AUSTIN,
Texas, May 16, 2022 /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,
2021.
First quarter 2022 net revenue was $3.4
million versus $0.4 million a
year ago, an increase of 740% year over year. Our gross profit
margin increased 94% year over year to 42.9% from negative 50.8% a
year ago, an increase of $1.7 million
in gross profit dollars
Our net loss per diluted share was $0.59 versus a net loss of $4.55 per diluted share a year ago, an
improvement of 671% year over year. Our net loss attributable
to common stockholders was $7.8
million versus a net loss of $3.0
million a year ago. The net loss included non-cash expenses
associated with a change in the fair value of contingent
liabilities and amortization of loan discount and fees of
$3.0 million.
"Our first quarter 2022 results reflect another quarter of
meaningful improvement in our business results," said
Hil Davis, Chief Executive Officer
of Digital Brands Group.
"We continue to drive significant revenue growth year-over-year.
In fact, based on our current wholesale orders for this summer and
fall, we believe that we will continue to experience strong
year-over-year revenue growth. This revenue growth is
creating leverage on our fixed costs. We believe that we will
benefit from this revenue growth in the fall to fully leverage our
fixed costs," concluded Davis.
First Quarter 2022
Highlights
- Net Sales were $3.4 million
versus $0.4 million in the year ago
quarter, an increase of 740% year over year. The increase in net
sales was driven by an increase in revenue across all our
brands.
- Our gross profit margin increased 671% year over year to 42.9%
from negative 50.8%. Gross profit increased by $1.7 million due to improved gross margins at all
our brands.
- Net loss attributable to common stockholders was $7.8 million, or $0.59 per diluted share, compared to net loss
attributable to common stockholders of $3.0
million, or $4.55 per diluted
share, in the prior year period.
- Net loss in the first quarter of 2022 included non-cash
expenses associated with a change in the fair value of contingent
liabilities and amortization of loan discount and fees of
$3.0 million.
Conference Call and Webcast
Details
The Company will host a conference call and webcast at
5:30 p.m. ET today to discuss
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 13730157.
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,
|
|
|
|
|
|
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
3,432,410
|
|
$
408,405
|
Cost of net
revenues
|
|
1,958,911
|
|
615,942
|
|
Gross profit
(loss)
|
|
1,473,499
|
|
(207,537)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
General and
administrative
|
|
4,611,235
|
|
1,907,518
|
|
Sales and
marketing
|
|
1,040,572
|
|
170,820
|
|
Distribution
|
|
202,848
|
|
63,578
|
|
Change in fair value of
contingent consideration
|
|
1,200,321
|
|
-
|
|
|
Total operating
expenses
|
|
7,054,976
|
|
2,141,916
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(5,581,477)
|
|
(2,349,453)
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
expense
|
|
(1,567,877)
|
|
(675,044)
|
|
Other non-operating
income (expenses)
|
|
(683,588)
|
|
562
|
|
|
Total other income
(expense), net
|
|
(2,251,465)
|
|
(674,482)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
(provision)
|
|
-
|
|
-
|
Net loss
|
|
$
(7,832,942)
|
|
$
(3,023,935)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding -
|
|
|
|
|
|
basic and
diluted
|
|
13,235,062
|
|
664,167
|
Net loss per common
share - basic and diluted
|
|
|
$
(0.59)
|
|
$
(4.55)
|
|
The accompanying
notes are an integral part of these financial
statements.
|
DIGITAL BRANDS
GROUP, INC
STATEMENTS OF CASH
FLOW
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
|
Net loss
|
|
$
(7,832,942)
|
|
$
(3,023,935)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
552,004
|
|
100,687
|
|
|
Amortization of loan
discount and fees
|
|
1,093,583
|
|
223,065
|
|
|
Stock-based
compensation
|
|
139,093
|
|
36,976
|
|
|
Change in fair value of
warrant liability
|
|
(5,970)
|
|
(562)
|
|
|
Change in fair value of
derivative liability
|
|
682,103
|
|
-
|
|
|
Change in fair value of
contingent consideration
|
|
1,200,321
|
|
-
|
|
|
Change in credit
reserve
|
|
(9,067)
|
|
3,335
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
(49,554)
|
|
22,700
|
|
|
|
Due from factor,
net
|
|
294,439
|
|
(6,950)
|
|
|
|
Inventory
|
|
262,753
|
|
573,496
|
|
|
|
Prepaid expenses and
other current assets
|
|
(126,369)
|
|
(195,027)
|
|
|
|
Accounts
payable
|
|
1,972,441
|
|
195,528
|
|
|
|
Accrued expenses and
other liabilities
|
|
669,514
|
|
98,075
|
|
|
|
Deferred
revenue
|
|
71,707
|
|
(1,667)
|
|
|
|
Accrued compensation -
related party
|
|
-
|
|
(62,777)
|
|
|
|
Accrued
interest
|
|
450,788
|
|
394,479
|
|
|
Net cash used in
operating activities
|
|
(635,156)
|
|
(1,642,577)
|
Cash flows from
investing activities:
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(5,576)
|
|
-
|
|
|
Net cash used in
investing activities
|
|
(5,576)
|
|
-
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds (repayments)
from related party advances
|
|
(11,105)
|
|
-
|
Advances (repayments)
from factor
|
|
(179,126)
|
|
32,617
|
Proceeds from venture
debt and loan payable
|
|
868,582
|
|
1,347,050
|
Issuance of convertible
notes payable
|
|
-
|
|
528,650
|
Offering
costs
|
|
-
|
|
(130,523)
|
|
|
Net cash provided by
financing activities
|
|
678,351
|
|
1,777,794
|
Net increase in cash
and cash equivalents
|
|
37,619
|
|
135,217
|
Cash and cash
equivalents at beginning of period
|
|
528,394
|
|
575,986
|
Cash and cash
equivalents at end of period
|
|
$
566,013
|
|
$
711,203
|
|
The accompanying
notes are an integral part of these financial
statements.
