Revenues increased 48.4% to $5.1
million
Gross margin increased 113.9% to $2.4
million
AUSTIN,
Texas, May 22, 2023 /PRNewswire/
-- Digital Brands Group, Inc. ("DBG") (NASDAQ:
DBGI), a curated collection of luxury lifestyle,
digital-first brands, today reported financial results for its
first quarter ended March 31,
2023.
"We are pleased to see the significant operating leverage we
experienced with the acquisition of Sundry, and still expect to
achieve positive EBITDA this fall even in a challenging macro
environment" said Hil Davis, CEO of
Digital Brands Group. "We are also excited about our two new
revenue channels that launch this Fall, which are our proprietary
affiliate program and our multi-brand retail stores."
Results for the First Quarter
- Net revenues increased 48.4% to $5.1
million compared to $3.4
million a year ago
- Gross margin increased 113.9% to $2.4
million compared to $1.1
million a year ago
-
- Gross profit margins increased significantly to 47.9% from
33.2% a year ago
- G&A expenses, including non-cash items, increased 8.4% to
$4.6 million compared to $4.3 million a year ago
-
- G&A as a % of revenue declined to 91.0% from 124.6% a year
ago
- G&A expenses included $3.1
million in non-cash expenses compared to $1.8 million a year ago
- Excluding these non-cash items, G&A would have been
$1.6 million compared to $2.5 million a year ago, which as a % of revenues
declined to 30.4% from 72.6% a year ago
- Sales & Marketing expenses increased 7.2% to $1.1 million compared to $1.0 million a year ago
-
- Sales and marketing expenses ratio was 21.9% compared to 30.3%
a year ago
- Loss from operations declined to $3.6
million compared to a loss of $5.6
million a year ago
-
- Excluding the non-cash items in G&A expenses, loss from
operations declined to $500,000
compared to a loss of $3.8 million a
year ago
- These losses included approximately $250,000 in expenses associated with the
integration and timing of the Sundry transition, which will no
longer be incurred
- Net loss attributable to common stockholders was $6.2 million, or $1.08 per diluted share, compared to $7.8 million, or $59.18 per diluted share, a year ago
-
- Excluding the non-cash items from G&A and other income, net
loss would have been $2.4 million, or
$0.42 per diluted share, compared to
a net loss of $6.1 million, or a loss
of $45.77 per diluted share, a year
ago
"Our business is completely different now than it was in
2022. We lost a year due to the market decline in 2022, which
delayed our acquisition of Sundry. We knew this acquisition was the
critical step in our path to build a company with scale, positive
EBITDA and positive cash flow. Now that the Sundry acquisition has
closed, we are well on our way to achieving our initial goals,"
said Hil Davis, Chief Executive
Officer of Digital Brands Group.
Davis continued, "we are also excited for the forecasted monthly
free cash flow that we will generate this fall associated with the
transition to positive EBITDA coupled with the end of our MCA
payments in early October. We should generate over
$500,000 in free cash flow monthly
starting after our last MCA payment."
Conference Call and Webcast Details Updated
Management will host a conference call on Monday, May 22 at 10:00
a.m. ET to discuss the results. The live conference call can
be accessed by dialing (866) 605-1828 from the U.S. or
internationally. The conference I.D. code is 13739029 or via the
web by using the following link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=VEEr5XVj.
Forward-looking Statements
Certain statements included in this release are "forward-looking
statements" within the meaning of the federal securities laws.
