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, 2025. 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 did not maintain effective controls over: ● The overall design of internal controls over financial reporting, including insufficient policies and procedures, lack of management review of key account reconciliations, and inadequate technical accounting analysis for complex transactions. ● The accrual of liabilities and accounts payable cut-off, resulting in expenses not being recorded in the proper period. ● Equity issuances and share-based payment accounting, including determination of measurement dates, valuation, and completeness and accuracy of shares issued. ● The recognition and classification of prepaid expenses, including evaluation of future economic benefit and timely expense recognition. ● The recognition and evaluation of intangible assets and asset acquisitions, including documentation supporting capitalization, valuation, and impairment assessments. ● Information provided by third-party service providers, including sufficient review of completeness and accuracy of such information used in financial reporting. 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. 50 ● 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. ● 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, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 51 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, 2025. Name Age Position Executive Officers and Directors John Hilburn Davis IV 53 President and Chief Executive Officer Reid Yeoman 43 Chief Financial Officer Mark T. Lynn 41 Director Trevor Pettennude 58 Director Jameeka Aaron 45 Director Huong “Lucy” Doan 56 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 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; ● establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns; 53 ● 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 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 2025, 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 2025. 55 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, 2025 and 2024. 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 2025 $ 249,000 (1) $ — $ — $ — $ 249,000 President and Chief Executive Officer 2024 $ 249,000 $ — $ — $ — $ 249,000 Reid Yeoman 2025 $ 250,000 (2) $ — $ — $ — $ 250,000 Chief Financial Officer 2024 $ 250,000 (2) $ — $ — $ — $ 250,000 (1) This amount represents the amount of salary Mr. Davis was entitled to receive under his agreement with the Company. (2) 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, 2024. 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. On December 11, 2024, the Board of Directors approved a one - for - 50 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 Option That Have Stock That That Rights That Unexercised Unexercised Unexercised Exercise Option Not Have Have Have Options(#) Options(#) Unearned Price Expiration Vested Not Not Not Name Exercisable Unexercisable Options (#) ($) Date (#) Vested Vested Vested John “Hil” Davis 17 15 2 $ 518,750 May-31 — — — — Reid Yeoman 1 1 1 $ 518,750 May-31 56 Employment Agreements In December 2020, we entered into an offer letter with Mr. Davis, our Chief Executive Officer and a member of our board. The offer letter provides for an annual base salary of $350,000 effective October 1, 2020, and for Mr. Davis to be appointed to our board effective November 30, 2020. Effective January 1, 2021, Mr. Davis is also eligible to receive an annual bonus with a target of 175%, and with a range from 0% to a maximum of 225%, of his base salary based upon achievement of Company and individual goals. He is also eligible to participate in employee benefit plans that we offer to our other senior executives. In the event of a termination of his employment after June 30, 2021, Mr. Davis is eligible for severance benefits as may be approved by the Board. Mr. Davis is subject to our recoupment, insider trading and other company policies, a perpetual non-disclosure of confidential information covenant, a non-disparagement covenant and a non-solicitation of employees covenant. Mr. Davis’ offer letter also provided for an option grant exercisable for up to 17 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 1 share 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 400 shares (after effect of reverse stock split) 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 26 shares(after taking reverse stock split effect) 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, 22 grants (as adjusted for the Reverse Stock Split) have been made under the 2020 Plan and 4 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. 57 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 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. 58 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. 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 March [●], 2025 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. 59 Shares of common stock issuable pursuant to a stock option, warrant or convertible note that is currently exercisable or convertible, or is exercisable or convertible within 60 days after the date of determination of ownership, are deemed to be outstanding and beneficially owned for purposes of computing the percentage ownership of the holder of the stock option, warrant or convertible note but are not treated as outstanding for purposes of computing the percentage ownership of any other person. The applicable percentage ownership in the following table is based on 16,329,371 shares of our common stock outstanding as of April 15, 2026. 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) 18 * Reid Yeoman 1 * Mark Lynn(3) 3 * Trevor Pettenude(4) 1 * Jameeka Aaron 0 * Huong “Lucy” Doan 0 * All executive officers, directors and director nominees as a group (6 persons) (5) 23 * * Less than one percent. (1) Represents options exercisable at $518,750 per share. (2) Represents options to acquire up to 1 share of common stock, exercisable at $518,750 per share. (3) Includes options to acquire up to 3 shares of common stock exercisable between $195,000 and $410,000 per share. (4) Includes options to acquire up to 1 share of common stock exercisable between $195,000. (5) Represents options to acquire up to 23 shares of common stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE As of December 31, 2025 and 2024, amounts due to related parties was $370,921 and $411,921, respectively. The advances are unsecured, non-interest bearing and due on demand. Amounts due to related parties consist of amounts due to current and former executives, and a board member. As of December 31, 2025 and 2024, due to related parties includes $87,221 in advances from Mark Lynn, a director and former officer of the company, and accrued salary and expense reimbursements of $134,670 to current officers of the company. 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, 2025 and 2024, $149,000 and $190,000, respectively, was outstanding. 60 Policies and Procedures for Related Person Transactions Our board of directors intends to adopt a written related person policy to set forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we are to be a participant, the amount involved exceeds $100,000 and a related person had or will have a direct or indirect material interest, including purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. Director Independence Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has determined that Trevor Pettennude, Jameeka Aaron, and Huong “Lucy” Doan, do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of Nasdaq. In making these determinations, our board of directors considered the current and prior relationships that each non- employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table provides information regarding the fees billed to us by dbb mckennon and Macias Gini & O’Connell LLP in the fiscal years ended December 31, 2025 and 2024, respectively. All fees described below were approved by the Board: For the Fiscal Years Ended December 31, 2025 2024 Audit fees (1) $ 351,220 $ 519,995 Audit related fees — — Tax fees — — All other fees (2) — — Total fees $ 351,220 $ 519,995 (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 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 Exhibit Number Description 2.1 Plan of Conversion of Digital Brands Group, Inc. (incorporated by reference to Exhibit 2.1 of Digital Brands Group Inc.’s Current Report on Form 8-K filed with the SEC on January 5, 2026). 2.2 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). 2.3 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). 2.4 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). 2.5 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). 2.6 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). 2.7 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). 2.8 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). 2.9 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 Articles of Incorporation of Digital Brands Group, Inc. (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Current Report on Form 8-K filed with the SEC on January 5, 2026). 3.2 Certificate of Designations, Preferences and Rights of the Series D Convertible Stock of Digital Brands Group, Inc. (incorporated by reference to Exhibit 3.1 of Digital Brands Group Inc.’s Current Report on Form 8-K filed with the SEC on February 17, 2026). 3.3 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). 3.4 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). 3.5 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). 3.6 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). 3.7 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). 3.8 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). 3.9 Bylaws of Digital Brands Group, Inc. (incorporated by reference to Exhibit 3.2 of Digital Brands Group Inc.’s Current Report on Form 8-K filed with the SEC on January 5, 2026). 3.10 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). 3.11 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). 3.12 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). 62 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). 63 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 13, 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 13, 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 13, 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). 10.13 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). 10.14 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). 10.15 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). 10.16 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). 10.17 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). 10.18 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). 10.19 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). 64 Exhibit Number Description 10.20 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). 10.21 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). 10.22 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). 10.23 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). 10.24 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). 10.25 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). 10.26 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). 10.27 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). 10.28 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). 10.29 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). 10.30 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). 10.31 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). 10.32+ 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). 10.33+ 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). 10.34 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). 10.35 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). 10.36 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)). 65 Exhibit Number Description 10.37 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). 10.38 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). 10.39 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 13, 2023). 10.40 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 13, 2023). 10.41 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). 10.42 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). 10.43 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). 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. 66 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIGITAL BRANDS GROUP, INC. By: /s/ John Hilburn Davis IV April 15, 2026 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, 2026 John Hilburn Davis IV (Principal Executive Officer) /s/ Reid Yeoman Chief Financial Officer April 15, 2026 Reid Yeoman (Principal Financial and Accounting Officer) /s/ Mark T. Lynn Director April 15, 2026 Mark T. Lynn /s/ Trevor Pettennude Director April 15, 2026 Trevor Pettennude /s/ Jameeka Aaron Green Director April 15, 2026 Jameeka Aaron Green /s/ Huong “Lucy” Doan Director April 15, 2026 Huong “Lucy” Doan 67 DIGITAL BRANDS GROUP, INC. FINANCIAL STATEMENTS DECEMBER 31, 2025 AND 2024 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 3501 ) F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 324 ) 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 Report of Independent Registered Public Accounting Firm 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, 2025, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2025, 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, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. 