# EDGAR Filing Document

**Accession Number:** 0001668010
**File Stem:** 0001493152-26-016851
**Filing Date:** 2026-4
**Character Count:** 440383
**Document Hash:** 3cb3076c6e94661bd98b44f61ebc12f6
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-26-016851.hdr.sgml**: 20260415

**ACCESSION NUMBER**: 0001493152-26-016851

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 96

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260415

**DATE AS OF CHANGE**: 20260415

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Digital Brands Group, Inc.
- **CENTRAL INDEX KEY:** 0001668010
- **STANDARD INDUSTRIAL CLASSIFICATION:** RETAIL-APPAREL & ACCESSORY STORES [5600]
- **ORGANIZATION NAME:** 07 Trade & Services
- **EIN:** 461942864
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40400
- **FILM NUMBER:** 26864755

**BUSINESS ADDRESS:**
- **STREET 1:** 4700 S. BOYLE AVE
- **CITY:** VERNON
- **STATE:** CA
- **ZIP:** 90058
- **BUSINESS PHONE:** (720)937-9286

**MAIL ADDRESS:**
- **STREET 1:** 4700 S. BOYLE AVE
- **CITY:** VERNON
- **STATE:** CA
- **ZIP:** 90058

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Denim LA, Inc.
- **DATE OF NAME CHANGE:** 20160225

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-K**

☒ ANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended **December 31, 2025**

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)1 OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: **001-40400**

**DIGITAL BRANDS GROUP, INC.**

(Exact name of registrant as specified in its charter)

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| | |
|:---|:---|
| **Nevada** | **46-1942864** |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |

---

**1400 Lavaca Street**

**Austin, TX 78701**

(Address of principal executive offices, including zip code)

**(209) 651-0172**

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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| | |
|:---|:---|
| **Title of each class** | **Name of each exchange on which registered** |
| Common Stock, par value $0.0001 per share DBGI | Nasdaq Capital Markets |
| Warrants, each exercisable to purchase one share of common stock DBGI | Nasdaq Capital Markets |

---

**Securities registered pursuant to Section 12(g) of the Act: None**

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☐ Smaller reporting company ☒ <br> Emerging growth company ☒

If an emerging growth company, indicate by check mark if this registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2025, the aggregate market value of the common stock held by non-affiliates of the registrant, based on the closing price of the shares of common stock on June 30, 2025, was approximately $40,197,117.

As of April 15, 2026, the Company had 16,629,371 shares of common stock, $0.0001 par value, issued and outstanding.

Documents Incorporated by Reference: None.

**DIGITAL BRANDS GROUP, INC.**

**FORM 10-K**

**TABLE OF CONTENTS**

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| | | |
|:---|:---|:---|
| **[PART I](#sh_001)** |  |  |
| Item 1. | [Business](#sh_002) | 2 |
| Item 1A. | [Risk Factors](#sh_003) | 15 |
| Item 1B. | [Unresolved Staff Comments](#sh_004) | 34 |
| Item 1C. | [Cybersecurity](#sh_005) | 34 |
| Item 2. | [Properties](#sh_006) | 35 |
| Item 3. | [Legal Proceedings](#sh_007) | 36 |
| Item 4. | [Mine Safety Disclosures](#sh_008) | 36 |
| **[PART II](#sh_009)** |  |  |
| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#sh_010) | 37 |
| Item 6. | [Reserved](#sh_011) | 38 |
| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#sh_012) | 38 |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#sh_013) | 50 |
| Item 8. | [Financial Statements and Supplementary Data](#sh_014) | 50 |
| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#sh_015) | 50 |
| Item 9A. | [Controls and Procedures](#sh_016) | 50 |
| Item 9B. | [Other Information](#sh_017) | 51 |
| Item 9C | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#sh_018) | 51 |
| **[PART III](#sh_019)** |  |  |
| Item 10. | [Directors, Executive Officers and Corporate Governance](#sh_020) | 52 |
| Item 11. | [Executive Compensation](#sh_021) | 56 |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#sh_022) | 59 |
| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#sh_023) | 60 |
| Item 14. | [Principal Accountant Fees and Services](#sh_024) | 61 |
| **[PART IV](#sh_025)** |  |  |
| Item 15. | [Exhibits and Financial Statement Schedules](#sh_026) | 62 |
| Item 16. | [Form 10-K Summary](#sh_027) | 66 |

---

i

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

Except for historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which involve risks and uncertainties. These forward-looking statements can be identified by the use of forward- looking terminology, including the terms "believe," "estimate," "project," "aim," "anticipate," "expect," "seek," "predict," "contemplate," "continue," "possible," "intend," "may," "plan," "forecast," "future," "might," "will," "could," would" or "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Annual Report on Form 10-K and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies, the industry in which we operate and potential acquisitions. We derive many of our forward- looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on the date of this Annual Report on Form 10-K.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward- looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the stability of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K. In addition, even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report on Form 10-K, those results or developments may not be indicative of results or developments in subsequent periods.

Important factors that could cause our results to vary from expectations include, but are not limited to:

● substantial doubt about the Company's ability to continue as a going concern due to illiquidity issues;

● the potential for additional impairments of intangible assets;

● our lack of combined operating history;

● the impact of persistent inflation and its effect on our supply chain and inventory;

● the impact of a potentially moderate or severe economic recession;

● the highly fragmented and competitive nature of our industry;

● our ability to successfully locate and acquire companies in the apparel business, to obtain debt and/or equity financing for that purpose and to successfully integrate them into our business and manage our internal growth;

● loss of any of our executives and managers;

● quarterly variations in our operating results;

● our ability to attract and retain qualified employees while controlling labor costs;

● our ability to manage our working capital to facilitate our inventory management;

● disruptions in the manufacturing and supply chains;

● our ability to adapt our product offerings to changing preferences and consumer tastes;

● our exposure to claims relating to employment violations and workplace injuries;

● our exposure to claims arising from our acquired operations;

● the potential for asset impairments when we acquire businesses;

● disruptions in our information technology systems;

● restrictions imposed on our operations by our credit facility and by other indebtedness we may incur in the future;

● our ability to implement and maintain effective internal control over financial reporting; and

● additional factors discussed under the sections captioned "*Risk Factors*," "*Management's Discussion and Analysis of Financial Condition and Results of Operations*" and "*Business.* "

Other sections of this Annual Report on Form 10-K include additional factors that could adversely impact our business and financial performance. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Annual Report on Form 10-K may not occur. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or to review any estimate and/or forward- looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Annual Report on Form 10-K might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, but not limited to, the factors mentioned above.

Because of these uncertainties, you should not place undue reliance on these forward-looking statements when making an investment decision.

**PART I**

*References in this Annual Report on Form 10-K to "we," "us," "Digital Brands Group," "DBG," "Company," or "our company" are to Digital Brands Group, Inc., a Nevada corporation, and its consolidated subsidiaries, Bailey 44, LLC ("Bailey"), MOSBEST, LLC ("Stateside") and SUNNYSIDE, LLC ("Sundry"). References to "management" or our "management team" are to our executive officers and directors.*

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| | |
|:---|:---|
| **ITEM 1.** | **BUSINESS** |

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***Recent Developments***

 ****

During 2025, the Company entered into several strategic agreements to expand its collegiate apparel and marketing platform, including arrangements with AAA Tuscaloosa (University of Alabama), LLC, Traffic Holdco, LLC, Buffalo Sports Properties / Learfield, The Grove Collective, LLC, and MavDB Consulting LLC.

Effective July 16, 2025, the Company entered into Exclusive Private Label Manufacturing Agreements with AAA Tuscaloosa, LLC and Traffic Holdco, LLC. Under these agreements, the Company manufactures collegiate-branded apparel for distribution through university channels and related platforms. In connection with these arrangements, the Company agreed to issue common stock with total equity commitments of approximately $3.0 million for AAA and a minimum of $9.0 million for Traffic Holdco over three-year terms. The shares are issued in exchange for services including licensing access, marketing, distribution, and compliance support and are accounted for in accordance with ASC 718. The Company records prepaid assets for the fair value of shares issued, which are amortized over the respective agreement terms. Both agreements include make-whole provisions (through March 2027) requiring the Company to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment; accordingly, the awards are liability-classified and remeasured at fair value each reporting period through earnings.

Effective December 3, 2025, the Company entered into a Marketing and Sponsorship Agreement with Buffalo Sports Properties, LLC, a Learfield property, for the University of Colorado athletic program. Under the agreement, the Company receives sponsorship, media, and NIL marketing benefits in exchange for annual consideration of $550,000, consisting of $350,000 in equity and $200,000 in cash, over a three-year term. The equity component is accounted for under ASC 718 and is subject to an 18-month make-whole provision (through June 2027), resulting in liability classification and periodic fair value remeasurement. The cash component is recorded as prepaid sponsorship expense and amortized over the period the related services are received. The agreement also includes variable and fixed NIL-related funding arrangements, which are recognized as expense as incurred or when the related activities occur.

Effective November 19, 2025, the Company entered into an Exclusive Private Label Manufacturing Agreement with The Grove Collective, LLC. In connection with the agreement, the Company issued shares of common stock with an aggregate fair value of approximately $2.9 million, representing a total equity commitment of $3.0 million. The shares vested immediately and are accounted for as consideration for services, including marketing and distribution support. The Company recorded a prepaid asset for the fair value of the shares issued, which is being amortized over the three-year term. For the year ended December 31, 2025, approximately $0.1 million of marketing expense was recognized, with the remaining balance recorded as prepaid expense.

On March 12, 2025, the Company entered into a Vendor Agreement with MavDB Consulting LLC to provide capital markets advisory and consulting services, including investor introductions and strategic advisory support. In connection with the agreement, the Company agreed to pay a one-time fee of approximately $2.5 million. The costs associated with this agreement are recognized as expense as the related services are performed.

As of December 31, 2025, no make-whole payments were required under any of the above agreements, as the fair value of shares issued exceeded the respective contractual commitments.

On October 2, 2024, the Company received a letter from the Listing Qualifications Staff (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that the Staff has determined to delist the Company's common stock from Nasdaq at the opening of business on October 11, 2024, based on the Company's failure to maintain a minimum bid price of $1 per share per Listing Rule 5550(a)(2), unless the Company requests an appeal of such determination by October 9, 2024. The Company submitted the appeal request to Nasdaq on October 9, 2024. Nasdaq granted a hearing of the appeal to be held on December 3, 2024. On November 20, 2024, the Company received notice from the Staff of Nasdaq that the Company no longer satisfied the $35,000,000 market value of listed securities requirement, or the alternative $2,500,000 stockholders' equity requirement, as set forth in Listing Rule 5550(b), and that such failure would serve as an additional basis for the delisting of the Company's securities from Nasdaq. In the Company's Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the period ended September 30, 2024 (the "Q3 Report"), filed with the SEC on November 15, 2024, the Company reported stockholders' equity of $19,046 and, therefore, no longer complied with the Rule. On December 16, 2024, the Staff of Nasdaq notified the Company that the Nasdaq Hearings Panel (the "Panel") determined to delist the Company's common stock and trading of the Company's securities was suspended on Nasdaq at the open of trading on December 18, 2024. Immediately after the delisting of the Company's common stock, the Company's common stock began being quoted on the OTC Pink Market under its existing symbol, "DBGI". The Panel reached its decision because the Company was in violation of Listing Rules 5550(a)(2), 5550(b)(1), and 5635, the Bid Price, Shareholders' Equity, and Shareholder Approval Rules, respectively.

On January 21, 2025, the Company entered into a five-year marketing services agreement with MavDB Consulting LLC for services including content production, social media marketing, and student athlete engagement. As consideration, the Company issued pre-funded warrants to purchase 2,068,965 shares of common stock at $0.01 per share, exercisable immediately and expiring five years from issuance, subject to a 4.99% beneficial ownership limitation (adjustable to 9.99% upon 61 days' notice). The issuance was made in reliance on Section 4(a)(2) of the Securities Act.

On January 22, 2025, the Company issued a promissory note in the principal amount of $260,000 (purchase price $200,000 after a $60,000 original issue discount) to an accredited investor, maturing April 22, 2025, with default interest at 16% per annum.

*Reverse Stock Split*

In December 2024, following the approval of shareholders, we completed a one-for-50 (1-for-50) reverse stock split (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every fifty (50) shares of the Company's Pre-Reverse Stock Split common stock was combined and automatically became one (1) share of common stock. The Reverse Stock Split did not (i) change the authorized number of shares, (ii) change the par value of the common stock, or (iii) modify any voting rights of the common stock.

Also, at the effective time of the Reverse Stock Split, the number of shares of common stock issuable upon exercise of warrants (including public warrants under the trading symbol "DBGIW"), preferred stock, and other convertible securities, as well as any commitments to issue securities, that provide for adjustments in the event of a reverse stock split will be appropriately adjusted pursuant to their applicable terms for the Reverse Stock Split. If applicable, the conversion price for each outstanding share of preferred stock and the exercise price for each outstanding warrant will be increased, pursuant to their terms, in inverse proportion to the 1-for-50 split ratio such that upon conversion or exercise, the aggregate conversion price for conversion of preferred stock and the aggregate exercise price payable by the warrant holder to the Company for shares of common stock subject to such warrant will remain approximately the same as the aggregate conversion or exercise price, as applicable, prior to the Reverse Stock Split.

*Completion of offering Common Stock and Pre-Funded Warrants*

On February 13, 2025, 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") 11,365,340 units (the "Units"), including (i) 125,535 units consisting of one share of common stock, par value $0.0001 per share (the "Common Stock") and two warrants to purchase one share of Common Stock each (the "Share Unit Warrants"), at a purchase price per unit equal to $0.66, and (ii) 11,239,805 units consisting of a pre-funded warrant to purchase one share of Common Stock ("Pre-Funded Warrants"), immediately exercisable at an exercise price of $0.0001 per share, and two warrants to purchase one share of Common Stock each (the "PFW Unit Warrants, and collectively with the Share Unit Warrants, the "Warrants"), at a purchase price per unit equal to $0.6599. The Warrants may be exercised for an aggregate of 22,730,680 shares of Common Stock at an exercise price equal to $0.66 per share, subject to adjustment for stock splits and similar events. The Purchase Agreement contains 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 February 18, 2025.

The Company offered Pre-Funded Warrants to those Purchasers whose purchase of Common Stock in the Offering would have resulted in the Purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or at the election of the Purchaser, 9.99%) of our Common Stock immediately following the consummation of the Offering in lieu of the Common Stock that would otherwise result in ownership in excess of 4.99% (or at the election of the purchaser, 9.99%) of the outstanding Common Stock of the Company. The Pre-Funded Warrants may be exercised commencing on the issuance date and do not expire. The Pre-Funded Warrants are exercisable for cash; provided, however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the Common Stock issuable upon exercise of the Pre-Funded Warrants. The exercise of the Pre-Funded Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Pre-Funded Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder's affiliates would hold 4.99% (or, upon election of a Purchaser prior to the issuance of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon exercise of the Pre-Funded Warrant held by the applicable holder, provided that the holder may increase or decrease the beneficial ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot be waived

The Warrants may be exercised commencing on the issuance date and expire one year from issuance. The Warrants are exercisable for cash at an exercise price of $0.66 per share; provided, however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the Common Stock issuable upon exercise of the Warrants. The exercise of the Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder's affiliates would hold 4.99% (or, upon election of a Purchaser prior to the issuance of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon exercise of the Warrants held by the applicable holder, provided that the holder may increase or decrease the beneficial ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot be waived.

At the closing of the Offering, the Company issued warrants to RBW Capital Partners LLC, acting through Dawson James Securities, Inc. (the "Placement Agent"), for the purchase of 568,267 shares of Common Stock at an exercise price of $0.759 per share (the "Placement Agent Warrants"), which is equal to 115% of the price per Unit. The Placement Agent Warrants are exercisable at any time commencing six (6) months from the date of commencement of sales in the Offering and expiring five (5) years from the commencement of sales in the Offering. During the aforementioned six (6) month period, the Placement Agent Warrant may not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Placement Agent Warrant pursuant to FINRA Rule 5110(e)(1)(A).

The Common Stock, Pre-Funded Warrants, Common Stock issuable upon exercise of the Pre-Funded Warrants, Warrants, Common Stock issuable upon exercise of the Warrants, Placement Agent Warrants, and Common Stock issuable upon exercise of the Placement Agent Warrants were offered pursuant to a registration statement on Form S-1 (File No. 333-284508), as filed with the Securities and Exchange Commission (the "Commission") on January 27, 2025, as amended, and was declared effective on February 11, 2025 (the "Registration Statement").

The Placement Agent acted as the exclusive placement agent for the Offering pursuant to a Placement Agency Agreement dated February 13, 2025 (the "Placement Agency Agreement") by and between the Company and the Placement Agent. The Placement Agency Agreement contains customary conditions to closing, representations and warranties of the Company, and termination rights of the parties, as well as certain indemnification obligations of the Company and ongoing covenants for the Company.

The Offering resulted in gross proceeds to the Company of approximately $7,500,000, 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 or 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 (which amount shall not include any additional proceeds the Company may receive from the exercise of the Warrants, or the Pre-Funded Warrants, issued in this Offering) and reimbursement of up to $150,000 for expenses of legal counsel and other actual out-of-pocket expenses.

*National Securities Exchange*

 

[open]

***Our Company***

Digital Brands Group is a curated collection of lifestyle brands that offers a variety of apparel products through direct-to-consumer and wholesale distribution. Our complementary brand portfolio provides us with the unique opportunity to cross-merchandise our brands. We aim for our customers to wear our brands head to toe and to capture what we call "closet share" by gaining insight into their preferences to create targeted and personalized content specific to their cohort. Operating our brands under one portfolio provides us with the ability to better utilize our technological, human capital and operational capabilities across all brands. As a result, we have been able to realize operational efficiencies and continue to identify additional cost saving opportunities to scale our brands and overall portfolio.

Our portfolio currently consists of five brands that leverage our three channels: our websites, wholesale and royalty (license revenue).

● **Bailey 44** combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go. Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway. Bailey 44 is primarily a wholesale brand, which we are transitioning to a digital, direct-to-consumer brand.

● **DSTLD** offers stylish high-quality garments without the luxury retail markup valuing customer experience over labels. DSTLD is primarily a digital direct-to-consumer brand.