Forward-looking statements are made based on our expectations and
beliefs concerning future events impacting DBG and therefore
involve several risks and uncertainties. You can identify these
statements by the fact that they use words such as "will,"
"anticipate," "estimate," "expect," "should," and "may" and other
words and terms of similar meaning or use of future dates, however,
the absence of these words or similar expressions does not mean
that a statement is not forward-looking. All statements regarding
DBG's plans, objectives, projections and expectations relating to
DBG's operations or financial performance, and assumptions related
thereto are forward-looking statements. We caution that
forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied in
the forward-looking statements. DBG undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by law. Potential risks and uncertainties that could
cause the actual results of operations or financial condition of
DBG to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to: risks
arising from the widespread outbreak of an illness or any other
communicable disease, or any other public health crisis, including
the coronavirus (COVID-19) global pandemic; the level of consumer
demand for apparel and accessories; disruption to DBGs distribution
system; the financial strength of DBG's customers; fluctuations in
the price, availability and quality of raw materials and contracted
products; disruption and volatility in the global capital and
credit markets; DBG's response to changing fashion trends, evolving
consumer preferences and changing patterns of consumer behavior;
intense competition from online retailers; manufacturing and
product innovation; increasing pressure on margins; DBG's ability
to implement its business strategy; DBG's ability to grow its
wholesale and direct-to-consumer businesses; retail industry
changes and challenges; DBG's and its vendors' ability to maintain
the strength and security of information technology systems; the
risk that DBG's facilities and systems and those of our third-party
service providers may be vulnerable to and unable to anticipate or
detect data security breaches and data or financial loss; DBG's
ability to properly collect, use, manage and secure consumer and
employee data; stability of DBG's manufacturing facilities and
foreign suppliers; continued use by DBG's suppliers of ethical
business practices; DBG's ability to accurately forecast demand for
products; continuity of members of DBG's management; DBG's ability
to protect trademarks and other intellectual property rights;
possible goodwill and other asset impairment; DBG's ability to
execute and integrate acquisitions; changes in tax laws and
liabilities; legal, regulatory, political and economic risks;
adverse or unexpected weather conditions; DBG's indebtedness and
its ability to obtain financing on favorable terms, if needed,
could prevent DBG from fulfilling its financial obligations; and
climate change and increased focus on sustainability issues. More
information on potential factors that could affect DBG's financial
results is included from time to time in DBG's public reports filed
with the SEC, including DBG's Annual Report on Form 10-K, and
Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished
with the SEC.
DIGITAL BRANDS
GROUP, INC
|
STATEMENT OF
OPERATIONS
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
Restated
|
Net revenues
|
|
|
$
5,095,234
|
|
$
3,432,410
|
Cost of net
revenues
|
|
2,656,652
|
|
2,292,191
|
Gross profit
|
|
2,438,582
|
|
1,140,219
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
General and administrative
|
|
4,636,844
|
|
4,277,955
|
Sales and
marketing
|
|
1,115,643
|
|
1,040,572
|
Distribution
|
|
270,185
|
|
202,848
|
Change in fair
value of contingent consideration
|
|
-
|
|
1,200,321
|
Total operating expenses
|
|
6,022,672
|
|
6,721,696
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(3,584,090)
|
|
(5,581,477)
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
Interest expense
|
|
(1,873,270)
|
|
(1,567,877)
|
Other
non-operating income (expenses)
|
|
(678,989)
|
|
(683,588)
|
Total other income (expense),
net
|
|
(2,552,259)
|
|
(2,251,465)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
(provision)
|
|
-
|
|
-
|
Net loss
|
|
|
|
|
$ (6,136,349)
|
|
$ (7,832,942)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding -
|
|
|
|
|
|
|
|
|
|
basic and
diluted
|
|
5,670,362
|
|
132,351
|
Net loss per common
share - basic and diluted
|
|
|
|
|
|
|
|
$
(1.08)
|
|
$
(59.18)
|
The accompanying notes are an integral part of
these financial statements.
