “Company”) as of December 31, 2022, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year 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, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter – Correction of Error As described in Note 3 to the consolidated financial statements, the Company corrected the classification of certain costs and expenses, and accordingly, restated amounts included in the 2022 consolidated statement of operations to conform 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 consolidated 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ dbb mckennon (Firm No. 3501) Newport Beach, California April 17, 2023, except for the effects of the stock split and discontinued operations as described in Notes 1 and 3, for which the date is August 24, 2023 We served as the Company’s auditor from 2018 to 2023. ​ F-3 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 20,773 ​ $ 1,275,616 Accounts receivable, net of allowance for credit losses of $ 41,854 and $ 19,394 , respectively ​ 74,833 ​ 583,368 Due from factor, net ​ 337,811 ​ 839,400 Inventory ​ 4,849,600 ​ 5,122,564 Prepaid expenses and other current assets ​ 276,670 ​ 766,901 Assets per discontinued operations, current ​ ​ — ​ ​ 241,544 Total current assets ​ 5,559,687 ​ 8,829,393 Property, equipment and software, net ​ 55,509 ​ 104,512 Goodwill ​ 8,973,501 ​ 8,973,501 Intangible assets, net ​ 9,982,217 ​ 12,906,238 Deposits ​ 75,431 ​ 193,926 Right of use asset ​ ​ 689,688 ​ ​ 102,349 Assets per discontinued operations ​ — ​ 2,628,136 Total assets ​ $ 25,336,033 ​ $ 33,738,055 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ Accounts payable ​ $ 7,538,902 ​ $ 8,016,173 Accrued expenses and other liabilities ​ 4,758,492 ​ 3,936,920 Due to related parties ​ ​ 400,012 ​ ​ 555,217 Contingent consideration liability ​ — ​ 12,098,475 Convertible note payable, net ​ 100,000 ​ 2,721,800 Accrued interest payable ​ 1,996,753 ​ 1,561,795 Loan payable, current ​ 2,325,842 ​ 1,829,629 Promissory note payable, net ​ 4,884,592 ​ 9,000,000 Operating lease liability ​ ​ 1,210,814 ​ ​ 102,349 Liabilities per discontinued operations, current ​ — ​ 1,071,433 Total current liabilities ​ 23,215,407 ​ 40,893,791 Loan payable ​ 150,000 ​ 150,000 Deferred tax liability ​ ​ 368,034 ​ ​ — Liabilities per discontinued operations ​ — ​ 147,438 Total liabilities ​ 23,733,441 ​ 41,191,229 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity (deficit): ​ ​ ​ ​ Undesignated preferred stock, $ 0.0001 par, 10,000,000 shares authorized, 0 shares issued and outstanding as of both December 31, 2023 and 2022, respectively ​ ​ — ​ — Series A convertible preferred stock, $ 0.0001 par, 6,300 shares designated, 6,300 shares issued and outstanding as of both December 31, 2023 and 2022, respectively ​ ​ 1 ​ 1 Series C convertible preferred stock, $ 0.0001 par, 4,786 and 0 shares outstanding as of December 31, 2023 and 2022, respectively ​ 1 ​ — Common stock, $ 0.0001 par, 1,000,000,000 shares authorized, 1,114,359 and 178,758 shares issued and outstanding as of December 31, 2023 and 2022, respectively ​ ​ 110 ​ ​ 18 Additional paid-in capital ​ 115,596,929 ​ 96,294,123 Accumulated deficit ​ ( 113,994,449 ) ​ ( 103,747,316 ) Total stockholders’ equity (deficit) ​ 1,602,592 ​ ( 7,453,174 ) Total liabilities and stockholders’ equity (deficit) ​ $ 25,336,033 ​ $ 33,738,055 ​ See the accompanying notes to the consolidated financial statements. F-4 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 Net revenues ​ $ 14,916,422 ​ $ 13,971,178 Cost of net revenues ​ 8,372,642 ​ 8,030,908 Gross profit ​ 6,543,780 ​ 5,940,270 Operating expenses: ​ ​ ​ ​ General and administrative ​ 14,299,389 ​ 16,371,536 Sales and marketing ​ 4,035,835 ​ 4,950,635 Distribution ​ 1,002,343 ​ 611,569 Impairment ​ ​ — ​ ​ 15,539,332 Change in fair value of contingent consideration ​ ​ ( 10,698,475 ) ​ ​ 564,303 Total operating expenses ​ 8,639,092 ​ 38,037,375 Loss from operations ​ ( 2,095,312 ) ​ ( 32,097,105 ) Other (expense) income: ​ ​ ​ ​ Interest expense ​ ( 5,517,118 ) ​ ( 9,014,337 ) Other non-operating (expenses) income ​ ( 704,166 ) ​ 3,068,080 Total other expense, net ​ ( 6,221,284 ) ​ ( 5,946,257 ) Income tax benefit (provision) ​ ​ ( 368,034 ) ​ ​ — Net loss from continuing operations ​ ​ ( 8,684,630 ) ​ ​ ( 38,043,362 ) (Loss) income from discontinued operations, net of tax ​ ( 1,562,503 ) ​ — Net loss ​ $ ( 10,247,133 ) ​ $ ( 38,043,362 ) ​ ​ ​ ​ ​ Weighted average common shares outstanding - basic and diluted ​ 424,402 ​ 20,852 Net loss from continuing per common share - basic and diluted ​ $ ( 20.46 ) ​ $ ( 1,233.10 ) ​ See the accompanying notes to the consolidated financial statements. ​ ​ F-5 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series A Convertible ​ Series B ​ Series C Convertible ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ ​ Preferred Stock ​ Preferred Stock ​ Preferred Stock ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders’ ​ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances at December 31, 2021 — ​ ​ — — ​ — ​ — ​ ​ — ​ 5,201 ​ ​ 1 ​ $ 58,614,172 ​ $ ( 65,703,954 ) ​ $ ( 7,089,781 ) Issuance of common stock in public offering — ​ — — ​ — ​ — ​ — ​ 14,956 ​ 1 ​ 9,347,449 ​ — ​ 9,347,450 Issuance of common stock and exercise of pre-funded warrants in public offering ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ 72,727 ​ ​ 7 ​ ​ 9,999,989 ​ ​ — ​ ​ 9,999,996 Offering costs — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ( 2,921,646 ) ​ — ​ ( 2,921,646 ) Common stock issued in connection with business combination — ​ — — ​ — ​ — ​ — ​ 3,636 ​ — ​ 1,000,000 ​ — ​ 1,000,000 Common stock issued pursuant to consulting agreement — ​ — — ​ — ​ — ​ — ​ 30 ​ — ​ 123,000 ​ — ​ 123,000 Warrant and common shares issued with notes — ​ — — ​ — ​ — ​ — ​ 2,400 ​ — ​ 1,368,741 ​ — ​ 1,368,741 Conversion of notes and derivative liability into common stock — ​ — — ​ — ​ — ​ — ​ 79,807 ​ 8 ​ 11,983,381 ​ — ​ 11,983,389 Conversion of venture debt into Series A convertible preferred stock ​ 6,300 ​ ​ 1 ​ — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 6,299,999 ​ ​ — ​ ​ 6,300,000 Stock-based compensation ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 479,038 ​ ​ — ​ ​ 479,038 Net loss — ​ ​ — — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 38,043,362 ) ​ ​ ( 38,043,362 ) Balances at December 31, 2022 6,300 ​ ​ 1 — ​ — ​ — ​ ​ — ​ 178,758 ​ ​ 18 ​ ​ 96,294,123 ​ ​ ( 103,747,316 ) ​ ​ ( 7,453,174 ) Issuance of common stock pursuant to private placement, net of offering costs ​ — ​ — — ​ — ​ — ​ — ​ 51,086 ​ 5 ​ 4,463,071 ​ — ​ 4,463,076 Shares and warrants issued with notes ​ — ​ ​ — — ​ — ​ — ​ ​ — ​ 4,400 ​ ​ — ​ ​ 658,494 ​ ​ — ​ ​ 658,494 Conversion of notes into preferred stock ​ — ​ ​ — ​ — ​ — ​ 5,761 ​ ​ 1 ​ — ​ ​ — ​ ​ 5,759,177 ​ ​ — ​ ​ 5,759,177 Issuance of Series B preferred stock ​ — ​ ​ — ​ 1 ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 25,000 ​ ​ — ​ ​ 25,000 Issuance of common stock pursuant to disposition ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ 78,103 ​ ​ 8 ​ ​ 1,357,035 ​ ​ — ​ ​ 1,357,043 Cancellation of Series B preferred stock ​ — ​ ​ — ​ ( 1 ) ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 25,000 ) ​ ​ — ​ ​ ( 25,000 ) Common stock issued for services ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ 109,930 ​ ​ 11 ​ ​ 1,656,417 ​ ​ — ​ ​ 1,656,428 Exercise of warrants ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ 123,814 ​ ​ 12 ​ ​ 1,167,554 ​ ​ — ​ ​ 1,167,566 Issuance of common stock pursuant to private placement, net of offering costs ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ 513,875 ​ ​ 51 ​ ​ 3,832,254 ​ ​ — ​ ​ 3,832,305 Conversion of preference shares into common stock ​ — ​ ​ — ​ — ​ — ​ ( 975 ) ​ ​ — ​ 54,394 ​ ​ 5 ​ ​ ( 5 ) ​ ​ — ​ ​ — Stock-based compensation ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 408,810 ​ ​ — ​ ​ 408,810 Net loss ​ — ​ ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 10,247,133 ) ​ ​ ( 10,247,133 ) Balances at December 31, 2023 6,300 ​ $ 1 — ​ — ​ 4,786 ​ $ 1 ​ 1,114,359 ​ $ 110 ​ $ 115,596,929 ​ $ ( 113,994,449 ) ​ $ 1,602,592 ​ See the accompanying notes to the consolidated financial statements. ​ ​ F-6 Table of Contents DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 10,247,133 ) ​ $ ( 38,043,362 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Depreciation and amortization ​ 3,249,194 ​ 2,226,376 Amortization of loan discount and fees ​ 3,937,007 ​ 6,506,384 Loss on extinguishment of debt ​ 716,517 ​ — Loss on disposition of business ​ ​ 1,523,940 ​ ​ — Stock-based compensation ​ ​ 408,810 ​ ​ 602,038 Shares issued for services ​ 1,656,428 ​ — Change in credit reserve ​ ​ 202,761 ​ ​ ( 118,840 ) Change in fair value of contingent consideration ​ ​ ( 10,698,475 ) ​ ​ 564,303 Deferred tax expense ​ ​ 368,034 ​ ​ 367,696 Fees incurred in connection with debt financings ​ ​ — ​ ​ 568,149 Change in fair value of warrant liability ​ ​ — ​ ​ ( 18,223 ) Change in fair value of derivative liability ​ ​ — ​ ​ ( 1,354,434 ) Impairment of goodwill and intangible assets ​ — ​ 15,539,331 Forgiveness of Payroll Protection Program ​ ​ — ​ ​ ( 1,760,755 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ 497,771 ​ ( 475,036 ) Due from factor, net ​ 144,755 ​ 655,708 Inventory ​ 375,682 ​ 471,831 Prepaid expenses and other current assets ​ ​ 551,259 ​ ​ ( 402,515 ) Accounts payable ​ 1,900 ​ 919,131 Accrued expenses and other liabilities ​ 1,047,430 ​ 1,992,649 Deferred revenue ​ ( 183,782 ) ​ ( 74,268 ) Due to related parties ​ ​ ​ 278,590 Accrued interest ​ 434,958 ​ 984,358 Net cash used in operating activities ​ ( 6,012,942 ) ​ ( 10,570,889 ) Cash flows from investing activities: ​ ​ ​ ​ ​ Cash acquired (consideration) pursuant to business combination ​ ​ — ​ ​ ( 7,247,303 ) Purchase of property, equipment and software ​ ​ ( 29,675 ) ​ ​ ( 5,533 ) Deposits ​ 118,494 ​ ​ ( 60,548 ) Net cash provided by (used in) investing activities ​ 88,819 ​ ( 7,313,384 ) Cash flows from financing activities: ​ ​ ​ ​ Repayments of elated party advances ​ ( 155,205 ) ​ — Advances (repayments) from factor ​ 154,073 ​ ( 3,096 ) Repayments of related party notes ​ ​ — ​ ​ ( 170,000 ) Repayment of contingent consideration ​ — ​ ( 645,304 ) Proceeds from venture debt ​ — ​ 237,500 Issuance of loans and note payable ​ 5,479,611 ​ 3,280,360 Repayments of convertible and promissory notes ​ ​ ( 10,129,811 ) ​ ​ ( 7,437,349 ) Issuance of convertible notes payable ​ ​ — ​ ​ 6,951,250 Proceeds from public offering ​ ​ — ​ ​ 19,347,446 Offering costs ​ ​ — ​ ​ ( 2,921,646 ) Issuance of common stock, net of offering costs ​ 8,145,381 ​ — Proceeds from exercise of warrants ​ ​ 1,167,566 ​ ​ — Net cash provided by financing activities ​ 4,661,614 ​ 18,639,161 Net change in cash and cash equivalents ​ ( 1,262,509 ) ​ 754,888 Cash and cash equivalents at beginning of year ​ 1,283,282 ​ 528,394 Cash and cash equivalents at end of year ​ $ 20,773 ​ $ 1,283,282 Less: cash of discontinued operations ​ ​ — ​ ​ 7,666 Cash of continuing operations at end of year ​ $ 20,773 ​ $ 1,275,616 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ Cash paid for income taxes ​ $ — ​ $ — Cash paid for interest ​ $ 711,815 ​ $ 734,869 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities: ​ ​ ​ ​ Conversion of notes into preferred stock ​ $ 5,759,177 ​ $ — Conversion of notes into common stock ​ $ — ​ $ 11,983,389 Right of use asset ​ $ 467,738 ​ $ 102,349 Warrants issued in connection with note ​ $ — ​ $ 1,368,741 Derivative liability in connection with convertible note ​ $ — ​ $ 559,957 Conversion of related party notes and payables into preferred and common stock ​ $ — ​ $ 6,300,000 Conversion of venture debt into preferred stock ​ $ — ​ $ — ​ 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. On December 30, 2022, the Company closed its previously announced acquisition of Sunnyside, LLC dba Sundry (“Sundry”) pursuant to its Second Amended and Restated Membership Interest Purchase Agreement with Moise Emquies to purchase 100 % of the issued and outstanding equity of Sundry. On the acquisition date, Sundry became a wholly owned subsidiary of the Company. See Note 4. On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby contemporaneously with the parties’ execution of the Settlement Agreement (i) the Company agreed to make an aggregate cash payment of $ 229,000 to D. Jones Tailored Collection, Ltd. (“D. Jones”), (ii) the Company issued 1,952,580 shares of common stock to D. Jones, and (iii) the Company assigned and transferred one hundred percent ( 100 %) of the Company’s membership interest in H&J to D. Jones. The H&J Settlement was accounted for a business disposition. Reverse Stock Split On October 21, 2022, the Board of Directors approved a one -for-100 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. The reverse stock split became effective as of November 3, 2022. 