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/ dbbmckennon San Diego, California April 15, 2026 We have served as the Company’s auditor since December 2025. F- 2 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Digital Brands Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Digital Brands Group, Inc. (the Company) as of December 31, 2024, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended, 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, 2024, and the result 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. 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 flows 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 the entity’s 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 audit provides a reasonable basis for our opinion. /s/ Macias Gini & O’Connell LLP We began serving as the Company’s auditor in 2023. In 2025, we became the predecessor auditor. Irvine, California April 9, 2025 F- 3 DIGITAL BRANDS GROUP, INC. CONSOLIDATED BALANCE SHEETS 2025 2024 Year Ended December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 1,934,831 $ 164,431 Restricted cash 5,744,174 - Accounts receivable, net 153,983 44,067 Due from factor, net 273,437 390,186 Inventory 3,136,660 3,823,940 Prepaid expenses and other current assets 9,372,958 274,643 Total current assets 20,616,043 4,697,267 Property, equipment and software, net 15,736 24,089 Goodwill 5,788,445 8,973,501 Intangible assets, net 4,494,871 6,120,039 Deposits 82,331 75,431 Prepaid marketing expenses 13,491,954 - Total assets $ 44,489,380 $ 19,890,327 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 6,270,892 $ 6,424,661 Accrued expenses and other liabilities 5,561,491 5,257,102 Due to related parties 370,921 411,921 Convertible note payable, net - 100,000 Accrued interest payable 2,787,506 2,328,078 Loan payable, current 2,624,749 2,798,116 Stock payable 4,951,128 - Promissory note payable 3,500,000 3,500,000 Total current liabilities 26,066,687 20,819,878 Share based payment liability 9,405,699 - Loans payable - 150,000 Deferred tax liability 248,990 248,990 Total liabilities 35,721,376 21,218,868 Commitments and contingencies (Note 14) - - Stockholders’ equity (deficit): Undesignated preferred stock, $ 0.0001 par, 10,000,000 shares authorized, 0 shares issued and outstanding as of both December 31, 2025 and 2024 - - Series A convertible preferred stock, $ 0.0001 par, 6,300 shares designated, 6,300 shares issued and outstanding as of both December 31, 2025 and 2024 1 1 Series C convertible preferred stock, $ 0.0001 par, 1,344 shares issued and outstanding as of both December 31, 2025 and 2024, respectively 1 1 Series D convertible preferred stock, $ 0.0001 par, 15,906 and 0 shares issued and outstanding as of December 31, 2025 and 2024, respectively 2 - Preferred stock, value 2 - Common stock, $ 0.0001 par, 1,000,000,000 shares authorized, 8,788,335 and 838,583 shares issued and outstanding as of December 31, 2025 and 2024, respectively 879 83 Additional paid-in capital 164,120,717 125,772,412 Accumulated deficit ( 155,353,596 ) ( 127,101,038 ) Total stockholders’ equity (deficit) 8,768,004 ( 1,328,541 ) Total liabilities and stockholders’ equity (deficit) $ 44,489,380 $ 19,890,327 See the accompanying notes to the consolidated financial statements. F- 4 DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS 2025 2024 Year Ended December 31, 2025 2024 Net revenues $ 7,380,921 $ 11,555,656 Cost of net revenues 6,326,300 7,911,536 Gross profit 1,054,621 3,644,120 Operating expenses: General and administrative 9,674,699 8,652,361 Sales and marketing 14,596,126 2,896,698 Distribution 643,569 907,843 Impairment of goodwill and intangible assets 5,674,004 1,388,000 Total operating expenses 30,588,398 13,844,902 Loss from operations ( 29,533,777 ) ( 10,200,782 ) Other income (expense): Change in fair value of share based payment liability 1,714,790 - Interest expense ( 514,584 ) ( 2,941,171 ) Other non-operating income (expenses) 81,013 ( 83,680 ) Total other income (expense), net 1,281,219 ( 3,024,851 ) Income tax benefit (provision) - 119,044 Net loss $ ( 28,252,558 ) $ ( 13,106,589 ) Deemed dividend on modification of Series D preferred stock ( 2,104,688 ) - Net loss attributable to common stockholders $ ( 30,357,246 ) $ ( 13,106,589 ) Weighted average common shares outstanding - basic and diluted 13,956,769 170,853 Net loss per common share - basic and diluted $ ( 2.18 ) $ ( 76.71 ) See the accompanying notes to the consolidated financial statements. F- 5 DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Series A Convertible Series C Convertible Series D Convertible Additional Total Stockholders’ Preferred Stock Preferred Stock Preferred Stock Common Stock Paid-in Accumulated Equity Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balances at December 31, 2023 6,300 1 4,786 1 - - 22,287 $ 2 115,597,037 ( 113,994,449 ) 1,602,592 Issuance of common stock pursuant to private placements - - - - - - 806,754 81 9,374,360 - 9,374,441 Conversion of debt and interest into common stock 3,120 318,767 318,767 Shares issued for services - - - - - - 2,582 - 312,634 - 312,634 Conversion of preferred shares into common stock - - ( 3,442 ) - - - 3,840 - - - - Stock-based compensation - - - - - - - - 169,614 - 169,614 Net loss - - - - - - - - - ( 13,106,589 ) ( 13,106,589 ) Balances at December 31, 2024 6,300 1 1,344 1 - - 838,583 83 125,772,412 ( 127,101,038 ) ( 1,328,541 ) Balances 6,300 1 1,344 1 - - 838,583 83 125,772,412 ( 127,101,038 ) ( 1,328,541 ) Issuance of pre-funded warrants in connection with services contract - - - - - - - - 2,689,656 - 2,689,656 Issuance of common stock and pre-funded warrants pursuant to private placement offering - - - - - - 125,535 13 6,642,420 - 6,642,433 Exercise of pre-funded warrants in connection with private placement offering - - - - - - 5,701,820 570 1,192,886 - 1,193,456 Issuance of shares pursuant to acquisition of intangibles - - - - - - 344,827 35 2,948,241 - 2,948,276 Issuance of Series D preferred stock per private placement offering - - - - 15,906 2 - - 11,386,998 - 11,387,000 Conversion of accounts payable in common stock - - - - - - 11,582 1 113,850 - 113,851 Shares issued pursuant to service contracts 1,765,988 177 13,374,254 13,374,431 Net loss - - - - - - - - - ( 28,252,558 ) ( 28,252,558 ) Balances at December 31, 2025 6,300 $ 1 1,344 $ 1 15,906 $ 2 8,788,335 $ 879 $ 164,120,717 $ ( 155,353,596 ) $ 8,768,004 Balances 6,300 $ 1 1,344 $ 1 15,906 $ 2 8,788,335 $ 879 $ 164,120,717 $ ( 155,353,596 ) $ 8,768,004 See the accompanying notes to the consolidated financial statements. F- 6 DIGITAL BRANDS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 2025 2024 Year Ended December 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 28,252,558 ) $ ( 13,106,589 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,092,849 2,505,598 Amortization of loan discount and fees 21,900 2,429,591 Change in fair value of share based payment liability ( 1,714,790 ) - Impairment of goodwill and intangible assets 5,674,004 1,388,000 Loss on conversion of accounts payable into common stock 31,471 - Shares issued for services 482,227 312,635 Stock-based compensation - 169,614 Change in credit reserve - ( 151,611 ) Shares issued for loan interest conversion - 4,950 Non-cash lease expense - 81,374 Deferred tax expense - ( 119,044 ) Changes in operating assets and liabilities: Accounts receivable, net ( 109,916 ) 30,766 Due from factor 116,749 99,236 Inventory 687,280 1,025,660 Prepaid expenses and other current assets 4,449,087 2,027 Accounts payable ( 71,388 ) ( 1,114,242 ) Accrued expenses and other liabilities 304,389 498,610 Accrued interest payable 459,428 381,678 Lease liabilities - ( 602,500 ) Due to related parties ( 41,000 ) 11,909 Deposits ( 6,900 ) - Net cash used in operating activities ( 15,877,168 ) ( 6,152,338 ) Cash flows from financing activities: Issuance of loans and note payable 240,000 790,977 Repayments of convertible notes and loan payable ( 685,267 ) ( 3,869,422 ) Proceeds of issuance of Series D preferred stock, net of issuance costs 11,387,000 - Proceeds from exercise of warrants 5,807,576 - Proceeds for issuance of pre-funded warrants 6,642,433 - Issuance of common stock for cash - 9,374,441 Net cash provided by financing activities 23,391,742 6,295,996 Net change in cash, cash equivalents, and restricted cash 7,514,574 143,658 Cash, cash equivalents, and restricted cash at beginning of year 164,431 20,773 Cash, cash equivalents, and restricted cash at end of year $ 7,679,005 $ 164,431 Reconciliation of cash and restricted cash: Cash at beginning of year $ 164,431 $ 20,773 Restricted cash at beginning of year - - Cash and restricted cash at beginning of year $ 164,431 $ 20,773 Cash at end of year $ 1,934,831 $ 164,431 Restricted cash at end of year 5,744,174 - Cash and restricted cash at end of year $ 7,679,005 $ 164,431 Supplemental disclosure of cash flow information: Cash paid for income taxes $ - $ - Cash paid for interest $ 47,000 $ 1,838,682 Supplemental disclosure of non-cash investing and financing activities: Issuance of pre-funded warrants for prepaid marketing services $ 2,689,656 $ - Shares issued for prepaid marketing services $ 13,229,211 $ - Non-cash purchase of intangible assets $ 2,948,276 $ - Recognition of share-based payment liability $ 11,120,489 $ - Shares issued for services and conversion of accounts payable $ 82,380 $ 313,816 See the accompanying notes to the consolidated financial statements. F- 7 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 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. Effective December 29, 2025, the Company reincorporated from the State of Delaware to the State of Nevada pursuant to a plan of conversion. The Company filed a certificate of conversion with the Delaware Secretary of State and articles of incorporation with the Nevada Secretary of State. The Reincorporation did not result in any change in the Company’s business, management, assets, or liabilities. All outstanding shares continued without change. The Company’s affairs are now governed by the Nevada Revised Statutes and its Nevada Articles of Incorporation and Bylaws. Reverse Stock Split On December 11, 2024, the Board of Directors approved a 1-for-50 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 December 11, 2024. 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 NOTE 2: GOING CONCERN The Company has not generated profits since inception, has sustained net losses of $ 28,252,558 and $ 13,106,589 for the years ended December 31, 2025 and 2024, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2025 and 2024. 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. As of December 31, 2025, the Company had an accumulated deficit of $ 155,353,596 and a working capital deficit of $ 5,450,644 , calculated as the excess of current liabilities over current assets. 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, which it has done, or obtain financing through the sale of debt and/or equity securities, which it has done. 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. While the Company has several potential sources of cash including cash warrants that are registered and exercisable that are in the money, the ability to initiate an at-the-market (“ATM”) offering under its current shelf registration statement, no assurance can be given that the Company will be successful in these efforts. Management’s Plans During 2025, the Company completed several equity raises: (i) in February 2025, gross proceeds of $ 7,500,000 from common stock, warrants and pre-funded warrants; (ii) in August and September 2025, gross proceeds of approximately $ 12,725,000 from Series D Convertible Preferred Stock and additional warrant exercises of approximately $ 6,642,000 ; and (iii) at-the-market equity financings under the Company’s shelf registration. As of December 31, 2025, the Company had cash and cash equivalents of $ 1,934,831 and restricted cash of $ 5,744,174 (aggregate $ 7,679,005 ). The Company believes its existing cash resources and planned operations—including its collegiate apparel program under agreements with AAA Tuscaloosa, LLC, Traffic Holdco, LLC, The Grove Collective, LLC, and Buffalo Sports Properties, LLC (Learfield), increased wholesale pricing, and continued cost reduction measures—will be sufficient to fund operations for at least one year from the date these financial statements are issued. The Company also notes that the Bailey promissory note with a principal balance of $ 3,500,000 and accrued interest of approximately $ 2,624,000 matured on December 8, 2025 and remains unpaid as of December 31, 2025. Management is currently in discussions with the lender regarding repayment or potential extension of the note. In addition, management continues to monitor the release conditions for the $ 5,744,174 of restricted cash held pursuant to the Series D Securities Purchase Agreement, the release of which would further support liquidity. Throughout the next twelve months, the Company intends to fund its operations from the funds raised through equity offerings, including at-the-market equity financings, equity line of credits (“ELOC”), further warrant exercises or other public or private equity offerings. Additionally, the Company intends to fund operations from increased revenues due to its new marketing efforts, including its collegiate apparel program and increased wholesale pricing, through settlement and renegotiation of aged payables, conversions of outstanding debt and accrued interest, and continuing its cost cutting measures, which the Company has already made during the nine months of 2025. Based on the current state of operations, the additional capital sources available to the Company, and the cash on hand of approximately $ 7.7 million (aggregate unrestricted and restricted), management believes that the Company has sufficient capital to meet its financial obligations for the next 12 months as of the issuance date of these financial statements. