Digital Brands Group Reports First Quarter 2024 Financial Results

Loss from operations was $225,000 versus $3.7 million a year ago

Austin, TX, May 20, 2024 (GLOBE NEWSWIRE) — 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, 2024.

“Despite a timing shift in our wholesale shipments, which shifted revenue from the first quarter to the second quarter, we experienced significant operating expense leverage. We expect this operating leverage to continue throughout the year. In fact, this operating leverage coupled with higher revenues will result in higher flow through to our operating and net income,” said Hil Davis, CEO of Digital Brands Group.

Results for the First Quarter

  • Net revenues were $3.6 million compared to $4.4 million a year ago

o   Net revenues were negatively impacted by wholesale shipments that slipped from the end of March to the first half of April

o   This wholesale revenue shift will benefit our second quarter revenue

  • Gross profit margins increased to 48.1% compared to 45.5% a year ago

o   Gross profit was $1.7 million compared to $2.0 million a year ago

  • G&A expenses decreased to $1.0 million compared to $4.5 million a year ago

o   G&A expense ratio was 27.2% compared to 100.5% a year ago

  • Sales & Marketing expenses were $700,000 compared to $1.0 million a year ago

o   Sales and marketing expenses ratio was 19.8% compared to 22.0% a year ago

  • Net operating loss was $225,000 compared to a loss of $3.7 million a year ago
  • Net loss was $684,000, or a loss of $0.46 per diluted share, compared to a loss of $6.1 million, or a loss of $27.48 per diluted share, a year ago

Conference Call and Webcast Details Updated

Management will host a conference call on Monday, May 20, 2024 at 10:30 a.m. ET to discuss the results. The live conference call can be accessed by dialing 888-506-0062 from the U.S. or internationally. The conference I.D. code is 817721 or referencing Digital Brands or via the web by using the following link: https://www.webcaster4.com/Webcast/Page/3044/50662.

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  
    2024     2023  
Net revenues   $ 3,576,587     $ 4,439,508  
Cost of net revenues     1,855,851       2,420,194  
Gross profit     1,720,736       2,019,314  
                 
Operating expenses:                
General and administrative     971,732       4,460,462  
Sales and marketing     708,150       977,154  
Distribution     265,499       270,185  
Total operating expenses     1,945,381       5,707,802  
                 
Loss from operations     (224,645 )     (3,688,487 )
                 
Other income (expense):                
Interest expense     (504,991 )     (1,864,598 )
Other non-operating income (expenses)     45,901       (678,989 )
Total other income (expense), net     (459,090 )     (2,543,587 )
                 
Income tax benefit (provision)            
Net loss from continuing operations     (683,735 )     (6,232,075 )
Income from discontinued operations, net of tax           95,726  
Net loss   $ (683,735 )   $ (6,136,349 )
                 
Weighted average common shares outstanding –                
basic and diluted     1,485,210       226,814  
Net loss per common share – basic and diluted   $ (0.46 )   $ (27.48 )

The accompanying notes are an integral part of these financial statements.

DIGITAL BRANDS GROUP, INC

STATEMENTS OF CASH FLOW

    Three Months Ended  
    March 31,  
    2024     2023  
Cash flows from operating activities:                
Net loss   $ (683,735 )   $ (6,136,349 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     1,117,240       959,207  
Amortization of loan discount and fees     492,858       1,412,425  
Loss on extinguishment of debt           689,100  
Stock-based compensation     100,299       105,594  
Shares issued for services     224,265       499,338  
Change in credit reserve     (151,611 )     109,298  
Changes in operating assets and liabilities:                
Accounts receivable, net     (207,071 )     282,947  
Due from factor, net     (297,951 )     (77,776 )
Inventory     201,127       299,188  
Prepaid expenses and other current assets     (24,545 )     (218,286 )
Accounts payable     (1,409,514 )     (416,093 )
Accrued expenses and other liabilities     (440,775 )     464,855  
Deferred revenue           115,292  
Accrued interest     (161,130 )     218,740  
Net cash used in operating activities     (1,240,541 )     (1,692,520 )
Cash flows from investing activities:                
Purchase of property, equipment and software     (13,785 )      
Deposits           87,379  
Net cash provided by (used in) investing activities     (13,785 )     87,379  
Cash flows from financing activities:                
Repayments from related party advances     (1,233 )     (104,170 )
Advances from factor     27,936       217,625  
Issuance of loans and note payable           3,542,199  
Repayments of convertible notes and loan payable     (518,026 )     (5,677,621 )
Issuance of common stock for cash     1,736,206       5,000,003  
Offering costs           (686,927 )
Net cash provided by financing activities     1,244,882       2,291,109  
Net chane in cash and cash equivalents     (9,443 )     685,968  
Cash and cash equivalents at beginning of period     20,773       1,283,282  
Cash and cash equivalents at end of period   $ 11,330     $ 1,969,250  
                 
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:                
Right of use asset   $     $ 467,738  

The accompanying notes are an integral part of these financial statements.

DIGITAL BRANDS GROUP, INC
STATEMENT OF BALANCE SHEETS

    March 31,     December 31,  
    2024     2023  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 11,330     $ 20,773  
Accounts receivable, net     281,904       74,833  
Due from factor, net     759,437       337,811  
Inventory     4,648,473       4,849,600  
Prepaid expenses and other current assets     301,215       276,670  
Total current assets     6,002,359       5,559,687  
Property, equipment and software, net     69,294       55,509  
Goodwill     8,973,501       8,973,501  
Intangible assets, net     9,262,670       9,982,217  
Deposits     75,431       75,431  
Right of use asset     465,069       689,688  
Total assets   $ 24,848,324     $ 25,336,033  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 6,266,814     $ 7,538,902  
Accrued expenses and other liabilities     4,317,717       4,758,492  
Due to related parties     398,779       400,012  
Convertible note payable, net     100,000       100,000  
Accrued interest payable     1,835,623       1,996,753  
Loan payable, current     2,300,674       2,325,842  
Promissory note payable, net     5,057,666       4,884,592  
Right of use liability, current portion     1,073,389       1,210,814  
Total current liabilities     21,350,662       23,215,407  
Loan payable     150,000       150,000  
Deferred tax liability     368,034       368,034  
Total liabilities     21,868,696       23,733,441  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares                
 issued and outstanding as of both March 31, 2024 and December 31, 2023            
Series A convertible preferred stock, $0.0001 par, 6,300 shares designated, 6,300 shares issued and                
outstanding as of both March 31, 2024 and December 31, 2023     1       1  
Series C convertible preferred stock, $0.0001 par, 3,239 and 4,786 shares issued and                
outstanding as of March 31, 2024 and December 31, 2023, respectively     1       1  
Common stock, $0.0001 par, 1,000,000,000 shares authorized, 1,714,157 and 1,114,359 shares                
issued and outstanding as of March 31, 2024 and December 31, 2023, respectively     169       110  
Additional paid-in capital     117,657,641       115,596,929  
Accumulated deficit     (114,678,184 )     (113,994,449 )
Total stockholders’ equity     2,979,628       1,602,592  
Total liabilities and stockholders’ equity   $ 24,848,324     $ 25,336,033  

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. 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.

Digital Brands Group, Inc. Company Contact

Hil Davis, CEO
Email: [email protected]
Phone: (800) 593-1047

SOURCE Digital Brands Group, Inc.

Related Links

https://www.digitalbrandsgroup.co

https://ir.digitalbrandsgroup.co


Bay Street News