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. On August 21, 2023, the Board of Directors approved a one -for-25 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. The reverse stock split became effective as of August 22, 2023. 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. 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 $ 10,247,133 and $ 38,043,362 for the years ended December 31, 2023 and 2022, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2023 and 2022. The Company has historically lacked liquidity to satisfy obligations as they come due and as of December 31, 2023, and the Company had a working capital deficit of $ 17,655,720 . These factors, among others, arise 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. The Company’s ability to continue as a going concern for the next 12 months from the date the financial statements were available to be issued is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing. Through the date the financial statements were available to be issued, the Company has been primarily financed through the issuance of capital stock and debt. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations. No assurance can be given that the Company will be successful in these efforts. ​ 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, Stateside and Sundry 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. D iscontinued Operations Certain prior year accounts have been reclassified to conform with current year presentation regarding income (loss) from discontinued operations. H&J’s assets and liabilities as of December 31, 2022 have also been reclassified on the consolidated balance sheet. See Note 5. 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, 2023 and 2022, 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 . F-9 Table of Contents 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 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, accounts receivable, due from factor, prepaid expenses, accounts payable, accrued expenses, deferred revenue, due to related parties, related party note payable, accrued interest, loan 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, 2023 Using: ​ Level 1 Level 2 Level 3 Total Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration ​ — ​ — ​ — ​ — ​ ​ $ — ​ $ — ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ as of December 31, 2022 Using: ​ Level 1 Level 2 Level 3 Total Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration ​ ​ — ​ ​ — ​ ​ 12,098,475 ​ ​ 12,098,475 ​ ​ $ — ​ $ — ​ $ 12,098,475 ​ $ 12,098,475 ​ 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 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 F-10 Table of Contents 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. 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 years ended December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ Contingent ​ ​ Consideration ​ ​ Liability Balance as of December 31, 2022 ​ $ 12,098,475 Norwest Waiver - settlement of Bailey44 contingent consideration ​ ​ ( 10,698,475 ) H&J Settlement Agreement - settlement of H&J contingent consideration ​ ​ ( 1,400,000 ) Outstanding as of December 31, 2023 ​ $ — ​ Norwest Waiver On June 21, 2023, the Company, on the one hand, and Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP (together, the “Norwest Investors”), on the other hand, executed a Waiver and Amendment (the “Norwest Amendment”) whereby the Norwest Investors agreed to waive and terminate certain true up rights of the Norwest Investors under the Agreement and Plan of Merger, dated February 12, 2020 (the “Bailey Merger Agreement”), among the Company, Bailey 44, LLC, Norwest Venture Partners XI, LP, and Norwest Venture Partners XII, LP and Denim.LA Acquisition Corp. This transaction is known as the “Norwest Waiver”. As a result of the Norwest Waiver, the Company recorded a fair value of $ 0 pertaining to the contingent consideration contemplated under the Bailey Merger Agreement, resulting in a gain in the change in fair value of contingent consideration of $ 10,698,475 . H&J Settlement Agreement On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby the Company transferred 100 % of its membership interests in H&J to D. Jones (the “H&J Seller”). Pursuant to the Settlement Agreement, the Company agreed to make an aggregate cash payment of $ 229,000 to the H&J Seller and the Company issued 1,952,580 shares of common stock to the H&J Seller. In connection with the Settlement Agreement, the parties agreed that no further shares were owed to the H&J Seller resulting from the stock price guarantee pursuant to the May 2021 H&J acquisition. As a result, the Company recorded a gain in the change in fair value of contingent consideration of $ 1,400,000 . The change in fair value was included in loss from discontinued operations in the consolidated statements of operations. See Note 4 for further detail. The detail of contingent consideration by company is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Bailey ​ $ — ​ 10,698,475 Harper & Jones ​ — ​ 1,400,000 ​ ​ $ — ​ $ 12,098,475 ​ Derivative Liability In connection with the Company’s convertible notes, 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. F-11 Table of Contents 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 years ended December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ Derivative ​ Liability Outstanding as of December 31, 2021 ​ $ 2,294,720 Initial fair value on issuance of convertible note ​ 559,957 Conversion of underlying notes into common stock ​ ( 1,500,243 ) Change in fair value ​ ​ ( 1,354,434 ) Outstanding as of December 31, 2022 ​ ​ — Initial fair value on issuance of convertible note ​ ​ — Change in fair value ​ ​ — Outstanding as of December 31, 2023 ​ $ — ​ During the year ended December 31, 2022, the Company utilized the following inputs for the fair value of the derivative liability: volatility of 70.9 % - 96.7 %, risk-free rate of 2.71 % - 3.74 %, and remaining term ranging from .08 years - 0.62 years. ​ The change in fair value of the derivative liability is included in other non-operating income (expense), net in the consolidated statements of operations. Accounts Receivable and Expected Credit Loss We carry our accounts receivable at invoiced amounts less allowances for customer credit losses and other deductions to present the net amount expected to be collected on the financial asset. All receivables are expected to be collected within one year of the consolidated balance sheet. We do not accrue interest on the trade receivables. Management evaluates the ability to collect accounts receivable based on a combination of factors. Receivables are determined to be past due based on individual credit terms. An allowance for credit losses is maintained based on the length of time receivables are past due, historical collections, or the status of a customer’s financial position. Receivables are written off in the year deemed uncollectible after efforts to collect the receivables have proven unsuccessful. We do not have any off-balance sheet credit exposure related to our customers. We periodically review accounts receivable, estimate an allowance for bad debts, and simultaneously record the appropriate expense in the statement of operations. Such estimates are based on general economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Past due accounts are written off against that allowance only after all collection attempts have been exhausted and the prospects for recovery are remote. Recoveries of accounts receivable previously written off are recorded as income when received. The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk. As of December 31, 2023, the Company determined an allowance for credit losses of $ 41,854 . 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 H&J and first-in, first-out method for Bailey, Stateside and Sundry. The inventory balances as of December 31, 2023 and 2022 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. F-12 Table of Contents Inventory consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Raw materials $ 695,580 $ 1,611,134 Work in process ​ 585,387 ​ 888,643 Finished goods ​ 3,568,633 ​ 2,622,787 Inventory ​ $ 4,849,600 ​ $ 5,122,564 ​ 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, 2023 and 2022 consist of software with three ( 3 ) year lives, property and 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 $ 50,823 and $ 75,126 for the years ended December 31, 2023 and 2022, 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 ​ Impairment 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 F-13 Table of Contents 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. 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 fourth quarter every year. 