Net income loss was only $0.6 million in the fourth quarter, excluding non-cash expenses
AUSTIN, Texas, April 15, 2024 /PRNewswire/ -- Digital Brands Group, Inc. ("DBG") (NASDAQ: DBGI), a curated collection of luxury lifestyle, digital-first brands, today reported financial results for its fourth quarter and fiscal year ended December 31, 2023.
"The fourth quarter was the end of Sundry's bottom, which our first quarter results will reflect. Despite lower revenue contribution from Sundry in the fourth quarter, we almost achieved break even net income due to our cost savings (excluding non-cash expenses). Based on first quarter wholesale shipments and second quarter wholesale bookings, we are excited to see revenue growth meaningfully re-accelerate. This increase in the revenue trend will be coupled with a significantly lower operating expense structure," said Hil Davis, CEO of Digital Brands Group.
"We are excited to announce our first quarter earnings in May, which we believe will show the strength of the business. We will also have preliminary results from our outlet store opening in Allen, TX. Simply put, as we have stated, 2024 is the year we expected to experience the inflection point in our business."
Results for the Fiscal Year
- Net revenues increased 6.8% to $14.9 million compared to $14.0 million a year ago
- This excludes revenue from Harper & Jones as it was spun out in the second quarter
- This represents the lowest point of Sundry's wholesale revenues in the second half of 2023 versus the first and second quarter wholesale bookings for 2024
- Gross margin increased 10.2% to $6.5 million compared to $5.9 million a year ago
- Gross profit margins increased to 43.9% from 42.5% a year ago
- G&A expenses, including non-cash items, decreased 12.7% to $14.3 million compared to $16.4 million a year ago
- G&A expenses, excluding non-cash item expenses, decreased 35.7% to $8.8 million compared to $13.7 million a year ago
- G&A expenses included $5.5M in non-cash expenses associated with D&A and stock option expenses
- Sales & Marketing expenses decreased 18.5% to $4.0 million compared to $5.0 million a year ago
- Sales and marketing expenses ratio was 27.1% compared to 35.4% a year ago
- Net loss per share attributable to common stockholders was $10.2 million, or $20.46 per share, compared to a loss of $38.0 million, or a loss of $1,233.10 per share, a year ago
- Net loss, excluding the non-cash charges and add backs was $8.0 million compared to a loss of $28.8 million a year ago
- Net loss per diluted share, excluding non-cash expenses and add backs, was $18.81 per share compared to $934.38 per share a year ago
Results for the Fourth Quarter
- Net revenues were $2.8 million compared to $3.4 million a year ago
- This includes non-cash contra revenue adjustment of $0.7 million. Excluding these, net revenues would have been $3.5 million
- This also represents one of the lowest points of Sundry's wholesale revenue based on both the first and second quarter wholesale bookings
- Gross profit decreased $0.5 million compared to $0.6 million a year ago
- This includes non-cash expenses of $0.3 million
- Gross profit margins decreased to 18.3% from 19.0% a year ago, which includes the non-cash expenses to net revenues and cost of goods sold. Excluding these charges, gross profit margins would have been 43.5%
- G&A expenses, including non-cash items, decreased 30.6% to $2.2 million compared to $3.2 million a year ago
- Sales & Marketing expenses decreased 13.4% to $0.8 million compared to $1.0 million a year ago
- Net loss per diluted share attributable to common stockholders was $3.7 million, or $8.76 per share, compared to a loss of $15.8 million, or a loss of $511.54 per share, a year ago
- Net loss was $0.6 million, excluding the non-cash charges of $3.1 million, compared to a loss of $19.2 million a year ago
- Net loss per diluted share, excluding non-cash expenses was $1.48 per share compared to $621.22 per share a year ago
Conference Call and Webcast Details Updated
Management will host a conference call on Monday, April 15 at 5:00 p.m. ET to discuss the results. The live conference call can be accessed by dialing 866-605-1828 from the U.S. or internationally. The conference I.D. code is 13746007 or referencing Digital Brands or via the web by using the following link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=jg0EmFTQ.