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans. F- 9 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, 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 U.S. 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. Significant estimates include the fair value of equity instruments, share-based payment liabilities, prepaid marketing assets, goodwill and intangible asset impairment assessments, and income tax valuation allowances. Actual results could differ from those estimates. Cash and Equivalents and Concentration of Credit Risk The Company considers all highly liquid securities with an original maturity of less than three months to be cash equivalents. As of December 31, 2025 and 2024, 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 . Restricted Cash As of December 31, 2025, the Company had restricted cash of $ 5,744,174 held in a segregated bank account pursuant to the terms of the Securities Purchase Agreement related to the Series D Convertible Preferred Stock offering. These funds are restricted pending release upon satisfaction of the applicable conditions, including shareholder approval and SEC effectiveness of the resale registration statement. As of December 31, 2024, there was no restricted cash. The Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the consolidated statement of cash flows. Prepaid Marketing Expenses and Liability-Classified Share-Based Awards The Company enters into long-term marketing, licensing, manufacturing, and sponsorship arrangements with third-party service providers under which it may issue common stock or equity-linked instruments in exchange for future services, including distribution, licensing access, product specification support, and marketing and promotional activities. These arrangements are accounted for as share-based payments to nonemployees in accordance with ASC 718, Compensation—Stock Compensation . Where share-based consideration is determined to be in exchange for distinct goods or services, including those received from a customer, the Company accounts for such transactions as the purchase of services. The Company recognizes a prepaid marketing or service asset measured at the grant-date fair value of the share-based consideration issued, representing the value of services to be received over the contractual term. Such prepaid assets are amortized on a straight-line basis over the period in which the related services are received, which generally corresponds to the contractual service period. Certain share-based arrangements include make-whole provisions that require the Company to deliver a fixed monetary value using a variable number of shares, or, in certain cases, cash. These provisions result in liability classification under ASC 718 and ASC 480, Distinguishing Liabilities from Equity , as the Company has an obligation to settle a fixed dollar amount rather than a fixed number of shares. Liability-classified share-based awards are initially measured at fair value on the grant date and subsequently remeasured at fair value at each reporting date until settlement. Changes in fair value are recognized in earnings in the period of change. Compensation cost is recognized over the requisite service period, with cumulative adjustments recorded for changes in fair value. F- 10 The Company evaluates features within these arrangements, including make-whole provisions, under ASC 815, Derivatives and Hedging , to determine whether such features should be accounted for separately as derivatives. The Company has concluded that these features qualify for the scope exception applicable to share-based payment arrangements and therefore are not accounted for as freestanding or embedded derivatives. Accordingly, no bifurcation is required. The fair value of liability-classified share-based awards is estimated using a Monte Carlo simulation model. This valuation technique incorporates significant assumptions, including the Company’s stock price, expected volatility, risk-free interest rate, expected term, and other market-based inputs. Due to the use of significant unobservable inputs, these measurements are classified within Level 2 of the fair value hierarchy. Separately, certain contractual marketing investment commitments represent best-efforts obligations and do not create a present obligation or identifiable asset. Accordingly, such costs are expensed as incurred in accordance with ASC 720, Advertising Costs . Fair Value of Financial Instruments The Company measures certain assets and liabilities at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. ASC 820 establishes a three-level hierarchy that prioritizes the inputs used in valuation techniques: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement. These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company’s only recurring fair value measurements are its share-based payment liabilities arising from the make-whole provisions in the collegiate apparel agreements. These are classified as Level 2, as their valuation relies on significant unobservable inputs that are significant to the overall fair value measurement. Specifically, the expected stock price volatility is estimated from the Company’s own historical stock price data; because the Company does not have actively traded options or other instruments from which implied volatility could be observed, this input is unobservable. Under ASC 820-10-35-52, an instrument is classified based on the lowest level input that is significant to the fair value measurement. Changes in fair value are recognized in earnings each reporting period. See Note 9. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and short-term debt approximate fair value due to their short-term nature. The carrying value of the Company’s long-term SBA loan approximates fair value as the interest rate is fixed at a rate commensurate with current market rates for similar instruments. 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. F- 11 We periodically review accounts receivable, estimate an allowance for credit losses, 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, 2025 and 2024, the Company determined an allowance for credit losses of $ 307,526 and $ 295,837 respectively. Net accounts receivable was $ 74,833 as of December 31, 2023. Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for DSTLD and first-in, first-out method for Bailey, Stateside and Sundry. The inventory balances as of December 31, 2025 and 2024 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress. Inventory consisted of the following: SCHEDULE OF INVENTORY 2025 2024 December 31, 2025 2024 Raw materials $ 585,609 $ 665,450 Work in process 999,366 250,820 Finished goods 1,551,685 2,907,670 Inventory $ 3,136,660 $ 3,823,940 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, 2025 and 2024 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 $ 8,353 and $ 31,422 for the years ended December 31, 2025 and 2024, 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: SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS ACQUIRED AS PART OF BUSINESS COMBINATION Customer relationships 3 years Technology assets 3 years F- 12 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 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, 2025, 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 each reporting unit (Bailey44, Stateside and Sundry) may not be recoverable. The qualitative assessment was primarily due to reduced or stagnant revenues of each entity as compared to the Company’s initial projections at the time of each respective acquisitions, as well as certain 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 $ 1,260,500 in the consolidated statements of operations, as detailed below by entity. The Company also compared the fair value of the reporting units to their carrying amounts and recorded goodwill impairment of $ 3,185,056 ($ 1,081,000 for Bailey and $ 2,104,056 for Stateside) in the consolidated statements of operations. No goodwill impairment was recorded for Sundry. The Company utilized the enterprise value approach in the impairment tests of each reporting unit in 2025. F- 13 The following is a summary of goodwill and intangible impairment recorded pertaining to each entity: SCHEDULE OF GOODWILL AND INTANGIBLE IMPAIRMENT 2025 2024 Year Ended December 31, 2025 2024 Goodwill: Bailey $ 1,081,000 $ - Stateside 2,104,056 - Total goodwill impairment 3,185,056 - Intangible assets: Brand name — Stateside 1,260,500 254,500 OpenDaily intangible assets 1,228,448 - Brand name - Bailey - 1,133,500 Total intangible asset impairment 2,488,948 1,388,000 Total impairment charges $ 5,674,004 $ 1,388,000 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, 2025 and 2024 respectively, including the carrying value of the identifiable intangible assets and goodwill assigned to the respective reporting units. 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 F- 14 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. 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. For the Company’s licensing agreement via Bailey44, the Company recognizes royalty revenue on a monthly basis over the term of the license agreement. 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. University Collegiate Apparel Revenue Starting in 2025, the Company generates revenue through its collegiate apparel agreements with AAA Tuscaloosa, LLC, Traffic Holdco, LLC, The Grove Collective, LLC, and Buffalo Sports Properties / Learfield. Revenue is recognized through two channels: (i) university store consignment, under which products are shipped to university campus bookstores and revenue is recognized based on actual sales reported by the store, and (ii) university online direct-to-consumer, under which revenue is recognized based on Shopify sales data from each university’s dedicated online portal when products are sold to end customers. In both cases, products are placed with the counterparty on consignment and the Company recognizes revenue only when a sale to an end consumer has occurred, consistent with ASC 606-10-55-37. Revenue from university channels is tracked separately in dedicated receivable accounts. 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 $ 45,000 and $ 75,000 for the years ended December 31, 2025 and 2024, respectively. Total shipping and handling costs included in distribution costs were $ 643,569 and $ 907,843 , respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2025 and 2024 amounted to approximately $ 465,000 and $ 138,000 , 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, 2025 and 2024, the Company did not have any derivative instruments that were designated as hedges. F- 15 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. 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. 