● **Stateside** is an elevated, America first brand with all knitting, dyeing, cutting and sewing sourced and manufactured locally in Los Angeles. The collection is influenced by the evolution of the classic t-shirt, offering a simple yet elegant look. Stateside is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

● **Sundry** offers distinct collections of women's clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products. Sundry's products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California. Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

● **Avo** is a collegiate licensed loungewear brand that offers t-shirts, tanks, fleece sweats, shorts, and other loungewear products. Avo eliminates the wholesale mark-up, so its products have a sharper price point. Avo works directly with the colleges and universities to design and create compelling products that feature student-athletes, fraternities and sororities in our digital ads, emails, SMS and website photos. Avo has raised over $17 million for student athletes since it was launched in April 2025. Avo leverages the Company's current design and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands. We currently have ten universities on the website, and expect to announce significantly more universities over the next few months.

We believe that successful apparel brands sell in all revenue channels. However, each channel offers different margin structures and requires different customer acquisition and retention strategies. We were founded as a digital-first retailer that has strategically expanded into select wholesale and direct retail channels. We strive to strategically create omnichannel strategies for each of our brands that blend physical and online channels to engage consumers in the channel of their choosing. Our products are sold direct-to-consumers principally through our websites and our own showrooms, but also through our wholesale channel, primarily in specialty stores and select department stores. With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens our ability to efficiently acquire and retain customers while also driving high customer lifetime value.

We believe that by leveraging a physical footprint to acquire customers and increase brand awareness, we can use digital marketing to focus on retention and a very tight, disciplined high value new customer acquisition strategy, especially targeting potential customers lower in the sales funnel. Building a direct relationship with the customer as the customer transacts directly with us allows us to better understand our customer's preferences and shopping habits. Our substantial experience as a company originally founded as a digitally native-first retailer gives us the ability to strategically review and analyze the customer's data, including contact information, browsing and shopping cart data, purchase history and style preferences. This in turn has the effect of lowering our inventory risk and cash needs since we can order and replenish product based on the data from our online sales history, replenish specific inventory by size, color and SKU based on real times sales data, and control our mark-down and promotional strategies versus being told what mark downs and promotions we have to offer by the department stores and boutique retailers.

We define "closet share" as the percentage ("share") of a customer's clothing units that ("of closet") she or he owns in her or his closet and the amount of those units that go to the brands that are selling these units. For example, if a customer buys 20 units of clothing a year and the brands that we own represent 10 of those units purchased, then our closet share is 50% of that customer's closet, or 10 of our branded units divided by 20 units they purchased in entirety. Closet share is a similar concept to the widely used term wallet share, it is just specific to the customer's closet. The higher our closet share, the higher our revenue as higher closet share suggests the customer is purchasing more of our brands than our competitors.

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. We define Lifetime Value or LTV as an estimate of the average revenue that a customer will generate throughout their lifespan as our customer. This value/revenue of a customer helps us determine many economic decisions, such as marketing budgets per marketing channel, retention versus acquisition decisions, unit level economics, profitability and revenue forecasting.

In April of 2024, we entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb of Dallas. We opened the store in April 2024 The Company closed the store in October 2024 to focus on its e-commerce strategy with VaynerCommerce, a digital marketing agency.

We intend to continue to actively pursue acquisitions to increase and tighten customer cohorts and increase our ability to create more customized content and personalized looks and styles for each customer cohort. We believe that customers want and trust brands that can deliver customized content and personalized looks and styles. We expect this should result in higher customer loyalty, higher lifetime value, higher average order value and lower customer acquisition cost.

*Organizational Structure*

We operate the brands on a decentralized basis with an emphasis on brand level execution supported by corporate coordination. The brand's executive teams will continue to operate and leverage relationships with customers and suppliers, including designing and producing product and developing marketing plans including social media, email and digital communications.

We consolidate marketing and tech contracts as we have done with Bailey's contracts, which has provided significant cost savings. We review the fabric mills and factories used by each brand to see if we can consolidate or cross utilize these mills and factories, which will drive increased volumes, lower production costs and higher gross margins. We are also consolidating production into a few factories in Europe from China and the U.S., which lowers our average production cost per unit.

We leverage the Digital Brands Group marketing and data analytics team to create cross-marketing campaigns based on the customer data respective to each brand's customer base. As an example, the Digital Brands Group's marketing and data team reviews the customer data across all our portfolio brands and will work with each brand to identify the new customers from our other portfolio brands that they can target and what styles and looks should be created for each of those customer cohorts. The brand level employees then execute the looks and styles and create the customized customer communication based on the information and data from the Digital Brands Group marketing and data teams.

Certain administrative functions are centralized on a regional and, in certain circumstances, a national basis following, including but not limited to accounting support functions, corporate strategy and acquisitions, human resources, information technology, insurance, marketing, data analytics and customer cross-merchandising, advertising buys, contract negotiations, safety, systems support and transactional processing.

**Principal Products and Services**

***Bailey — Brand Summary***

In February 2020, we acquired Bailey. Bailey delivers distinct high-quality, well-fitting, on-trend contemporary apparel using an entry contemporary price point. Bailey combines beautiful, luxe fabrics and on-trend designs to offer clean, sophisticated ready-to-wear separates that easily transition from day to night and for date night. Bailey offers fashionable staples with timeless design features, making them wearable for any occasion — the majority of products are tops, sweaters and dresses.

Bailey's full seasonal collections of dresses, tops, jumpsuits, bottoms, sets, jackets and rompers retail at price points between $90 and $350. We believe that we can create more compelling price points as we leverage our direct-to-consumer expertise. As we increase the direct-to-consumer revenue mix, we believe we will have opportunities to increase our margins, which will mostly be passed along to the customer with lower price points.

With our acquisition of Bailey 44, LLC, we view the following as tangible near term growth opportunities:

● Increase emphasis on email and SMS communications allowing for personalized direct customer engagement, retention and repurchases.

● Increase market share in existing and new wholesale, including specialty boutiques due to the well-known and respected designer we hired in June 2020.

● Increase digital spend, social media presence, and brand and influencer collaborations.

● Selective opportunity to roll out proven retail concept in well defined, strategic locations.

● International expansion and licensing opportunities in select categories.

***Stateside — Brand Summary***

We acquired Stateside in August 2021. Stateside is a collection of elevated American basics influenced by the evolution of the classic T-shirt. All garments are designed and produced in Los Angeles from the finest fabrics. All knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles.

Stateside is known for delivering high quality, luxury T-shirts, tops and bottoms. Stateside is primarily a wholesale brand with very limited online revenue. Their T-shirt prices range from $68 to $94, their other tops range from $98 to $130, and their bottoms from $80 to $144.

With our acquisition of Stateside, we view the following as tangible near-term growth opportunities:

● Increase online revenues significantly as we have spent very little resources on developing its online sales opportunity from the website optimization to photography to email marketing to online advertising to digital customer acquisition and retention.

● Increase gross margins by ordering larger quantities as we pay meaningful upcharges for minimum order quantities.

● Launch seasonal new product categories such as women's knits and wovens in the top category and women's wovens in the bottom category. We believe knits and wovens tops are one of the larger product categories in womenswear, with higher price points and dollar profit.

***Sundry — Brand Summary***

We acquired Sundry in December 2022. Sundry offers distinct collections of women's clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products. Sundry's products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California. The products are designed and mostly produced in Los Angeles from the finest fabrics. The majority of the knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles, with some sweaters made overseas.

Sundry is known for delivering high quality novelty and resort style T-shirts, tops and bottoms. Sundry is mostly a wholesale brand with meaningful online revenue. Their T-shirt prices range from $68 to $98, their other tops range from $98 to $198, and their bottoms range from $80 to $228.

With our acquisition of Sundry, we view the following as tangible near-term growth opportunities:

● Increase online revenues significantly as we cross-market their customer base with the customer bases from our other brands.

● Increase gross margin dollars by updating the product line and driving increased volume through the wholesale and online channels.

● Launch a new product category for 2025 in women's athleisure. We believe athleisure is one of the largest product categories in womenswear, with high repeat spend and closet share.

***DSTLD — Brand Summary***

DSTLD focuses on minimalist design, superior quality, and only the essential wardrobe pieces. We deliver casual luxury rooted in denim; garments that are made with exhaustive attention to detail from the finest materials for a closet of timeless, functional staples. Our brand name "DSTLD" is derived from the word 'distilled,' meaning to extract only the essentials. As such, DSTLD boasts a line of key wardrobe pieces in a fundamental color palette of black, white, grey, and denim.

Our denim prices generally range from $75 to $95; similar quality brands produced at the same factories wholesale for approximately $95 to $125 and retail for $185 to $350. Our t-shirts and tops range from $30 to $90, while similar quality brands produced at the same factories wholesale for approximately $25 to $75 and retail for $60 to $250. Our casual pants range from $85 to $109, with similar quality brands produced at the same factories wholesaling for approximately $85 to $115 and retailing for $175 to $250.

***Avo — Brand Summary***

**Avo** is a collegiate licensed loungewear brand that offers t-shirts, tanks, fleece sweats, shorts, and other loungewear products. Avo eliminates the wholesale mark-up, so its products have a sharper price point. Avo works directly with the colleges and universities to design and create compelling products that feature student-athletes, fraternities and sororities in our digital ads, emails, SMS and website photos. Avo has raised over $17 million for student athletes since it was launched in April 2025. Avo leverages the Company's current design and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands. We currently have ten universities on the website, and expect to announce significantly more universities over the next few months.

Avo launched in late August 2024 as an everyday essentials brand. In April 2025, Avo pivoted to a collegiate licensed model, which launched at the University of Alabama through Yea Alabama. Since April 2025, Avo has added 9 universities to its offering and expects to add significantly more over the next few months. Prices for t-shirts and tanks range from $30 to $58 based on the fabric quality, gender and style (such as hoodies vs crew necks). The women's softest fleece are $68 and we are launching a new fleece product for men and women that will arrange from $68 to $88 based on style and gender. Other product prices will range from $48 for shorts to $98 for quarter zips, polos or sweaters. Avo pays a royalty rate to each university based on the university's royalty rates. Avo focuses on supporting female student athletes. Avo also works directly with the Greek life at these universities.

*Sales and Distribution*

DSTLD and Avo products are sold primarily direct-to-consumer, via our website. By selling direct-to-consumer, we are able to eliminate the wholesale mark-up and offer sharper pricing to the customer. At some universities, Avo does sell through the university's bookstores, at which point are margins are much lower as we do not add a wholesale mark-up. Avo believes this channel is a marketing channel that has a slight profit and creates a physical touch point with the customer.

Bailey products are distributed through wholesale and direct-to-consumer channels. The wholesale channel includes premium department stores, select independent boutiques and third-party online stores.

Stateside and Sundry products are distributed through wholesale and direct-to-consumer channels includes premium department stores and national chains, select independent boutiques and third-party online stores.

We do not have material terms or arrangements with our third-party distributors. As is customary in the wholesale side of the retail apparel industry, we work with the wholesale buyers for every product collection and season to develop a purchase order based on quantities, pricing, profit margin and any future mark- down agreements. Historically, these factors are driven by the wholesale buyer's belief of how well they think the product will sell at their stores. For example, if the collection is considered very strong by the wholesale buyer, we usually achieve higher quantities, higher margins and lower future markdown guarantees. Conversely, when the wholesale buyer considers the collection to be weak, we experience lower quantities, lower margins and higher mark-down guarantees.

Our direct-to-consumer channels include our own website. Old season stock is sold through selected off- price retailers, with additional sales generated through specifically cut product for select off-price retailers.

All of our DSTLD, Avo, Bailey and Stateside and Sundry sellable product is stored at our corporate warehouse and distribution center in Los Angeles, CA, which also houses our corporate office. In addition to storing product, we also receive and process new product deliveries, process and ship outbound orders, and process and ship customer returns in this same facility.

We offer free shipping and returns above to all our customers in the United States once they achieve a cart size amount of $50 for all brands but Avo and $99 for Avo. We also offer customers the option to upgrade to 2-Day or Overnight Shipping for an additional cost.

*Design and Development*

Our products are designed at the headquarters of each brand, which are in Los Angeles, CA. Each brand's design efforts are supported by well-established product development and production teams. The continued collaboration between design and merchandising ensures we respond to consumer preferences and market trends with new innovative product offerings while maintaining our core fashion foundation. In-house design and production teams in Los Angeles perform development of the sample line, allowing for speed to market, flexibility and quality of fit.

We analyze trends, markets, and social media feedback along and utilize historical data and industry tools to identify essential styles and proper replenishment timing and quantities.

We rely on a limited number of suppliers to provide our finished products, so we can aggregate pricing power. As we continue to increase our volumes, we will source additional factories to spread out our risks.

While we have developed long-standing relationships with a number of our suppliers and manufacturing sources and take great care to ensure that they share our commitment to quality and ethics, we do not have any long-term term contracts with these parties for the production and supply of our fabrics and products. We require that all of our manufacturers adhere to a vendor code of ethics regarding social and environmental sustainability practices. Our product quality and sustainability team partners with leading inspection and verification firms to closely monitor each supplier's compliance with applicable laws and our vendor code of ethics.

Currently, our Bailey, DSTLD, Avo and Stateside and Sundry products are shipped from our suppliers to our distribution center in Los Angeles, CA which currently handles all our warehousing, fulfillment, outbound shipping and returns processing. Our Sundry products will be shipped from our suppliers to our distribution center in Los Angeles, CA which will handle all our warehousing, fulfillment, outbound shipping and returns processing. During 2025, we will review maintaining our own distribution centers versus using a third-party solution.

*Product Suppliers: Sourcing and Manufacturing*

We work with a variety of apparel manufacturers in North America, Asia and Europe. We only work with full package suppliers, which supply fabric, trims, along with cut/sew/wash services, only invoicing us for the final full cost of each garment. This allows us the ability to maximize cash flows and optimize operations. We do not have long-term written contracts with manufacturers, though we have long-standing relationships with a diverse base of vendors.

We do not own or operate any manufacturing facilities and rely solely on third-party contract manufacturers operating primarily in Europe, United States, and the Asia Pacific region for the production of our products depending on the brand. All of our contract manufacturers are evaluated for quality systems, social compliance and financial strength by our internal teams prior to being selected and on an ongoing basis. Where appropriate, we strive to qualify multiple manufacturers for particular product types and fabrications.

All of our garments are produced according to each brand's specifications, and we require that all manufacturers adhere to strict regulatory compliance and standards of conduct. The vendors' factories are monitored by each brand's production team to ensure quality control, and they are monitored by independent third-party inspectors we employ for compliance with local manufacturing standards and regulations on an annual basis. We also monitor our vendors' manufacturing facilities regularly, providing technical assistance and performing in-line and final audits to ensure the highest possible quality.

We source our products from a variety of domestic and international manufacturers. When deciding which factory to source a specific product from, we take into account the following factors:

● Cost of garment

● Retail price for end consumer

● Production time

● Minimum order quantity

● Shipping/delivery time

● Payment terms

By taking all of these into consideration, we can focus on making sure we have access to in-demand and high quality products available for sale to our customers at competitive price points and sustainable margins for our business.

*Marketing*

We believe marketing is a critical element in creating brand awareness and an emotional connection, as well as driving new customer acquisition and retention. Each brand has its own in-house marketing department, which creates and produces marketing initiatives specific to each marketing channel and based on the specific purpose, such as acquisition, retention or brand building.

Our goal at the brand and the portfolio level is to increase brand awareness and reach, customer engagement, increase new customer conversion and repurchase rates and average order size. We utilize a multi-pronged marketing strategy to connect with our customers and drive traffic to our online platform, comprised of the following:

***Customer Acquisition Marketing***

<u>Paid Social Media Marketing:</u> This is our primary customer acquisition channel, and it is composed almost entirely of paid Facebook and Instagram marketing. We believe our core customers rely on the opinions of their peers, often expressed through social media. Social media platforms are viral marketing platforms that allow our brands to communicate directly with our customers while also allowing customers to interact with us and provide feedback on our products and service. We make regular posts highlighting new products, brand stories, and other topics and images we deem "on brand". By being a verified brand, our followers can shop products directly from our posts. We are also able to link to products in the stories feature.

<u>Affiliate Marketing:</u> With select online publications and influencers, we've sought to establish CPA or revenue sharing agreements. We believe these agreements are effective in incentivizing influencers or media to push our product and allowing us to only pay partners based on performance.

<u>Email Marketing:</u> We utilize email marketing to build awareness and drive repeat purchases. We believe this can be the most personalized customer communication channel for our brands, and therefore should continue to be one of our highest performing channels. We use an email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails, with the main goal of driving increased site traffic and purchases. We maintain a database through which we track and utilize key metrics such as customer acquisition cost, lifetime value per customer, cost per impression and cost per click.

<u>Retargeting:</u> We engage the services of certain retargeting engines that allow us to dynamically target our visitors on third-party websites via banner/content ads.

<u>Content Marketing:</u> We use content marketing platforms that allow us to serve up native ads in the form of articles promoting our brand story and specific products.

<u>Search Engine Optimization:</u> This is the process of maximizing the number of visitors to our website by increasing our rankings in the search results on internet search engines. This is done by optimizing our onsite content, by making sure our pages, titles, tags, links, and blog content is structured to increase our search results on certain keywords, and our offsite content, which is the number of external websites linking to our website, usually through press articles and other advertising channels.

<u>Print Advertising:</u> We also intend to utilize print advertisements in magazines or billboards in major metropolitan areas to drive increased site traffic and brand awareness.

<u>Video / Blog Content:</u> We plan to offer videos and blog posts as a way to engage and educate the customer on our brands, how to wear different looks and styles, and create confidence and trust between our brands and customers. Videos and blog posts will include interviews with our designers, a behind-the- scenes look at how products are made, features of other artists or creatives, and photo shoots.

***Instagram and Influencer Marketing***

Instagram and influencer marketing is one of our largest initiatives. On a weekly basis, we reach out to and receive requests from tastemakers in fashion, lifestyle, and photography. We have developed a certain set of criteria for working with influencers (for example, engagement level, aesthetic, audience demographic) that have enabled us to garner impactful impressions. Our focus is not on the size of an account, but on creating organic relationships with influencers who are excited to tell our story. While most of our collaborations are compensated solely through product gifts, we also offer an affiliate commission of up to 20% through the influencer platforms.