DIGITAL BRANDS
GROUP, INC
|
STATEMENTS OF CASH
FLOW
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
$
(6,136,349)
|
|
$
(7,832,942)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
959,207
|
|
552,004
|
Amortization of loan discount and fees
|
|
1,412,425
|
|
1,093,583
|
Loss on extinguishment of debt
|
|
689,100
|
|
-
|
Stock-based compensation
|
|
105,594
|
|
139,093
|
Shares issued for services
|
|
499,338
|
|
-
|
Change in credit reserve
|
|
109,298
|
|
(9,067)
|
Change in fair value of warrant liability
|
|
-
|
|
(5,970)
|
Change in fair value of derivative liability
|
|
-
|
|
682,103
|
Change in fair
value of contingent consideration
|
|
-
|
|
1,200,321
|
Changes in
operating assets and liabilities:
|
|
|
|
|
Accounts receivable, net
|
|
282,947
|
|
(49,554)
|
Due from factor,
net
|
|
(77,776)
|
|
294,439
|
Inventory
|
|
299,188
|
|
262,753
|
Prepaid expenses and other current assets
|
|
(218,286)
|
|
(126,369)
|
Accounts
payable
|
|
(416,093)
|
|
1,972,441
|
Accrued expenses
and other liabilities
|
|
464,855
|
|
669,514
|
Deferred
revenue
|
|
115,292
|
|
71,707
|
Accrued
interest
|
|
218,740
|
|
450,788
|
Net cash used in
operating activities
|
|
(1,692,520)
|
|
(635,156)
|
Cash flows from
investing activities:
|
|
|
|
|
Purchase of property,
equipment and software
|
|
|
|
|
|
|
|
-
|
|
(5,576)
|
Deposits
|
|
|
|
|
|
|
|
87,379
|
|
-
|
Net cash provided
by (used in) investing activities
|
|
87,379
|
|
(5,576)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds (repayments)
from related party advances
|
|
(104,170)
|
|
(11,105)
|
Advances (repayments)
from factor
|
|
217,625
|
|
(179,126)
|
Issuance of loans and
note payable
|
|
3,542,199
|
|
868,582
|
Repayments of
convertible notes and loan payable
|
|
(5,677,621)
|
|
-
|
Issuance of common
stock pursuant to private placement
|
|
|
|
|
|
|
|
5,000,003
|
|
-
|
Offering
costs
|
|
|
|
|
|
|
|
(686,927)
|
|
-
|
Net cash provided
by financing activities
|
|
2,291,109
|
|
678,351
|
Net chane in cash
and cash equivalents
|
|
685,968
|
|
37,619
|
Cash and cash
equivalents at beginning of period
|
|
1,283,282
|
|
528,394
|
Cash and cash
equivalents at end of period
|
|
$ 1,969,250
|
|
$
566,013
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Cash paid for income
taxes
|
|
$
-
|
|
$
-
|
Cash paid for
interest
|
|
$
60,465
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
|
|
Conversion of notes
into common stock
|
|
|
|
|
|
|
|
$
-
|
|
$ 1,201,582
|
Right of use
asset
|
|
|
|
|
|
|
|
$
467,738
|
|
$
250,244
|
The accompanying notes are an integral part of
these financial statements.