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, 2025, we had one operating segment which pertains to the sale of apparel. All brands and reporting units currently report 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 brands share similar economic and other qualitative characteristics, and therefore the results of our operating businesses are aggregated into one reportable segment. All of the operating businesses 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. F- 16 Net Loss per Share Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding 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, 2025 and 2024, 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, 2025 and 2024 are as follows: SCHEDULE OF POTENTIALLY DILUTIVE ITEMS OUTSTANDING 2025 2024 Year Ended December 31, 2025 2024 Series A convertible preferred stock 542 542 Series C convertible preferred stock 1,500 1,500 Series D convertible preferred stock 9,192,054 - Common stock warrants 31,111,481 45,701 Stock options 31 31 Total potentially dilutive shares 40,305,608 47,774 The stock options and warrants above are out-of-the-money as of December 31, 2025 and 2024. As of December 31, 2025, there were 10,240,894 pre-funded warrants included in the denominator of weighted average shares outstanding, as shown below: SCHEDULE OF WEIGHTED AVERAGE SHARES OUTSTANDING Weighted average common shares outstanding 2,275,941 Weighted average pre-funded warrants outstanding 11,680,828 Weighted average common shares outstanding — basic 13,956,769 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 December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires greater disaggregation of income tax disclosures related to the income tax reconciliation and income taxes paid. The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The Company adopted ASU 2023-09 on January 1, 2025 and it did not have any material impact on the consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures. This update requires entities to disaggregate operating expenses into specific categories, such as salaries and wages, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. ASU 2024-03 may be applied retrospectively or prospectively. The Company is currently evaluating the impact of this standard on its financial statement presentation and disclosures. Management does not believe that any 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. F- 17 NOTE 4: ACQUISITIONS Business Combinations 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. The Sundry Notes have been fully settled. 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. 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 . 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 22,031 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 1,652 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. Asset Acquisition On April 1, 2025, the Company entered into an Asset Purchase Agreement with Open Daily Technologies Inc., pursuant to which the Company acquired intellectual property and related assets for total consideration of $ 3,000,000 . The consideration was settled through issuance of 344,827 shares of restricted Common Stock at $ 8.70 per share. The transaction closed on April 2, 2025. F- 18 The acquired assets primarily comprise technology infrastructure (including the Outfit platform, iOS applications, Shopify-integrated web application, and related source code), registered intellectual property such as patents and trademarks, proprietary technical knowledge, and strategic business relationships. No liabilities were assumed as part of the transaction. The transaction has been accounted for as an asset acquisition in accordance with ASC 805-10, as substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable intangible assets, thereby satisfying the concentration test. Additionally, no substantive processes or workforce were transferred, further supporting the conclusion that the transaction does not constitute a business combination. The total purchase consideration has been allocated to the acquired assets on a relative fair value basis as follows: SCHEDULE OF ASSET ACQUISITION ● Technology Assets – $ 1,500,000 ● Strategic Relationships – $ 750,000 ● Registered Intellectual Property – $ 250,000 ● Proprietary Know-How – $ 250,000 Accordingly, no goodwill has been recognized. The total consideration has been measured based on the acquisition-date fair value of the equity instruments issued, determined using the quoted market price of the Company’s common stock on the acquisition date. The aggregate cost recognized amounts to $ 2,948,276 , reflecting the fair value of 344,827 shares issued on the closing date. The consideration transferred has been measured based on the fair value of equity instruments issued. While the transaction was initially recorded at $ 8.70 per share (as agreed in the Asset Purchase Agreement), subsequent evaluation of observable market data indicates that the closing market price of the Company’s common stock on April 30, 2025 was $ 8.55 per share. Accordingly, a difference of $ 0.15 per share resulted in a total adjustment of $ 51,724 ( 344,827 shares × $ 0.15 ), and the aggregate consideration has been revised to $ 2,948,276 based on the acquisition-date fair value of the equity consideration. The $ 51,724 adjustment was allocated proportionately in all acquired intangible assets. All acquired intangible assets meet the asset recognition criteria under U.S. GAAP, as they embody probable future economic benefits, are controlled by the Company, and arise from a completed transaction. Further, none of the acquired assets qualify as in-process research and development under ASC 730, as the technology and related assets are fully developed and commercially deployable. The acquired technology assets were placed into service during 2025 and are being amortized on a straight-line basis over their estimated useful lives. Amortization expense is included in operating expenses. NOTE 5: PREPAID MARKETING EXPENSES In 2025, the Company entered into multi-year marketing, licensing, sponsorship, and service agreements under which it provides equity instruments, pre-funded warrants, or cash as consideration. Amounts paid or the fair value of instruments issued in excess of amounts currently expensed are recorded as prepaid assets and amortized over the contractual service period on a straight-line basis. University Marketing Agreements AAA Tuscaloosa, LLC — University of Alabama Effective July 16, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with AAA Tuscaloosa, LLC (“AAA”), pursuant to which the Company manufactures University of Alabama–branded apparel. AAA is responsible for marketing and selling the products through its website and campus bookstores and is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through AAA’s distribution channels. As consideration, the Company agreed to issue common stock valued at $ 1,000,000 per year over the three-year term (total equity commitment of $ 3,000,000 ). On December 12, 2025, the Company issued 285,714 shares of common stock at a grant-date fair value of $ 7.92 per share (grant date: September 22, 2025; aggregate equity fair value: $ 2,262,855 ). The share-based consideration represents payment for distinct services, including licensing access, distribution, and marketing services, and is accounted for under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision at grant date, was $ 4,341,104 . The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $ 666,032 of marketing expense, representing 168 days of amortization. As of December 31, 2025, the prepaid balance was $ 3,675,072 , of which $ 1,357,173 is classified as current and $ 2,317,899 as non-current. F- 19 The agreement includes a 15-month make-whole provision (through March 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the $ 3,000,000 commitment; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions. Traffic Holdco, LLC — Collegiate NIL Program Effective July 16, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with Traffic Holdco, LLC (“Traffic”), pursuant to which the Company obtained exclusive apparel manufacturing rights for collegiate Name, Image and Likeness (“NIL”) programs at a minimum of three universities. Traffic is responsible for licensing, marketing, and distribution through university channels and is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through Traffic’s distribution channels. As consideration, the Company agreed to issue common stock valued at $ 1,000,000 per university per year over the three-year term (minimum total equity commitment of $ 9,000,000 ). On December 12, 2025, the Company issued 857,143 shares of common stock at a grant-date fair value of $ 7.92 per share (grant date: September 22, 2025; aggregate equity fair value: $ 6,788,573 ). The share-based consideration represents payment for distinct services, including licensing access, distribution, marketing, and compliance services, and is accounted for under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision, was $ 13,023,328 . The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $ 1,998,100 of marketing expense, representing 168 days of amortization. As of December 31, 2025, the prepaid balance was $ 11,025,228 , of which $ 4,341,109 is classified as current and $ 6,684,119 as non-current. The agreement includes a 15-month make-whole provision (through March 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions. The Grove Collective, LLC — University of Mississippi Effective November 19, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with The Grove Collective, LLC (“Grove”), pursuant to which the Company will exclusively manufacture apparel products to be sold through Grove’s website and retail channels. The agreement supports marketing and brand development initiatives related to the University of Mississippi NIL program. Grove is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through Grove’s channels. As consideration, the Company issued 385,107 shares of common stock at a grant-date fair value of $ 7.50 per share (aggregate equity fair value: $ 2,888,303 ), representing a total equity commitment of $ 3,000,000 . The share-based consideration is accounted for as payment for distinct marketing, distribution, and related services under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision at grant date, was $ 4,970,835 . The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $ 190,662 of marketing expense, representing 42 days of amortization. As of December 31, 2025, the prepaid balance was $ 4,780,173 , of which $ 1,656,945 is classified as current and $ 3,123,228 as non-current. The agreement includes a 15-month make-whole provision; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions. Buffalo Sports Properties / Learfield — University of Colorado Effective December 3, 2025, the Company entered into a three-year Marketing and Sponsorship Agreement with Buffalo Sports Properties, LLC and Learfield (the “Provider”) for the University of Colorado athletic program. Under the agreement, the Company receives sponsorship, media, and NIL marketing benefits in exchange for a combination of cash and equity consideration. The Provider is considered the Company’s customer under ASC 606; revenue is recognized upon delivery of sponsorship and marketing benefits over the term. As consideration, the Company agreed to pay $ 550,000 per year over the three-year term, consisting of $ 350,000 per year in common stock (total equity commitment: $ 1,050,000 ) and $ 200,000 per year in cash (total cash: $ 537,931 ). On December 12, 2025, the Company issued 193,036 shares of common stock at $ 6.68 per share (grant date: December 3, 2025; aggregate equity fair value: $ 1,289,480 ). The equity component is accounted for as payment for distinct sponsorship, media, and marketing services under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision, was $ 2,014,433 . The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $ 51,881 of marketing expense, representing 29 days of amortization. As of December 31, 2025, the prepaid balance was $ 1,962,551 , of which $ 671,478 is classified as current and $ 1,291,073 as non-current. The cash component is recognized as prepaid sponsorship expense and amortized as benefits are received; the first cash installment is due under the January 2026 billing schedule. F- 20 The agreement includes an 18-month make-whole provision (through June 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed amount; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions. Other Marketing Agreements MavDB Consulting LLC In January 2025, the Company entered into a two-year marketing services agreement with MavDB Consulting LLC for content production, social media marketing, student athlete engagement, and event staffing. The consideration was satisfied through the issuance of 2,068,965 pre-funded warrants with an aggregate fair value of $ 2,689,656 , accounted for as share-based consideration for marketing and advisory services. The warrants are equity-classified with no make-whole provision. The Company recognized $ 1,269,193 of marketing expense for the year ended December 31, 2025, representing 344 days of amortization over the two-year term. As of December 31, 2025, the prepaid balance was $ 1,420,463 , of which $ 1,344,828 is classified as current and $ 75,635 as non-current. In September 2025, the Company entered into a two-year cash-based marketing agreement with MavDB Consulting LLC for $ 1,240,000 . The Company recognized $ 1,240,000 of marketing expense for the year ended December 31, 2025, representing the full contract value. No prepaid balance remains as of December 31, 2025. In March 2025, Bailey entered into a five-year cash-based marketing services agreement with MavDB Consulting LLC for $ 2,500,000 . The Company recognized $ 2,500,000 of marketing expense for the year ended December 31, 2025, representing the full contract value. No prepaid balance remains as of December 31, 2025. MavDB is controlled by a shareholder who holds a significant amount