***Public Relations***

To generate ongoing organic and word-of-mouth awareness, we intend to work with print and online media outlets to announce new products and develop timely news stories. We are in contact with leading fashion, business, and tech writers in order to capitalize on celebrity fashion features, e-commerce trend pieces, or general brand awareness articles. We may utilize outside agencies from time to time. We visit the major fashion, tech, and news outlets in New York City on a quarterly basis to keep them up to date on our latest launches and any relevant company developments.

***Celebrity and Influencer Gifting***

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We approach celebrity gifting in a strategic, discerning manner. We have longstanding, personal relationships with the industry's top stylists; we do not send clothing blindly or unsolicited. We have successfully placed clothing (and as a result, fashion press) on a number of well-known A-list celebrities and well known influencers.

***Loyalty Program***

We plan to develop and launch a company-wide loyalty program, which would include all our brands. Our customer loyalty program will be designed to engage and reward our customers in a direct and targeted manner, and to cross merchandise our portfolio brands to our customers. Customers will earn reward points that can be used to purchase products. We will also use loyalty point multipliers to create customer purchases, especially, which is a strategy beauty retailer have effectively used.

***Competition***

Our business depends on our ability to create consumer demand for our brands and products. We focus on designing products that we hope exceed consumer expectations, which should result in retention and repurchases. We plan to invest in cross merchandising brands to customers through customized customer communications and personalized styles and looks utilizing products across all our portfolio brands, which we believe creates a competitive advantage for our brands versus single brands. The markets in which we compete are highly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market share, any of which could substantially harm our business and results of operations. We compete directly against wholesalers and direct retailers of apparel, including large, diversified apparel companies with substantial market share and strong worldwide brand recognition. Many of our competitors, including Vince, James Perse, Rag & Bone, Madewell, AG, FRAME, All Saints, and Vouri, have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution, and other resources than we do.

As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by:

● quickly adapting to changes in customer requirements or consumer preferences;

● discounting excess inventory that has been written down or written off;

● devoting resources to the marketing and sale of their products, including significant advertising campaigns, media placement, partnerships and product endorsement; and

● engaging in lengthy and costly intellectual property and other disputes.

***Government Regulation***

Our business is subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business. These laws and regulations include federal and state consumer protection laws and regulations, which address, among other things, the privacy and security of consumer information, sending of commercial email, and unfair and deceptive trade practices.

Under applicable federal and state laws and regulations addressing privacy and data security, we must provide notice to consumers of our policies with respect to the collection and use of personal information, and our sharing of personal information with third parties, and notice of any changes to our data handling practices. In some instances, we may be obligated to give customers the right to prevent sharing of their personal information with third parties. Under applicable federal and state laws, we also are required to adhere to a number of requirements when sending commercial email to consumers, including identifying advertising and promotional emails as such, ensuring that subject lines are not deceptive, giving consumers an opportunity to opt-out of further communications and clearly disclosing our name and physical address in each commercial email. Regulation of privacy and data security matters is an evolving area, with new laws and regulations enacted frequently. For example, California recently enacted legislation that, among other things, will require new disclosures to California consumers, and afford such consumers new abilities to opt out of certain sales of personal information. In addition, under applicable federal and state unfair competition laws, including the California Consumer Legal Remedies Act, and U.S. Federal Trade Commission, or FTC, regulations, we must, and our network of influencers may be required to, accurately identify product offerings, not make misleading claims on our websites or in advertising, and use qualifying disclosures where and when appropriate. The growth and demand for eCommerce could result in more stringent domestic and foreign consumer protection laws that impose additional compliance burdens on companies that transact substantial business on the Internet.

Our international business is subject to additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, as well as foreign laws and regulations addressing topics such as advertising and marketing practices, customs duties and taxes, privacy, data protection, information security and consumer rights, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories. Many foreign jurisdictions have laws, regulations, or other requirements relating to privacy, data protection, and consumer protection, and countries and territories are adopting new legislation or other obligations with increasing frequency.

In many jurisdictions, there is great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet and eCommerce. New legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet and eCommerce could result in significant additional obligations on our business or may necessitate changes to our business practices. These obligations or required changes could have an adverse effect on our cash flows and results of operations. Further, any actual or alleged failure to comply with any of these laws or regulations by us, our vendors or our network of influencers could hurt our reputation, brand and business, force us to incur significant expenses in defending against proceedings or investigations, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties.

*Employees*

As of December 31, 2025, we had 33 employees, all of whom were full-time employees. None of our employees is currently covered by a collective bargaining agreement. We have had no labor-related work stoppages and we believe our relationship with our employees is strong.

We believe that a diverse workforce is important to our success. We will continue to focus on the hiring, retention and advancement of women and underrepresented populations, and to cultivate an inclusive and diverse corporate culture. In the future, we intend to continue to evaluate our use of human capital measures or objectives in managing our business such as the factors we employ or seek to employ in the development, attraction and retention of personnel and maintenance of diversity in our workforce.

The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees. We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.

We also provide robust compensation and benefits programs to help meet the needs of our employees.

**Available Information**

Our Internet address is https://www.digitalbrandsgroup.co. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Exchange Act are available on the SEC's website *http://www.sec.gov*. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

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| **ITEM 1A.** | **RISK FACTORS** |

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Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, as well as our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K, before making an investment decision. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all your investment.

Below is a summary of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:

● We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations.

● If we do not obtain adequate capital funding or improve our financial performance, we may not be able to continue as a going concern.

● Widespread outbreak of an illness or any other public health crisis could materially and adversely affect, and has materially and adversely affected, our business, financial condition and results of operations.

● If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business, and our revenues and operating results will be adversely affected.

● We may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer.

● We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.

● Our ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we may be unable to obtain on acceptable terms.

● We have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability to react to changes in our business.

● We may not be able to generate sufficient cash to service all our debt or refinance our obligations and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.

● Our results of operations have been and could be in the future adversely affected as a result of asset impairments.

● If we fail to effectively manage our growth, our business, financial condition and operating results could be harmed.

● If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner, our business, financial condition and operating results could be harmed.

● Our business depends on our ability to maintain a strong portfolio of brands and engaged customers. We may not be able to maintain and enhance our existing brand portfolio if we receive customer complaints, negative publicity or otherwise fail to live up to consumers' expectations, which could materially adversely affect our business, operating results and growth prospects.

● An economic downturn or economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for our products.

● We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue.

● Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.

● If we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would have a material adverse effect on our business and operating results.

● We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected.

● Merchandise returns could harm our business.

● We rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.

● Our sales and gross margins may decline as a result of increasing product costs and decreasing selling prices.

● Our operations are currently dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse and distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on our business and operations.

● Our sales and gross margins may decline because of increasing freight costs.

● Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations.

● Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

● Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

● If we cannot successfully protect our intellectual property, our business could suffer.

● If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results could be materially adversely affected.

● Organizations face growing regulatory and compliance requirements.

● Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity.

● Our business is affected by seasonality.

● The price of our common stock has in the past and may in the future fluctuate substantially.

● If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock.

● If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock.

● We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors and may make it more difficult to compare our performance with other public companies.

● Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

● Provisions in our articles of incorporation and bylaws and under Nevada law could discourage a takeover that stockholders may consider favorable.

● We may be required to issue additional shares of our common stock further to agreements whereby we acquired Bailey. Any such additional issuances would result in additional dilution to our stockholders.

● We do not expect to pay any dividends in the foreseeable future.

● If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline.

*Risks related to our financial condition and business.*

***We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations.***

We have incurred significant net losses since inception. Our net loss was approximately $28.3 and $13.1 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $155.35 million. We may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, delays, and other unknown events, as well as the inflationary and potentially recessive economic environment.

We anticipate that our operating expenses will increase substantially in the foreseeable future as we undertake the acquisition and integration of different brands, incur expenses associated with maintaining compliance as a public company, and incur increased marketing and sales expenses in an effort to grow our customer base. These increased expenditures may make it more difficult to achieve and maintain profitability. In addition, our efforts to grow our business may be more expensive than we expect, and we may not be able to generate sufficient revenue to offset increased operating expenses. If we are required to reduce our expenses, our growth strategy could be materially affected. We will need to generate and sustain significant revenue levels in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability.

Accordingly, we cannot assure you that we will achieve sustainable operating profits as we continue to expand our product offerings and infrastructure, further develop our marketing efforts, and otherwise implement our growth initiatives. Any failure to achieve and maintain profitability would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our financial condition.

***We have received capital funding to continue the business operations***

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The Company has historically incurred net losses and experienced negative cash flows from operations. As of December 31, 2025, we had a working capital deficit of $5.45 million. However, the Company has successfully obtained substantial capital funding, which provides the necessary liquidity to support its ongoing operations and allows it to continue as a going concern.

With this funding, we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial performance. While additional funding may be required in the future to support expansion, we are confident in our ability to secure capital on acceptable terms as needed.

The amount and timing of our future funding requirements will depend on various factors, including:

● The timing and cost of potential future acquisitions;

● Integration of businesses we have acquired or may acquire in the future;

● Hiring additional management and personnel to support our growth; and

● Costs associated with the build-out and opening of showrooms for certain brands, as needed.

While we continue to monitor our financial position and capital needs, our recent funding strengthens our ability to operate effectively, respond to competitive pressures, and achieve long-term profitability. Additionally, we remain mindful of any debt financing covenants that may restrict our ability to incur additional debt, pay dividends, or engage in certain transactions.

***If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business and our revenues and operating results will be adversely affected.***

One of our principal growth strategies has been and continues to be is to grow our business and increase our revenue through the acquisition of additional businesses within our industry. It may be difficult for us to identify desirable companies to acquire. We may face competition in our pursuit to acquire additional businesses, which could limit the number of available companies for sale and may lead to higher acquisition prices. When we identify desirable companies, their owners may not be willing to sell their companies at all or on terms that we have determined to be commercially reasonable. If our efforts to locate and acquire desirable companies on terms that are acceptable to us are not successful, our revenues and operating results may be adversely affected.

***We may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer.***

A significant part of our grown strategy is acquiring additional businesses. If we buy a company or a division of a company in the future, there can be no assurance that we will be able to profitably manage such business or successfully integrate such business without substantial costs, delays or other operational or financial problems. Acquisitions also may require us to spend a substantial portion of our available cash, incur debt or other liabilities, amortize expenses related to intangible assets, incur write-offs of goodwill or other assets or obligate us to issue a substantial number of shares of our capital stock, which would result in dilution for our existing stockholders. There can be no assurance that the businesses we acquire in the future will achieve anticipated revenues or earnings. Additionally:

● the key personnel of the acquired business may decide not to work for us;

● changes in management at an acquired business may impair its relationships with employees and customers;

● we may be unable to maintain uniform standards, controls, procedures and policies among acquired businesses;

● we may be unable to successfully implement infrastructure, logistics and systems integration;

● we may be held liable for legal claims (including environmental claims) arising out of activities of the acquired businesses prior to our acquisitions, some of which we may not have discovered during our due diligence, and we may not have indemnification claims available to us or we may not be able to realize on any indemnification claims with respect to those legal claims;

● we will assume risks associated with deficiencies in the internal controls of acquired businesses;

● we may not be able to realize the cost savings or other financial benefits we anticipated;

● we may be unable to successfully scale an acquired business; and

● our ongoing business may be disrupted or receive insufficient management attention.

Some or all of these factors could have a material adverse effect on our business, financial condition and results of operations. Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect. In the apparel industry, differing brands are used to reach different market segments and capture new market share. However, not every brand deployment is successful. In addition, integrating an acquired business or technology is risky. We may incur significant costs acquiring, developing, and promoting new brands only to have limited market acceptance and limited resulting sales. If this occurs, our financial results may be negatively impacted and we may determine it is in the best interest of the company to no longer support that brand. If a new brand does not generate sufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected. Finally, acquisitions could be viewed negatively by analysts, investors or our customers.

In addition, we may not be successful in acquiring businesses and may expend time and expenses in connection with failed acquisitions. In addition to such time and expenses, public announcement of a failed acquisition could also negatively impact the trading price of our common stock.

***We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.***

We may be subject to claims or liabilities arising from the ownership or operation of acquired businesses for the periods prior to our acquisition of them, including environmental, warranty, workers' compensation and other employee-related and other liabilities and claims not covered by insurance. These claims or liabilities could be significant. Our ability to seek indemnification from the former owners of our acquired businesses for these claims or liabilities may be limited by various factors, including the specific time, monetary or other limitations contained in the respective acquisition agreements and the financial ability of the former owners to satisfy our indemnification claims. In addition, insurance companies may be unwilling to cover claims that have arisen from acquired businesses or locations, or claims may exceed the coverage limits that our acquired businesses had in effect prior to the date of acquisition. If we are unable to successfully obtain insurance coverage of third-party claims or enforce our indemnification rights against the former owners, or if the former owners are unable to satisfy their obligations for any reason, including because of their current financial position, we could be held liable for the costs or obligations associated with such claims or liabilities, which could adversely affect our financial condition and results of operations.

***Our ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we may be unable to obtain on acceptable terms.***

The timing, size and success of our acquisition efforts and the associated capital commitments cannot be readily predicted. We intend to use our common stock, cash, debt and borrowings under our credit facility, if necessary, as consideration for future acquisitions of companies. The issuance of additional common stock in connection with future acquisitions may be dilutive to holders of shares of common stock. In addition, if our common stock does not maintain a sufficient market value or potential acquisition candidates are unwilling to accept common stock as part of the consideration for the sale of their businesses, we may be required to use more of our cash resources, including obtaining additional capital through debt financing. However, there can be no assurance that we will be able to obtain financing if and when it is needed or that it will be available on terms that we deem acceptable. As a result, we may be unable to pursue our acquisition strategy successfully, which may prevent us from achieving our growth objectives.

***We have an amount of debt which may be considered significant for a company of our size, which could adversely affect our financial condition and our ability to react to changes in our business.***

As of December 31, 2025, we had an aggregate principal amount of debt outstanding of approximately $6.5 million. We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base.

Our substantial debt could have important consequences to us. For example, it could:

● make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness;

● require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes;

● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations;

● place us at a competitive disadvantage to our competitors with proportionately less debt for their size;

● limit our ability to refinance our existing indebtedness or borrow additional funds in the future;

● limit our flexibility in planning for, or reacting to, changing conditions in our business; and

● limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.

Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations.

***We may not be able to generate sufficient cash to service all of our debt or refinance our obligations and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.***

We currently have $3.5 million in notes outstanding pursuant to our Bailey acquisition. We are currently unable to repay or refinance borrowings so any such action by these lenders could force us into bankruptcy or liquidation.

In addition, our ability to make scheduled payments on our indebtedness or to refinance our obligations under our debt agreements, will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business risk factors we face as described in this section, many of which may be beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures or planned growth objectives, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flows and capital resources may not be sufficient for payments of interest on and principal of our debt, and such alternative measures may not be successful and may not permit us to meet scheduled debt service obligations. In addition, the recent worldwide credit crisis could make it more difficult for us to refinance our indebtedness on favorable terms, or at all.

In the absence of such operating results and resources, we may be required to dispose of material assets to meet our debt service obligations. We may not be able to consummate those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that we realize will be adequate to meet debt service obligations when due.

***Our results of operations have been and could be in the future adversely affected as a result of asset impairments.***

Our results of operations and financial condition have been and could be in the future adversely affected by impairments to goodwill, other intangible assets, receivables, long-lived assets or investments. For example, when we acquire a business, we record goodwill in an amount equal to the amount we paid for the business minus the fair value of the net tangible assets and other identifiable intangible assets of the acquired business. Goodwill and other intangible assets that have indefinite useful lives cannot be amortized, but instead must be tested at least annually for impairment. As a result of our acquisitions of Sundry, Stateside and Bailey, our goodwill and intangible assets as of December 31, 2025 were $5.8 and $6.1 million, respectively. During the years ended December 31, 2025, we recorded impairment expense of $4.4 million and $1.4 million pertaining to the goodwill and intangible assets. Any future impairments, including impairments of goodwill, intangible assets, long-lived assets or investments, could have a material adverse effect on our financial condition and results of operations for the period in which the impairment is recognized.

***If we fail to effectively manage our growth, our business, financial condition and operating results could be harmed.***

We have grown and expect to continue to grow rapidly. To effectively manage our growth, we must continue to implement our operational plans and strategies, improve our business processes, improve and expand our infrastructure of people and information systems, and expand, train and manage our employee base. Since our inception and as a result of our acquisitions, we have rapidly increased our employee headcount across our organization to support the growth of our business. To support continued growth, we must effectively integrate, develop and motivate a large number of new employees while maintaining our corporate culture. We face significant competition for personnel. To attract top talent, we have had to offer, and expect to continue to offer, competitive compensation and benefits packages before we can validate the productivity of new employees. We may also need to increase our employee compensation levels to remain competitive in attracting and retaining talented employees. The risks associated with a rapidly growing workforce will be particularly acute as we choose to expand into new merchandise categories and internationally. Additionally, we may not be able to hire new employees quickly enough to meet our needs. If we fail to effectively manage our hiring needs or successfully integrate new hires, our efficiency, our ability to meet forecasts and our employee morale, productivity and retention could suffer, which may have an adverse effect on our business, financial condition and operating results.

We are also required to manage numerous relationships with various vendors and other third parties.

Further growth of our operations, vendor base, fulfillment center, information technology systems or internal controls and procedures may not be adequate to support our operations. If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be adversely affected.

***If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner, our business, financial condition and operating results could be harmed.***

Our success largely depends on our ability to consistently gauge tastes and trends and provide a diverse and balanced assortment of merchandise that satisfies customer demands in a timely manner. Our ability to accurately forecast demand for our products could be affected by many factors, including an increase or decrease in demand for our products or for products of our competitors, our failure to accurately forecast acceptance of new products, product introductions by competitors, unanticipated changes in general market conditions, and weakening of economic conditions or consumer confidence in future economic conditions. We typically enter into agreements to manufacture and purchase our merchandise in advance of the applicable selling season and our failure to anticipate, identify or react appropriately, or in a timely manner to changes in customer preferences, tastes and trends or economic conditions could lead to, among other things, missed opportunities, excess inventory or inventory shortages, markdowns and write-offs, all of which could negatively impact our profitability and have a material adverse effect on our business, financial condition and operating results. Failure to respond to changing customer preferences and fashion trends could also negatively impact the image of our brands with our customers and result in diminished brand loyalty.