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. Annual Impairment Tests At December 31, 2023, management determined that certain events and circumstances occurred that indicated that the carrying value of the Company’s brand name assets, and the carrying amount of the reporting units, pertaining to Bailey44, Stateside and Sundry may not be recoverable. The qualitative assessment was primarily due to reduced or stagnant revenues of both entities as compared to the Company’s initial projections at the time of each respective acquisition, as well as the entities’ liabilities in excess of assets. Upon the quantitative analysis performed, the Company determined that the fair value of the intangible assets and reporting units were greater than the respective carrying values. As such, no impairment was recorded . The Company utilized the enterprise value approach in the impairment tests of each reporting unit in 2023. As of December 31, 2023, the Bailey44 reporting unit, which has an attributable goodwill balance of $3,158,123, has a negative carrying amount. At December 31, 2022, management determined that certain events and circumstances occurred that indicated that the carrying value of the Company’s brand name assets, and the carrying amount of the reporting units, pertaining to Bailey44 and Harper & Jones may not be recoverable. The qualitative assessment was primarily due to reduced or stagnant revenues of both entities as compared to the Company’s initial projections at the time of each respective acquisition, as well as the entities’ liabilities in excess of assets. As such, the Company compared the estimated fair value of the brand names with its carrying value and recorded an impairment loss of $ 3,667,000 in the consolidated statements of operations. Additionally, the Company compared the fair value of the reporting units to the carrying amounts and recorded an impairment loss of $ 11,872,332 pertaining to goodwill in the consolidated statements of operations. The following is a summary of goodwill and intangible impairment recorded pertaining to each entity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2023 2022 Bailey brand name $ — $ 2,182,000 Harper & Jones brand name ​ — ​ 1,485,000 Total impairment of intangibles ​ — ​ 3,667,000 Bailey goodwill ​ — ​ 3,321,095 Harper & Jones goodwill ​ — ​ 8,551,237 Total impairment of goodwill ​ — ​ 11,872,332 Total impairment ​ $ — ​ $ 15,539,332 ​ In determining the fair value of the respective reporting units, management estimated the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants at the measurement date. This includes reviewing market comparables such as revenue multipliers and assigning certain assets and liabilities to the reporting units, such as the respective working capital deficits of each entity and debt obligations that would need to be assumed by a market participant buyer in an orderly transaction. The Company calculated the carrying amounts of each reporting unit by utilizing the entities’ assets and liabilities at December 31, 2023, including the carrying value of the identifiable intangible assets and goodwill assigned to the respective reporting units. F-14 Table of Contents 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 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 In accordance with FASB ASC 606, Revenue from Contracts with Customers ¸ the Company determines revenue recognition through the following steps: ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract, and ● Recognition of revenue when or as the performance obligations are satisfied Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product, upon shipment of product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. F-15 Table of Contents The Company derives its revenue primarily from wholesale and e-commerce transactions. For both channels, revenue is recognized at the time the product is shipped to the customer, which is the point in time when control is transferred. The Company considers the sale of products as a single performance obligation. 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 deducts discounts, sales tax, and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued expenses until remitted to the taxing authorities. Shipping and handling fees charged to customers are included in net revenues. All shipping and handling costs are accounted for as distribution expenses, and are therefore not evaluated as a separate performance obligation. ​ Cost of Revenues Cost of revenues consists primarily of inventory sold and related freight-in. Cost of revenues includes direct labor pertaining to our inventory production activities and an allocation of overhead costs including rent and insurance. Cost of revenues also includes inventory write-offs and reserves. 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 $ 128,000 and $ 72,000 for the years ended December 31, 2023 and 2022, respectively. Total shipping and handling costs included in distribution costs were approximately $ 1,016,716 and $ 525,000 , respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2023 and 2022 amounted to approximately $ 728,000 and $ 1,178,000 , respectively. The amounts are included in sales and marketing expense. General and Administrative General and administrative expenses consist primarily of compensation and benefits costs, professional services and information technology. General and administrative expenses also include payment processing fees, design and warehousing fees. 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, 2023 and 2022, 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-16 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 an 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). In 2022, the Company wrote off these costs to general and administrative expenses in the consolidated statements of operations as the equity line of credit financing never occurred. 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 December 31, 2023 our operating segments included: DSTLD, Bailey, Stateside and Sundry. 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 F-17 Table of Contents or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding 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, 2023 and 2022, 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, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Convertible notes ​ — ​ 37,915 Series A convertible preferred stock ​ 27,097 4,320 Series C convertible preferred stock ​ 267,001 — Common stock warrants 1,180,220 176,733 Stock options 1,558 1,558 Total potentially dilutive shares 1,475,876 220,526 ​ The stock options and warrants above are out-of-the-money as of December 31, 2023 and 2022. Leases On January 1, 2022, the Company adopted ASC 842, Leases , as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from lease arrangements. The Company adopted the new guidance using a modified retrospective method. Under this method, the Company elected to apply the new accounting standard only to the most recent period presented, recognizing the cumulative effect of the accounting change, if any, as an adjustment to the beginning balance of retained earnings. Accordingly, prior periods have not been recast to reflect the new accounting standard. The cumulative effect of applying the provisions of ASC 842 had no material impact on accumulated deficit. The Company elected transitional practical expedients for existing leases which eliminated the requirements to reassess existing lease classification, initial direct costs, and whether contracts contain leases. Also, the Company elected to present the payments associated with short-term leases as an expense in statements of operations. Short-term leases are leases with a lease term of 12 months or less. Recent Accounting Pronouncements 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 elected to utilize the extended adoption period available to the Company as an emerging growth company. The Company has adopted ASU 2016-02 as of January 1, 2022. See Note 11. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instrument – Credit Losses”. This ASU, and the related ASUs issued subsequently by the FASB introduce a new model for recognizing credit loss on financial assets not accounted for at fair values through net income, including loans, debt securities, trade receivables, net investment in leases and available-for-sale debt securities. The new ASU broadens the information that an entity must consider in developing estimates of expected credit losses and requires an entity to estimate credit losses over the life of an exposure based on historical information, current information and reasonable supportable forecasts. The Company adopted this ASU on January 1, 2023, using the modified retrospective approach. The adoption of this ASU did not have a material impact on financial statements as Company’s customers are direct consumers and pay at the time of purchase. As of December 31, 2023, the Company determined an allowance for expected credit loss of $ 48,326 . F-18 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. The following accounting pronouncements have been issued as of April 15, 2024 but are not yet effective and may affect the future financial reporting by the Company: ● ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity: This ASU addresses the complexity of certain guidance for convertible instruments and contracts in an entity’s own equity. The ASU is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. ● ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions: The ASU is intended to clarify the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of the security. For public business entities, the amendments in ASU 2022- 03 are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. NOTE 4: BUSINESS COMBINATIONS 2022 Acquisition Sundry On December 30, 2022, the Company completed its previously announced acquisition (the “ Sundry Acquisition”) of all of the issued and outstanding membership interests of Sunnyside, LLC, a California limited liability company (“Sundry”), pursuant to that certain Second Amended and Restated Membership Interest Purchase Agreement (the “ Sundry Agreement”), dated October 13, 2022, by and among Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (“ Sundry Sellers”), George Levy as the Sundry Sellers’ representative, the Company as Buyer, and Sundry. Pursuant to the Agreement, Sellers, as the holders of all of the outstanding membership interests of Sundry, exchanged all of such membership interests for (i) $ 7.5 million in cash, (ii) $ 5.5 million in promissory notes of the Company (the “Sundry Notes”), and (iii) a number of shares of common stock of the Company equal to $ 1.0 million (the “Sundry Shares”), calculated in accordance with the terms of the Agreement, which consideration was paid or delivered to the Sellers, Jenny Murphy and Elodie Crichi. Each Sundry Note bears interest at eight percent (8%) per annum and matured on February 15, 2023 (see Note 7). The Company issued 90,909 shares of common stock to the Sundry Sellers on December 30, 2022 at a fair value of $ 1,000,000 . The Company evaluated the acquisition of Sundry 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 $ 7,500,000 Promissory notes payable ​ 5,500,000 Common stock ​ 1,000,000 Purchase price consideration ​ $ 14,000,000 ​ F-19 Table of Contents 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 ​ $ 252,697 Accounts receivable, net ​ 63,956 Due from factor, net ​ 387,884 Inventory ​ 2,941,755 Prepaid expenses and other current assets ​ 32,629 Property, equipment and software, net ​ 48,985 Goodwill ​ 3,711,322 Intangible assets ​ 7,403,800 Accounts payable ​ ( 615,706 ) Accrued expenses and other liabilities ​ ( 227,321 ) Purchase price consideration ​ $ 14,000,000 ​ 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. The results of Sundry have been included in the consolidated financial statements since the date of acquisition. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Sundry acquisition had occurred as of January 1, 2022. 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, ​ ​ 2022 Net revenues ​ $ 28,519,261 Net loss ​ $ ( 42,001,415 ) Net loss per common share ​ $ ( 54.46 ) ​ Previous Acquisitions 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 . The total purchase price consideration was $ 15,500,000 . F-20 Table of Contents 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. As of December 31, 2023 and 2022, the Company has a contingent consideration liability of $ 0 and $ 10,698,475 , respectively, based on the valuation shortfall as noted above. See Note 3. 