of warrants and prefunded warrants. See Notes 10 and 11 for further detail on the equity transactions related to MavDB. Other In September 2025, the Company entered into a one-year agreement with Velora Marketing Services for $ 350,000 and a one-year agreement with i2i Marketing for $ 425,000 . The Company recognized $ 350,000 and $ 425,000 of marketing expense, respectively, for the year ended December 31, 2025, representing the full contract value of each agreement. No prepaid balance remains as of December 31, 2025. In September 2025, Bailey entered into a one-year marketing agreement with Candlelight Ventures for $ 350,000 . The Company recognized $ 350,000 of marketing expense for the year ended December 31, 2025, representing the full contract value. No prepaid balance remains as of December 31, 2025. Costs associated with all cash-based agreements are recognized as prepaid assets and expensed over the respective contractual service periods. Summary of Consideration and Prepaid Balances The following table summarizes the consideration provided under each agreement and the resulting prepaid marketing balances as of December 31, 2025: SCHEDULE OF CONSIDERATION AND PREPAID BALANCES Consideration Agreement Term 2025 Prepaid Balance as of December 31, 2025 Agreement Type Amount (Years) Amortization Current Non-Current Total MavDB (Jan 2025) PFW* $ 2,689,656 2 $ 1,269,193 $ 1,344,828 $ 75,635 $ 1,420,463 Traffic Holdco Shares + MW** 13,023,328 3 1,998,100 4,341,109 6,684,119 11,025,228 AAA Tuscaloosa Shares + MW 4,341,104 3 666,032 1,357,173 2,317,899 3,675,072 Grove Shares + MW 4,970,835 3 190,662 1,656,945 3,123,228 4,780,173 Learfield Shares + MW 2,014,433 3 51,882 671,478 1,291,073 1,962,551 $ 27,039,356 $ 4,175,869 $ 9,371,533 $ 13,491,954 $ 22,863,487 * PFW = pre-funded warrants, equity-classified with no make-whole provision. ** Shares + MW = common stock issued plus a make-whole provision guaranteeing the counterparty a minimum aggregate share value. The make-whole creates a liability-classified share-based award under ASC 718, measured at fair value via Monte Carlo simulation. See Note 9. F- 21 The following table disaggregates total consideration for the share-based agreements between the equity component (fair value of shares or warrants issued, recorded in equity) and the liability component (initial fair value of the make-whole provision, recorded as share-based payment liability on the consolidated balance sheet): SCHEDULE OF DISAGGREGATES TOTAL CONSIDERATION FOR SHARE BASED AGREEMENTS Fair Value of Equity (Shares & PFW) Share-Based Payment Liability Total Traffic Holdco $ 6,788,573 $ 6,234,755 $ 13,023,328 AAA Tuscaloosa 2,262,855 2,078,249 4,341,104 Grove 2,888,303 2,082,532 4,970,835 Learfield 1,289,480 724,953 2,014,433 $ 13,229,211 $ 11,120,489 $ 24,349,700 Total aggregate consideration for all share-based agreements was $ 24,349,700 at initial recognition, comprising $ 13,229,211 in equity fair value and $ 11,120,489 in share-based payment liability (make-whole provisions). At December 31, 2025, the total share-based payment liability was remeasured to $ 9,405,699 , resulting in a recognized gain of $ 1,714,790 . Classification and Future Amortization Prepaid marketing expenses are classified as current or non-current based on the portion of each agreement expected to be amortized within the next twelve months from the balance sheet date. Current prepaid balances represent the pro-rata share of total consideration allocable to services to be received in the twelve months ending December 31, 2026. Non-current prepaid balances represent the remaining unamortized consideration allocable to periods beyond December 31, 2026. For agreements where amortization commenced during 2025, the current portion reflects the next twelve months of straight-line amortization based on the original contract term. For agreements entered into near year-end (primarily Learfield, commencing December 3, 2025), the current portion reflects the estimated twelve-month share based on the contractual service start date. Amortization begins on the service commencement date of each agreement. Total prepaid marketing expenses recognized during the year ended December 31, 2025 was $ 3,978,943 . Estimated future amortization of prepaid marketing expenses as of December 31, 2025 is as follows: SCHEDULE OF AMORTIZATION OF PREPAID MARKETING EXPENSES Year Ended December 31, Amount 2026 $ 9,371,533 2027 8,102,340 2028 5,389,614 Prepaid marketing expenses $ 22,863,487 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 collection1 services. For one factoring company, interest on advances is charged as of the last day of each month at a rate equal to the Term SOFR 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. F- 22 Advances are collateralized by a security interest in substantially all of the companies’ assets. Due to/from factor consist of the following: SCHEDULE OF DUE TO/ FROM FACTOR 2025 2024 December 31, 2025 2024 Outstanding receivables: Without recourse $ 283,849 $ 460,815 With recourse 13,920 142,914 Matured funds and deposits 61,838 61,941 Advances ( 86,170 ) ( 275,484 ) Credits due customers - - Due from factor, net $ 273,437 $ 390,186 NOTE 7: GOODWILL AND INTANGIBLE ASSETS Goodwill The Company recorded goodwill from each of its business combinations. As part of its 2025 annual impairment testing, the Company recorded goodwill impairment charges of $ 3,185,056 ($ 1,081,000 for the Bailey reporting unit and $ 2,104,056 for the Stateside reporting unit). No goodwill impairment was recorded in 2024. The following is a summary of goodwill activity by entity for the years ended December 31, 2025 and 2024: SCHEDULE OF GOODWILL ACTIVITY BY ENTITY December 31, 2024 Additions Impairment December 31, 2025 Bailey $ 3,158,123 $ - $ ( 1,081,000 ) $ 2,077,123 Stateside 2,104,056 - ( 2,104,056 ) - Sundry 3,711,322 - - 3,711,322 Goodwill $ 8,973,501 $ - $ ( 3,185,056 ) $ 5,788,445 Intangible Assets For the year ended December 31, 2025, the Company recorded intangible asset impairment charges of $ 2,488,948 , comprising: (i) $ 1,260,500 related to the Stateside brand name (indefinite-lived), reflecting the Company’s assessment that the carrying value exceeded the estimated fair value based on the reporting unit’s performance; and (ii) $ 1,228,448 related to the OpenDaily technology asset and associated intangible assets acquired in April 2025 pursuant to the asset acquisition of Open Daily Technologies, Inc., which were fully impaired based on a reassessment of recoverability. No intangible asset impairment was recorded in 2024, other than $ 1,388,000 related to HJ customer relationships. Total impairment charges (goodwill and intangible assets) for the year ended December 31, 2025 were $ 5,674,004 . The following table summarizes information relating to the Company’s identifiable intangible assets as of December 31, 2025 and 2024: SCHEDULE OF INFORMATION RELATING TO THE COMPANY’S IDENTIFIABLE INTANGIBLE ASSETS Gross Accumulated Carrying December 31, 2025 Amount Impairment Amortization Value Amortized: Customer relationships $ 8,634,560 $ - $ ( 8,634,560 ) $ - Technology asset 2,948,275 ( 1,228,448 ) ( 418,336 ) 1,301,491 $ 11,582,835 $ ( 1,228,448 ) $ ( 9,052,896 ) $ 1,301,491 Indefinite-lived: Brand name 4,453,880 ( 1,260,500 ) - 3,193,380 Total $ 16,036,715 $ ( 2,488,948 ) $ ( 9,052,896 ) $ 4,494,871 Gross Accumulated Carrying December 31, 2024 Amount Impairment Amortization Value Amortized: Customer relationships 10,022,560 ( 1,388,000 ) ( 6,968,401 ) 1,666,159 $ 10,022,560 $ ( 1,388,000 ) $ ( 6,968,401 ) $ 1,666,159 Indefinite-lived: Brand name 4,453,880 - - 4,453,880 Total $ 14,476,440 $ ( 1,388,000 ) $ ( 6,968,401 ) $ 6,120,039 Refer to Note 3 for discussion on the intangible asset impairment recorded in 2025. The Company recorded amortization expense of $ 2,084,496 and $ 2,474,178 during the years ended December 31, 2025 and 2024, respectively, which is included in general and administrative expenses in the consolidated statements of operations. The technology asset acquired from Open Daily Technologies Inc. (see Note 3) was placed in service during 2025 and is being amortized on a straight-line basis over its estimated useful life. Amortization expense is included in operating expenses. F- 23 NOTE 8: LIABILITIES AND DEBT Accrued Expenses and Other Liabilities Accrued expenses and other liabilities is comprised of the following: SCHEDULE OF ACCRUED EXPENSES AND OTHER LIABILITIES 2025 2024 December 31, 2025 2024 Accrued expenses $ 591,371 $ 591,371 Payroll related liabilities 4,646,647 4,268,880 Sales tax liability 158,571 187,971 Other liabilities 164,902 208,880 Accrued expenses and other liabilities $ 5,561,491 $ 5,257,102 Payroll related liabilities are primarily related to overdue payroll taxes due to be remitted to federal and state authorities by Digital Brands Group, Inc. and Bailey. The amounts may be subject to further penalties and interest. As of December 31, 2025, accrued expenses include $ 535,000 in accrued common stock issuances pursuant to an advisory agreement for services performed in 2022. The shares of common stock owed under the agreement are expected to be issued in early 2026. Accrued interest payable of $ 2,787,506 as of December 31, 2025 (December 31, 2024: $ 2,328,078 ) relates primarily to unpaid interest on the Bailey sellers’ promissory note and is presented separately on the Consolidated Balance Sheet. Debt The following table summarizes the Company’s outstanding debt obligations as of December 31, 2025 and 2024: SCHEDULE OF OUTSTANDING DEBT OBLIGATIONS 2025 2024 December 31, 2025 2024 Current: Merchant cash advances $ 1,483,159 $ 1,858,157 Sunnyside Shopify loan, net of discount 58,296 - B44 PPP note payable 933,294 939,959 Convertible note payable, net - 100,000 Promissory note payable, net 3,500,000 3,500,000 Notes payable 150,000 - Total current debt 6,124,749 6,398,116 Non-current: Notes payable (long-term) - 150,000 Total non-current debt - 150,000 Total debt $ 6,124,749 $ 6,548,116 Convertible Debt On February 20, 2025, the Company settled the remaining convertible debt principal in cash, along with $ 47,000 of accrued interest. As of December 31, 2025 and 2024, the outstanding principal balance was $ 0 and $ 100,000 , respectively. Loan Payable — PPP, SBA, and Shopify In April 2022, Bailey received notification of full forgiveness of its second SBA Paycheck Protection Program (“PPP”) loan totaling $ 1,347,050 and partial forgiveness of its first PPP loan totaling $ 413,705 . As of December 31, 2025 and December 31, 2024, Bailey had an outstanding PPP loan balance of $ 933,294 , classified as current. The loan matures in April 2026 . No additional forgiveness was recognized during 2025. In June 2020, the Company received an SBA Economic Injury Disaster Loan of $ 150,000 bearing interest at 3.75 % per annum, maturing April 2050 . The outstanding balance was $ 150,000 as of December 31, 2025 and 2024, classified as current in 2025 due to technical default. The Company’s Sunnyside subsidiary maintains a Shopify Capital loan with an outstanding balance of $ 58,296 as of December 31, 2025, classified as current. F- 24 Merchant Advances From 2022 through 2024, the Company obtained several merchant cash advances secured by expected future sales receipts, with repayments made on a weekly basis. The Company made total cash repayments of $ 374,998 for the year ended December 31, 2025. The advances are non-interest bearing. The following is a summary of the merchant advances: SCHEDULE OF MERCHANT ADVANCES 2025 2024 December 31, 2025 2024 Principal $ 1,483,159 $ 1,858,157 Less: unamortized debt discount - - Merchant cash advances, net $ 1,483,159 $ 1,858,157 Promissory Note Payable As of December 31, 2025 and 2024, the outstanding principal on the note payable to the sellers of Bailey 44, LLC was $ 3,500,000 . The note bears interest at 12 % per annum, payable quarterly. Interest expense was $ 420,000 for the year ended December 31, 2025 ($ 105,000 per quarter). Accrued and unpaid interest was $ 2,624,000 as of December 31, 2025, recorded separately as accrued interest payable on the consolidated balance sheet. The note matured on December 8, 2025. As of December 31, 2025, the note has not been repaid and is in technical default. The Company is currently in discussions with the lender regarding repayment, extension, or refinancing of the obligation. Management has not identified any cross-default provisions in other material agreements that would be triggered by this default. This default has been considered in the Company’s going concern assessment. See Note 2. Subsequent to December 31, 2025, the note remains outstanding and unpaid. The Company continues to accrue interest at the contractual rate of 12 % per annum. No formal acceleration notice has been received from the lender as of the date these financial statements were available to be issued. Target Capital Convertible Promissory Note On April 30, 2024, the Company issued a convertible promissory note in the original principal amount of $ 250,000 (the “Note”) to Target Capital 1 LLC, an Arizona