***Our business depends on our ability to maintain a strong portfolio of brands and engaged customers. We may not be able to maintain and enhance our existing brand portfolio if we receive customer complaints, negative publicity or otherwise fail to live up to consumers' expectations, which could materially adversely affect our business, operating results and growth prospects.***

Our ability to acquire or offer new brands and maintain and enhance the appeal of our existing brands is critical to expanding our base of customers. A significant portion of our customers' experience depends on third parties outside of our control, including vendors, suppliers and logistics providers such as FedEx, UPS and the U.S. Postal Service. If these third parties do not meet our or our customers' expectations, including timely delivery of our products, or if they increase their rates, our business may suffer irreparable damage or our costs may increase. Also, if we fail to promote and maintain our brands, or if we incur excessive expenses in this effort, our business, operating results and financial condition may be materially adversely affected. We anticipate that as our market becomes increasingly competitive, our ability to acquire or offer new brands and to maintain and enhance our existing brands may become increasingly difficult and expensive and will depend largely on our ability to provide high quality products to our customers and a reliable, trustworthy and profitable sales channel to our vendors, which we may not do successfully.

Customer complaints or negative publicity about our sites, products, product delivery times, customer data handling and security practices or customer support, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and result in harm to our brands.

***An economic downturn or economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for our products.***

Our operating results are affected by the relative condition of the United States economy, as many of our products may be considered discretionary items for consumers. Our customers may reduce their spending and purchases due to job loss or fear of job loss, foreclosures, bankruptcies, higher consumer debt and interest rates, reduced access to credit, falling home prices, increased taxes, and/or lower consumer confidence. Consumer demand for our products may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty. Current, recent past, and future conditions may also adversely affect our pricing and liquidation strategy; promotional activities, product liquidation, and decreased demand for consumer products could affect profitability and margins. Any of the foregoing factors could have a material adverse effect on our business, results of operations, and financial condition.

Additionally, many of the effects and consequences of U.S. and global financial and economic conditions could potentially have a material adverse effect on our liquidity and capital resources, including the ability to raise additional capital, if needed, or could otherwise negatively affect our business and financial results. For example, global economic conditions may also adversely affect our suppliers' access to capital and liquidity with which to maintain their inventory, production levels, and product quality and to operate their businesses, all of which could adversely affect our supply chain. Market instability could make it more difficult for us and our suppliers to accurately forecast future product demand trends, which could cause us to carry too much or too little merchandise in various product categories.

***We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue.***

The markets in which we compete are highly competitive. Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market share, any of which could substantially harm our business and results of operations. We compete directly against wholesalers and direct retailers of apparel, including large, diversified apparel companies with substantial market share and strong worldwide brand recognition. Many of our competitors, including Vince, James Perse, Rag & Bone, Madewell, AG, FRAME, All Saints, Zegna and Ralph Lauren, have significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution, and other resources than we do.

As a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share by:

● quickly adapting to changes in customer requirements or consumer preferences;

● discounting excess inventory that has been written down or written off;

● devoting resources to the marketing and sale of their products, including significant advertising campaigns, media placement, partnerships and product endorsement; and

● engaging in lengthy and costly intellectual property and other disputes.

Our inability to compete successfully against our competitors and maintain our gross margin could have a material adverse effect on our business, financial condition and results of operations.

***Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.***

We use third-party social media platforms as, among other things, marketing tools. We also maintain relationships with many social media influencers and engage in sponsorship initiatives. As existing e-commerce and social media platforms continue to rapidly evolve and new platforms develop, we must continue to maintain a presence on these platforms and establish presences on new or emerging popular social media platforms. If we are unable to cost-effectively use social media platforms as marketing tools or if the social media platforms we use change their policies or algorithms, we may not be able to fully optimize such platforms, and our ability to maintain and acquire customers and our financial condition may suffer.

Furthermore, as laws and regulations and public opinion rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, our network of social media influencers, our sponsors or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices or otherwise could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and operating results.

In addition, an increase in the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations. For example, in some cases, the FTC has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser.

We do not prescribe what our influencers post, and if we were held responsible for the content of their posts or their actions, we could be fined or forced to alter our practices, which could have an adverse impact on our business.

Negative commentary regarding us, our products or influencers and other third parties who are affiliated with us may also be posted on social media platforms and may be adverse to our reputation or business. Influencers with whom we maintain relationships could engage in behavior or use their platforms to communicate directly with our customers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us. It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases. Our target consumers often value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate, without affording us an opportunity for redress or correction.

***If we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would have a material adverse effect on our business and operating results.***

A significant portion of our net sales are generated from sales to existing customers. If existing customers no longer find our offerings appealing, or if we are unable to timely update our offerings to meet current trends and customer demands, our existing customers may make fewer or smaller purchases in the future. A decrease in the number of our customers who make repeat purchases or a decrease in their spending on the merchandise we offer could negatively impact our operating results. Further, we believe that our future success will depend in part on our ability to increase sales to our existing customers over time, and if we are unable to do so, our business may suffer. If we fail to generate repeat purchases or maintain high levels of customer engagement and average order value, our growth prospects, operating results and financial condition could be materially adversely affected.

***We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected.***

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Our business requires us to manage a large volume of inventory effectively. We regularly add new apparel, accessories and beauty styles to our sites, and we depend on our forecasts of demand for and popularity of various products to make purchase decisions and to manage our inventory of stock- keeping units, or SKUs. Demand for products, however, can change significantly between the time inventory is ordered and the date of sale. Demand may be affected by seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors, and our consumers may not purchase products in the quantities that we expect.

It may be difficult to accurately forecast demand and determine appropriate levels of product. We generally do not have the right to return unsold products to our suppliers. If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs. In addition, if we are required to lower sale prices in order to reduce inventory level or to pay higher prices to our suppliers, our profit margins might be negatively affected. Any failure to manage owned brand expansion or accurately forecast demand for owned brands could adversely affect growth, margins and inventory levels. In addition, our ability to meet customer demand has been and may be in the future negatively impacted by disruptions in the supply chain from a number of factors, including, for example, the COVID-19 coronavirus outbreak in China. The COVID-19 coronavirus has impacted our supply chain and may delay or prevent the manufacturing or transport of product. Any of the above may materially and adversely affect our business, financial condition and operating results.

***Merchandise returns could harm our business.***

We allow our customers to return products, subject to our return policy. If the rate of merchandise returns increases significantly or if merchandise return economics become less efficient, our business, financial condition and operating results could be harmed. Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of product returns. From time to time our products are damaged in transit, which can increase return rates and harm our brands.

***We rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.***

We rely on third-party suppliers primarily located outside of the United States to provide raw materials for our products. In addition, we do not own or operate any manufacturing facilities and rely solely on unaffiliated manufacturers primarily located outside the United States to manufacture our products. Increases in the costs of labor and other costs of doing business in these countries could significantly increase our costs to produce our products and could have a negative impact on our operations, net revenue, and earnings. In addition, certain of our manufacturers are subject to government regulations related to wage rates, and therefore the labor costs to produce our products may fluctuate. Factors that could negatively affect our business include a potential significant revaluation of the currencies used in these countries, which may result in an increase in the cost of producing products, labor shortages and stoppages and increases in labor costs, and difficulties in moving products manufactured out of the countries in which they are manufactured and through the ports in North America, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, and natural disasters or health pandemics. A labor strike or other transportation disruption affecting these ports could significantly disrupt our business. In addition, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of "normal trade relations" status with any country in which our products are manufactured, could significantly increase our cost of products and harm our business. We may also experience increased costs in raw goods, transportation and labor. Additionally, we are also subject to global supply chain disruptions, which may include longer lead times for raw fabrics, inbound shipping and longer production times.

Supply chain issues have specifically impacted the following for our brands:

● Increased costs in raw materials from fabric prices, which have increased 10% to 100% depending on the fabric, the time of year, and the origin of the fabric, as well as where the fabric is being shipped;

● Increased cost per kilo to ship via sea or air, which has increased from 25% to 300% depending on the time of year and from the country we are shipping from;

● Increased transit time via sea or air, which have increased by two weeks to two months; and

● Increased labor costs for producing the finished goods, which have increased 5% to 25% depending on the country and the labor skill required to produce the goods.

The operations of our suppliers can be subject to additional risks beyond our control, including shipping delays, labor disputes, trade restrictions, tariffs and embargos, or any other change in local conditions. We may experience a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, we may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all. We do not have any long-term supply contracts in place with any of our suppliers and we compete with other companies, including many of our competitors, for fabrics, raw materials, production and import quota capacity. We have occasionally received, and may in the future receive, shipments of products that fail to comply with our specifications or that fail to conform to our quality control standards. We have also received, and may in the future receive, products that are otherwise unacceptable to us or our customers. Under these circumstances, we may incur substantial expense to remedy the problems and may be required to obtain replacement products. If we fail to remedy any such problem in a timely manner, we risk the loss of net revenue resulting from the inability to sell those products and related increased administrative and shipping costs. Additionally, if the unacceptability of our products is not discovered until after such products are purchased by our customers, our customers could lose confidence in our products or we could face a product recall. In such an event our brand reputation may be negatively impacted which could negatively impact our results of operations.

These and other factors beyond our control could result in our third-party suppliers and manufacturers being unable to fill our orders in a timely manner. If we experience significant increased demand, or we lose or need to replace an existing third- party supplier and manufacturer as a result of adverse economic conditions or other reasons, we may not be able to secure additional manufacturing capacity when required or on terms that are acceptable to us, or at all, or manufacturers may not be able to allocate sufficient capacity to us in order to meet our requirements.

In addition, even if we are able to find new third-party suppliers or manufacturers, we may encounter delays in production and added costs as a result of the time it takes to train our manufacturers on our methods, products and quality control standards. Moreover, it is possible that we will experience defects, errors, or other problems with their work that will materially affect our operations and we may have little or no recourse to recover damages for these losses. Any delays, interruption or increased costs in the supply of fabric or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower net revenues and net income both in the short and long term.

In addition to the foregoing, one of our subsidiary's depends on two primary suppliers located in China and Turkey for the substantial portion of raw materials used in its products and the manufacture of these products, which makes it vulnerable to a disruption in the supply of its products. As a result, termination of these supply arrangements, an adverse change in the financial condition of these suppliers or an adverse change in their ability to manufacture and/or deliver desired products on a timely basis each could have a material adverse effect on our business, financial condition and results of operations.

***Our sales and gross margins may decline as a result of increasing product costs and decreasing selling prices.***

The fabrics used in our products include synthetic fabrics whose raw materials include petroleum-based products, as well as natural fibers such as cotton. Significant price fluctuations or shortages in petroleum or other raw materials can materially adversely affect our cost of net revenues.

In addition, the United States and the countries in which our products are produced or sold internationally have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty or tariff levels. Countries impose, modify and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition and results of operations.

***Our operations are currently dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse and distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on our business and operations.***

Our warehouse and fulfillment/distribution functions are currently primarily handled from a single facility in Vernon, California. Our current fulfillment/distribution operations are dependent on the continued use of this facility. Any significant interruption in the operation of the warehouse and fulfillment/ distribution center due to COVID-19 restrictions, natural disasters, accidents, system issues or failures, or other unforeseen causes that materially impair our ability to access or use our facility, could delay or impair the ability to distribute merchandise and fulfill online orders, which could cause sales to decline.

We also depend upon third-party carriers for shipment of a significant amount of merchandise directly to our customers. An interruption in service by these third-party carriers for any reason could cause temporary disruptions in business, a loss of sales and profits, and other material adverse effects.

***Our sales and gross margins may decline as a result of increasing freight costs.***

Freight costs are impacted by changes in fuel prices through surcharges, among other factors. Fuel prices and surcharges affect freight costs both on inbound freight from suppliers to the distribution center as well as outbound freight from the distribution center to stores/shops, supplier returns and third-party liquidators, and shipments of product to customers. The cost of transporting our products for distribution and sale is also subject to fluctuation due in large part to the price of oil. Because most of our products are manufactured abroad, our products must be transported by third parties over large geographical distances and an increase in the price of oil can significantly increase costs. Manufacturing delays or unexpected transportation delays can also cause us to rely more heavily on airfreight to achieve timely delivery to our customers, which significantly increases freight costs. Increases in fuel prices, surcharges, and other potential factors may increase freight costs. Any of these fluctuations may increase our cost of products and have an adverse effect on our margins, results of operations and financial condition.

***Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations.***

Labor is a significant portion of our cost structure and is subject to many external factors, including unemployment levels, prevailing wage rates, minimum wage laws, potential collective bargaining arrangements, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation. From time to time, legislative proposals are made to increase the federal minimum wage in the United States, as well as the minimum wage in California and a number of other states and municipalities, and to reform entitlement programs, such as health insurance and paid leave programs. As minimum wage rates increase or related laws and regulations change, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly or salaried employees. Any increase in the cost of our labor could have an adverse effect on our business, financial condition and results of operations or if we fail to pay such higher wages we could suffer increased employee turnover. Increases in labor costs could force us to increase prices, which could adversely impact our sales. If competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could have a material adverse effect on our business, financial condition and results of operations.

***Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.***

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information, and financial and other personally identifiable information of our customers and employees. The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen. Advanced attacks are multi-staged, unfold over time, and utilize a range of attack vectors with military-grade cyber weapons and proven techniques, such as spear phishing and social engineering, leaving organizations and users at high risk of being compromised. The vast majority of data breaches, whether conducted by a cyber attacker from inside or outside of the organization, involve the misappropriation of digital identities and user credentials. These credentials are used to gain legitimate access to sensitive systems and high-value personal and corporate data. Many large, well-known organizations have been subject to cyber-attacks that exploited the identity vector, demonstrating that even organizations with significant resources and security expertise have challenges securing their identities. Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, a disruption of our operations, damage to our reputation, or a loss of confidence in our business, any of which could adversely affect our business, revenues, and competitive position.

***Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.***

Our future success largely depends upon the continued services of our executive officers and management team, especially our Chief Executive Officer and President, Mr. John "Hil" Davis. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain "key person" life insurance on any of our executive officers. Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our stock.

In addition, our continuing ability to attract and retain highly qualified personnel, especially employees with experience in the fashion and fitness industries, will also be critical to our success because we will need to hire and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industries. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. As a result, the value of your investment could be significantly reduced or completely lost.

***If we cannot successfully protect our intellectual property, our business could suffer.***

We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes. We primarily rely on copyright and trade secret laws to protect our proprietary technologies and processes, including the algorithms we use throughout our business. Others may independently develop the same or similar technologies and processes, or may improperly acquire and use information about our technologies and processes, which may allow them to provide a service similar to ours, which could harm our competitive position. Our principal trademark assets include the registered trademarks "DSTLD", "Bailey 44", "AVO", "STATESIDE" and "SUNDRY" and our logos and taglines. Our trademarks are valuable assets that support our brand and consumers' perception of our services and merchandise. We also hold the rights to the "www.digitalbrandsgroup.co", www.dstld.com, "www.bailey44.com" Internet domain name and various related domain names, which are subject to Internet regulatory bodies and trademark and other related laws of each applicable jurisdiction. If we are unable to protect our trademarks or domain names, our brand recognition and reputation would suffer, we would incur significant expense establishing new brands and our operating results would be adversely impacted. Further, to the extent we pursue patent protection for our innovations, patents we may apply for may not issue, and patents that do issue or that we acquire may not provide us with any competitive advantages or may be challenged by third parties. There can be no assurance that any patents we obtain will adequately protect our inventions or survive a legal challenge, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain. We may be required to spend significant resources to monitor and protect our intellectual property rights, and the efforts we take to protect our proprietary rights may not be sufficient.

***If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results could be materially adversely affected.***

A substantial number of our customers currently shop with us through our e-commerce website and mobile application. Increasingly, customers are using tablets and smart phones to shop online with us and with our competitors and to do comparison shopping. Any failure on our part to provide an attractive, effective, reliable, user-friendly e-commerce platform that offers a wide assortment of merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers could place us at a competitive disadvantage, result in the loss of sales, harm our reputation with customers, and could have a material adverse impact on our business and results of operations.

***Organizations face growing regulatory and compliance requirements.***

New and evolving regulations and compliance standards for cyber security, data protection, privacy, and internal IT controls are often created in response to the tide of cyber-attacks and will increasingly impact organizations. Existing regulatory standards require that organizations implement internal controls for user access to applications and data. In addition, data breaches are driving a new wave of regulation with stricter enforcement and higher penalties. Regulatory and policy-driven obligations require expensive and time-consuming compliance measures. The fear of non-compliance failed audits, and material findings has pushed organizations to spend more to ensure they are in compliance, often resulting in costly, one-off implementations to mitigate potential fines or reputational damage. Any substantial costs associated with failing to meet regulatory requirements, combined with the risk of fallout from security breaches, could have a material adverse effect on our business and brand.

***Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity.***

The labeling, distribution, importation, marketing and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the U.S., as well as by various other federal, state, provincial, local and international regulatory authorities in the locations in which our products are distributed or sold. If we fail to comply with those regulations, we could become subject to significant penalties or claims or be required to recall products, which could negatively impact our results of operations and disrupt our ability to conduct our business, as well as damage our brand image with consumers. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant unanticipated compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net revenues.

Any international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-bribery laws applicable to our operations. Although we have policies and procedures to address compliance with the FCPA and similar laws, there can be no assurance that all of our employees, agents and other partners will not take actions in violations of our policies. Any such violation could subject us to sanctions or other penalties that could negatively affect our reputation, business and operating results.

***Our business is affected by seasonality.***

Our business is affected by the general seasonal trends common to the retail apparel industry. This seasonality may adversely affect our business and cause our results of operations to fluctuate, and, as a result, we believe that comparisons of our operating results between different quarters within a single fiscal year are not necessarily meaningful and that results of operations in any period should not be considered indicative of the results to be expected for any future period.