Forward-looking Statements
Certain statements included in this release are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting DBG and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as "will," "anticipate," "estimate," "expect," "should," and "may" and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding DBG's plans, objectives, projections and expectations relating to DBG's operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. DBG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of DBG to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel and accessories; disruption to DBGs distribution system; the financial strength of DBG's customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; DBG's response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers; manufacturing and product innovation; increasing pressure on margins; DBG's ability to implement its business strategy; DBG's ability to grow its wholesale and direct-to-consumer businesses; retail industry changes and challenges; DBG's and its vendors' ability to maintain the strength and security of information technology systems; the risk that DBG's facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; DBG's ability to properly collect, use, manage and secure consumer and employee data; stability of DBG's manufacturing facilities and foreign suppliers; continued use by DBG's suppliers of ethical business practices; DBG's ability to accurately forecast demand for products; continuity of members of DBG's management; DBG's ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; DBG's ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; adverse or unexpected weather conditions; DBG's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent DBG from fulfilling its financial obligations; and climate change and increased focus on sustainability issues. More information on potential factors that could affect DBG's financial results is included from time to time in DBG's public reports filed with the SEC, including DBG's Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.
|
DIGITAL BRANDS GROUP, INC
|
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$ 2,789,287
|
|
$ 3,375,245
|
|
$ 14,916,422
|
|
$ 13,971,178
|
|
Cost of net revenues
|
|
2,278,110
|
|
2,732,897
|
|
8,372,642
|
|
8,030,908
|
|
|
Gross profit
|
|
511,177
|
|
642,348
|
|
6,543,780
|
|
5,940,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
2,183,799
|
|
3,145,228
|
|
14,299,389
|
|
16,371,536
|
|
Sales and marketing
|
|
847,781
|
|
979,355
|
|
4,035,835
|
|
4,950,635
|
|
Distribution
|
|
251,398
|
|
89,059
|
|
1,002,343
|
|
611,569
|
|
Impairment
|
|
-
|
|
15,539,332
|
|
-
|
|
15,539,332
|
|
Change in fair value of contingent consideration
|
|
-
|
|
(5,854,052)
|
|
(10,698,475)
|
|
564,303
|
|
|
Total operating expenses
|
|
3,282,978
|
|
13,898,922
|
|
8,639,092
|
|
38,037,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(2,771,801)
|
|
(13,256,574)
|
|
(2,095,312)
|
|
(32,097,105)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(609,551)
|
|
(2,963,845)
|
|
(5,517,118)
|
|
(9,014,337)
|
|
Other non-operating income (expenses)
|
|
30,335
|
|
438,395
|
|
(704,166)
|
|
3,068,080
|
|
|
Total other income (expense), net
|
|
(579,216)
|
|
(2,525,450)
|
|
(6,221,284)
|
|
(5,946,257)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
|
(368,034)
|
|
-
|
|
(368,034)
|
|
-
|
|
Net loss from continuing operations
|
|
(3,719,051)
|
|
(15,782,024)
|
|
(8,684,630)
|
|
(38,043,362)
|
|
Income (loss) from discontinued operations, net of tax
|
|
-
|
|
-
|
|
(1,562,503)
|
|
-
|
|
Net loss
|
|
|
|
$ (3,719,051)
|
|
$ (15,782,024)
|
|
$ (10,247,133)
|
|
$ (38,043,362)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding -
|
|
|
|
|
|
|
|
|
|
basic and diluted
|
|
424,402
|
|
30,852
|
|
424,402
|
|
30,852
|
|
Net loss from continuing per common share - basic and diluted
|
$ (8.76)
|
|
$ (511.54)
|
|
$ (20.46)
|
|
$ (1,233.10)
|
|
|
The accompanying notes are an integral part of these financial statements.