limited liability company (the “Note Holder”), with a maturity date of April 30, 2025 (the “Maturity Date”). Pursuant to the terms of the Note, the Company agreed to pay the principal sum and a one-time interest charge of $ 50,000 to the Note Holder. In May 2024, the Company fully repaid the Note Holder $ 300,000 , including the principal and interest. The Company issued 1,000 shares of common stock to the Note Holder as commitment shares. NOTE 9: SHARE-BASED PAYMENT LIABILITY The Company’s collegiate apparel agreements (AAA Tuscaloosa, Traffic Holdco, Grove Collective, Buffalo Sports / Learfield – see Note 5) include make-whole provisions under which the Company is required to deliver a guaranteed aggregate dollar value through a variable number of common shares. Because the number of shares required for settlement varies based on the Company’s stock price, these arrangements are classified as liability-classified share-based payment awards under ASC 718. At inception, the Company measures the liability at fair value using a Monte Carlo simulation model, with a corresponding prepaid marketing asset recognized. The liability is remeasured at fair value at each subsequent reporting date, with changes recognized in earnings. The prepaid marketing asset is amortized on a straight-line basis over the contractual service period. See Note 5 for prepaid marketing balances. The share-based payment liability is classified within Level 2 of the fair value hierarchy under ASC 820. The primary inputs to the Monte Carlo simulation model — including the Company’s stock price, risk-free interest rate, and contractual term — are observable market inputs. Accordingly, the Company classifies these liabilities as Level 2. There were no transfers between levels during the year ended December 31, 2025. The following assumptions were used in the Monte Carlo simulation model at initial recognition and remeasurement as of December 31, 2025 of each make-whole liability: SCHEDULE OF ASSUMPTIONS WERE USED IN SHARE BASED PAYMENT LIABILITY At Initial Recognition Stock Price Strike Price Term (Yrs) Volatility Risk-Free Rate Fair Value per Share Total Fair Value Traffic Holdco (Sep 22) $ 7.92 $ 10.50 1.25 182 % 3.53 % $ 7.27 $ 6,234,755 AAA Tuscaloosa (Sep 22) $ 7.92 $ 10.50 1.25 182 % 3.53 % $ 7.27 2,078,249 Grove (Nov 19) $ 7.50 $ 7.79 1.25 197 % 3.53 % $ 5.41 2,082,532 Learfield (Dec 3) $ 6.68 $ 5.44 1.25 193 % 3.53 % $ 3.54 724,953 $ 11,120,489 At Remeasurement (December 31, 2025) Stock Price Strike Price Term (Yrs) Volatility Risk-Free Rate Fair Value per Share Total Fair Value Traffic Holdco (Dec 31) $ 12.68 $ 10.50 1.19 180 % 3.48 % $ 5.12 $ 5,390,539 AAA Tuscaloosa (Dec 31) $ 12.68 $ 10.50 1.19 180 % 3.48 % $ 5.12 1,813,512 Grove (Dec 31) $ 12.68 $ 7.79 1.14 180 % 3.48 % $ 3.21 1,635,666 Learfield (Dec 31) $ 12.68 $ 5.44 1.25 180 % 3.48 % $ 3.54 565,982 $ 9,405,699 Volatility was estimated based on the historical stock price of the Company over the applicable measurement period. The risk-free rate is based on the U.S. Treasury yield curve for the instrument’s remaining term as of the measurement date. The strike price represents the minimum guaranteed aggregate value per the respective agreement divided by the number of shares issued. The following is a summary of activity of the share-based payment liability for the year ended December 31, 2025: SCHEDULE OF ACTIVITY OF SHARE BASED PAYMENT LIABILITY Share-Based Payment Liability Balance, December 31, 2024 $ - Initial recognition - make-whole provisions 11,120,489 Change in fair value (gain) ( 1,714,790 ) Balance, December 31, 2025 $ 9,405,699 There were no transfers between levels during the year ended December 31, 2025. F- 25 NOTE 10: STOCKHOLDERS’ EQUITY (DEFICIT) Amendments to Certificate of Incorporation and Reincorporation Effective December 29, 2025, the Company reincorporated from the State of Delaware to the State of Nevada pursuant to a plan of conversion approved by the Board of Directors. The reincorporation did not affect the Company’s authorized capital structure, par values, or outstanding equity. Common Stock As of December 31, 2025, the Company had 1,000,000,000 shares of common stock, $ 0.0001 par value per share, authorized. As of December 31, 2025 and December 31, 2024, there were 8,788,335 and 838,583 shares of common stock issued and outstanding, respectively. 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. 2025 Common Stock Transactions During the year ended December 31, 2025, the Company issued common stock and equity instruments in the following transactions: ● In January 2025, the Company issued 2,068,965 pre-funded warrants to MavDB Consulting LLC as consideration for a two-year marketing services agreement. The fair value of those warrants ($ 2,689,656 ) was recorded as a prepaid marketing asset. See Note 5. ● In February 2025, the Company issued 125,535 shares of common stock and 11,239,805 pre-funded warrants for net proceeds of $ 6,642,433 . See the February 2025 Offering section below. During 2025, 4,012,375 shares were subsequently issued upon exercise of those pre-funded warrants. ● In April 2025, the Company issued 344,827 shares as consideration for the acquisition of technology assets from Open Daily Technologies Inc., at a fair value of $ 2,948,276 . See Note 4. ● In August and September 2025, the Company raised $ 11,387,000 in net proceeds through the Series D Convertible Preferred Stock offering. See the Series D section below. ● In 2025, the Company issued 1,721,000 shares under the four collegiate apparel agreements (AAA Tuscaloosa 285,714 ; Traffic Holdco 857,143 ; The Grove Collective 385,107 ; Learfield/Buffalo Sports 193,036 ). The shares were valued at their accounting grant-date fair value and recorded as prepaid marketing assets. See Note 5. ● The Company issued 11,582 shares to settle $ 113,851 of outstanding accounts payable to vendors. The Company also issued 44,988 shares to consultants for services performed for a fair value of $ 145,226 . ● During 2025, warrant holders exercised an aggregate of 5,701,820 Common Share Purchase Warrants, resulting in the issuance of shares of common stock and aggregate proceeds of $ 5,807,576 to the Company. See Note 11. ● During August 2025, certain warrant holders exercised Common Share Purchase Warrants at $ 0.66 per share generating aggregate proceeds of approximately $ 5.0 million for which the underlying shares had not been issued as of December 31, 2025. These proceeds are reflected as stock payable on the consolidated balance sheet. February 2025 Offering On February 13, 2025, the Company entered into securities purchase agreements with certain accredited investors, pursuant to which the Company agreed to issue and sell in a best efforts offering 11,365,340 units at a purchase price of $ 0.66 per unit, including: (i) 125,535 units consisting of one share of common stock and two common stock purchase warrants; and (ii) 11,239,805 units consisting of one pre-funded warrant (exercisable at $ 0.0001 per share with no expiration) and two common stock purchase warrants. The common stock purchase warrants are exercisable for an aggregate of 22,730,680 shares of common stock at $ 0.66 per share. The February 2025 Offering closed on February 18, 2025, generating net proceeds of $ 6,642,433 after placement agent fees and expenses. Pre-Funded Warrants were offered to purchasers whose purchase of common stock would have resulted in beneficial ownership exceeding 4.99% (or 9.99% at the purchaser’s election) of outstanding common stock. Pre-Funded Warrants are immediately exercisable, do not expire, and may be exercised on a cashless basis if no effective registration statement is available . Stock Payable As of December 31, 2025, stock payable of $ 4,951,128 represents amounts received from warrant holders for exercises in which the underlying shares of common stock had not yet been issued as of December 31, 2025. During August 2025, certain warrant holders exercised Common Share Purchase Warrants at $ 0.66 per share for aggregate proceeds of approximately $ 5.0 million; the shares had not been issued as of December 31, 2025 and accordingly the proceeds were recorded as stock payable. As of December 31, 2025, the Company had exercised warrants representing an obligation to issue shares of common stock. Upon issuance, the balance will be reclassified to stockholders’ equity. See Note 17 for shares issued subsequent to December 31, 2025. F- 26 2024 Common Stock Transactions Offerings On May 3, 2024, the Company entered into that certain inducement offer to exercise common stock purchase warrants with the Investor (the “Inducement Agreement”), pursuant to which (i) the Company agreed to lower the exercise price of the Existing Warrants to $ 156.50 per share and (ii) the Investor agreed to exercise the Existing Warrants into 20,555 shares of common stock (the “Exercise Shares”) by payment of the aggregate exercise price of $ 3,216,857 . The closing occurred on May 7, 2024. The Company has issued all of the 20,555 shares of common stock underlying the Existing Warrants. The Company received the entire gross proceeds of $ 3,216,857 in May 2024, which represents the exercise of the entire 20,555 warrants at the $ 156.50 exercise price. The Company received net proceeds of $ 2,877,475 after placement agent fees and expenses. In addition, pursuant to the Inducement Agreement, the Company issued to the Investor a Series A-1 common share purchase warrant to purchase up to 20,555 shares of Common Stock (“Series A-1 Warrant”) and Series B-1 common share purchase warrant to purchase up to 20,555 shares of Common Stock (“Series B-1 Warrant”, and collectively with the Series A-1 Warrant, the “Warrants”) on May 7, 2024, each at an initial exercise price equal to $ 144 per share of Common Stock. The Series A-1 Warrant are exercisable immediately upon issuance and expires five and one-half (5.5) years following the issuance date and the Series B-1 Warrant are exercisable immediately upon issuance and expires fifteen (15) months following the issuance date. In connection with the Inducement Agreement, we entered into an engagement agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which we have, among other things, issued to Wainwright’s designees warrants to purchase up to 1,541 shares of Common Stock (the “Wainwright Warrants”). The terms of the Wainwright Warrants are substantially the same as the terms of the Series A-1 Warrant except that they have an exercise price of $ 195.63 per share. Between July 1, 2024 and October 22, 2024, the Company issued and sold 105,125 shares of Common Stock (the “Recent ATM Share Sales”) to H.C. Wainwright & Co., LLC (the “Agent”) as sales agent or principal, pursuant to the terms of the Company’s previously announced At-The-Market Offering Agreement, dated December 27, 2023, between us and the Agent (the “Sales Agreement”). The Company received net proceeds of $ 2,063,386 from the Recent ATM Share Sales. Between October 23, 2024 and December 17, 2024, the Company issued and sold 65,236 shares of Common Stock to the Agent as sales agent or principal, pursuant to the terms of the Sales Agreement, and received net proceeds of $ 278,160 . On October 28, 2024, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering (the “Offering”): (i) 124,673 shares of common stock (the “Common Stock”), at a purchase price of $ 5.00 per share of Common Stock, and (ii) 482,187 pre-funded warrants (“Pre-Funded Warrants”) to purchase Common Stock, at a purchase price of $ 4.995 per Pre-Funded Warrant, immediately exercisable at an exercise price of $ 0.005 per share. The Purchase Agreement contained customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties. The Offering closed on October 30, 2024. The Offering resulted in gross proceeds to the Company of approximately $ 3,000,000 , before deducting placement agent fees and commissions and other offering expenses, and excluding proceeds to the Company, if any, that may result from the future exercise of the Pre-Funded Warrants issued in the Offering. As compensation to the Placement Agent, as the exclusive placement agent in connection with the Offering, the Company paid to the Placement Agent a cash fee of 8.0% of the aggregate gross proceeds raised in the Offering, a non-accountable expense allowance of 1.0% of the aggregate gross proceeds raised in the Offering, reimbursement of up to $ 50,000 for expenses of legal counsel and other actual out-of-pocket expenses, and up to $ 15,950 for clearing agent closing costs. The Company received net proceeds of approximately $ 2,546,213 from the Offering (the “Public Offering Proceeds”). During the year ended December 31, 2024, the Company issued an aggregate of 806,754 shares of common stock pursuant to the offerings detailed above for net proceeds of $ 9,374,441 . F- 27 Series A Convertible Preferred Stock On September 29, 2022, the Company designated up to 6,800 shares of Series A Convertible Preferred Stock, par value $ 0.0001 , with a stated value of $ 1,000 per share. Each share of Series A Preferred Stock is convertible at the holder’s option