 

*Risks Related to our Common Stock*

***The price of our common stock has in the past and may in the future fluctuate substantially.***

The market price of our common stock has in the past and could in the future be extremely volatile. From May 2021 to December 31, 2025, the high and low prices of our common stock as quoted on the NasdaqCM was $746,250 and $1.12, respectively (as appropriately adjusted for the 1-for-100 , 1-for-25 and 1-for-50 reverse stock splits effectuated by the Company in November 2022, August 2023 December 2024, respectively). The future market price of our common stock may be significantly affected by factors, such as:

● market conditions affecting the apparel industries;

● quarterly variations in our results of operations;

● changes in government regulations;

● the announcement of acquisitions by us or our competitors;

● changes in general economic and political conditions;

● volatility in the financial markets;

● results of our operations and the operations of others in our industry;

● changes in interest rates;

● threatened or actual litigation and government investigations;

● the addition or departure of key personnel;

● actions taken by our stockholders, including the sale or disposition of their shares of our common stock; and

● differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts' recommendations or projections.

These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the public offering price.

Furthermore, in recent years the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of our common stock and materially affect the value of your investment.

In the past, securities class action litigation often has been instituted against companies following periods of volatility in the market price of their securities. This type of litigation, if directed at us, could result in substantial costs and a diversion of management's attention and resources.

***If we are not able to comply with the applicable continued listing requirements or standards of the NasdaqCM, Nasdaq could delist our common stock.***

On January 17, 2023, Digital Brands Group, Inc. (the "Company") was notified by the Nasdaq Hearings Panel (the "Panel") that the Company has evidenced compliance with all applicable requirements for continued listing on The NasdaqCM, including the $2.5 million stockholders' equity requirement set forth in Nasdaq Listing Rule 5550(b). The Company remained subject to a "Panel Monitor," as that term is defined by Nasdaq Listing Rule 5815(d)(4)(A), through January 17, 2024.

There can be no assurance that we will successfully regain our Nasdaq listing. As our Common Stock and warrants are currently traded on the OTC marketplace, and as of the date of filing these financial statements, the company has not yet returned to NasdaqCM, our stockholders may experience reduced liquidity and increased difficulty in obtaining accurate price quotations. Additionally, the ability to issue additional securities for financing or other purposes, or to secure necessary funding in the future, may be materially and adversely affected due to the absence of a national securities exchange listing.

***If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock.***

We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting for that purpose. We have identified material weaknesses in our internal control over financial reporting. These material weaknesses relate to the fact that we do not maintain a comprehensive policies and procedures manual designed to establish internal controls over financial reporting to reduce the risk of publishing materially misstated financial statements, as well as define responsibilities and segregate incompatible duties to reduce the risk of unauthorized transactions.

We are in the process of taking steps intended to remedy these material weaknesses, and we will not be able to fully address these material weaknesses until these steps have been completed. See "*Management's Discussion and Analysis of Financial Condition and Results of Operations — Controls and Procedures*" for information regarding our remediation efforts.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. A material weakness is defined in the standards established by the Public Company Accounting Oversight Board (United States) as a deficiency, or an acquisition of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We intend to begin the process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation, which process is time consuming, costly and complex. If we fail to increase and maintain the number and expertise of our staff for our accounting and finance functions and to improve and maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results accurately and prevent fraud. In addition, we cannot be certain that any such steps we undertake will successfully remediate the material weaknesses or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause our stock price to decline. As a result of such failures, we could also become subject to investigations by Nasdaq, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition and divert financial and management resources. Even if we are able to report our consolidated financial statements accurately and timely, if we do not make all the necessary improvements to address the material weaknesses, continued disclosure of our material weaknesses will be required in future filings with the SEC, which could reduce investor confidence in our reported results and our cause our stock price to decline.

***We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors and may make it more difficult to compare our performance with other public companies.***

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. Those exemptions include, but are not limited to, a requirement to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements in our periodic reports and proxy statements, and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements. We have elected to adopt these reduced disclosure requirements. We may take advantage of these provisions until we are no longer an emerging growth company.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior December 31st, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non- emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Additionally, we are a "smaller reporting company" as defined in Rule 10(f)(1) of Regulation S-K. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of that year's second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of that year's second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, reduced disclosure obligations regarding executive compensation. Furthermore, as long as we are neither a "large, accelerated filer" nor an "accelerated filer," as a smaller reporting company, we would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

***Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.***

The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock in the market after this offering. These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

***Provisions in articles of incorporation and bylaws and under Nevada law could discourage a takeover that stockholders may consider favorable.***

Our articles of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable because they, among other things:

● the Nevada Revised Statutes, or NRS, "acquisition of controlling interest" statutes (NRS 78.378 through 78.3793, inclusive) contain provisions governing the acquisition of a controlling interest in certain Nevada corporations, and these "control share" laws provide generally that any person that acquires a "controlling interest" in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights; and

● require the written request of stockholders holding an aggregate of 25% of shares of our common stock in order for stockholders to call a special meeting, which together with the elimination of stockholder action by written consent described above, makes it very difficult for stockholders to take action during the interim periods between annual meetings of stockholders.

As a Nevada corporation, we are also subject to the "acquisition of controlling interest" statutes contained in Sections 78.378 through 78.3793 of the NRS. Under Nevada law, an acquiring person who acquires a controlling interest in an "issuing corporation" may not exercise voting rights on any control shares unless such voting rights are conferred by a majority vote of the disinterested stockholders at a special or annual meeting. Additionally, Nevada's business combination statutes prohibit an "interested stockholder" from entering into a "combination" with a Nevada corporation for three years after becoming an interested stockholder unless certain conditions are met, including board approval of the transaction. Our board of directors and disinterested stockholders could rely on these provisions to prevent or delay an acquisition of us.

 ****

***We do not expect to pay any dividends in the foreseeable future.***

We intend to retain our future earnings, if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, the limits imposed by the terms of our credit facility and such other factors as our board of directors deems relevant. Accordingly, investors in our common stock may need to sell their shares to realize a return on their investment in our common stock, and investors may not be able to sell their shares at or above the prices paid for them.

***If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline.***

The trading price for our common stock will depend in part on the research and reports about us that are published by analysts in the financial industry. Analysts could issue negative commentary about us or our industry, or they could downgrade our common stock. We may also not receive sufficient research coverage or visibility in the market. Any of these factors could result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of their investment.

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| **ITEM 1B.** | **UNRESOLVED STAFF COMMENTS** |

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None.

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|:---|:---|
| **ITEM 1C.** | **CYBERSECURITY** |

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*Risk Management and Strategy*

Our comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats involves a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization's operations, data, and systems.

Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas. The cybersecurity risk management program includes:

● Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and broader enterprise IT environment;

● A team principally responsible for managing (i) cybersecurity risk assessment processes, (ii) security controls, and (iii) response to cybersecurity incidents;

● The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of security controls;

● Cybersecurity awareness training for users and senior management, including through the use of third-party providers for regular mandatory training;

● A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and,

● A risk management process for third-party service providers, suppliers and vendors, including a rigorous vetting process and ongoing monitoring mechanisms designed to ensure compliance with cybersecurity standards.

As of the date of this Annual Report on Form 10-K, the Company is not aware of any cybersecurity incidents that have had a materially adverse effect on our operations, business, results of operations, or financial condition.

*Governance*

Our Board of Directors considers cybersecurity risk as part of its risk oversight function. It has delegated oversight of cybersecurity and other information technology risks to the Audit Committee. The Audit Committee oversees the implementation of the cybersecurity risk management program.

The Audit Committee receives periodic reports from management on potential cybersecurity risks and threats and receives presentations on cybersecurity topics from the Company's Information Systems Manager. The Audit Committee reports to the full Board of Directors regarding its activities, including those related to cybersecurity. The full Board of Directors also receives briefings from management on the cybersecurity risk management program as needed.

Management is responsible for assessing and managing our material risks from cybersecurity threats. Management has primary responsibility for our overall cybersecurity risk management program and supervises both the internal cybersecurity personnel and external cybersecurity consultants. The Company's Information Systems Manager has many years of experience leading cybersecurity oversight and has extensive experience with information technology, including security, auditing, compliance, systems, and programming.

The management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants; and alerts and reports produced by security tools deployed in the IT environment. Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Directors.

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|:---|:---|
| **ITEM 2.** | **PROPERTIES** |

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We currently have month to month rented properties approximately 44,206 square feet of office and showroom spaces in California. We believe that our existing facilities will be sufficient for our needs for the foreseeable future.

The following table sets forth information with respect to our facilities:

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|:---|:---|:---|:---|
| | | **Square** | **Square** |
| | | **Footage** | **Footage** |
| <br>**Location** | <br>**Type** | **(approximate)** | **(approximate)** |
| Vernon, California | Corporate Warehouse and Distribution Center |  | 42206 |

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|:---|:---|
| **ITEM 3.** | **LEGAL PROCEEDINGS** |

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We are currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights. These matters also include the following:

● 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.

Depending on the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect our business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, we believe based on our current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, cash flows, or financial condition.

Except as may be set forth above the Company is not a party to any legal proceedings, and the Company is not aware of any claims or actions pending or threatened against us. In the future, the Company might from time to time become involved in litigation relating to claims arising from its ordinary course of business, the resolution of which the Company does not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

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| **ITEM 4.** | **MINE SAFETY DISCLOSURES** |

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Not applicable.

**PART II**

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|:---|:---|
| **ITEM. 5** | **MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES** |

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**Market Information**

Our Common Stock is quoted on The OTC Pink Marketplace under the symbol "DBGI". Prior to December 18, 2024, the Company's common stock was listed on the Nasdaq Capital Market. The OTC Market is a computer network that provides information on current "bids" and "asks," as well as volume information.

For the fiscal years ended December 31, 2024 (through December 17, 2024) and 2023, the following table sets forth the high and low sale prices for our common stock as reported by The Nasdaq Stock Market ("Nasdaq"). Beginning on December 18, 2024, the Company's common stock was quoted on the OTC Pink Marketplace. Accordingly, the table below sets forth the range of high and low closing bid quotations for our common stock as reported by the OTC Markets Group, beginning on December 18, 2024. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

On August 22, 2023, the Company effectuated a 1-for-25 reverse stock split of its outstanding common stock (the "2023 Reverse Stock Split"). On December 12, 2024, the Company effectuated a 1-for-50 reverse stock split of its outstanding common stock (the "2024 Reverse Stock Split," and together with the 2023 Reverse Stock Split, the "Reverse Stock Splits"). Dollar amounts included in the table have been adjusted to reflect the Reverse Stock Splits.

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| | | |
|:---|:---|:---|
|  | Low | High |
| ***Fiscal 2024*** |  |  |
| First Quarter (January 1, 2024 - March 31, 2024) | $115 | $640 |
| Second Quarter (April 1, 2024 - June 30, 2024) | $65.50 | $242.50 |
| Third Quarter (July 1, 2024 - September 30, 2024) | $15 | $105.50 |
| Fourth Quarter (October 1, 2024 - December 31, 2024) | $1.03 | $30.34 |
| <br>***Fiscal 2025*** |  |  |
| First Quarter (February 13, 2025 - March 20, 2025) | $1.06 | $10.19 |
| Second Quarter (May 6, 2025 - May 27, 2025) | $7.12 | $17.13 |
| Third Quarter (September 23, 2025 - August 25, 2025) | $4.245 | $12.75 |
| Fourth Quarter (November 20, 2025 - December 30, 2025) | $6.50 | $13.25 |

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**Holders**

On December 31, 2025, the last reported sale price of our Common Stock was $12.68 per share. There is no established public trading market for the Units, the Warrants or the Pre-Funded Warrants. We do not intend to apply for listing of the Units, the Warrants or the Pre-Funded Warrants on any securities exchange or recognized trading system. As of the date of this financial statement, 14,083,794 shares of common stock were issued and outstanding.

**Dividends**

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our shares of common stock will be your sole source of gain for the foreseeable future.

**Recent Sales of Unregistered Securities**

During the year ended December 31, 2025, the Company issued the following unregistered securities:

On January 21, 2025, the Company issued pre-funded warrants to purchase 2,068,965 shares of common stock to MavDB Consulting LLC in exchange for five-year marketing services. The warrants have an exercise price of $0.01 per share and are exercisable immediately.

On February 18, 2025, pursuant to securities purchase agreements, the Company issued 125,535 shares of common stock and 11,239,805 pre-funded warrants in an S-1 registered offering for aggregate gross proceeds of approximately $7.5 million.

On April 1, 2025, the Company issued 344,827 shares of common stock as consideration for the acquisition of certain technology assets from Open Daily Technologies Inc., representing fair value of approximately $2,948,276.

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 for gross proceeds of approximately $11.2 million to accredited investors.

On September 3, 2025, the Company issued 36,488 shares of common stock to Tradigital Marketing Group, LLC and 11,582 shares to Donohoe Advisory Associates LLC for services and conversion of accounts payable, respectively.

On September 26, 2025, the Company issued 1,875 additional shares of Series D Convertible Preferred Stock to an accredited investor for gross proceeds of $1.5 million pursuant to an amendment to the original Securities Purchase Agreement. On December 12, 2025, the Company issued an aggregate of 1,721,000 shares of common stock to AAA Tuscaloosa, LLC (285,714 shares), Traffic Holdco, LLC (857,143 shares), The Grove Collective, LLC (385,107 shares), and Learfield Communications LLC (193,036 shares) as consideration under the respective collegiate apparel agreements. All of the foregoing issuances were made without registration under the Securities Act of 1933 in reliance on the exemption from registration provided by Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder. Each of the recipients represented that they were accredited investors and acquired the securities for investment purposes only. Securities Authorized for Issuance Under Equity Compensation Plans

We have adopted a 2020 Omnibus Incentive Stock Plan (the "2020 Plan"). An aggregate of 26 shares of our common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan. The 2020 Plan administrator may grant awards to any employee, director, and consultants of the company and its subsidiaries. To date, grants covering 22 shares of common stock (as adjusted for the Reverse Stock Split) have been made under the 2020 Plan and 4 shares remain eligible for issuance under the 2020 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. The Board may at any time amend or terminate the 2020 Plan, provided that no such action may be taken that adversely affects any rights or obligations with respect to any awards previously made under the 2020 Plan without the consent of the recipient. No awards may be made under the 2020 Plan after the tenth anniversary of its effective date.

Awards under the 2020 Plan may include incentive stock options, nonqualified stock options, stock appreciation rights ("SARs"), restricted shares of common stock, restricted stock Units, performance share or Unit awards, other stock-based awards and cash-based incentive awards.

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|:---|:---|
| **ITEM 6.** | **RESERVED** |
| **ITEM 7.** | **MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |

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*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the historical financial statements of the relevant entities and the pro forma financial statements and the notes thereto included elsewhere in this Form 10-K. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."*

*Unless otherwise indicated by the context, references to "DBG" refer to Digital Brands Group, Inc. solely, and references to the "Company," "our," "we," "us" and similar terms refer to Digital Brands Group, Inc., together with its wholly-owned subsidiaries Bailey 44, LLC ("Bailey"), MOSBEST, LLC ("Stateside") and SUNNYSIDE, LLC ("Sundry").*

**Business Overview**

***Our Company***

Digital Brands Group is a curated collection of lifestyle apparel brands, including Bailey 44, DSTLD, Stateside, and Sundry, that offers a variety of apparel products through direct-to-consumer and wholesale distribution channels. In 2025, the Company launched its collegiate name, image and likeness (NIL) apparel program, entering into multi-year agreements with AAA Tuscaloosa (University of Alabama), Traffic Holdco, The Grove Collective (Ole Miss), and Learfield/Buffalo Sports Properties (University at Buffalo). Our complementary brand portfolio provides us with the unique opportunity to cross merchandise our brands. We aim for our customers to wear our brands head to toe and to capture what we call "closet share" by gaining insight into their preferences to create targeted and personalized content specific to their cohort. Operating our brands under one portfolio provides us with the ability to better utilize our technological, human capital and operational capabilities across all brands. As a result, we have been able to realize operational efficiencies and continue to identify additional cost saving opportunities to scale our brands and overall portfolio.

Our portfolio consists of five significant brands that leverage our three channels: our websites, wholesale and license revenue.

● **Bailey 44** combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go. Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway. Bailey 44 is primarily a wholesale brand, which we are transitioning to a digital, direct-to-consumer brand.

● **DSTLD** offers stylish high-quality garments without the luxury retail markup valuing customer experience over labels. DSTLD is primarily a digital direct-to-consumer brand, to which we recently added select wholesale retailers to generate brand awareness.

● **Stateside** is an elevated, America first brand with all knitting, dyeing, cutting and sewing sourced and manufactured locally in Los Angeles. The collection is influenced by the evolution of the classic T-shirt offering a simple yet elegant look. Stateside is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

● **Sundry** offers distinct collections of women's clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessory products. Sundry's products are coastal casual and consist of soft, relaxed and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California. Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

● **Avo –** Avo is a women's essential brand that will offer t-shirts, sweats, dresses, sweaters and athleisure. Avo eliminates the wholesale mark-up, so its products have a sharper price point. Avo also offers larger discounts when the customer bundles multiple products to their cart, which allows Avo to leverage its shipping and fulfillment costs. Avo leverages the Company's current design and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands.

We believe that successful apparel brands sell in all revenue channels. However, each channel offers different margin structures and requires different customer acquisition and retention strategies. We were founded as a digital-first retailer that has strategically expanded into select wholesale and direct retail channels. We strive to strategically create omnichannel strategies for each of our brands that blend physical and online channels to engage consumers in the channel of their choosing. Our products are sold direct-to- consumers principally through our websites and our own showrooms, but also through our wholesale channel, primarily in specialty stores and select department stores. With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens our ability to efficiently acquire and retain customers while also driving high customer lifetime value.

We believe that by leveraging a physical footprint to acquire customers and increase brand awareness, we can use digital marketing to focus on retention and a very tight, disciplined high value new customer acquisition strategy, especially targeting potential customers lower in the sales funnel. Building a direct relationship with the customer as the customer transacts directly with us allows us to better understand our customer's preferences and shopping habits. Our substantial experience as a company originally founded as a digitally native-first retailer gives us the ability to strategically review and analyze the customer's data, including contact information, browsing and shopping cart data, purchase history and style preferences. This in turn has the effect of lowering our inventory risk and cash needs since we can order and replenish product based on the data from our online sales history, replenish specific inventory by size, color and SKU based on real times sales data, and control our mark-down and promotional strategies versus being told what mark downs and promotions we have to offer by the department stores and boutique retailers.