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 and other current assets ​ 7,970 Deposits ​ 9,595 Property, equipment and software, net ​ ​ — Goodwill ​ 2,104,056 Intangible assets ​ 5,939,140 Accounts payable ​ ( 374,443 ) Accrued expenses and other liabilities ​ ( 445,372 ) ​ ​ $ 8,403,196 ​ 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. F-21 Table of Contents 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. ​ NOTE 5: DISCONTINUED OPERATIONS On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby contemporaneously with the parties’ execution of the Settlement Agreement (i) the Company agreed to make an aggregate cash payment of $ 229,000 to D. Jones Tailored Collection, Ltd. (“D. Jones”), (ii) the Company issued 1,952,580 shares of common stock to D. Jones, and (iii) the Company assigned and transferred one hundred percent ( 100 %) of the Company’s membership interest in H&J to D. Jones. This transaction is known as the “H&J Settlement”. The H&J Settlement was accounted for a business disposition in accordance with ASC 810-40-40-3A. As of June 21, 2023, the Company no longer consolidated the assets, liabilities, revenues and expenses of H&J. The components of the disposition are as follows: ​ ​ ​ ​ Cash payment due to H&J Seller $ ( 229,000 ) Common shares issued to H&J Seller* ​ ( 1,357,043 ) Total fair value of consideration received (given) ​ $ ( 1,586,043 ) ​ ​ ​ ​ Carrying amount of assets and liabilities ​ Cash and cash equivalents ​ 18,192 Accounts receivable, net ​ 55,782 Prepaid expenses and other current assets ​ 25,115 Goodwill ​ 1,130,311 Intangible assets, net ​ 1,246,915 Deposits ​ 4,416 Accounts payable ​ ( 40,028 ) Accrued expenses and other liabilities ​ ( 734,068 ) Deferred revenue ​ ( 18,347 ) Due to related parties ​ ( 1,008 ) Contingent consideration ​ ( 1,400,000 ) Loan payable ​ ( 219,894 ) Note payable - related party ​ ( 129,489 ) Total carrying amount of assets and liabilities ​ ( 62,103 ) ​ ​ ​ ​ Loss on disposition of business ​ $ ( 1,523,940 ) * Represents the fair value of 1,952,580 shares of common stock issued to D. Jones. The net assets of the discontinued operations at December 31, 2022 were not materially different from the balances as of June 21, 2023. Through December 31, 2023, the Company has made payments to D. Jones totaling $ 200,000 . The remaining balance of $ 29,000 is included in accrued expenses and other liabilities on the consolidated balance sheet. The loss of disposition of business of $ 1,523,940 was included in income (loss) from discontinued operations, net of tax in the consolidated statements of operations. F-22 Table of Contents In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying consolidated statements of operations for the three and year ended December 31, 2023 and 2022. The results of the discontinued operations of HJ for the year ended December 31, 2023 and 2022 consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 2022 Net revenues ​ $ 1,405,482 ​ $ 3,637,620 Cost of net revenues ​ 565,621 ​ 1,241,594 Gross profit ​ 839,861 ​ 2,396,026 ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ General and administrative ​ 520,582 ​ 1,731,299 Sales and marketing ​ 346,167 ​ 931,650 Total operating expenses ​ 866,749 ​ 2,662,949 ​ ​ ​ ​ ​ ​ ​ Loss from operations ​ ( 26,889 ) ​ ( 266,922 ) ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ Interest expense ​ ( 11,675 ) ​ ( 52,927 ) Loss on disposition of business ​ ( 1,523,940 ) ​ — Total other income (expense), net ​ ( 1,535,615 ) ​ ( 52,927 ) ​ ​ ​ ​ ​ ​ ​ Income tax benefit (provision) ​ — ​ — Net loss from discontinued operations ​ $ ( 1,562,503 ) ​ $ ( 319,849 ) ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding - basic and diluted ​ 424,402 ​ 771,297 Net income (loss) from discontinued operations per common share - basic and diluted ​ $ ( 3.68 ) ​ $ ( 0.41 ) ​ ​ NOTE 6: DUE FROM FACTOR The Company, via its subsidiaries, Bailey, Stateside and Sundry, 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. 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 and Sundry, 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. F-23 Table of Contents Due to/from factor consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Outstanding receivables: ​ ​ Without recourse ​ $ 808,233 ​ $ 1,680,042 With recourse ​ 99,055 ​ 65,411 Matured funds and deposits ​ ​ 65,321 ​ ​ 81,055 Advances ​ ( 483,187 ) ​ ( 632,826 ) Credits due customers ​ ( 151,611 ) ​ ( 354,282 ) ​ ​ $ 337,811 ​ $ 839,400 ​ ​ NOTE 7: GOODWILL AND INTANGIBLE ASSETS Goodwill The Company recorded goodwill from each of its business combinations. The following is a summary of goodwill by entity for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Bailey ​ $ 3,158,123 ​ $ 3,158,123 Stateside ​ 2,104,056 ​ 2,104,056 Sundry ​ 3,711,322 ​ 3,711,322 ​ ​ $ 8,973,501 ​ $ 8,973,501 ​ Refer to Note 3 for discussion on the goodwill impairment recorded in 2022. In connection with the H&J disposition, the Company derecognized $ 1,130,311 in goodwill. Intangible Assets The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Accumulated Carrying December 31, 2023 ​ Amount ​ Amortization ​ Value Amortized: ​ ​ ​ ​ ​ ​ ​ Customer relationships ​ $ 8,634,560 $ ( 4,494,223 ) ​ $ 4,140,337 ​ ​ $ 8,634,560 $ ( 4,494,223 ) ​ $ 4,140,337 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indefinite-lived: ​ ​ ​ ​ ​ ​ ​ ​ ​ Brand name ​ ​ 5,841,880 ​ — ​ 5,841,880 ​ ​ $ 14,476,440 ​ $ ( 4,494,223 ) ​ $ 9,982,217 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Accumulated Carrying December 31, 2022 ​ Amount ​ Amortization ​ Value Amortized: ​ ​ ​ Customer relationships ​ $ 9,734,560 ​ ​ ( 2,670,202 ) ​ $ 7,064,358 ​ ​ 9,734,560 ​ ​ ( 2,670,202 ) ​ ​ 7,064,358 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indefinite-lived: ​ ​ ​ ​ ​ ​ ​ ​ Brand name ​ ​ 5,841,880 ​ ​ — ​ ​ 5,841,880 ​ ​ $ 15,576,440 ​ $ ( 2,670,202 ) ​ $ 12,906,238 ​ F-24 Table of Contents Refer to Note 3 for discussion on the intangible asset impairment recorded in 2022. The Company recorded amortization expense of $ 1,993,616 and $ 2,151,250 during the years ended December 31, 2023 and 2022, respectively, which is included in general and administrative expenses in the consolidated statements of operations. Future amortization expense at December 31, 2023 is as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ ​ 2024 ​ 2,474,177 2025 ​ 1,666,160 ​ ​ $ 4,140,337 ​ ​ NOTE 8: 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, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Accrued expenses ​ $ 617,374 ​ $ 668,714 Reserve for returns ​ — ​ 307,725 Payroll related liabilities ​ 3,895,640 ​ 2,618,870 Sales tax liability ​ 145,545 ​ 262,765 Other liabilities ​ 99,934 ​ 78,845 ​ ​ $ 4,758,492 ​ $ 3,936,920 ​ Payroll related liabilities are primarily related in DBG and Bailey44 payroll taxes due to remit to federal and state authorities. The amounts are subject to further penalties and interest. As of December 31, 2023, accrued expenses included $ 535,000 in accrued common stock issuances pursuant to an advisory agreement for services performed in 2022. The 200 shares of common stock owed per the agreement are expected to be issued in the second quarter of 2024. Venture Debt As of December 31, 2021, the gross loan balance with Black Oak Capital (“Black Oak”) pertaining to its senior credit agreement was $ 6,001,755 . In February 2022, the Company received $ 237,500 in proceeds, including loan fees of $ 12,500 , from the existing venture debt lender under the same terms as the existing facility. On September 29, 2022, the Company and Black Oak executed a Securities Purchase Agreement (the “Black Oak SPA”) whereby the Company issued 6,300 shares of Series A Convertible Preferred Stock to Black Oak for $ 1,000 per share (see Note 7). The shares were issued pursuant to the conversion of Black Oak’s entire principal amount of $ 6,251,755 , and the Company recorded $ 48,245 in interest as part of the conversion. Pursuant to the Black Oak SPA, all accrued interest remaining outstanding. Accrued interest was $ 269,870 as of December 31, 2023 and 2022. For the year ended December 31, 2022, $ 12,500 of loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balance of $ 0 as of December 31, 2023 and 2022. Interest expense was $ 0 and $ 573,455 for the years ended December 31, 2023 and 2022, respectively. F-25 Table of Contents Convertible Debt 2020 Regulation CF Offering As of December 31, 2023 and 2022, there was $ 100,000 remaining in outstanding principal that was not converted into equity (see table below). Convertible Promissory Notes On April 8, 2022, the Company and various purchasers executed a Securities Purchase Agreement (“April Notes”) whereby the investors purchased from the Company convertible promissory notes in the aggregate principal amount of $ 3,068,750 , consisting of original issue discount of $ 613,750 . The Company received net proceeds of $ 2,313,750 after the original issue discount and fees, resulting in a debt discount of $ 755,000 . Upon the Company’s public offering in May 2022 (see below), the Company repaid $ 3,068,750 to the investors and the debt discount was fully amortized. In connection with the April Notes, the Company issued an aggregate of 12,577 warrants to purchase common stock at an exercise price of $ 122 per share. The Company recognized $ 98,241 as a debt discount for the fair value of the warrants using the Black-Scholes option model, which was fully amortized upon the notes’ repayment in May. On July 22 and July 28, 2022, the Company and various purchasers executed a Securities Purchase Agreement (“July Notes”) whereby the investors purchased from the Company convertible promissory notes in the aggregate principal amount of $ 1,875,000 , consisting of original issue discount of $ 375,000 . The Company received net proceeds of $ 1,450,000 after the original issue discount and fees. In connection with the July 22 and July 28 notes, the Company issued an aggregate of 41,124 and 27,655 warrants to purchase common stock at an exercise price of $ 15.20 and $ 11.30 per share, respectively. The Company recognized $ 692,299 as a debt discount for the fair value of the warrants using the Black-Scholes option model, which will be amortized to interest expense over the life of the notes. If the July Notes are not repaid in full by the maturity date or if any other event of default occurs, (1) the face value of the notes will be automatically increased to 120 %; (2) the notes will begin generating an annual interest rate of 20 %, which will be paid in cash monthly until the default is cured; and (3) if such default continues for 14 or more calendar days, at the Investors’ discretion, the notes shall become convertible at the option of the investors into shares of the Company’s common stock at a conversion price equal to the closing price of the Company’s common stock on the on the date of the note conversion. The Company evaluated the terms of the conversion features of the July 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 July, the Company recognized a derivative liability at an aggregate fair value of $ 559,957 , which was recorded as a debt discount and will amortized over the life of the notes. In December 2022, the Company fully repaid the outstanding principal of $ 1,875,000 pertaining to the July 22 and 28 notes, as well as an additional $ 416,923 due to the default provisions noted above. This amount was included in interest expense in the consolidated statements of operations. On December 29, 2022, the Company and various purchasers executed a Securities Purchase Agreement (“December Notes”) whereby the investors purchased from the Company convertible promissory notes in the aggregate principal