into a number of shares of common stock determined by dividing the stated value ($ 1,000 ) by the conversion price of $ 9.30 (the closing price on September 29, 2022). Series A holders are entitled to vote with the holders of common stock on an as-converted basis. Series A Preferred Stock ranks senior to common stock and junior to Senior Securities as to dividends and liquidation. As of December 31, 2025 and December 31, 2024, there were 6,300 shares of Series A Convertible Preferred Stock issued and outstanding, with an aggregate liquidation preference of $ 6,300,000 . Series C Convertible Preferred Stock On June 21, 2023, the Company issued 5,761 shares of Series C Convertible Preferred Stock, par value $ 0.0001 , with a stated value of $ 1,000 per share, to the Sundry sellers in exchange for cancellation of promissory notes issued in December 2022. Each share of Series C Preferred Stock is convertible at the holder’s option into common stock at a conversion price of $ 0.717 per share (the lower of the closing price on June 20, 2023 and the five-day average preceding the issuance date). The Company may redeem all or any portion of the outstanding Series C shares at 112% of the then-current stated value at any time after June 21, 2023, provided an effective registration statement is in place. Series C holders are entitled to vote with common stockholders on an as-converted basis. Series C ranks pari passu with Series A and senior to common stock. As of December 31, 2025 and December 31, 2024, there were 1,344 shares of Series C Convertible Preferred Stock issued and outstanding, with an aggregate liquidation preference of $ 1,344,000 . Series D Convertible Preferred Stock 2025 Transactions On August 13, 2025, the Company completed the initial closing of a private placement, issuing 14,031.25 shares of Series D Convertible Preferred Stock, par value $ 0.0001 per share, with a stated value of $ 1,000 per share, for gross cash proceeds of approximately $ 11.2 million (aggregate stated value of $ 14.0 million). On September 26, 2025, pursuant to an amendment to the Securities Purchase Agreement, the Company issued an additional 1,875 shares of Series D Preferred Stock to an investor for gross cash proceeds of $ 1.5 million, at a stated value of $ 1,150 per share (aggregate stated value of $ 2.16 million for this tranche). Total gross proceeds from the Series D offerings were $ 12.7 million. Net proceeds received, after deducting offering costs, were $ 11.4 million. As of December 31, 2025, there were 15,906 shares of Series D Convertible Preferred Stock issued and outstanding. Conversion : Each share of Series D Preferred Stock is convertible at the holder’s option into common stock at a price equal to 80% of the lowest closing price of the Company’s common stock for the five trading days immediately preceding the conversion date, subject to beneficial ownership limitations of 4.99% (adjustable to 9.99%) . Dividends : Series D holders are entitled to receive dividends equal (on an as-converted basis) to dividends paid on common stock, when and if declared. No dividends have been declared or paid. Voting : Series D holders vote with holders of common stock on an as-converted basis, subject to ownership limitations. Liquidation Preference : Series D ranks senior to common stock and Junior Securities, pari passu with Series A and Series C, and junior to Senior Securities. Upon liquidation, each Series D holder is entitled to receive the greater of: (i) the stated value plus accrued dividends, or (ii) the amount such holder would receive if Series D were converted to common stock immediately prior to such liquidation. As of December 31, 2025, the aggregate liquidation preference of the Series D Preferred Stock was approximately $ 23,859,375 . The Company is required to hold the offering proceeds in a segregated bank account. As of December 31, 2025, $ 5,744,174 remains in the segregated account as restricted cash, pending release upon: (i) shareholder approval of the reverse stock split and 20% rule , and (ii) SEC effectiveness of the resale registration statement. See Note 3. ASC 480 and 815 Analysis The Company evaluated the Series D Convertible Preferred Stock under ASC 480, ASC 815, and ASC 480-10-S99-3A. Under ASC 480, the Series D does not meet the definition of a mandatorily redeemable instrument, as there are no mandatory redemption provisions or obligations requiring the Company to deliver cash or other assets to holders. The instrument is therefore not classified as a liability under ASC 480. Under ASC 815, the Company evaluated all embedded features of the Series D Preferred Stock, including the conversion option, participating dividends, price protection, protective rights, and liquidation preference. The Company determined that all such features are clearly and closely related to the equity host and do not require bifurcation as separate derivative instruments. The conversion option is equity-settled, the ownership limitations maintain equity characteristics, and there are no put features, mandatory repurchase provisions, or redemption rights exercisable at the option of holders or upon events outside the Company’s control. F- 28 Under ASC 480-10-S99-3A, the Company evaluated whether the Series D should be classified as temporary equity. Because there are no redemption features exercisable at the option of the holder or upon the occurrence of events not solely within the Company’s control, the Series D Preferred Stock does not meet the criteria for temporary equity classification. Accordingly, the Series D is classified as permanent equity in the Consolidated Balance Sheets. Modification On September 23, 2025, the Company amended the Certificate of Designations for the Series D Convertible Preferred Stock to increase the stated value from $ 1,000 to $ 1,150 per share and expand the authorized shares from 15,000 to 17,500 . The amendment was accounted for as a modification by analogy to ASC 718-20, and the Company recognized a deemed dividend of $ 2,104,688 , representing the aggregate increase in stated value transferred to preferred shareholders. Liquidation Preferences As of December 31, 2025, the aggregate liquidation preferences of the Company’s preferred stock were as follows: SCHEDULE OF LIQUIDATION PREFERENCE Series Liquidation Preference Series A Convertible Preferred Stock $ 6,300,000 Series C Convertible Preferred Stock 1,344,000 Series D Convertible Preferred Stock 23,859,375 Total $ 31,503,375 NOTE 11: WARRANTS AND STOCK OPTIONS Common Stock Warrants A summary of common stock warrant activity for the years ended December 31, 2025 and 2024 is as follows: SCHEDULE OF INFORMATION RELATED TO COMMON STOCK WARRANTS Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2024 45,701 $ 580.12 Granted 36,788,155 0.42 Exercised ( 5,701,820 ) 0.20 Forfeited ( 20,555 ) 144.00 Outstanding - December 31, 2025 31,111,481 $ 1.13 Exercisable at December 31, 2024 45,701 $ 580.12 Exercisable at December 31, 2025 31,111,481 $ 1.13 Warrant Transactions MavDB Consulting LLC Pre-Funded Warrants On January 21, 2025, in connection with a two-year marketing services agreement, the Company issued 2,068,965 pre-funded warrants to MavDB Consulting LLC at an exercise price of $ 0.01 per share. The fair value of the pre-funded warrants was $ 2,689,656 ($ 1.30 per share), recorded as a prepaid marketing asset. The warrants are immediately exercisable and expire two years from issuance. See Note 5. February 2025 Offering Warrants In February 2025, the Company issued 33,970,485 warrants pursuant to the February 2025 Offering (see Note 10), including 11,239,805 pre-funded warrants exercisable at $ 0.0001 per share with no expiration date, and 22,730,680 common stock purchase warrants exercisable at $ 0.66 per share. During the year ended December 31, 2025, 8,730,796 warrants were exercised for shares of common stock, generating aggregate proceeds of $ 5,807,576 . The Company also issued placement agent warrants to purchase up to 748,705 shares of common stock at $ 0.76 per share in connection with the February 2025 Offering. As of December 31, 2025, stock payable of $ 4,951,128 represents amounts received from warrant holders for exercises in which the underlying shares of common stock had not yet been issued as of December 31, 2025. During August 2025, certain warrant holders exercised Common Share Purchase Warrants at $ 0.66 per share for aggregate proceeds of approximately $ 5.0 million; the shares had not been issued as of December 31, 2025 and accordingly the proceeds were recorded as stock payable. F- 29 Stock Options As of December 31, 2025 and 2024, the Company had 31 stock options outstanding with a weighted average exercise price of $ 452,500 per share. All outstanding options are exercisable. No options were granted, exercised, or forfeited during the year ended December 31, 2025. Stock-based compensation expense of $ 0 and $ 169,614 was recognized for the years ended December 31, 2025 and 2024, respectively. There is no unrecognized compensation cost related to outstanding stock options as of December 31, 2025. The 2020 Omnibus Incentive Stock Plan (the “2020 Plan”) authorizes an aggregate of 26 shares of common stock for awards. As of December 31, 2025, grants covering 22 shares have been made and 4 shares remain available for future issuance under the 2020 Plan . NOTE 12: RELATED PARTY TRANSACTIONS As of December 31, 2025 and 2024, amounts due to related parties was $ 370,921 and $ 411,921 , respectively. The advances are unsecured, non-interest bearing and due on demand. Amounts due to related parties consist of amounts due to current and former executives, and a board member. As of December 31, 2025 and 2024, due to related parties includes $ 87,222 in advances from Mark Lynn, a director and former officer of the company, and accrued salary and expense reimbursements of $ 134,699 to current officers of the company. 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, 2025 and December 31, 2024, $ 149,000 and $ 190,000 , respectively, was outstanding. NOTE 13: 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 company currently maintains two leased properties under month-to-month agreements, which are classified as short-term leases in accordance with ASC 842. The first property, located in Vernon, California, serves as the Corporate Warehouse and Distribution Center, encompassing approximately 42,000 square feet with a monthly base rent of $ 12,000 . The second property is a showroom or office location also operated on a month-to-month basis. Because both leases are month-to-month with terms of 12 months or less, the Company has elected the short-term lease practical expedient and no right-of-use asset or lease liability has been recognized. Rent expense related to these leases is recognized on a straight-line basis over the applicable monthly periods. Refer to Note 17 for detail on a lease entered into 2026. NOTE 14: COMMITMENTS AND CONTINGENCIES Marketing Agreement Commitments The Company has entered into multi-year marketing and sponsorship agreements with AAA Tuscaloosa, LLC, Traffic Holdco, LLC, The Grove Collective, LLC, and Buffalo Sports Properties/Learfield, each of which includes equity and, in some cases, cash commitments over three-year terms. Certain of these agreements include make-whole provisions under which the Company may be required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment during the protection period. These arrangements are accounted for as liability-classified share-based payment awards; the related liabilities are measured at fair value at each reporting date using Monte Carlo simulation models. See Note 5 for the prepaid marketing balances and Note 9 for the fair value of those liabilities as of December 31, 2025. Legal Contingencies The Company is subject to various legal proceedings arising in the ordinary course of business. Liabilities are recorded when losses are considered probable and reasonably estimable. F- 30 · On March 20, 2024, a former temporary worker engaged through a third-party placement agency, who was never an employee of the Company, filed a wrongful termination lawsuit against the Company. The Company is disputing this claim. The Company settled this matter in March 2026 for $ 16,000 . · On April 17, 2024, a former employee filed a wrongful termination lawsuit against the Company. The employee was part of the marketing team, which was fully transitioned to a third-party outsourced marketing solution. The Company disputed the claim and initially pursued arbitration; however, the matter was settled in May 2025 for a payment by the company of $ 81,000 . Of this amount, $ 41,000 was paid in June 2025, with the remaining $ 40,000 to be paid in three equal installments of $ 13,000 in July, August 2025, and September 2025. The Company has made all the payments and the lawsuit is dismissed. · In June 2021, a vendor filed a lawsuit against Bailey related to a retail store lease in the amount of $ 1,500,000 . 