We define "closet share" as the percentage ("share") of a customer's clothing units that ("of closet") she or he owns in her or his closet and the amount of those units that go to the brands that are selling these units. For example, if a customer buys 20 units of clothing a year and the brands that we own represent 10 of those units purchased, then our closet share is 50% of that customer's closet, or 10 of our branded units divided by 20 units they purchased in entirety. Closet share is a similar concept to the widely used term wallet share, it is just specific to the customer's closet. The higher our closet share, the higher our revenue as higher closet share suggests the customer is purchasing more of our brands than our competitors.

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. We define Lifetime Value or LTV as an estimate of the average revenue that a customer will generate throughout their lifespan as our customer. This value/revenue of a customer helps us determine many economic decisions, such as marketing budgets per marketing channel, retention versus acquisition decisions, unit level economics, profitability and revenue forecasting.

We acquired Bailey in February 2020, Stateside in August 2021 and Sundry in December 2022. We agreed on the consideration that we paid in each acquisition in the course of arm's length negotiations with the holders of the membership interests in each of Bailey, Stateside and Sundry. In determining and negotiating this consideration, we relied on the experience and judgment of our management and our evaluation of the potential synergies that could be achieved in combining the operations of Bailey, Stateside and Sundry. We did not obtain independent valuations, appraisals or fairness opinions to support the consideration that we paid/agreed to pay.

**Avo – Brand Summary**

Avo is a women's essential brand that will offer t-shirts, sweats, dresses, sweaters and athleisure. Avo eliminates the wholesale mark-up, so its products have a sharper price point. Avo also offers larger discounts when the customer bundles multiple products to their cart, which allows Avo to leverage its shipping and fulfillment costs. Avo leverages the Company's current design and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands.

Avo launched in late August 2024 and prices for t-shirts range from $20 to $50 based on the size of the customer's bundle. Other product prices will range from $17.50 for tanks to $198 for sweaters with no retail price above $99 if the customer bundles three units or more. If the customer bundles two units then they receive a 40% discount and if they bundle three units or more the customer receives a 60% discount.

**Material Trends, Events and Uncertainties**

***Supply Chain Disruptions***

We are subject to global supply chain disruptions, which may include longer lead times for raw fabrics, inbound shipping and longer production times. Supply chain issues have specifically impacted the following for our brands:

● Increased costs in raw materials from fabric prices, which have increased 10% to 100% depending on the fabric, the time of year, and the origin of the fabric, as well as where the fabric is being shipped;

● Increased cost per kilo to ship via sea or air, which has increased from 25% to 300% depending on the time of year and from the country we are shipping from;

● Increased transit time via sea or air, which have increased by two weeks to two months; and

● Increased labor costs for producing the finished goods, which have increased 5% to 25% depending on the country and the labor skill required to produce the goods. We have been able to pass along some of these increased costs and also offset some of these increased costs with higher gross margin online revenue.

***Seasonality***

Our quarterly operating results vary due to the seasonality of our individual brands, and are historically stronger in the second half of the calendar year

***Substantial Indebtedness***

As of December 31, 2025, we had an aggregate principal amount of debt outstanding of approximately $6.1 million.

We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base.

Our substantial debt could have important consequences to us. For example, it could:

● make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness;

● require us to dedicate a substantial portion of our cash flows from operations to make payments on our debt, which would reduce the availability of our cash flows from operations to fund working capital, capital expenditures or other general corporate purposes;

● increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations;

● place us at a competitive disadvantage to our competitors with proportionately less debt for their size;

● limit our ability to refinance our existing indebtedness or borrow additional funds in the future;

● limit our flexibility in planning for, or reacting to, changing conditions in our business; and

● limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.

Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations.

We currently have $3.5 million in notes outstanding pursuant to our Bailey acquisition. We are currently unable to repay or refinance borrowings so any such action by these lenders could force us into bankruptcy or liquidation.

In addition, our ability to make scheduled payments on our indebtedness or to refinance our obligations under our debt agreements, will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business risk factors we face as described in this section, many of which may be beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures or planned growth objectives, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flows and capital resources may not be sufficient for payments of interest on and principal of our debt, and such alternative measures may not be successful and may not permit us to meet scheduled debt service obligations. In addition, the recent worldwide credit crisis could make it more difficult for us to refinance our indebtedness on favorable terms, or at all.

In the absence of such operating results and resources, we may be required to dispose of material assets to meet our debt service obligations. We may not be able to consummate those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that we realize will be adequate to meet debt service obligations when due.

***Performance Factors***

We believe that our future performance will depend on many factors, including the following:

*Ability to Increase Our Customer Base in both Online and Traditional Wholesale Distribution Channels*

We are currently growing our customer base through both paid and organic online channels, as well as by expanding our presence in a variety of physical retail distribution channels. Online customer acquisitions typically occur at our direct websites for each brand*.* Our online customer acquisition strategies include paid and unpaid social media, search, display and traditional media. Our products for Bailey, DSTLD and Stateside are also sold through a growing number of physical retail channels, including specialty stores, department stores and online multi-brand platforms.

*Ability to Acquire Customers at a Reasonable Cost*

We believe an ability to consistently acquire customers at a reasonable cost relative to customer retention rates, contribution margins and projected life-time value will be a key factor affecting future performance. To accomplish this goal, we intend to balance advertising spend between online and offline channels, as well as cross marketing and cross merchandising our portfolio brands and their respective products. We believe the ability to cross merchandise products and cross market brands, will decrease our customer acquisition costs while increasing the customer's lifetime value and contribution margin. We will also balance marketing spend with advertising focused on creating emotional brand recognition, which we believe will represent a lower percentage of our spend.

*Ability to Drive Repeat Purchases and Customer Retention*

We accrue substantial economic value and margin expansion from customer cohort retention and repeat purchases of our products on an annual basis. Our revenue growth rate and operating margin expansion will be affected by our customer cohort retention rates and the cohorts annual spend for both existing and newly acquired customers.

*Ability to Expand Our Product Lines*

Our goal is to expand our product lines over time to increase our growth opportunity. Our customer's annual spend and brand relevance will be driven by the cadence and success of new product launches.

*Ability to Expand Gross Margins*

Our overall profitability will be impacted by our ability to expand gross margins through effective sourcing and leveraging buying power of finished goods and shipping costs, as well as pricing power over time.

*Ability to Expand Operating Margins*

Our ability to expand operating margins will be impacted by our ability to leverage (1) fixed general and administrative costs, (2) variable sales and marketing costs, (3) elimination of redundant costs as we acquire and integrate brands, (4) cross marketing and cross merchandising brands in our portfolio, and (4) drive customer retention and customer lifetime value. Our ability to expand operating margins will result from increasing revenue growth above our operating expense growth, as well as increasing gross margins. For example, we anticipate that our operating expenses will increase substantially in the foreseeable future as we undertake the acquisition and integration of different brands, incur expenses associated with maintaining compliance as a public company, and increased marketing and sales efforts to increase our customer base. While we anticipate that the operating expenses in absolute dollars will increase, we do not anticipate that the operating expenses as a percentage of revenue will increase. We anticipate that the operating expenses as a percentage of revenue will decrease as we eliminate duplicative costs across brands including a reduction in similar labor roles, contracts for technologies and operating systems and creating lower costs from higher purchasing power from shipping expenses to purchase orders of products. This reduction of expenses and lower cost per unit due to purchasing power should create meaningful savings in both dollars and as a percentage of revenue.

As an example, we were able to eliminate several million in expenses within six months of acquiring Bailey. Examples of these savings include eliminating several Bailey teams, which our teams took over.

We merged over half of the technology contracts and operating systems contracts from two brands into one brand contract at significant savings. We also eliminated our office space and rent and moved everyone into the Bailey office space. Finally, we eliminated DSTLD's third-party logistics company and started using Bailey's internal logistics. This resulted in an increase in our operating expenses in absolute dollars as there were now two brands versus one brand. However, the operating expenses as a percentage of pre-COVID revenue declined meaningfully and as we increase revenue for each brand, we expect to experience higher margins.

*Ability to Create Free Cash Flow*

Our goal is to achieve near term free cash flow through cash flow positive acquisitions, elimination of redundant expenses in acquired companies, increasing customer annual spend and lowering customer acquisition costs through cross merchandising across our brand portfolio.

*Critical Accounting Policies and Estimates*

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

***Use of Estimates***

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

***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.

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 3 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*.

***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.

***Goodwill Impairment***

We are required to assess our goodwill for impairment at least annually for each reporting unit that carries goodwill. We may elect to first do a qualitative assessment to determine whether it is more likely than not that a reporting unit's fair value is in excess of its carrying value. If the qualitative assessment concludes that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. If the fair value is determined to be less than its carrying value, we record goodwill impairment equal to the amount by which the reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

***Intangible Assets Impairment***

We evaluate the carrying amount of intangible assets and other long-lived assets for impairment whenever indicators of impairment exist. We test these assets for recoverability by comparing the net carrying amount of the asset or asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset or asset group. If the assets are recoverable, an impairment loss does not exist, and no loss is recorded. If the carrying amounts of the assets are not recoverable, an impairment loss is recognized for any deficiency of the asset or asset group's fair value compared to their carrying amount. Although we base cash flow forecasts on assumptions that are consistent with plans and estimates we use to manage our business, there is significant judgment in determining the cash flows attributable to these assets, including markets and market share, sales volumes and mix, and working capital changes.

*Financial Statement Components*

***Bailey***

*Net Revenue*

Bailey sells its products directly to customers. Bailey also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores. In 2024, Bailey also has entered into a license agreement whereby it earns royalty revenues.

*Cost of Net Revenue*

Bailey's cost of net revenue includes the direct cost of purchased and manufactured merchandise; inventory shrinkage; inventory adjustments due to obsolescence including excess and slow-moving inventory and lower of cost and net realizable reserves; duties; and inbound freight. Cost of net revenue also includes direct labor to production activities such as pattern makers, cutters and sewers. Cost of net revenue includes an allocation of overheard costs such as rent, utilities and commercial insurance pertaining to direct inventory activities.

*Operating Expenses*

Bailey's operating expenses include all operating costs not included in cost of net revenues and sales and marketing. These costs consist of general and administrative, fulfillment and shipping expense to the customer.

General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses related to Bailey's operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.

Bailey's fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse.

*Sales & Marketing*

Bailey's sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives.

*Interest Expense*

Bailey's interest expense consists primarily of interest related to its outstanding debt to our senior lender.

***DBG***

*Net Revenue*

We sell our products to our customers directly through our website. In those cases, sales, net represents total sales less returns, promotions and discounts.

*Cost of Net Revenue*

Cost of net revenue include direct cost of purchased merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost and net realizable reserves.

*Operating Expenses*

Our operating expenses include all operating costs not included in cost of net revenues. These costs consist of general and administrative, sales and marketing, and fulfillment and shipping expense to the customer.

General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, and expenses related to our operations at our headquarters, including utilities, depreciation and amortization, and other costs related to the administration of our business.

We expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and higher expenses for insurance, investor relations and professional services. We expect these costs will increase our operating costs.

Fulfillment and shipping expenses include the cost to operate our warehouse — or prior to Bailey 44 acquisition, costs paid to our third-party logistics provider — including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse.

In addition, the amortization of the identifiable intangibles acquired in the acquisitions is included in operating expenses.

*Interest Expense*

Interest expense consists primarily of interest related to our debt outstanding to our senior lender, convertible debt, and other interest bearing liabilities.

***Stateside***

*Net Revenue*

Stateside sells its products directly to customers. Stateside also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores.

*Cost of Net Revenue*

Stateside's cost of net revenue includes the direct cost of purchased and manufactured merchandise; inventory shrinkage; inventory adjustments due to obsolescence including excess and slow-moving inventory and lower of cost and net realizable reserves; duties; and inbound freight. Cost of net revenue also includes direct labor to production activities such as pattern makers, cutters and sewers. Cost of net revenue includes an allocation of overheard costs such as rent, utilities and commercial insurance pertaining to direct inventory activities.

*Operating Expenses*

Stateside's operating expenses include all operating costs not included in cost of net revenues and sales and marketing. These costs consist of general and administrative, fulfillment and shipping expense to the customer.

General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses related to Stateside's stores and to Stateside's operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.

Stateside's fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse.

*Sales & Marketing*

Stateside's sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives.

 ****

***Sundry***

*Net Revenue*

Sundry sells its products directly to customers. Sundry also sells its products indirectly through wholesale channels that include third-party online channels and physical channels such as specialty retailers and department stores.

*Cost of Net Revenue*

Sundry's cost of net revenue includes the direct cost of purchased and manufactured merchandise; inventory shrinkage; inventory adjustments due to obsolescence including excess and slow-moving inventory and lower of cost and net realizable reserves; duties; and inbound freight. Cost of net revenue also includes direct labor to production activities such as pattern makers, cutters and sewers. Cost of net revenue includes an allocation of overheard costs such as rent, utilities and commercial insurance pertaining to direct inventory activities.

*Operating Expenses*

Sundry's operating expenses include all operating costs not included in cost of net revenues and sales and marketing. These costs consist of general and administrative, fulfillment and shipping expense to the customer.

General and administrative expenses consist primarily of all payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses related to Sundry's stores and to Sundry's operations at its headquarters, including utilities, depreciation and amortization, and other costs related to the administration of its business.

Sundry's fulfillment and shipping expenses include the cost to operate its warehouse including occupancy and labor costs to pick and pack customer orders and any return orders; packaging; and shipping costs to the customer from the warehouse and any returns from the customer to the warehouse.

*Sales and Marketing*

Sundry's sales and marketing expense primarily includes digital advertising; photo shoots for wholesale and direct-to-consumer communications, including email, social media and digital advertisements; and commission expenses associated with sales representatives.

**Results of Operations**

***Year ended December 31, 2025 compared to year ended December 31, 2024***

The following table presents our results of operations for the years ended December 31, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Net revenues | $7380921 | $11555656 |
| Cost of net revenues | 6326300 | 7911536 |
| Gross profit | 1054621 | 3644120 |
| General and administrative | 9674699 | 8652361 |
| Sales and marketing | 14596126 | 2896698 |
| Other operating expenses | 6317573 | 2295843 |
| Operating loss | (29533777) | (10200782) |
| Other expenses | 1281219 | (3024851) |
| Loss before provision for income taxes | (28252558) | (13106589) |
| Provision for income taxes |  | 119044 |
| Net loss from continuing operations | (28252558) | (13106589) |
| Net loss | $(28252558) | $(13106589) |

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*Net Revenues*

Net revenues decreased by $4.2 million to $7.4 million for the year ended December 31, 2025, compared to $11.6 million in the corresponding fiscal period in 2024. The decrease was primarily due to a delay in wholesale shipments, and lower ecommerce revenues across each brand due to less digital advertising spend.

*Gross Profit*

Our gross profit decreased by $2.5 million for the year ended December 31, 2025 to $1.1 million from $3.6 million for the corresponding fiscal period in 2024. The decrease in gross margin was primarily attributable to a decrease in sales.

Our gross margin was 14.3% for the year ended December 31, 2025 compared to 31.5% for year ended December 31, 2024. The decrease in gross margin was due to corresponding decrease in the ecommerce revenue and write down of Sundry's inventory.

*General and Administrative Expenses*

General and administrative expenses increased by $1.0 million for the year ended December 31, 2025 to $9.7 million compared to $8.7 million in 2024. The increase was primarily due to accrued legal contingencies, partially offset by a decrease due to lower consulting and professional fees, as well as other cost cutting measures across our Company, as all brands achieved operational synergies in 2025. These synergies included the elimination of its warehouse, office, fulfillment and redundancies in headcount

General and administrative expenses as a percentage of revenue were 131% in 2025 compared to 75% in 2024, reflecting the significant revenue decline relative to the largely fixed cost base.

*Sales and Marketing Expenses*

Sales and marketing expenses increased by $11.7 million for the year ended December 31, 2025 to $14.6 million compared to $2.9 million in 2024. The increase in sales and marketing expenses was primarily driven by the amortization of prepaid marketing assets under multi-year marketing and sponsorship agreements entered into during 2025, including collegiate NIL program agreements with AAA Tuscaloosa, Traffic Holdco, The Grove Collective, and Learfield, as well as cash-based marketing agreements with MavDB Consulting, Velora Marketing, i2i Marketing, and Candlelight Ventures.

Sales and marketing expenses as a percentage of revenue was 198% in 2025 as compared to 25% in 2024.

*Other Operating Expenses (income)*

Other operating expenses included distribution expenses, impairment and change in fair value of contingent consideration. Other operating expenses were $6.3 million in 2025 as compared to expenses of $2.3 million in 2024, an increase in expenses of $4.0 million. In 2025, there was $5.7 million in impairment charges on goodwill and intangible assets, comprising $3.2 million of goodwill impairment (Bailey and Stateside), $1.3 million of Stateside brand name impairment, and $1.2 million of OpenDaily technology asset impairment. In 2024, the Company recorded a $3.2 million increase in the change in fair value of contingent consideration pertaining to the Norwest waiver for Bailey and H&J Settlement.

*Other Income (Expense)*

Other income (expense) was $(1.3) million in the year ended December 31, 2025 as compared to $3.0 million in the year ended December 31, 2024. During the year ended December 31, 2025, the Company recorded a change in the fair value of share based liability of $(1.7) million.

*Net Loss* 

Our net loss increased by $15.2 million to a loss of $28.3 million for the year ended December 31, 2025 compared to a loss of $13.1 million for the corresponding fiscal period in 2024 primarily due to the higher operating expenses and lower gross profit.

**Liquidity and Capital Resources**

Each of DBG, Bailey, Stateside and Sundry has historically satisfied both liquidity needs and funding of operations through borrowings capital raises and internally generated cash flow, Changes in working capital, are driven primarily by levels of business activity. Historically each of DBG, Bailey, Stateside and Sundry has maintained credit line facilities to support such working capital needs and makes repayments on that facility with excess cash flow from operations.

The Company requires significant capital to meet its obligations as they become due. Management believes its existing cash resources and planned operations—including revenues expected from its collegiate apparel program, continued cost reduction measures, and the potential release of $5,744,174 in restricted cash currently held pursuant to the Series D offering—will be sufficient to fund operations for at least twelve months from the date of issuance of these financial statements. The Company may also pursue additional equity or debt financings as needed. There can be no assurance as to the availability or terms upon which such financing might be available. The Bailey sellers' promissory note of $3,500,000 matured on December 8, 2025 and remains in default; management is in active discussions with the lender regarding repayment or extension.