amount of $ 4,000,000 , consisting of original issue discount of $ 800,000 . The Company received net proceeds of $ 3,000,000 . The December Notes were due and payable on February 15, 2023. If the December Notes are not repaid in full by the maturity date or if any other event of default occurs, (1) the face value of the December Notes will be automatically increased to 120 %; (2) the Notes will begin generating an annual interest rate of 20 %, which will be paid in cash monthly until the default is cured; and (3) if such default continues for 14 or more calendar days, at the investors’ discretion, the December Notes shall become convertible at the option of the investors into shares of the Company’s common stock at a conversion price equal to the closing price of the Company’s common stock on the date of the note conversion. F-26 Table of Contents In connection with the December Notes, the Company issued to the investors an aggregate of 469,480 warrants to purchase common stock at an exercise price equal to $ 4.26 , and 60,000 shares of common stock. The Company recognized $ 428,200 as a debt discount for the fair value of the warrants and common shares using the Black-Scholes option model, resulting in a total debt discount of $ 1,378,200 . In connection with the December Notes, the Company issued to the investors an aggregate of 469,480 warrants to purchase common stock at an exercise price equal to $ 4.26 , and 60,000 shares of common stock. The Company recognized $ 428,200 as a debt discount for the fair value of the warrants and common shares using the Black-Scholes option model, which will be amortized to interest expense over the life of the notes. In February 2023, the principal of $ 4,000,000 of the December Notes were fully repaid. The Company amortized $ 1,220,830 of debt discount up until the repayment date, and then recognized a loss on extinguishment of debt of $ 157,370 which is included in other non-operating income (expenses) on the consolidated statements of operations. The following is a summary of the convertible notes for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unamortized Convertible Note ​ Principal Debt Discount Payable, Net Balance, December 31, 2022 ​ $ 4,100,000 ​ $ ( 1,378,200 ) ​ $ 2,721,800 Repayments of notes ​ ​ ( 4,000,000 ) ​ ​ — ​ ​ ( 4,000,000 ) Amortization of debt discount ​ ​ — ​ ​ 1,220,830 ​ ​ 1,220,830 Loss on extinguishment of debt ​ ​ — ​ ​ 157,370 ​ ​ 157,370 Balance, December 31, 2023 ​ $ 100,000 ​ $ — ​ $ 100,000 ​ During the years ended December 31, 2023 and 2022, the Company amortized $ 1,220,830 and $ 6,506,384 , respectively of debt discount to interest expense pertaining to all convertible notes. As of December 31, 2022, there was no remaining derivative liability outstanding pertaining to any convertible notes. Loan Payable — PPP and SBA Loan In April 2022, Bailey received notification of full forgiveness of its 2 nd PPP Loan totaling $ 1,347,050 and partial forgiveness of its 1 st PPP Loan totaling $ 413,705 . As of December 31, 2023 and December 31, 2022, Bailey had an outstanding PPP Loan balance of $ 933,295 and matures in 2026. Merchant Advances Future Sales Receipts In 2022, the Company obtained several merchant advances. These advances are, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis. As of December 31, 2022, $ 896,334 remained outstanding. During 2023, the Company received additional proceeds totaling $ 2,452,923 . The Company made total cash repayments, pertaining to principal and interest of $ 4,518,512 . The following is a summary of the merchant advances as of December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Principal ​ $ 2,960,946 ​ $ 896,334 Less: unamortized debt discount ​ ( 1,966,881 ) ​ — Merchant cash advances, net ​ $ 994,065 ​ $ 896,334 ​ The unamortized debt discount of $ 1,966,881 will be amortized to interest expense over the expected remaining terms of the agreements through the fourth quarter of 2024. During the year ended December 31, 2023, the Company recorded $ 1,247,403 in interest expense pertaining to these advances. F-27 Table of Contents In 2023, the Company refinanced two merchant advance agreements. The refinances were accounted for as a loss extinguishment under ASC 470-50-40, and accordingly the Company recognized a loss on extinguishment of $ 559,147 which is included in other non-operating income (expenses) in the consolidated statements of operations. In connection with these advances, the Company granted 6,095 warrants to purchase common stock at an exercise price of $ 131.25 to the lender. Other In 2023, the Company obtained merchant advances totaling $ 690,000 from Shopify Capital and another lender and made repayments totaling $ 658,718 . As of December 31, 2023, the remaining principal outstanding was $ 149,898 . These advances are, for the most part, secured by expected future sales transactions of the Company with expected payments on a daily basis. In 2023, the Company obtained merchant advances totaling $ 312,938 from Gynger Inc. As of December 31, 2023, the remaining principal outstanding was $ 273,188 and technically in default. Promissory Note Payable As of December 31, 2023 and 2022, the outstanding principal on the note to the sellers of Bailey was $ 3,500,000 . The maturity date was December 31, 2022. On July 5, 2023, the parties agreed to extend the maturity date to June 30, 2024. The note incurs interest at 12 % per annum. Interest expense was $ 420,000 and $ 420,000 for the yeas ended December 31, 2023 and 2022, all respectively, which was accrued and unpaid as of December 31, 2023. As noted in Note 4, the Company issued a promissory note in the principal amount of $ 5,500,000 to the Sundry Holders pursuant to the Sundry acquisition. The note bears interest at 8 % per annum and matured on February 15, 2023. In February 2023, the parties verbally agreed to extend the maturity date to December 31, 2023. Interest expense was $ 259,177 for the year ended December 31, 2023. On June 21, 2023, the Company and the Sundry Holders executed a Securities Purchase Agreement (the “Sundry SPA”) whereby the Company issued 5,761 shares of Series C Convertible Preferred Stock to the Sundry Holders for $ 1,000 per share (see Note 7). The shares were issued pursuant to the cancellation of the Sundry Holders’ entire principal amount of $ 5,500,000 and accrued interest of $ 259,177 . In March 2023, the Company and various purchasers executed a Securities Purchase Agreement (“March 2023 Notes”) whereby the investors purchased from the Company promissory notes in the aggregate principal amount of $ 2,458,750 , consisting of original issue discount of $ 608,750 . The Company received net proceeds of $ 1,850,000 after additional fees. The March 2023 Notes are due and payable on September 30, 2023 (the “Maturity Date”). If the Company completes a debt or equity financing of less than $ 7,500,000 , the Company is required to repay 50 % of the remaining balance of the March 2023 Notes. Following such 50 % repayment, the Company must also use any proceeds from any subsequent debt or equity financing to repay the March 2023 Notes. Upon the closing of any debt or equity financing of $ 7,500,000 or greater, the Company is required to repay 100 % of the Notes with no penalties. There is no additional interest after the 20 % original interest discount. Upon the Company’s equity financing in September 2023, the Company repaid an aggregate $ 1,247,232 in principal to the respective noteholders. The Company recognized a debt discount of $ 608,750 , which was fully amortized through December 31, 2023. The notes contain certain conversion provisions upon an event of default. The parties are currently working on an extension to the Maturity Date and have acknowledged that the default provisions have not been triggered. It is expected that the March 2023 Notes will be fully repaid by the end of the second quarter of 2024. In connection with the amendments, the Company increased the principal owed on the March 2023 Notes to $ 519,222 , with a corresponding increase to unamortized debt discount. F-28 Table of Contents The following is a summary of promissory notes payable, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Bailey Note ​ $ 3,500,000 ​ $ 3,500,000 Sundry Note ​ — ​ 5,500,000 March 2023 Notes - principal ​ 1,730,740 ​ — March 2023 Notes - unamortized debt discount ​ ( 346,148 ) ​ — Promissory note payable, net ​ $ 4,884,592 ​ $ 9,000,000 ​ ​ NOTE 9: STOCKHOLDERS’ EQUITY (DEFICIT) Amendments to Certificate of Incorporation On October 13, 2022, the Company amended its Amended and Restated Certificate of Incorporation to increase to increase the number of authorized shares of the Company’s common stock from 200,000,000 to 1,000,000,000 , and in conjunction therewith, to increase the aggregate number of authorized shares to 1,010,000,000 shares. On October 21, 2022, the Board of Directors approved a one -for-100 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. The reverse stock split became effective as of November 3, 2022. 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. On August 21, 2023, the Board of Directors approved a one -for- 25 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. The reverse stock split became effective as of August 22, 2023. 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. Common Stock The Company had 1,000,000,000 shares of common stock authorized with a par value of $ 0.0001 as of December 31, 2023. 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. 2023 Transactions On January 11, 2023, the Company, entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which the Company agreed to issue and sell, in a private placement (the “January Private Placement”), an aggregate of 475,000 shares of the Company’s common stock (“Common Stock”), and accompanying warrants to purchase 475,000 shares of Common Stock, at a combined purchase price of $ 3.915 per share and Common Warrant, and (ii) 802,140 pre-funded warrants exercisable for 802,140 shares of Common Stock, and accompanying common warrants to purchase 802,140 shares of Common Stock, at a combined purchase price of $ 3.915 per pre-funded warrant and accompanying common warrant, to the investors, for aggregate gross proceeds from the January Private Placement of approximately $ 5 million before deducting placement agent fees and related offering expenses. As a result of the transaction, the Company issued 1,277,140 shares of Common Stock, including the 475,000 shares and the immediate exercise of 802,140 pre-funded warrants, for gross proceeds of $ 5.0 million. The Company received net proceeds of $ 4.3 million after deducting placement agent fees and offering expenses. In January 2023, the Company issued 110,000 shares of common stock at a fair value of $ 322,300 to a former convertible noteholder pursuant to default provisions. The amount was included in interest expense in the consolidated statements of operations. In March 2023, the Company issued an aggregate of 118,890 shares of common stock to Sundry executives based on their employment agreements with the Company. The fair value of $ 499,338 , or $ 4.20 per share as determined by the agreements, was included in general and administrative expenses in the consolidated statements of operations. F-29 Table of Contents In June 2023, the Company issued 1,952,580 shares of common stock to D. Jones at a fair value of $ 1,357,043 pursuant to the H&J Settlement Agreement. On August 31, 2023, the Company entered into a Securities