|
DIGITAL BRANDS
GROUP, INC
STATEMENT OF BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2022
|
|
2021
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
566,013
|
|
$
528,394
|
|
|
Accounts receivable,
net
|
|
|
138,948
|
|
89,394
|
|
|
Due from factor,
net
|
|
|
879,042
|
|
985,288
|
|
|
Inventory
|
|
|
2,492,605
|
|
2,755,358
|
|
|
Prepaid expenses and
other current assets
|
|
|
544,269
|
|
417,900
|
|
|
|
|
Total current
assets
|
|
4,620,877
|
|
4,776,334
|
Deferred offering
costs
|
|
367,696
|
|
367,696
|
Property, equipment and
software, net
|
|
|
88,650
|
|
97,265
|
Goodwill
|
|
|
|
18,264,822
|
|
18,264,822
|
Intangible assets,
net
|
|
|
12,303,501
|
|
12,841,313
|
Deposits
|
|
|
|
137,794
|
|
137,794
|
Right of use
asset
|
|
|
250,244
|
|
-
|
|
|
|
|
Total assets
|
|
|
$
36,033,584
|
|
$
36,485,224
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
$
8,535,132
|
|
$ 6,562,690
|
|
|
Accrued expenses and
other liabilities
|
|
2,906,659
|
|
2,237,145
|
|
|
Deferred
revenue
|
|
348,104
|
|
276,397
|
|
|
Due to related
parties
|
|
256,530
|
|
277,635
|
|
|
Contingent
consideration liability
|
|
13,379,797
|
|
12,179,476
|
|
|
Convertible notes,
current
|
|
100,000
|
|
100,000
|
|
|
Accrued interest
payable
|
|
1,561,467
|
|
1,110,679
|
|
|
Note payable - related
party
|
|
309,489
|
|
299,489
|
|
|
Venture debt, net of
discount
|
|
6,251,755
|
|
6,001,755
|
|
|
Loan payable,
current
|
|
3,502,000
|
|
2,502,000
|
|
|
Promissory note
payable
|
|
3,500,000
|
|
3,500,000
|
|
|
Right of use liability,
current portion
|
|
198,686
|
|
-
|
|
|
|
|
Total current
liabilities
|
|
40,849,619
|
|
35,047,266
|
Convertible note
payable, net
|
|
5,671,267
|
|
5,501,614
|
Loan payable
|
|
366,764
|
|
713,182
|
Derivative
liability
|
|
2,664,171
|
|
2,294,720
|
Warrant
liability
|
|
12,253
|
|
18,223
|
Right of use
liability
|
|
51,558
|
|
-
|
|
|
|
|
Total
liabilities
|
|
49,615,632
|
|
43,575,005
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
|
|
Undesignated preferred
stock, $0.0001 par, 10,000,000 shares authorized, 0
shares
|
|
|
|
|
|
|
issued and
outstanding as of both March 31, 2022 and December 31,
2021
|
|
-
|
|
-
|
|
Common stock, $0.0001
par, 200,000,000 shares authorized, 13,875,591 and 13,001,690
shares
|
|
|
|
|
|
|
issued and outstanding
as of March 31, 2022 and December 31, 2021, respectively
|
|
1,387
|
|
1,300
|
|
Additional paid-in
capital
|
|
59,953,461
|
|
58,612,873
|
|
Accumulated
deficit
|
|
(73,536,896)
|
|
(65,703,954)
|
|
|
|
|
Total stockholders'
equity (deficit)
|
|
(13,582,048)
|
|
(7,089,781)
|
|
|
|
|
Total liabilities and
stockholders' equity (deficit)
|
|
$
36,033,584
|
|
$ 36,485,224
|
|
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
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content:https://www.prnewswire.com/news-releases/digital-brands-group-reports-first-quarter-2022-financial-results-301548368.html
SOURCE Digital Brands Group, Inc.