In 2025, the Company completed an offering consisting of several equity offerings generating aggregate net financing proceeds of approximately $23.8 million, including the February 2025 S-1 offering ($6.6 million net), the Series D Convertible Preferred Stock offering ($11.4 million net), and warrant exercises ($6.3 million).

*Cash Flow Activities*

The following table presents selected captions from our condensed statement of cash flows for the years ended December 31, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Net cash provided by operating activities: |  |  |
| Net loss | $(28252558) | $(13106589) |
| Non-cash adjustments | $6587661 | $6621108 |
| Change in operating assets and liabilities | $5787729 | $333144 |
| Net cash used in operating activities | $(15877168) | $(6152338) |
| Net cash provided by (used in) investing activities | $- | $- |
| Net cash provided by financing activities | $23391742 | $6295996 |
| Net change in cash | $7514574 | $143658 |

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*Cash Flows Used In Operating Activities*

For the year ended December 31, 2025, net cash used in operating activities was $15.9 million, compared to $6.2 million for the year ended December 31, 2024. The increase in cash used in operating activities was primarily driven by a higher net loss of $28.3 million in 2025 compared to $13.1 million in 2024, partially offset by non-cash adjustments of $6.6 million and favorable changes in operating assets and liabilities of $5.8 million.

*Cash Flows provided by Investing Activities*

Our cash provided by investing activities was $0 in the year ended December 31, 2025 and December 31, 2024.

 

*Cash Flows Provided by Financing Activities*

Cash provided by financing activities was $23.4 million for the year ended December 31, 2025 compared to $6.3 million for the corresponding fiscal period in 2024. Cash inflows in 2025 included $11.4 million from the issuance of Series D Convertible Preferred Stock, $6.6 million from proceeds for the issuance of pre-funded warrants, $5.8 million from the exercise of warrants, and $0.2 million from the issuance of notes, loans and merchant advances, partially offset by note, loan and notes payable repayments of $0.7 million. Cash inflows in 2024 included $9.4 million in equity proceeds after offering costs including proceeds from the exercise of warrants, $0.8 million from the issuance of notes, loans and merchant advances, partially offset by note, loan and notes payable repayments of $3.9 million.

*Contractual Obligations and Commitments*

As of December 31, 2025, we have $6.1 million in outstanding principal on debt, primarily our promissory notes due to the Bailey44 Sellers, the March 2023 Notes, PPP and merchant advances. Aside from our remaining non-current SBA obligations, all outstanding loans have maturity dates through 2025.

*Off-Balance Sheet Arrangements and Future Commitments*

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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| | |
|:---|:---|
| **ITEM 7A.** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK** |

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Not applicable.

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|:---|:---|
| **ITEM 8.** | **FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA** |

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The information required by this item may be found on pages F-1 through F-30 of this annual report on Form 10-K.

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| | |
|:---|:---|
| **ITEM 9.** | **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE** |

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None.

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| | |
|:---|:---|
| **ITEM 9A.** | **CONTROLS AND PROCEDURES** |

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***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.

● 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.

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| | |
|:---|:---|
| **ITEM 9B.** | **OTHER INFORMATION** |

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None.

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| | |
|:---|:---|
| **ITEM 9C.** | **DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS** |

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Not applicable.

**PART III**

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| | |
|:---|:---|
| **ITEM 10.** | **DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE** |

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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.

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| | | |
|:---|:---|:---|
| **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 |

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***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.

**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;

● 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.

***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.

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|:---|:---|
| **ITEM 11.** | **EXECUTIVE COMPENSATION** |

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**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.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br>**Name and Principal Position** | **Fiscal**<br>**Year** |<br>**Salary** |  |<br>**Bonus** | **Option**<br>**Awards** | **Stock**<br>**Awards** |<br>**Total** |
| John "Hil" Davis | 2025 | $249000 | (1) | $— | $— | $— | $249000 |
| President and Chief Executive Officer | 2024 | $249000 |  | $— | $— | $— | $249000 |
| Reid Yeoman | 2025 | $250000 | (2) | $— | $— | $— | $250000 |
| Chief Financial Officer | 2024 | $250000 | (2) | $— | $— | $— | $250000 |

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(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.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** | **Option Awards** | | **Stock Awards** | **Stock Awards** | **Stock Awards** | **Stock Awards** |
| <br>**Name** |<br><br><br><br><br>**Number of**<br>**Securities**<br>**Underlying**<br>**Unexercised**<br>**Options(#)**<br>**Exercisable** |<br><br><br><br><br>**Number of**<br>**Securities**<br>**Underlying**<br>**Unexercised**<br>**Options(#)**<br>**Unexercisable** |<br><br><br>**Equity**<br>**Incentive**<br>**Plan**<br>**Awards:**<br>**Number of**<br>**Securities**<br>**Underlying**<br>**Unexercised**<br>**Unearned**<br>**Options (#)** |<br><br><br><br><br><br>**Option**<br>**Exercise**<br>**Price**<br>**($)** | <br>**Option**<br>**Expiration**<br>**Date** |<br><br><br><br>**Number of**<br>**Shares or**<br>**Units of**<br>**Stock**<br>**That Have**<br>**Not**<br>**Vested**<br>**(#)** |<br><br><br><br>**Market**<br>**Value of**<br>**Shares**<br>**or**<br>**Units of**<br>**Stock That**<br>**Have**<br>**Not**<br>**Vested** |<br>**Equity**<br>**Incentive**<br>**Plan**<br>**Awards:**<br>**Number**<br>**of**<br>**Unearned**<br>**Shares,**<br>**Units or**<br>**Other**<br>**Rights**<br>**That**<br>**Have**<br>**Not**<br>**Vested** | **Equity**<br>**Incentive**<br>**Plan**<br>**Awards:**<br>**Market or**<br>**Payout**<br>**Value**<br>**of**<br>**Unearned**<br>**Shares,**<br>**Units or**<br>**Other**<br>**Rights That**<br>**Have**<br>**Not**<br>**Vested** |
| John "Hil" Davis | 17 | 15 | 2 | $518750 | May-31 |  |  |  |  |
| Reid Yeoman | 1 | 1 | 1 | $518750 | May-31 |  |  |  |  |

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***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.

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.

 ****

***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.

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| | |
|:---|:---|
| **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.

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.

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| | | |
|:---|:---|:---|
| <br>**Name of Beneficial Owner** | **Number of**<br>**Shares**<br>**Beneficially**<br>**Owned** |<br>**Percentage of**<br>**Shares**<br>**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.

&nbsp;&nbsp;&nbsp;&nbsp;(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.

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| | |
|:---|:---|
| **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.

**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.

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| | |
|:---|:---|
| **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:

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| | | |
|:---|:---|:---|
|  | **For the Fiscal Years Ended** | **For the Fiscal Years Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Audit fees (1) | $351220 | $519995 |
| Audit related fees |  |  |
| Tax fees |  |  |
| All other fees (2) |  |  |
| Total fees | $351220 | $519995 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(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.

**PART IV**

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| | |
|:---|:---|
| **ITEM 15.** | **EXHIBITS, FINANCIAL STATEMENT SCHEDULES** |

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**(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

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| | |
|:---|:---|
| **Exhibit**<br> **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).](https://www.sec.gov/Archives/edgar/data/1668010/000149315226000420/ex2-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex2d1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex2d2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex2d3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex2d4.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex2d5.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922005851/tm222717d5_ex1-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922073646/tm2219174d1_ex2-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922109704/tm2228251d1_ex2-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000149315226000420/ex3-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000149315226007183/ex3-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex3d3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922096552/tm2224712d1_ex3-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922106347/tm2227329d1_ex3-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922106347/tm2227329d1_ex3-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922109704/tm2228251d1_ex3-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922111496/0001104659-22-111496-index.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000149315226000420/ex3-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921150464/tm2130840d8_ex3-5.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922089970/tm2223191d1_ex3-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922096552/tm2224712d1_ex3-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921150464/tm2130840d8_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921068873/tm2038877d25_ex10-1.htm) |

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| | |
|:---|:---|
| **Exhibit**<br> **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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921068873/tm2038877d25_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921055661/tm2038877d11_ex4-4.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922083194/tm2221904d1_ex10-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922083194/tm2221904d1_ex10-3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922085298/tm2222209d2_ex10-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922085298/tm2222209d2_ex10-3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922109704/tm2228251d1_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921111686/tm2126684d1_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921111686/tm2126684d1_ex4-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921111686/tm2126684d1_ex4-3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921123704/tm2129419d1_ex4-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921141930/tm2133487d1_ex4-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922044852/tm2211776d1_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922083194/tm2221904d1_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922106347/tm2227329d1_ex4-1.htm) |
| 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)](https://www.sec.gov/Archives/edgar/data/1668010/000110465922058349/tm2215033d1_ex4-1.htm) |
| 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)](https://www.sec.gov/Archives/edgar/data/1668010/000110465922058349/tm2215033d1_ex4-2.htm) |
| 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)).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922122558/tm2229029d7_ex4-27.htm) |
| 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)).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922122558/tm2229029d7_ex4-28.htm) |
| 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)).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922122558/tm2229029d7_ex4-29.htm) |
| 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)).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922122558/tm2229029d7_ex4-30.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923000843/tm2233765d1_ex4-1.htm) |

---

---

| | |
|:---|:---|
| **Exhibit**<br> **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).](http://www.sec.gov/Archives/edgar/data/1668010/000110465923000862/tm2233765d2_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923003872/tm233245d2_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923003872/tm233245d2_ex4-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923003872/tm233245d2_ex4-3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921049405/tm2038877d2_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d4.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d6.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d7.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d16.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d17.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d18.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d23.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d24.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d25.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d26.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d28.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d31.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d32.htm) |

---

---

| | |
|:---|:---|
| **Exhibit**<br> **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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d33.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d34.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d35.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d36.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d37.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d40.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d41.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d42.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465921153057/dbgi-20211223xex10d43.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922044852/tm2211776d1_ex4-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922044852/tm2211776d1_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922044852/tm2211776d1_ex10-3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922046664/dbgi-20220418xex10d45.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922046664/dbgi-20220418xex10d46.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922085298/tm2222209d2_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922106347/tm2227329d1_ex10-1.htm) |
| 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)).](https://www.sec.gov/Archives/edgar/data/1668010/000110465922122558/tm2229029d7_ex10-38.htm) |

---

---

| | |
|:---|:---|
| **Exhibit**<br> **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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923000843/tm2233765d1_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923000843/tm2233765d1_ex10-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923003872/tm233245d2_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923003872/tm233245d2_ex10-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923000843/tm2233765d1_ex10-3.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923045079/tm2312638d1_ex10-1.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923045079/tm2312638d1_ex10-2.htm) |
| 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).](https://www.sec.gov/Archives/edgar/data/1668010/000110465923008035/dbgi-20220930xex21d1.htm) |
| 23.1 | [Consent of Macias Gini & O'Connell LLP](ex23-1.htm) |
| 23.2 | [Consent of dbbmckennon](ex23-2.htm) |
| 31.1\* | [Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)](ex31-1.htm) |
| 31.2\* | [Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)](ex31-2.htm) |
| 32.1\*\* | [Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350](ex32-1.htm) |
| 32.2\*\* | [Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350](ex32-2.htm) |
| 101.INS\* | Inline XBRL Instance |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema |
| 101.CAL\* | Inline XBRL Taxonomy Extension Calculation |
| 101.LAB\* | Inline XBRL Taxonomy Extension Labels |
| 101.PRE\* | Inline XBRL Taxonomy Extension Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |

---

\* Filed herewith.

\*\* Furnished herewith

# Indicates management contract or compensatory plan or arrangement.

---

| | |
|:---|:---|
| **ITEM 16.** | **FORM 10-K SUMMARY** |

---

None.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **DIGITAL BRANDS GROUP, INC.** | **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 |  |  |

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**DIGITAL BRANDS GROUP, INC.**

**FINANCIAL STATEMENTS**

**DECEMBER 31, 2025 AND 2024**

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| | |
|:---|:---|
| [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM](#wg_01) (PCAOB ID: 3501) | F-2 |
| [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM](#apf_001) (PCAOB ID: 324) | F-3 |
| [CONSOLIDATED BALANCE SHEETS](#wg_02) | F-4 |
| [CONSOLIDATED STATEMENTS OF OPERATIONS](#wg_03) | F-5 |
| [CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)](#wg_04) | F-6 |
| [CONSOLIDATED STATEMENTS OF CASH FLOWS](#wg_05) | F-7 |
| [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](#wg_06) | F-8 |

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*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.

*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

**DIGITAL BRANDS GROUP, INC.**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $1934831 | $164431 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 5744174 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | 153983 | 44067 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due from factor, net | 273437 | 390186 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 3136660 | 3823940 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 9372958 | 274643 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 20616043 | 4697267 |
| Property, equipment and software, net | 15736 | 24089 |
| Goodwill | 5788445 | 8973501 |
| Intangible assets, net | 4494871 | 6120039 |
| Deposits | 82331 | 75431 |
| Prepaid marketing expenses | 13491954 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $44489380 | $19890327 |
| **LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $6270892 | $6424661 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other liabilities | 5561491 | 5257102 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties | 370921 | 411921 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible note payable, net |  | 100000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable | 2787506 | 2328078 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loan payable, current | 2624749 | 2798116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock payable | 4951128 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Promissory note payable | 3500000 | 3500000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 26066687 | 20819878 |
| Share based payment liability | 9405699 |  |
| Loans payable |  | 150000 |
| Deferred tax liability | 248990 | 248990 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 35721376 | 21218868 |
| Commitments and contingencies (Note 14) |  |  |
| Stockholders' equity (deficit): |  |  |
| &nbsp;&nbsp;&nbsp;Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares issued and outstanding as of both December 31, 2025 and 2024 |  |  |
| &nbsp;&nbsp;&nbsp;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 |
| &nbsp;&nbsp;&nbsp;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 |
| &nbsp;&nbsp;&nbsp;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 |  |
| &nbsp;&nbsp;&nbsp;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 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 164120717 | 125772412 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (155353596) | (127101038) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity (deficit) | 8768004 | (1328541) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity (deficit) | $44489380 | $19890327 |

---

See the accompanying notes to the consolidated financial statements.

**DIGITAL BRANDS GROUP, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

---

| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Net revenues | $7380921 | $11555656 |
| Cost of net revenues | 6326300 | 7911536 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 1054621 | 3644120 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 9674699 | 8652361 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 14596126 | 2896698 |
| &nbsp;&nbsp;&nbsp;Distribution | 643569 | 907843 |
| &nbsp;&nbsp;&nbsp;Impairment of goodwill and intangible assets | 5674004 | 1388000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 30588398 | 13844902 |
| Loss from operations | (29533777) | (10200782) |
| Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Change in fair value of share based payment liability | 1714790 |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (514584) | (2941171) |
| &nbsp;&nbsp;&nbsp;Other non-operating income (expenses) | 81013 | (83680) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | 1281219 | (3024851) |
| Income tax benefit (provision) | - | 119044 |
| Net loss | $(28252558) | $(13106589) |
| Deemed dividend on modification of Series D preferred stock | (2104688) | - |
| Net loss attributable to common stockholders | $(30357246) | $(13106589) |
| Weighted average common shares outstanding - basic and diluted | 13956769 | 170853 |
| Net loss per common share - basic and diluted | $(2.18) | $(76.71) |

---

See the accompanying notes to the consolidated financial statements.

**DIGITAL BRANDS GROUP, INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)**

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Series A<br> Convertible** | **Series A<br> Convertible** | **Series C<br> Convertible** | **Series C<br> Convertible** | **Series D<br> Convertible** | **Series D<br> Convertible** | | | | | |
|  | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional**<br>**Paid-in**<br>**Capital** |<br>**Accumulated**<br>**Deficit** | **Total<br> Stockholders'** <br>**Equity**<br>**(Deficit)** |
| **Balances at December 31, 2023** | 6300 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1 | 4786 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | 22287 | $2 | 115597037 | (113994449) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1602592 |
| Issuance of common stock pursuant to private placements |  |  |  |  |  |  | 806754 | 81 | 9374360 |  | 9374441 |
| Conversion of debt and interest into common stock |  |  |  |  |  |  | 3120 |  | 318767 |  | 318767 |
| Shares issued for services |  |  |  |  |  |  | 2582 |  | 312634 |  | 312634 |
| Conversion of preferred shares into common stock |  |  | (3442) |  |  |  | 3840 |  |  |  |  |
| Stock-based compensation |  |  |  |  |  |  |  |  | 169614 |  | 169614 |
| Net loss | - | - | - | - | - | - | - | - | - | (13106589) | (13106589) |
| **Balances at December 31, 2024** | 6300 | 1 | 1344 | 1 |  |  | 838583 | 83 | 125772412 | (127101038) | (1328541) |
| Issuance of pre-funded warrants in connection with services contract | **-** | **-** | **-** | **-** |  |  |  |  | 2689656 |  | 2689656 |
| Issuance of common stock and pre-funded warrants pursuant to private placement offering | **-** | **-** | **-** | **-** |  |  | 125535 | 13 | 6642420 |  | 6642433 |
| Exercise of pre-funded warrants in connection with private placement offering | **-** | **-** | **-** | **-** |  |  | 5701820 | 570 | 1192886 |  | 1193456 |
| Issuance of shares pursuant to acquisition of intangibles | **-** | **-** | **-** | **-** |  |  | 344827 | 35 | 2948241 |  | 2948276 |
| Issuance of Series D preferred stock per private placement offering | **-** | **-** | **-** | **-** | 15906 | 2 |  |  | 11386998 |  | 11387000 |
| Conversion of accounts payable in common stock | **-** | **-** | **-** | **-** |  |  | 11582 | 1 | 113850 | **-** | 113851 |
| Shares issued pursuant to service contracts |  |  |  |  |  |  | 1765988 | 177 | 13374254 |  | 13374431 |
| Net loss | **-** | **-** | **-** | **-** | - | - | **-** | **-** | **-** | (28252558) | (28252558) |
| **Balances at December 31, 2025** | 6300 | $1 | 1344 | $1 | 15906 | $2 | 8788335 | $879 | $164120717 | $(155353596) | $8768004 |

---

See the accompanying notes to the consolidated financial statements.