DIGITAL BRANDS
GROUP, INC
|
STATEMENT OF BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
1,969,250
|
|
$
1,283,282
|
|
|
Accounts receivable,
net
|
|
345,439
|
|
628,386
|
|
|
Due from factor,
net
|
|
590,253
|
|
839,400
|
|
|
Inventory
|
|
4,926,094
|
|
5,225,282
|
|
|
Prepaid expenses and
other current assets
|
|
1,071,330
|
|
853,044
|
|
|
|
|
Total current
assets
|
|
8,902,366
|
|
8,829,394
|
Property, equipment and
software, net
|
|
71,803
|
|
76,657
|
Goodwill
|
|
|
|
10,103,812
|
|
10,103,812
|
Intangible assets,
net
|
|
13,473,151
|
|
14,427,503
|
Deposits
|
|
|
|
110,962
|
|
198,341
|
Right of use
asset
|
|
467,738
|
|
102,349
|
|
|
|
|
Total assets
|
|
$
33,129,832
|
|
$
33,738,056
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
7,671,050
|
|
$
8,098,165
|
|
|
Accrued expenses and
other liabilities
|
|
4,921,970
|
|
4,457,115
|
|
|
Deferred
revenue
|
|
317,421
|
|
202,129
|
|
|
Due to related
parties
|
|
452,055
|
|
556,225
|
|
|
Contingent
consideration liability
|
|
12,098,475
|
|
12,098,475
|
|
|
Convertible note
payable, net
|
|
100,000
|
|
2,721,800
|
|
|
Accrued interest
payable
|
|
1,780,535
|
|
1,561,795
|
|
|
Note payable - related
party
|
|
129,489
|
|
129,489
|
|
|
Loan payable,
current
|
|
1,329,507
|
|
1,966,250
|
|
|
Promissory note
payable, net
|
|
10,914,831
|
|
9,000,000
|
|
|
Right of use liability,
current portion
|
|
425,654
|
|
102,349
|
|
|
|
|
Total current
liabilities
|
|
40,140,987
|
|
40,893,792
|
Loan payable
|
|
798,759
|
|
297,438
|
Right of use
liability
|
|
53,107
|
|
-
|
|
|
|
|
Total
liabilities
|
|
40,992,853
|
|
41,191,230
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
|
|
Undesignated preferred
stock, $0.0001 par, 10,000,000 shares authorized, 0
shares
|
|
|
|
|
|
|
issued and
outstanding as of both March 31, 2023 and December 31,
2022
|
|
-
|
|
-
|
|
Series A preferred
stock, $0.0001 par, 1 share authorized, no shares issued and
outstanding as of
|
|
|
|
|
|
March 31, 2023 and
December 31, 2022
|
|
-
|
|
-
|
|
Series A convertible
preferred stock, $0.0001 par, 6,800 shares designated, 6,300 shares
issued and
|
|
|
|
|
|
outstanding as of both
March 31, 2023 and December 31, 2022
|
|
1
|
|
1
|
|
Common stock, $0.0001
par, 1,000,000,000 shares authorized, 5,974,969 and 4,468,939
shares
|
|
|
|
|
|
|
issued and outstanding
as of March 31, 2023 and December 31, 2022, respectively
|
|
598
|
|
447
|
|
Additional paid-in
capital
|
|
102,020,045
|
|
96,293,694
|
|
Accumulated
deficit
|
|
(109,883,665)
|
|
(103,747,316)
|
|
|
|
|
Total stockholders'
equity (deficit)
|
|
(7,863,021)
|
|
(7,453,174)
|
|
|
|
|
Total liabilities and
stockholders' equity (deficit)
|
|
$
33,129,832
|
|
$
33,738,056
|
The accompanying notes are an integral part of
these financial statements.
About Digital Brands Group
We offer a wide variety of apparel through numerous brands on a
both direct-to-consumer and wholesale basis. We have created a
business model derived from our founding as a digitally
native-first vertical brand. Digital native first brands are brands
founded as e-commerce driven businesses, where online sales
constitute a meaningful percentage of net sales, although they
often subsequently also expand into wholesale or direct retail
channels., Unlike typical e-commerce brands, as a digitally native
vertical brand we control our own distribution, sourcing products
directly from our third-party manufacturers and selling directly to
the end consumer. We focus on owning the customer's "closet share"
by leveraging their data and purchase history to create
personalized targeted content and looks for that specific customer
cohort. We have strategically expanded into an omnichannel brand
offering these styles and content not only on-line but at selected
wholesale and retail storefronts. We believe this approach allows
us opportunities to successfully drive Lifetime Value ("LTV") while
increasing new customer growth.
Digital Brands Group, Inc. Company Contact
Hil Davis, CEO
Email: invest@digitalbrandsgroup.co
Phone: (800) 593-1047
Related Links
https://www.digitalbrandsgroup.co
https://ir.digitalbrandsgroup.co
View original
content:https://www.prnewswire.com/news-releases/digital-brands-group-reports-first-quarter-2023-financial-results-301831133.html
SOURCE Digital Brands Group, Inc.