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. In the summer of 2024, Century City Mall, LLC obtained a judgment against Bailey 44, LLC in the amount of approximately $ 1.4 million, inclusive of both damages for unpaid rent and attorney fees and costs. This amount is included within the liabilities of Bailey 44, LLC in these accompanying financial statements. In this action, Century City Mall is attempting to hold Digital liable for the judgment against Bailey 44 on the theory that Digital is Bailey 44’s “alter ego.” The case is set for trial on July 21, 2026. The Company is unable to weigh in on the likely outcome of the case but will vigorously defend. ● In June 2022, a dispute originated due to a contractual arrangement involving alleged unpaid service fees of approximately $ 28,000 , as well as additional disputed amounts, and counterclaims asserted by the Company for damages arising from website-related issues. A default judgment of approximately $ 28,000 was entered against the Company in January 2025. The Company is currently challenging the judgment and has initiated a new action reasserting its claims. · On November 15, 2023, a vendor, Simon Showroom, filed a lawsuit against the company related to trade payables totaling approximately $ 582,208 , representing “double damages,” while the actual amount due to the vendor was $ 292,604 . The case was settled in full on December 10, 2024, for a total settlement amount of $ 400,000 . As part of the settlement, the Company paid $ 50,000 in December 2024, followed by a $ 60,000 payment in February 2025. As of December 31, 2025, the Company had an outstanding balance of $ 130,000 remaining, with monthly payments of $ 30,000 being made under the terms of the settlement agreement. The Company has made all payments, and the lawsuit is dismissed. 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, 2025. NOTE 15: INCOME TAXES The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for temporary differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates expected to apply in the years in which those differences are expected to reverse. The Company maintains a full valuation allowance against all net deferred tax assets due to its history of operating losses. Income Tax Provision For the year ended December 31, 2025, the Company recorded no current or deferred income tax expense or benefit. For the year ended December 31, 2024, the Company recorded a deferred income tax benefit of $ 119,044 . The components of the income tax provision are as follows: SCHEDULE OF COMPONENTS INCOME TAX PROVISION 2025 2024 Year Ended December 31, 2025 2024 Current: Federal $ - $ - State (California) - - Total current - - Deferred: Federal - ( 119,044 ) State (California) - - Total deferred - ( 119,044 ) Total income tax expense (benefit) $ - $ ( 119,044 ) F- 31 Deferred Tax Assets and Liabilities The Company’s deferred tax assets arise primarily from net operating loss carryforwards. The Company has recorded a full valuation allowance against its net deferred tax assets as it is not more likely than not that these assets will be realized. The following table presents deferred tax assets and liabilities as of December 31, 2025 and 2024: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2025 2024 December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 32,423,194 $ 24,774,064 Total gross deferred tax assets $ 32,423,194 $ 24,774,064 Deferred tax liabilities: Depreciation timing differences $ ( 1,840,170 ) $ ( 1,840,170 ) Total deferred tax liabilities $ ( 1,840,170 ) $ ( 1,840,170 ) Less: valuation allowance $ ( 30,832,014 ) $ ( 23,182,884 ) Net deferred tax asset (liability) $ ( 248,990 ) $ ( 248,990 ) Effective Tax Rate Reconciliation The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective for the year ended December 31, 2025. This standard requires the effective tax rate reconciliation to be presented in tabular format using both dollar amounts and percentages, disaggregated into prescribed categories. The reconciliation from the U.S. federal statutory rate of 21 % to the Company’s effective rate of 0 % and 0.9 % , respectively, for the years ended December 31, 2025 and 2024 is as follows: SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION 2025 % 2024 % Tax at federal statutory rate ( 21 %) $ ( 5,933,037 ) 21.0 % $ ( 2,777,383 ) 21.0 % Stock-based compensation - 0.0 % 47,411 - 0.4 % Non-deductible items 734,704 - 2.6 % 1,449,317 - 11.0 % Impairment of goodwill and intangibles 1,585,998 - 5.6 % 387,974 - 2.9 % Change in valuation allowance 3,612,335 - 12.8 % 773,637 - 5.8 % Total income tax expense (benefit) $ - 0.0 % $ ( 119,044 ) 0.9 % Income Taxes Paid The Company paid no federal, state, or local income taxes for the years ended December 31, 2025 and 2024. Valuation Allowance The Company maintained a full valuation allowance against its net deferred tax assets as of December 31, 2025 and 2024, due to its history of operating losses and uncertainty regarding the generation of future taxable income. The valuation allowance increased by $ 7,649,130 during 2025 and decreased by $ 5,419,573 during 2024, reflecting growth in net operating loss carryforwards. Net Operating Loss Carryforwards As of December 31, 2025, the Company had federal net operating loss carryforwards of approximately $ 108.7 million. Approximately $ 15.7 million relates to pre-2018 tax years and expires between 2033 and 2038. The remaining $ 93.7 million of post-2017 losses carry forward indefinitely but are subject to an annual 80% taxable income limitation under IRC §172. The Company also had California state NOL carryforwards of approximately $ 108.7 million, subject to a 20 -year carryforward period. The ability to utilize these carryforwards could become subject to annual limitations under Section 382 of the Internal Revenue Code if the Company undergoes an ownership change, generally defined as a cumulative shift of more than 50 percentage points in ownership among 5 %-or-greater stockholders over a three-year period. Uncertain Tax Positions The Company has not identified any uncertain tax positions as of December 31, 2025 or 2024, and has recorded no related liabilities. The Company is subject to examination by U.S. federal and California state tax authorities for all tax years from 2021 forward. F- 32 NOTE 16: SEGMENT REPORTING The Company operates as a 1 single reportable segment — direct-to-consumer (“DTC”) fashion brands. The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM reviews consolidated financial results to evaluate performance, allocate resources, and make operating decisions for the Company as a whole. In accordance with ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, effective for annual periods beginning after December 15, 2023, the Company is required to disclose significant segment expenses regularly provided to the CODM and included in the reported measure of segment profit or loss, even as a single reportable segment entity. The CODM uses net loss as the measure of segment profit or loss to assess performance and allocate resources. The significant segment expenses regularly provided to the CODM are presented in the table below. SCHEDULE OF SIGNIFICANT SEGMENT EXPENSES 2025 2024 Year Ended December 31, 2025 2024 Revenue $ 7,380,921 $ 11,555,656 Significant segment expenses: Cost of net revenues 6,326,300 7,911,536 General and administrative 9,674,699 8,652,361 Sales and marketing 14,596,126 2,896,698 Distribution 643,569 907,843 Impairment of goodwill and intangible assets 5,674,004 1,388,000 Total significant segment expenses 36,914,698 21,756,438 Other segment items ( a ) - - Other income (expense), net: Change in fair value of SBP liability 1,714,790 - Interest expense ( 514,584 ) ( 2,941,171 ) Other non-operating income (expenses) 81,013 ( 83,680 ) Total other income (expense), net 1,281,219 ( 3,024,851 ) Income tax benefit (provision) - 119,044 Segment net loss (CODM measure) $ ( 28,252,558 ) $ ( 13,106,589 ) (a) Other segment items consists of change in fair value of contingent consideration, change in credit reserve, and other immaterial items not separately identified as significant segment expenses. Since the Company operates as a single reportable segment, there are no reconciling items between segment totals and consolidated totals. Total segment assets as of December 31, 2025 and 2024 were $ 44,489,380 and $ 19,890,327 , respectively, equal to total consolidated assets. All assets are attributable to the Company’s single operating segment. All revenues and long-lived assets are attributable to operations within the United States. No single customer accounted for more than 10 % of net revenues during either period presented. NOTE 17: SUBSEQUENT EVENTS The Company has evaluated subsequent events through April 15, 2026, the date the financial statements were available to be issued. Bailey Note Payable The Company’s promissory note payable to Bailey, with a principal balance of $ 3,500,000 , matured on December 8, 2025 . As of the date of issuance of these financial statements, the note has not been repaid and remains outstanding. The Company is currently evaluating its options, including potential extension or refinancing of the obligation. The status of this note may have implications on the Company’s liquidity and going concern assessment. See Note 8 for further details. Warrant Exchange On February 13, 2026, the Company entered into letter agreements with certain holders of Common Share Purchase Warrants originally issued in the February 2025 offering at an exercise price of $ 0.66 per share. Pursuant to the agreements, the holders exercised 2,365,968 existing warrants generating aggregate proceeds to the Company of approximately $ 1.6 million. In exchange, the Company issued 9,634,032 new Common Share Purchase Warrants exercisable at $ 0.66 per share expiring June 17, 2026 . Certain holders received pre-funded warrants in lieu of common stock to the extent issuance would exceed their 4.99% beneficial ownership limitation. The Company agreed to register the shares issuable upon exercise of the new warrants on a Form S-3 registration statement to be filed by February 27, 2026. In February 2026, a holder of certain Company common stock warrants exercised 660,000 warrants at an exercise price of $ 0.66 per share, resulting in aggregate proceeds of approximately $ 1,000,000 . The Company is in the process of issuing the related shares, which have been recorded in stock payable. Marketing NIL Agreement On March 12, 2026, the Company entered into a three-year consulting agreement with Athlete Capital Sports LLC to participate in The Pennsylvania State University’s name, image and likeness (“NIL”) program for student-athletes. As consideration, the Company agreed to issue shares of common stock with an aggregate value of $ 3.0 million (determined based on the five-day VWAP or prior-day closing price, whichever is lower) on April 11, 2026. The shares are subject to a make-whole provision through the later of 15 months from the effective date or six months following effectiveness of the resale registration statement. The Company also agreed to invest $ 500,000 per year for three years into University student-athlete funds as directed by Athlete Capital Sports. Common Stock Issuances Subsequent to December 31, 2025 and through April 15, 2026, the Company issued an aggregate of 7,541,036 shares of common stock in the following transactions: (i) shares issued in satisfaction of stock payable obligations to investors in connection with warrant and pre-funded warrant exercises completed during 2025 for which the underlying shares had not yet been delivered as of December 31, 2025; (ii) shares issued upon the exercise of pre-funded warrants and cash warrants by investors; and (iii) shares issued pursuant to vendor marketing agreements. The Company continues to issue shares in the ordinary course as outstanding stock payable obligations are settled and warrants are exercised. Texas Lease Agreement Effective December 1, 2025, the Company entered into a lease agreement for approximately 70,301 square feet of warehouse and office space located at Round Rock, Texas. The lease commences on February 1, 2026 and has a term of 89 months, expiring on approximately June 30, 2033. The lease provides for a rent-free period from February 1, 2026 through June 30, 2026. Monthly base rent begins at approximately $ 45,627 in July 2026 and escalates annually, ranging from approximately $ 67,372 to $ 84,025 per month over the remaining term. Total base rent over the lease term is approximately $ 6.9 million. The Company is also responsible for its proportionate share of operating expenses, including taxes, insurance, and common area maintenance costs, initially estimated at approximately $ 16,783 per month. A security deposit of $ 140,500 was paid at signing, of which $ 70,250 is returnable after the 30th month of the term provided no default has occurred. The lease includes one five 5 -year renewal option at fair market rent. The Company will account for this lease as an operating lease under ASC 842, with a right-of-use asset and corresponding lease liability to be recognized on the commencement date of February 1, 2026. F- 33