Digital Brands Group(US:DBGI)2025-08-13 21:30PART I. FINANCIAL INFORMATION Financial Statements The unaudited statements show decreased revenue and a reduced net loss, with equity shifting from a deficit to a surplus due to financing Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $27,820,287 | $19,890,327 | | Total Current Assets | $6,450,666 | $4,697,267 | | Goodwill | $8,973,501 | $8,973,501 | | Total Liabilities | $20,714,167 | $21,218,868 | | Total Current Liabilities | $19,381,882 | $20,819,878 | | Total Stockholders' Equity (Deficit) | $7,106,120 | $(1,328,541) | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $2,251,379 | $3,396,069 | $4,123,080 | $6,972,656 | | Gross Profit | $711,552 | $1,558,677 | $1,584,007 | $3,279,413 | | Loss from Operations | $(1,985,217) | $(2,302,235) | $(3,981,777) | $(2,526,880) | | Net Loss | $(2,117,862) | $(3,510,480) | $(4,207,772) | $(4,194,215) | | Net Loss per Share | $(0.81) | $(104.18) | $(1.24) | $(123.10) | - Net cash used in operating activities for H1 2025 was $(6.1) million, up from $(2.9) million in H1 2024, while net cash from financing activities rose to $6.5 million from $3.0 million19251254 Notes to Unaudited Condensed Consolidated Financial Statements Key disclosures detail the alleviation of going concern uncertainty, an asset acquisition, and significant financing activities - Management concluded that substantial doubt about the Company's ability to continue as a going concern has been alleviated due to a $16.225 million offering and other capital sources3133 - On April 1, 2025, the Company acquired intellectual property from Open Daily Technologies Inc for 344,827 shares of common stock valued at $3,000,0008283 - In February 2025, an offering of common stock and pre-funded warrants raised net proceeds of $6,642,4339698 - In August 2025, a PIPE offering and warrant exercise generated gross proceeds of $16,225,000, improving pro forma stockholders' equity to over $33 million134138 - The company is involved in a legal dispute over a retail lease with a claimed amount of $450,968, reduced from an initial $1.5 million129273 Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue declined due to a strategic account drop, but net loss improved from reduced operating expenses and recent financing Results of Operations Comparison (Q2 2025 vs Q2 2024) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $2.3 million | $3.4 million | $(1.1) million | | Gross Profit | $0.7 million | $1.6 million | $(0.9) million | | Gross Margin | 32% | 46% | (14 pts) | | Operating Expenses | $2.7 million | $3.8 million | $(1.1) million | | Net Loss | $(2.1) million | $(3.5) million | $1.4 million | - The Q2 2025 revenue decrease was primarily due to dropping a large, low-margin wholesale account, with the impact expected to be offset by expanding another wholesale relationship230231 - Operating expenses decreased by $1.2 million in Q2 2025 year-over-year following significant headcount reductions, with an additional $0.7 million in savings anticipated235 - As of June 30, 2025, the company had $6.4 million in outstanding debt, mainly from promissory notes, PPP loans, and merchant advances255 - The company entered into exclusive private label manufacturing agreements with AAA Tuscaloosa and Traffic Holdco for university apparel subsequent to the reporting period219222 Quantitative and Qualitative Disclosures about Market Risk The company is exempt from market risk disclosures as a smaller reporting company - As a smaller reporting company, Digital Brands Group, Inc. is not required to provide the information for this item260 Controls and Procedures Disclosure controls were deemed ineffective due to material weaknesses in internal controls, with remediation efforts underway - Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025262 - The ineffectiveness stems from material weaknesses related to inadequate accounting resources and systems, which are under active remediation263268 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting269 PART II. OTHER INFORMATION Legal Proceedings The company is managing several legal matters, including a disputed lease claim and settled vendor and employee lawsuits - A vendor lawsuit concerning a retail lease has an updated claim of $450,968, down from $1.5 million, which the company disputes273 - A wrongful termination lawsuit was settled in May 2025 for a payment of $81,000273 - A lawsuit with vendor Simon Showroom was settled for $400,000, with a remaining balance of $130,000 as of June 30, 2025273 Risk Factors The company is not required to provide risk factor disclosures due to its status as a smaller reporting company - The company is not required to provide risk factor information as it qualifies as a "smaller reporting company"275 Unregistered Sales of Equity Securities and Use of Proceeds Equity sales were conducted under exemptions from registration requirements as detailed in the financial statement notes - Details on unregistered sales of equity are located in Note 7 of the financial statements276 - The issuances were made under exemptions from registration pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D276 Defaults upon Senior Securities No defaults upon senior securities were reported during the period - None277 Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Not applicable278 Other Information No material changes to shareholder processes or insider trading plans were reported for the quarter - During the quarter ended June 30, 2025, no director or officer adopted or terminated a Rule 10b5-1 trading plan280 Exhibits A list of filed exhibits includes officer certifications and key material agreements - The report includes a list of filed exhibits, such as CEO/CFO certifications and various material agreements281 Signatures