Purchase Agreement with a certain accredited investor, pursuant to which the Company agreed to issue and sell, in a private placement (the “August Private Placement”), an aggregate of 32,000 shares of the Company’s Common Stock and accompanying Series A warrants to purchase up to 32,000 shares of Common Stock and Series B warrants to purchase up to 32,000 shares of Common Stock at a combined purchase price of $ 9.73 per share and common warrants, and (ii) 481,875 pre-funded warrants exercisable for 481,875 shares of Common Stock, and accompanying Series A Warrants to purchase up to 481,875 shares of Common Stock and Series B Warrants to purchase up to 481,875 shares of Common Stock, at a combined purchase price of $ 9.73 , for aggregate gross proceeds from the August Private Placement of approximately $ 5 million. The Company received net proceeds of $ 3.8 million after deducting placement agent fees and offering expenses. Through December 31, 2023, all 481,875 pre-funded warrants from the August Private Placement had been exercised for shares of Common Stock. In connection with the August Private Placement, the Company entered into a warrant amendment (the “Warrant Amendment”) with certain investors to amend certain existing warrants to purchase up to 196,542 shares of Common Stock that were previously issued in December 2022 and January 2023 to the investors, with an exercise price of $ 131.25 per share and $ 95.00 per share, respectively (the “Amended Warrants”) as follows: (i) to reduce the exercise price of the Amended Warrants to $ 9.43 per share, and (ii) to extend the original expiration date of the Amended Warrants so that they will terminate five and one half years from the closing of the offering. Immediately following the Warrant Amendment, the Company exercised warrants for 123,814 shares of common stock for proceeds of $ 1,167,566 . In September 2023, the Company issued 42,782 shares in accrued amounts owed to Sundry executives based on their employment agreements for a total value of $ 500,000 . On September 10, 2023, the non-employee members of the board of directors adopted a 2023 Stock Purchase Plan (the “2023 Plan”) to enable the Company to attract, retain and motivate its employees. Under the 2023 Plan, qualified employees can purchase shares of the Company’s common stock at fair market value by either the delivery of cash or the delivery of a form of acceptable non-recourse promissory note. The aggregate number of common stock issuable under the 2023 Plan shall not exceed 65,000 subject to certain adjustment provided under the 2023 Plan. Pursuant to the 2023 Plan, the Company issued an aggregate of 63,000 shares of common stock to certain employees and consultants with accompanying 5-year non-recourse promissory notes. The issuance of the shares were considered for services, and as such the Company recorded $ 657,090 , or a fair value of $ 10.43 per share, in stock-based compensation which was included in general and administrative expenses int he consolidated statement of operations. In October 2023, 975 shares of Series C Convertible Preferred Stock converted into 54,394 shares of common stock. 2022 Transactions During the year ended December 31, 2022, the Company issued an aggregate of 79,807 shares of common stock pursuant to the conversion of the FirstFire and Oasis Notes (see Note 7). In September 2022, the Company issued 30 shares of common stock pursuant to a consultant agreement at a fair value of $ 123,000 . As part of the Sundry acquisition (see Note 4), the Company issued 3,636 shares of common stock to the Sundry Sellers at a fair value of $ 1,000,000 . In connection with the December Notes, the Company issued 2,400 shares of common stock with a fair value of $ 264,000 Series A Preferred Stock On August 31, 2022, the Company entered into a Subscription and Investment Representation Agreement with Hil Davis, its Chief Executive Officer, pursuant to which the Company agreed to issue 1 share of the Company’s Series A Preferred Stock to for $ 25,000 . The issuance of the preferred stock reduced the due to related party balance. The share of Series A Preferred Stock had 250,000,000 votes per share and voted together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to any proposals to amend the Certificate of Incorporation to effect a reverse stock split of the Company’s common stock and to increase F-30 Table of Contents the authorized number of shares of the Company’s common stock. The terms of the Series A Preferred Stock provided that the outstanding share of Series A Preferred Stock would be redeemed in whole, but not in part, at any time: (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically upon the approval of Proposals 2 and 6 presented at the Company’s 2022 annual shareholders meeting. Following conclusion of the shareholders meeting, such share of the Company’s Series A Preferred Stock was redeemed. On October 13, 2022, the outstanding share of the Company’s Series A Preferred Stock was redeemed for $ 25,000 . On September 13, 2023, the Company filed a certificate of cancellation (the “Series A Certificate of Cancellation”) with the Secretary of State of the State of Delaware, effective as of the time of filing, cancelling the Series A Certificate of Designation relating to the Series A Preferred Stock. Series A Convertible Preferred Stock On September 29, 2022, the Company filed the Certificate of Designation designating up to 6,800 shares out of the authorized but unissued shares of its preferred stock as Series A Convertible Preferred Stock. Except for stock dividends or distributions for which adjustments are to be made pursuant to the Certificate of Designation, the holders of the Series A Preferred Stock (the “Holders”) shall be entitled to receive, and the Company shall pay, dividends on shares of the Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of the Series A Preferred Stock. With respect to any vote with the class of Common Stock, each share of the Series A Preferred Stock shall entitle the Holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible. The Series A Preferred Stock shall rank (i) senior to all of the Common Stock; (ii) senior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms junior to any Preferred Stock (“Junior Securities”); (iii) on parity with any class or series of capital stock of the Corporation created specifically ranking by its terms on parity with the Preferred Stock (“Parity Securities”); and (iv) junior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to any Preferred Stock (“Senior Securities”), in each case, as to dividends or distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily. Each share of the Series A Preferred Stock shall be convertible, at any time and from time to time from and after September 29, 2022 at the option of the Holder thereof, into that number of shares of Common Stock determined by dividing the Stated Value of such share of the Series A Preferred Stock ($ 1,000 as of September 29, 2022) by the Conversion Price. The conversion price for each share of the Series A Preferred Stock is the closing price of the Common Stock on September 29, 2022, which was $ 9.30 . As of December 31, 2023 and 2022, there were 6,300 shares of Series A Convertible Preferred Stock issued and outstanding. Series B Preferred Stock On May 30, 2023, the Company entered into a Subscription and Investment Representation Agreement (the “Subscription Agreement”) with John Hilburn Davis IV, its Chief Executive Officer pursuant to which the Company agreed to issue and sell 1 share of the Company’s Series B Preferred Stock, par value $ 0.0001 per share (the “Series B Preferred Stock”) for $ 25,000 . On May 30, 2023, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Series B Preferred Stock. The Certificate of Designation provides that the Series B Preferred Stock will have 250,000,000 votes per share of Series B Preferred Stock and will vote together with the outstanding shares of the Company’s common stock, par value 0.0001 per share (the “Common Stock”) and Series A Convertible Preferred Stock, par value 0.0001 per share (the “Series A Convertible Preferred Stock”) as a single class exclusively with respect to any proposal to amend the Company’s Sixth Amended and Restated Certificate of Incorporation (as may be amended and/or restated from time to time, the “Restated Certificate”) to effect a reverse stock split of the Company’s common stock. The Series B Preferred Stock will be voted, without action by the holder, on any such proposal in the same proportion as shares of Common Stock and Series A Convertible Preferred Stock are voted. The Series B Preferred Stock otherwise has no voting rights. F-31 Table of Contents The Series B Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Series B Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Series B Preferred Stock will not be entitled to receive dividends of any kind. The outstanding share of Series B Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Restated Certificate implementing a reverse stock split. Upon such redemption, the holder of the Series B Preferred Stock will receive consideration of $ 25,000 in cash. On September 13, 2023, the Company filed a certificate of cancellation (the “Series B Certificate of Cancellation”) with the Secretary of State of the State of Delaware, effective as of the time of filing, cancelling the Series B Certificate of Designation, and thereby eliminating all Series B Preferred Stock. Series C Convertible Preferred Stock On June 21, 2023, the Company, on the one hand, and Moise Emquies, George Levy, Matthieu Leblan, Carol Ann Emquies, Jenny Murphy and Elodie Crichi (collectively, the “Sundry Investors”), on the other hand, executed a Securities Purchase Agreement (the “Sundry SPA”) whereby the Company issued 5,761 shares of Series C Convertible Preferred Stock, par value $ 0.0001 per share (the “Series C Preferred Stock”) to the Sundry Investors at a purchase price of $ 1,000 per share. The Series C Preferred Stock is convertible into a number of shares of the Company’s Common Stock equal to $ 1,000 divided by an initial conversion price of $ 0.717 which represents the lower of (i) the closing price per share of the Common Stock as reported on the Nasdaq on June 20, 2023, and (ii) the average closing price per share of Common Stock as reported on the Nasdaq for the five trading days preceding June 21, 2023. The shares of Series C Preferred Stock were issued in consideration for the cancellation of certain promissory notes issued by the Company to the Sundry Investors dated December 30, 2022 (the “Sundry Loan Documents”). The following is a summary of the rights and preferences of the Series C Convertible Preferred Stock. On June 21, 2023, the Company filed the Certificate of Designation with the Secretary of State for the State of Delaware designating up to 5,761 shares out of the authorized but unissued shares of its preferred stock as Series C Convertible Preferred Stock. The following is a summary of the principal terms of the Series C Preferred Stock. Except for stock dividends or distributions for which adjustments are to be made pursuant to the Certificate of Designation, the holders of the Series C Preferred Stock (the “Series C Holders”) shall be entitled to receive, and the Company shall pay, dividends on shares of the Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of the Series C Preferred Stock. The Series C Holders are entitled to vote as a class as expressly provided in the