**DIGITAL BRANDS GROUP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| **Cash flows from operating activities:** |  |  |
| Net loss | $(28252558) | $(13106589) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2092849 | 2505598 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of loan discount and fees | 21900 | 2429591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of share based payment liability | (1714790) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill and intangible assets | 5674004 | 1388000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on conversion of accounts payable into common stock | 31471 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares issued for services | 482227 | 312635 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation |  | 169614 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in credit reserve |  | (151611) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares issued for loan interest conversion |  | 4950 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash lease expense |  | 81374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax expense |  | (119044) |
| &nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | (109916) | 30766 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due from factor | 116749 | 99236 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 687280 | 1025660 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 4449087 | 2027 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (71388) | (1114242) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other liabilities | 304389 | 498610 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable | 459428 | 381678 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease liabilities |  | (602500) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties | (41000) | 11909 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits | (6900) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (15877168) | (6152338) |
| **Cash flows from financing activities:** |  |  |
| Issuance of loans and note payable | 240000 | 790977 |
| Repayments of convertible notes and loan payable | (685267) | (3869422) |
| Proceeds of issuance of Series D preferred stock, net of issuance costs | 11387000 |  |
| Proceeds from exercise of warrants | 5807576 |  |
| Proceeds for issuance of pre-funded warrants | 6642433 |  |
| Issuance of common stock for cash | - | 9374441 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 23391742 | 6295996 |
| **Net change in cash, cash equivalents, and restricted cash** | 7514574 | 143658 |
| Cash, cash equivalents, and restricted cash at beginning of year | 164431 | 20773 |
| Cash, cash equivalents, and restricted cash at end of year | $7679005 | $164431 |
| Reconciliation of cash and restricted cash: |  |  |
| &nbsp;&nbsp;&nbsp;Cash at beginning of year | $164431 | $20773 |
| &nbsp;&nbsp;&nbsp;Restricted cash at beginning of year | - | - |
| &nbsp;&nbsp;&nbsp;Cash and restricted cash at beginning of year | $164431 | $20773 |
| &nbsp;&nbsp;&nbsp;Cash at end of year | $1934831 | $164431 |
| &nbsp;&nbsp;&nbsp;Restricted cash at end of year | 5744174 | - |
| &nbsp;&nbsp;&nbsp;Cash and restricted cash at end of year | $7679005 | $164431 |
| **Supplemental disclosure of cash flow information:** |  |  |
| Cash paid for income taxes | $- | $- |
| Cash paid for interest | $47000 | $1838682 |
| **Supplemental disclosure of non-cash investing and financing activities:** |  |  |
| Issuance of pre-funded warrants for prepaid marketing services | $2689656 | $- |
| Shares issued for prepaid marketing services | $13229211 | $- |
| Non-cash purchase of intangible assets | $2948276 | $- |
| Recognition of share-based payment liability | $11120489 | $- |
| Shares issued for services and conversion of accounts payable | $82380 | $313816 |

---

See the accompanying notes to the consolidated financial statements.

**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.

**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.

**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.

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.

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:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Raw materials | $585609 | $665450 |
| Work in process | 999366 | 250820 |
| Finished goods | 1551685 | 2907670 |
| &nbsp;&nbsp;&nbsp;Inventory | $3136660 | $3823940 |

---

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 <br> Technology assets 3 years

Impairment

*Long-Lived Assets*

 

The Company reviews its long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.

*Goodwill*

 

Goodwill and identifiable intangible assets that have indefinite useful lives are not amortized, but instead are tested annually for impairment and upon the occurrence of certain events or substantive changes in circumstances. The annual goodwill impairment test allows for the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting 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.

The following is a summary of goodwill and intangible impairment recorded pertaining to each entity:

---

| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Goodwill: |  |  |
| Bailey | $1081000 | $- |
| Stateside | 2104056 | - |
| Total goodwill impairment | 3185056 |  |
| Intangible assets: |  |  |
| Brand name — Stateside | 1260500 | 254500 |
| OpenDaily intangible assets | 1228448 |  |
| Brand name - Bailey | - | 1133500 |
| Total intangible asset impairment | 2488948 | 1388000 |
| Total impairment charges | $5674004 | $1388000 |

---

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

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.

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.

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:

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| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Series A convertible preferred stock | 542 | 542 |
| Series C convertible preferred stock | 1500 | 1500 |
| Series D convertible preferred stock | 9192054 |  |
| Common stock warrants | 31111481 | 45701 |
| Stock options | 31 | 31 |
| Total potentially dilutive shares | 40305608 | 47774 |

---

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:

Weighted average common shares outstanding 2,275,941 <br> Weighted average pre-funded warrants outstanding   <u>11,680,828</u> <br> Weighted average common shares outstanding — basic   <u>13,956,769</u>

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.

**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.

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:

● 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.

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.

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:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | | **Prepaid Balance as of December 31, 2025** | **Prepaid Balance as of December 31, 2025** | **Prepaid Balance as of December 31, 2025** |
| <br>**Agreement** | **Consideration**<br>**Type** | **Agreement**<br>**Amount** | **Term**<br>**(Years)** | **2025**<br>**Amortization** | **Current** | **Non-Current** | **Total** |
| MavDB (Jan 2025) | PFW\* | $2689656 | 2 | $1269193 | $1344828 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 75635 | $1420463 |
| Traffic Holdco | Shares + MW\*\* | 13023328 | 3 | 1998100 | 4341109 | 6684119 | 11025228 |
| AAA Tuscaloosa | Shares + MW | 4341104 | 3 | 666032 | 1357173 | 2317899 | 3675072 |
| Grove | Shares + MW | 4970835 | 3 | 190662 | 1656945 | 3123228 | 4780173 |
| Learfield | Shares + MW | 2014433 | 3 | 51882 | 671478 | 1291073 | 1962551 |
|  |  | $27039356 |  | $4175869 | $9371533 | $13491954 | $22863487 |

---

\* 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.

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):

---

| | | | |
|:---|:---|:---|:---|
|  | **Fair Value of Equity (Shares & PFW)** | **Share-Based Payment Liability** | **Total** |
| Traffic Holdco | $6788573 | $6234755 | $13023328 |
| AAA Tuscaloosa | 2262855 | 2078249 | 4341104 |
| Grove | 2888303 | 2082532 | 4970835 |
| Learfield | 1289480 | 724953 | 2014433 |
|  | $13229211 | $11120489 | $24349700 |

---

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:

---

| | |
|:---|:---|
| **Year Ended December 31,** | **Amount** |
| 2026 | $9371533 |
| 2027 | 8102340 |
| 2028 | 5389614 |
|  | $22863487 |

---

**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.

Advances are collateralized by a security interest in substantially all of the companies' assets.

Due to/from factor consist of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Outstanding receivables: |  |  |
| &nbsp;&nbsp;&nbsp;Without recourse | $283849 | $460815 |
| &nbsp;&nbsp;&nbsp;With recourse | 13920 | 142914 |
| Matured funds and deposits | 61838 | 61941 |
| Advances | (86170) | (275484) |
| Credits due customers | - | - |
|  | $273437 | $390186 |

---

**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:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **Additions** | **Impairment** | **December 31, 2025** |
| Bailey | $3158123 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $(1081000) | $2077123 |
| Stateside | 2104056 |  | (2104056) |  |
| Sundry | 3711322 | - | - | 3711322 |
|  | $8973501 | $- | $(3185056) | $5788445 |

---

*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:

---

| | | | | |
|:---|:---|:---|:---|:---|
| <br>**December 31, 2025** | **Gross**<br>**Amount** |<br>**Impairment** | **Accumulated**<br>**Amortization** | **Carrying**<br>**Value** |
| **Amortized:** | | | | |
| Customer relationships | $8634560 | $- | $(8634560) | $- |
| Technology asset | 2948275 | (1228448) | (418336) | 1301491 |
|  | $11582835 | $(1228448) | $(9052896) | $1301491 |
| **Indefinite-lived:** |  |  |  |  |
| Brand name | 4453880 | (1260500) | - | 3193380 |
| **Total** | $16036715 | $(2488948) | $(9052896) | $4494871 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| <br>**December 31, 2024** | **Gross**<br>**Amount** |<br>**Impairment** | **Accumulated**<br>**Amortization** | **Carrying**<br>**Value** |
| **Amortized:** | | | | |
| Customer relationships | 10022560 | (1388000) | (6968401) | 1666159 |
|  | $10022560 | $(1388000) | $(6968401) | $1666159 |
| **Indefinite-lived:** |  |  |  |  |
| Brand name | 4453880 | - | - | 4453880 |
| **Total** | $14476440 | $(1388000) | $(6968401) | $6120039 |

---

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.

**NOTE 8: LIABILITIES AND DEBT**

**Accrued Expenses and Other Liabilities**

Accrued expenses and other liabilities is comprised of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Accrued expenses | $591371 | $591371 |
| Payroll related liabilities | 4646647 | 4268880 |
| Sales tax liability | 158571 | 187971 |
| Other liabilities | 164902 | 208880 |
|  | $5561491 | $5257102 |

---

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:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Current: |  |  |
| &nbsp;&nbsp;&nbsp;Merchant cash advances | $1483159 | $1858157 |
| &nbsp;&nbsp;&nbsp;Sunnyside Shopify loan, net of discount | 58296 |  |
| &nbsp;&nbsp;&nbsp;B44 PPP note payable | 933294 | 939959 |
| &nbsp;&nbsp;&nbsp;Convertible note payable, net |  | 100000 |
| &nbsp;&nbsp;&nbsp;Promissory note payable, net | 3500000 | 3500000 |
| &nbsp;&nbsp;&nbsp;Notes payable | 150000 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current debt | 6124749 | 6398116 |
| Non-current: |  |  |
| &nbsp;&nbsp;&nbsp;Notes payable (long-term) | - | 150000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-current debt | - | 150000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total debt | $6124749 | $6548116 |

---

**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.

**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:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Principal | $1483159 | $1858157 |
| Less: unamortized debt discount | - | - |
| Merchant cash advances, net | $1483159 | $1858157 |

---

**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

**<u>At Initial Recognition</u>**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **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 | $6234755 |
| AAA Tuscaloosa (Sep 22) | $7.92 | $10.50 | 1.25 | 182% | 3.53% | $7.27 | 2078249 |
| Grove (Nov 19) | $7.50 | $7.79 | 1.25 | 197% | 3.53% | $5.41 | 2082532 |
| Learfield (Dec 3) | $6.68 | $5.44 | 1.25 | 193% | 3.53% | $3.54 | 724953 |
|  |  |  |  |  |  |  | $11120489 |

---

**<u>At Remeasurement (December 31, 2025)</u>**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **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 | $5390539 |
| AAA Tuscaloosa (Dec 31) | $12.68 | $10.50 | 1.19 | 180% | 3.48% | $5.12 | 1813512 |
| Grove (Dec 31) | $12.68 | $7.79 | 1.14 | 180% | 3.48% | $3.21 | 1635666 |
| Learfield (Dec 31) | $12.68 | $5.44 | 1.25 | 180% | 3.48% | $3.54 | 565982 |
|  |  |  |  |  |  |  | $9405699 |

---

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:

---

| | |
|:---|:---|
|  | **Share-Based Payment**<br>**Liability** |
| Balance, December 31, 2024 | $- |
| Initial recognition - make-whole provisions | 11120489 |
| Change in fair value (gain) | (1714790) |
| Balance, December 31, 2025 | $9405699 |

---

There were no transfers between levels during the year ended December 31, 2025.

**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.

*2024 Common Stock Transactions*

 

*<u>Offerings</u>*

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.

***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.

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:

---

| | |
|:---|:---|
| **<u>Series</u>** | **Liquidation Preference** |
| Series A Convertible Preferred Stock | $6300000 |
| Series C Convertible Preferred Stock | 1344000 |
| Series D Convertible Preferred Stock | 23859375 |
| **Total** | $31503375 |

---

**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:

---

| | | |
|:---|:---|:---|
|  | **Common**<br>**Stock**<br>**Warrants** | **Weighted**<br>**Average**<br>**Exercise Price** |
| Outstanding - December 31, 2024 | 45701 | $580.12 |
| Granted | 36788155 | 0.42 |
| Exercised | (5701820) | 0.20 |
| Forfeited | (20555) | 144.00 |
| Outstanding - December 31, 2025 | 31111481 | $1.13 |
| Exercisable at December 31, 2024 | 45701 | $580.12 |
| Exercisable at December 31, 2025 | 31111481 | $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.

***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.

 

 

· 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:

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** |
| **Current:** |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $- | $- |
| &nbsp;&nbsp;&nbsp;State (California) | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current |  |  |
| **Deferred:** |  |  |
| &nbsp;&nbsp;&nbsp;Federal |  | (119044) |
| &nbsp;&nbsp;&nbsp;State (California) | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred | - | (119044) |
| **Total income tax expense (benefit)** | $**-** | $**(119044)** |

---

**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:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| **Deferred tax assets:** |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $32423194 | $24774064 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total gross deferred tax assets | $32423194 | $24774064 |
| **Deferred tax liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation timing differences | $(1840170) | $(1840170) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | $(1840170) | $(1840170) |
| Less: valuation allowance | $(30832014) | $(23182884) |
| **Net deferred tax asset (liability)** | $(248990) | $(248990) |

---

**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:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2025** | **%** | **2024** | **%** |
| Tax at federal statutory rate (21%) | $(5933037) | 21.0% | $(2777383) | 21.0% |
| Stock-based compensation |  | 0.0% | 47411 | -0.4% |
| Non-deductible items | 734704 | -2.6% | 1449317 | -11.0% |
| Impairment of goodwill and intangibles | 1585998 | -5.6% | 387974 | -2.9% |
| Change in valuation allowance | 3612335 | -12.8% | 773637 | -5.8% |
| Total income tax expense (benefit) | $**-** | 0.0% | $(119044) | 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.

**NOTE 16: SEGMENT REPORTING**

The Company operates as a 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.

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** |
| Revenue | $7380921 | $11555656 |
| **Significant segment expenses:** |  |  |
| &nbsp;&nbsp;&nbsp;Cost of net revenues | 6326300 | 7911536 |
| &nbsp;&nbsp;&nbsp;General and administrative | 9674699 | 8652361 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 14596126 | 2896698 |
| &nbsp;&nbsp;&nbsp;Distribution | 643569 | 907843 |
| &nbsp;&nbsp;&nbsp;Impairment of goodwill and intangible assets | 5674004 | 1388000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total significant segment expenses | 36914698 | 21756438 |
| Other segment items (a) |  |  |
| Other income (expense), net: |  |  |
| &nbsp;&nbsp;&nbsp;Change in fair value of SBP liability | 1714790 |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (514584) | (2941171) |
| &nbsp;&nbsp;&nbsp;Other non-operating income (expenses) | 81013 | (83680) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income (expense), net | 1281219 | (3024851) |
| Income tax benefit (provision) | - | 119044 |
| **Segment net loss (CODM measure)** | $(28252558) | $(13106589) |

---

&nbsp;&nbsp;&nbsp;&nbsp;(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-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.

## Exhibit 23.1

**Exhibit 23.1**

<u>Consent of Independent Registered Public Accounting Firm</u>

Digital Brands Group, Inc.

Austin, Texas

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-256261) and on Form S-3 (Nos. 333-266486 and 333-291361) of Digital Brands Group, Inc. (the "Company") of our report dated April 9, 2025 with respect to the consolidated balance sheet of the Company as of December 31, 2024 and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year then ended, included in this Annual Report on Form 10-K. Our report includes an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern.

---

| |
|:---|
| Macias, Gini and O'Connell LLP |
| Irvine, California |
| April 15, 2026 |

---

## Exhibit 23.2

**Exhibit 23.2**

<u>Consent of Independent Registered Public Accounting Firm</u>

Digital Brands Group, Inc.

Austin, Texas

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-256261) and on Form S-3 (Nos. 333-266486 and 333-291361) of Digital Brands Group, Inc. (the "Company") of our report dated April 15, 2026 with respect to the consolidated balance sheet of the Company as of December 31, 2025 and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended, included in this Annual Report on Form 10-K.

/s/ dbb*mckennon*

San Diego, CA

April 15, 2026

## Exhibit 31.1

**EXHIBIT 31.1**

**Certification of Principal Executive Officer Pursuant to**

**Section 302 of the Sarbanes-Oxley Act of 2002**

I, John Hilburn Davis, certify that:

1. I
 have reviewed this Annual Report on Form 10-K of Digital Brands Group, Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
 this report;

4. The
 registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
 Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
 to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
 within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated
 the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
 the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed
 in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
 or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The
 registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
 reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing
 the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All
 significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any
 fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
 internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: April 15, 2026 | By: | */s/ John Hilburn Davis* |
|  |  | John Hilburn Davis |
|  |  | Chief Executive Officer |
|  |  | (Principal Executive Officer) |

---

## Exhibit 31.2

**EXHIBIT 31.2**

**Certification of Principal Financial Officer Pursuant to**

**Section 302 of the Sarbanes-Oxley Act of 2002**

I, Reid Yeoman, certify that:

1. I
 have reviewed this Annual Report on Form 10-K of Digital Brands Group, Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
 this report;

4. The
 registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
 Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
 to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
 within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated
 the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
 the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed
 in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
 or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The
 registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
 reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing
 the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All
 significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
 and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any
 fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
 internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: April 15, 2026 | By: | */s/ Reid Yeoman* |
|  |  | Reid Yeoman |
|  |  | Chief Financial Officer |
|  |  | (Principal Financial Officer) |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906**

**OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Digital Brands Group, Inc. (the "Company") on Form 10-K, for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John Hilburn Davis, Chief Executive Officer of Digital Brands Group, Inc., certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The
 Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The
 information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
 of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

---

| | | |
|:---|:---|:---|
| Date: April 15, 2026 | By: | */s/ John Hilburn Davis* |
|  |  | John Hilburn Davis |
|  |  | Chief Executive Officer |
|  |  | (Principal Executive Officer) |

---

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906**

**OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Digital Brands Group, Inc. (the "Company") on Form 10-K, for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Reid Yeoman, Chief Financial Officer of Digital Brands Group, Inc., certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies
 with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained
 in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

---

| | | |
|:---|:---|:---|
| Date: April 15, 2026 | By: | */s/ Reid Yeoman* |
|  |  | Reid Yeoman |
|  |  | Chief Financial Officer |
|  |  | (Principal Financial Officer) |

---