|
|
DIGITAL BRANDS GROUP, INC
|
|
STATEMENTS OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net loss
|
|
|
|
$ (10,247,133)
|
|
$(38,043,362)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
3,249,194
|
|
2,226,376
|
|
|
Amortization of loan discount and fees
|
|
3,937,007
|
|
6,506,384
|
|
|
Loss on extinguishment of debt
|
|
716,517
|
|
-
|
|
|
Loss on disposition of business
|
|
1,523,940
|
|
-
|
|
|
Stock-based compensation
|
|
408,810
|
|
602,038
|
|
|
Shares issued for services
|
|
1,656,428
|
|
-
|
|
|
Change in credit reserve
|
|
202,761
|
|
(118,840)
|
|
|
Change in fair value of contingent consideration
|
|
(10,698,475)
|
|
564,303
|
|
|
Deferred tax expense
|
|
368,034
|
|
-
|
|
|
Deferred offering costs
|
|
-
|
|
367,696
|
|
|
Fees incurred in connection with debt financings
|
|
-
|
|
568,149
|
|
|
Change in fair value of warrant liability
|
|
-
|
|
(18,223)
|
|
|
Change in fair value of derivative liability
|
|
-
|
|
(1,354,434)
|
|
|
Impairment of goodwill and intangible assets
|
|
-
|
|
15,539,331
|
|
|
Forgiveness of Payroll Protection Program
|
|
-
|
|
(1,760,755)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
497,771
|
|
(475,036)
|
|
|
|
Due from factor, net
|
|
144,755
|
|
655,708
|
|
|
|
Inventory
|
|
375,682
|
|
471,831
|
|
|
|
Prepaid expenses and other current assets
|
|
551,259
|
|
(402,515)
|
|
|
|
Accounts payable
|
|
1,900
|
|
919,131
|
|
|
|
Accrued expenses and other liabilities
|
|
1,047,431
|
|
1,992,649
|
|
|
|
Deferred revenue
|
|
(183,782)
|
|
(74,268)
|
|
|
|
Due to related parties
|
|
-
|
|
278,590
|
|
|
|
Accrued interest
|
|
434,958
|
|
984,358
|
|
|
Net cash used in operating activities
|
|
(6,012,942)
|
|
(10,570,889)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Cash acquired (consideration) pursuant to business combination
|
|
-
|
|
(7,247,303)
|
|
Purchase of property, equipment and software
|
|
(29,675)
|
|
(5,533)
|
|
Deposits
|
|
|
|
118,494
|
|
(60,548)
|
|
|
Net cash provided by (used in) investing activities
|
|
88,819
|
|
(7,313,384)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds (repayments) from related party advances
|
|
(155,205)
|
|
-
|
|
Advances (repayments) from factor
|
|
154,073
|
|
(3,096)
|
|
Repayments of related party notes
|
|
-
|
|
(170,000)
|
|
Repayment of contingent consideration
|
|
-
|
|
(645,304)
|
|
Proceeds from venture debt
|
|
-
|
|
237,500
|
|
Issuance of loans and note payable
|
|
5,479,611
|
|
3,280,360
|
|
Repayments of convertible and promissory notes
|
|
(10,129,811)
|
|
(7,437,349)
|
|
Issuance of convertible notes payable
|
|
-
|
|
6,951,250
|
|
Proceeds from public offering
|
|
-
|
|
19,347,446
|
|
Offering costs
|
|
-
|
|
(2,921,646)
|
|
Issuance of common stock, net of offering costs
|
|
8,145,381
|
|
-
|
|
Exercise of warrants
|
|
1,167,566
|
|
-
|
|
|
Net cash provided by financing activities
|
|
4,661,614
|
|
18,639,161
|
|
Net change in cash and cash equivalents
|
|
(1,262,509)
|
|
754,888
|
|
Cash and cash equivalents at beginning of year
|
|
1,283,282
|
|
528,394
|
|
Cash and cash equivalents at end of year
|
|
20,773
|
|
1,283,282
|
|
Less: cash of discontinued operations
|
|
-
|
|
7,666
|
|
Cash of continuing operations at end of year
|
|
$ 20,773
|
|
$ 1,275,616
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Cash paid for income taxes
|
|
$ -
|
|
$ -
|
|
Cash paid for interest
|
|
$ 711,815
|
|
$ 734,869
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
Conversion of notes into preferred stock
|
|
$ 5,759,177
|
|
$ -
|
|
Conversion of notes into common stock
|
|
$ -
|
|
$ 11,983,389
|
|
Right of use asset
|
|
$ 467,738
|
|
$ 102,349
|
|
Warrants issued in connection with note
|
|
$ -
|
|
$ 1,368,741
|
|
Derivative liability in connection with convertible note
|
|
$ -
|
|
$ 559,957
|
|
Conversion of related party notes and payables into preferred and common stock
|
$ -
|
|
$ 6,300,000
|
|
Conversion of venture debt into preferred stock
|
|
$ -
|
|
$ -
|
|
|
The accompanying notes are an integral part of these financial statements.