Certificate of Designation. The Series C Holders are also entitled to vote with the holders of shares of Common Stock, voting together as one class, on all matters in which the Series C Holders are permitted to vote with the class of shares of Common Stock. With respect to any vote with the class of Common Stock, each share of the Series C Preferred Stock shall entitle the Holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible (subject to the ownership limitations specified in the Certificate of Designation) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the conversion price is calculated. The Series C Preferred Stock shall rank (i) senior to all of the Common Stock; (ii) senior to Junior Securities; (iii) on parity with Parity Securities; and (iv) junior to Senior Securities, in each case, as to dividends or distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily. Subject to any superior liquidation rights of the holders of any Senior Securities of the Company and the rights of the Company’s existing and future creditors, upon a Liquidation, each Holder shall be entitled to be paid out of the assets of the Company legally available for distribution to stockholders, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Parity Securities, an amount equal to the Stated Value (as defined in the Certificate of Designation) for each share of the Series C Preferred Stock held by such Holder and an amount equal to any accrued and unpaid dividends thereon, and thereafter the Series C Holders shall be entitled to receive out of the assets, whether capital or surplus, of the F-32 Table of Contents Company the same amount that a holder of Common Stock would receive if the Series C Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock. Each share of the Series C Preferred Stock shall be convertible, at any time and from time to time from and after June 21, 2023 at the option of the Holder thereof, into that number of shares of Common Stock determined by dividing the Stated Value of such share of the Series C Preferred Stock ($ 1,000 as of June 21, 2023) by the Conversion Price. The conversion price for each share of the Series C Preferred Stock is $ 0.717 , which is the lower of (a) the closing price per share of the Common Stock as reported on the NasdaqCM on June 20, 2023 (the trading day before the date of the Sundry SPA), and (b) the average closing price per share of Common Stock as reported on the NasdaqCM for the five trading days preceding the date of the Sundry SPA, subject to adjustment herein (the “Series C Conversion Price”). The Company has the option to redeem any or all of the then outstanding Series C Preferred Stock at 112 % of the then Stated Value any time after June 21, 2023 and so long as there is an effective Registration Statement covering the shares issuable upon conversion of the Series C Preferred Stock. In October 2023, 975 shares of Series C Convertible Preferred Stock converted into 54,394 shares of common stock. 2022 Underwriting Agreements and Public Offerings On May 5, 2022, the Company entered into an underwriting agreement (the “Alexander Underwriting Agreement”) with Alexander Capital, L.P., acting as representative of the several underwriters named in the Alexander Underwriting Agreement (the “ Alexander Underwriters”), relating to the Company’s underwritten the offering pursuant to which the Company agreed to issue and sell 373,898 shares of the Company’s common stock. The shares were sold to the public at a combined public offering price of $ 25 per share and were purchased by the Underwriters from the Company at a price of $ 23 per share. The Company also granted the Alexander Underwriters a 45-day option to purchase up to an additional 56,085 shares of Common Stock at the same price, which expired and were not purchased. The shares were sold in the Offering pursuant to a Registration Statement on Form S-1, as amended (File No. 333-264347) (the “Registration Statement”), a Registration Statement on Form S-1 pursuant to 462(b) of the Securities Act of 1933, as amended (File No. 333-264775), and a related prospectus filed with the Securities and Exchange Commission. The public offering closed on May 10, 2022 and the Company sold 373,898 shares of common stock for total gross proceeds of $ 9.3 million. The Company received net proceeds of $ 8.1 million after deducting underwriters’ discounts and commissions of $ 0.7 million and direct offering expenses of $ 0.5 million. On November 29, 2022, the Company, entered into a Securities Purchase Agreement with investors pursuant to which the Company agreed to issue and sell, in an offering (i) an aggregate of 168,000 shares (the “Shares”) of the Company’s common stock, and accompanying Class B Warrants (the “Class B Warrants”) to purchase 168,000 shares of common stock and accompanying Class C Warrants (the “Class C Warrants”) to purchase 168,000 shares of Common Stock, at a combined public offering price of $ 5.50 per share and Class B Warrant and Class C Warrant, and (ii) 1,650,181 pre-funded warrants (the “Pre-Funded Warrants” and together with the Class B Warrants and the Class C Warrants, the “Warrants” and together with the Shares and the shares of common stock underlying the Warrants, the “Securities”) exercisable for 1,650,181 shares of Common Stock, and accompanying Class B Warrants to purchase 1,650,181 shares of Common Stock and Class C Warrants to purchase 1,650,181 shares of Common Stock, at a combined public offering price of $ 5.50 , less the exercise price of $ 0.0001 , per Pre-Funded Warrant and accompanying Class B Warrant and Class C Warrant, to the Investors, for aggregate gross proceeds from the offering of approximately $ 10 million before deducting placement agent fees and related offering expenses. As a result of the transaction, the Company issued 1,818,181 shares of common stock, including the 168,000 shares and the immediate exercise of 1,650,181 pre-funded warrants, for gross proceeds of $ 10.0 million. The Company received net proceeds of $ 9.0 million after deducting placement agent fees and offering expenses. NOTE 10: RELATED PARTY TRANSACTIONS As of December 31, 2023 and 2022, the Company made net repayments for amounts due to related parties totaling $130,205 and $ 170,000 , respectively. As of December 31, 2023 and December 31, 2022, amounts due to related parties were $ 400,012 and $ 556,217 , respectively. The advances are unsecured, non-interest bearing and due on demand. Amounts due to related parties consist of current and former executives, and a board member. F-33 Table of Contents As of December 31, 2023 and 2022, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $ 104,568 and $ 104,568 respectively, and accrued salary and expense reimbursements of $ 87,222 and $ 100,649 , respectively, to current officers. In October 2022, the Company received advances from a director, Trevor Pettennude, totaling $ 325,000 . The advances are unsecured, non-interest bearing and due on demand. As of December 31, 2023 and 2022, the amounts $ 175,000 and $ 325,000 were outstanding. As of December 31, 2023, due to related parties includes advances from the Chief Executive Officer of $ 33,222 . ​ NOTE 11: SHARE-BASED PAYMENTS Common Stock Warrants 2023 Transactions In connection with the January Private Placement, the Company granted 32,085 pre-funded warrants which were immediately exercised for shares of common stock. The Company also granted an additional 51,085 warrants as part of the offering. Each warrant has an exercise price of $ 9.43 per share, is immediately exercisable upon issuance and expires five years after issuance. The Company also granted the placement agent 3,831 warrants to purchase common stock at an exercise price of $ 122.35 per share, which is immediately exercisable upon issuance and expires five years after issuance. In connection with merchant advances (Note 6), the Company granted 6,095 warrants to purchase common stock at an exercise price of $ 131.25 . The warrants are immediately exercisable upon issuance and expire five years after issuance. In connection with the August Private Placement, the Company granted 481,875 pre-funded warrants, which had not yet been exercised for shares of common stock as of September 30, 2023. These warrants are expected to be fully sold and exercised into shares in the fourth quarter of 2023. The Company also granted an additional 1,027,750 warrants as part of the offering. Each warrant has an exercise price of $ 9.43 per share, is immediately exercisable upon issuance and expires 5.5 years after issuance. The Company also granted the placement agent 38,541 warrants to purchase common stock at an exercise price of $ 12.16 per share, which is immediately exercisable upon issuance and expires 5.5 years after issuance. In connection with the August Private Placement, the Company entered into a warrant amendment (the “Warrant Amendment”) with certain investors to amend certain existing warrants to purchase up to 196,542 shares of Common Stock that were previously issued in December 2022 and January 2023 to the investors, with an exercise price of $ 131.25 per share and $ 95.00 per share, respectively (the “Amended Warrants”) as follows: (i) to reduce the exercise price of the Amended Warrants to $ 9.43 per share, and (ii) to extend the original expiration date of the Amended Warrants so that they will terminate five and one half years from the closing of the offering. Immediately following the Warrant Amendment, the Company exercised warrants for 123,814 shares of common stock for proceeds of $ 1,167,566 . 2022 Transactions In connection with the April note agreement, the Company granted warrants to acquire 12,577 shares of common stock at an exercise price of $ 122.00 per share expiring in April 2027. On May 10, 2022, pursuant to the Underwriting Agreement, the Company issued the Underwriters’ Warrants to purchase up to an aggregate of 14,956 shares of common stock. The Underwriters’ Warrants may be exercised beginning on November 1, 2022 until May 5, 2027. The initial exercise price of each Underwriters’ Warrant is $ 32.50 per share, which represents 130 % of the public offering price. In connection with the July 22 and July 28 notes, the Company issued an aggregate of 41,124 and 27,655 warrants to purchase common stock at an exercise price of $ 15.20 and $ 11.30 per share, respectively. The warrants expire in July 2027. In connection with the November public offering, the Company granted 1,650,181 pre-funded warrants which were immediately exercised for shares of common stock. The Company also granted an additional 1,818,181 Class B Warrants and 1,818,181 Class C Warrants as part of the offering. Each Class B Warrant has an exercise price of $ 5.25 per share, is immediately exercisable upon issuance and expires five years after issuance. Each Class C Warrant has an exercise price of $ 5.25 per share, is immediately exercisable upon F-34 Table of Contents issuance and expires thirteen months after issuance. The Company also granted the placement agent 136,364 warrants to purchase common stock at an exercise price of $ 6.88 per share, which are exercisable 180 days after issuance and expire in five years . In connection with the December Notes, the Company issued to the investors an aggregate of 469,480 warrants to purchase common stock at an exercise price equal to $ 4.26 for a fair value of $ 164,200 . The warrants are immediately exercisable. The Company granted 44,000 warrants to purchase common stock at an exercise price of $ 5.00 to the lender in connection with its merchant advances. A summary of information related to common stock warrants for the years ended December 31, 2023 and 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Common Weighted ​ ​ Stock ​ Average ​ ​ Warrants ​ Exercise Price Outstanding - December 31, 2022 ​ 176,733 ​ $ 209.25 Granted ​ 1,641,262 ​ ​ 14.69 Exercised ​ ( 637,775 ) ​ ​ 14.11 Forfeited ​ — ​ ​ — Outstanding - December 31, 2023 ​ 1,180,220 ​ $ 25.40 ​ ​ ​ ​ ​ ​ Exercisable at December 31, 2022 ​ 171,278 ​ $ 210.50 Exercisable at December 31, 2023 ​ 1,180,220 ​ $ 25.40 ​ Stock Options 2020 Incentive Stock Plan The Company has adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 1,320 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, 1,093 options were granted to executives and directors at an exercise price from $ 385 to $ 415 per share. As of December 31, 2022, 227 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 11,964 shares as December 31, 2023 and 2022. 