|
|
DIGITAL BRANDS GROUP, INC
|
|
STATEMENT OF BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ 20,773
|
|
$ 1,275,616
|
|
|
Accounts receivable, net
|
|
74,833
|
|
583,368
|
|
|
Due from factor, net
|
|
337,811
|
|
839,400
|
|
|
Inventory
|
|
|
4,849,600
|
|
5,122,564
|
|
|
Prepaid expenses and other current assets
|
|
276,670
|
|
766,901
|
|
|
Assets per discontinued operations, current
|
|
-
|
|
241,544
|
|
|
|
|
Total current assets
|
|
5,559,687
|
|
8,829,393
|
|
Property, equipment and software, net
|
|
55,509
|
|
104,512
|
|
Goodwill
|
|
|
|
|
|
8,973,501
|
|
8,973,501
|
|
Intangible assets, net
|
|
9,982,217
|
|
12,906,238
|
|
Deposits
|
|
|
|
|
|
75,431
|
|
193,926
|
|
Right of use asset
|
|
689,688
|
|
102,349
|
|
Assets per discontinued operations
|
|
-
|
|
2,628,136
|
|
|
|
|
Total assets
|
|
$ 25,336,033
|
|
$ 33,738,055
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$ 7,538,902
|
|
$ 8,016,173
|
|
|
Accrued expenses and other liabilities
|
|
4,758,492
|
|
3,936,920
|
|
|
Due to related parties
|
|
400,012
|
|
555,217
|
|
|
Contingent consideration liability
|
|
-
|
|
12,098,475
|
|
|
Convertible note payable, net
|
|
100,000
|
|
2,721,800
|
|
|
Accrued interest payable
|
|
1,996,753
|
|
1,561,795
|
|
|
Loan payable, current
|
|
2,325,842
|
|
1,829,629
|
|
|
Promissory note payable, net
|
|
4,884,592
|
|
9,000,000
|
|
|
Right of use liability, current portion
|
|
1,210,814
|
|
102,349
|
|
|
Liabilities per discontinued operations, current
|
|
-
|
|
1,071,433
|
|
|
|
|
Total current liabilities
|
|
23,215,407
|
|
40,893,791
|
|
Loan payable
|
|
|
150,000
|
|
150,000
|
|
Deferred tax liability
|
|
368,034
|
|
-
|
|
Liabilities per discontinued operations
|
|
-
|
|
147,438
|
|
|
|
|
Total liabilities
|
|
23,733,441
|
|
41,191,229
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
Undesignated preferred stock, $0.0001 par, 10,000,000 shares authorized, 0 shares
|
|
|
|
|
|
|
issued and outstanding as of both December 31, 2023 and 2022
|
|
-
|
|
-
|
|
Series A convertible preferred stock, $0.0001 par, 6,300 shares designated, 6,300 shares issued and
|
|
|
|
|
|
|
outstanding as of both December 31, 2023 and 2022, respectively
|
|
1
|
|
1
|
|
Series C convertible preferred stock, $0.0001 par, 4,786 and 0 shares
|
|
|
|
|
|
|
outstanding as of December 31, 2023 and 2022, respectively
|
|
1
|
|
-
|
|
Common stock, $0.0001 par, 1,000,000,000 shares authorized, 1,114,359 and 178,758 shares
|
|
|
|
|
|
|
issued and outstanding as of December 31, 2023 and 2022, respectively
|
|
110
|
|
18
|
|
Additional paid-in capital
|
|
115,596,930
|
|
96,294,123
|
|
Accumulated deficit
|
|
(113,994,449)
|
|
(103,747,316)
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
1,602,592
|
|
(7,453,174)
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$ 25,336,033
|
|
$ 33,738,055
|
|
|
The accompanying notes are an integral part of these financial statements.
|
|
About Digital Brands Group
We offer a wide variety of apparel through numerous brands on a both direct-to-consumer and wholesale basis. We have created a business model derived from our founding as a digitally native-first vertical brand. We focus on owning the customer's "closet share" by leveraging their data and purchase history to create personalized targeted content and looks for that specific customer cohort.
Digital Brands Group, Inc. Company Contact
Hil Davis, CEO
Email: invest@digitalbrandsgroup.co
Phone: (800) 593-1047
Related Links
https://www.digitalbrandsgroup.co
https://ir.digitalbrandsgroup.co
View original content:https://www.prnewswire.com/news-releases/digital-brands-group-reports-fourth-quarter-and-fiscal-year-2023-financial-results-302116664.html
SOURCE Digital Brands Group, Inc.