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 333 and as of December 31, 2023. Vesting generally occurs over a period of immediately to four years . F-35 Table of Contents ​ A summary of information related to stock options under our 2013 and 2020 Stock Plan for the years ended December 31, 2023 and 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ Options ​ Exercise Price Outstanding - December 31, 2022 ​ 1,558 ​ $ 9,050 Granted ​ — ​ ​ — Exercised ​ — ​ ​ — Forfeited ​ — ​ ​ — Outstanding - December 31, 2023 1,558 ​ $ 9,050 Exercisable at December 31, 2022 ​ 1,389 ​ $ 10,125 Exercisable at December 31, 2023 1,487 ​ $ 9,098 ​ ​ ​ ​ ​ ​ Weighted average duration (years) to expiration of outstanding options at December 31, 2023 5.47 ​ ​ Stock-based compensation expense of $ 408,810 and $ 479,038 was recognized during the year ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023 and 2022, $ 351,214 and $ 421,442 was recorded to general and administrative expenses, and $ 57,596 and $ 57,596 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, 2023 amounted to $ 169,190 and will be recognized over a weighted average period of 0.46 years. ​ NOTE 12: LEASE OBLIGATIONS Rent is classified by function on the consolidated statements of operations either as general and administrative, sales and marketing, or cost of revenue. The Company determines whether an arrangement is or contains a lease at inception by evaluating potential lease agreements including services and operating agreements to determine whether an identified asset exists that the Company controls over the term of the arrangement. Lease commencement is determined to be when the lessor provides access to, and the right to control, the identified asset. The rental payments for the Company’s leases are typically structured as either fixed or variable payments. Fixed rent payments include stated minimum rent and stated minimum rent with stated increases. The Company considers lease payments that cannot be predicted with reasonable certainty upon lease commencement to be variable lease payments, which are recorded as incurred each period and are excluded from the calculation of lease liabilities. Management uses judgment in determining lease classification, including determination of the economic life and the fair market value of the identified asset. The fair market value of the identified asset is generally estimated based on comparable market data provided by third-party sources. In January 2023, the Company entered into a lease agreement extension for its corporate office and distribution center in Vernon, California that expires on January 31, 2025. The lease has monthly base rent payments of $ 12,000 . The Company recognized a right of use asset of $ 31,597 and lease liability of $ 170,002 using a discount rate of 10.0 %. In September 2023, the Company entered into a lease agreement extension for a showroom space in Los Angeles, California that commences in March 2023 and expires in September 2024. The lease has a monthly base rent of $ 25,000 . The Company recognized a right of use asset of $ 658,091 and lease liability of $ 1,040,812 using a discount rate of 10.0 %. F-36 Table of Contents The following is a summary of operating lease assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Operating leases 2023 2022 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ ROU operating lease assets ​ $ 689,688 ​ $ 102,349 ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ Current portion of operating lease ​ 1,210,814 ​ 102,349 Total operating lease liabilities ​ $ 1,210,814 ​ $ 102,349 ​ ​ ​ ​ ​ ​ ​ ​ December 31, Operating leases ​ 2023 2022 Weighted average remaining lease term (years) 1.00 1.00 ​ Weighted average discount rate 10.00 % 6.00 % ​ ​ ​ ​ ​ ​ December 31, ​ 2023 Future minimum payments - 2024 ​ $ 1,268,230 Less imputed interest ​ ( 57,416 ) Total lease obligations ​ $ 1,210,814 ​ ​ NOTE 13: CONTINGENCIES ● On March 21, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $ 43,501 . Such amounts include interest due, and are included in accounts payable, net of payments made to date, in the accompanying consolidated balance sheets. The Company does not believe it is probable that the losses in excess of such trade payables will be incurred. ● On February 7, 2023, a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $ 182,400 . Such amounts include interest due, and are included in accounts payable, net of payments made to date, in the accompanying consolidated balance sheets. The Company does not believe it is probable that the losses in excess of such trade payables will be incurred. ● On November 9, 2022, a vendor filed a lawsuit against Digital Brand’s Group related to prior services rendered. The claims (including fines, fees, and legal expenses) total an aggregate of $ 50,190 . The matter was settled in January 2023 and are on payment plans which will be paid off in the second quarter of 2024. ● 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 . Both matters were settled in February 2022 and are on payment plans which will be paid off in the second quarter of 2024. ● 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. ● On November 16, 2023 a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $ 345,384 , which represents past due fees and late fees. Such amounts are included in the accompanying balance sheets. The Company does not believe it is probable that the losses in excess of such pay trade payables will be incurred. ● On November 15, 2023 a vendor filed a lawsuit against Digital Brands Group related to trade payables totaling approximately $ 582,208 , which represents “double damages. The amount due to the vendor is $ 292,604 . Such amounts are included in the F-37 Table of Contents accompanying balance sheets. The Company does not believe it is probable that the losses in excess of such pay trade payables will be incurred. ● On December 21, 2023, a former employee from over two years ago filed a wrongful termination lawsuit against the Company. The Company is disputing this claim. To this point, this same law firm recently sent a demand letter for another wrongful termination of a temporary worker we used from a third party placement agency. This person was not a Company employee at any time. ● A vendor filed a lawsuit against Bailey 44 related to a retail store lease in the amount of $ 1.5 million. The Company is disputing the claim for damages and the matter is ongoing. The vendor has recently updated the claim to now be $ 450,968 after signing a long-term lease with another brand for this location. The Company is disputing this new amount after review of the lease. 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 accompanying consolidated balance sheet as of December 31, 2023. Depending on the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect our business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, we believe based on our current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, cash flows, or financial condition. 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 14: 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, 2023, and 2022, the Company had net deferred tax assets before valuation allowance of $ 17,882,355 and $ 16,733,585 , respectively. The following table presents the deferred tax assets and liabilities by source: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Deferred tax assets: ​ ​ ​ ​ Net operating loss carryforwards ​ $ 19,354,491 ​ $ 16,733,582 Deferred tax liabilities: ​ ​ Indefinite lived intangible assets ​ ( 1,840,170 ) ​ — Valuation allowance ​ ( 17,882,355 ) ​ ​ ( 16,733,582 ) Net deferred tax assets (liabilities) ​ $ ( 368,034 ) ​ $ — ​ A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ 2023 2022 Statutory federal rate ​ 21.0 % 21.0 % State income taxes net of federal income tax benefit 7.0 7.0 ​ Permanent adjustment ​ ( 18.0 ) ​ — ​ Change in valuation allowance ( 14.4 ) ( 28.0 ) ​ Effective income tax rate ( 4.4 ) % — ​ ​ F-38 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, 2023, and no history of generating taxable income. Therefore, valuation allowances of $ 17,882,355 and $16,733,582 were recorded as of December 31, 2023 and 2022, respectively. Valuation allowance increased by $ 1,148,773 and $ 3,630,314 during the years ended December 31, 2023 and 2022, respectively. Deferred tax assets were calculated using the Company’s combined statutory tax rate, which it estimated to be approximately 28.0 %. The Company has evaluated its valuation allowance assertion which resulted in a full valuation allowance and residual naked credit given the net operating losses generated post 2017 are subject to a 80% limitation. As a result, the Company recorded a net deferred tax liability of $ 368,034 based on its assessment of the utilization of deferred tax assets surrounding the Company’s indefinite lived intangible assets. The effective rate is reduced to ( 4.4 %) and 0 % for 2023 and 2022 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, 2023 and 2022, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of approximately $ 69,242,000 and $ 59,865,000 , for which losses from 2018 forward can be carried forward indefinitely. As a result of prior operating losses, the Company has net operating loss, or “NOL,” carryforwards for federal income tax purposes. The ability to utilize NOL carryforwards to reduce taxable income in future years could become subject to significant limitations under Section 382 of the Internal Revenue Code if the Company undergoes an ownership change. The Company would undergo an ownership change if, among other things, the stockholders who own, directly or indirectly, 5 % or more of our common stock, or are otherwise treated as “5% shareholders” under Section 382 of the U.S. Internal Revenue Code and the regulations promulgated thereunder, increase their aggregate percentage ownership of the Company’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders at any time during the testing period, which is generally the three-year period preceding the potential ownership change. 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. ​ NOTE 15: SUBSEQUENT EVENTS ​ Through the issuance date, the Company has issued 481,172 shares of common stock pursuant to an At-The-Market Offering Agreement for an at-the-market offering (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”). Through the issuance date, the Company converted shares of Series C Preferred Stock into 50,043 shares of common stock. ​ ​ F-39