Financial Performance - Net revenues increased by $1.7 million to $5.1 million for the three months ended March 31, 2023, compared to $3.4 million in the same period in 2022, primarily due to the acquisition of Sundry in December 2022 [117]. - Gross profit rose by $1.3 million to $2.4 million for the three months ended March 31, 2023, up from $1.1 million in the same period in 2022, attributed to increased revenue and gross profit from Sundry [118]. - Operating loss improved to $(3.6) million for the three months ended March 31, 2023, compared to $(5.6) million in the same period in 2022 [116]. - Gross margin increased to 47.9% for the three months ended March 31, 2023, compared to 33.2% for the same period in 2022, attributed to cost efficiencies post-Sundry acquisition and reduced discounting [119]. - Net loss decreased by $1.7 million to $6.1 million for the three months ended March 31, 2023, compared to a loss of $7.8 million in 2022, driven by higher gross profit and lower operating expenses [122]. Expenses - General and administrative expenses were $4.6 million for the three months ended March 31, 2023, compared to $4.3 million in the same period in 2022 [116]. - Sales and marketing expenses increased to $1.1 million for the three months ended March 31, 2023, from $1.0 million in the same period in 2022 [116]. - Operating expenses decreased by $0.7 million to $6.0 million for the three months ended March 31, 2023, from $6.7 million in 2022, primarily due to a $1.2 million change in fair value of contingent consideration in 2022 [120]. Cash Flow and Financing - Cash used in operating activities increased by $1.1 million to $1.7 million for the three months ended March 31, 2023, compared to $0.6 million in 2022, mainly due to changes in operating assets and liabilities [126]. - Cash provided by financing activities was $2.3 million for the three months ended March 31, 2023, including $4.3 million in net proceeds from a private transaction [128]. - Cash provided by investing activities was $87,379 in 2023 due to the return of deposits, compared to cash used of $5,576 in 2022 for property and equipment purchases [127]. - The company plans to fund its capital needs through public or private equity offerings, debt financings, or other sources over the next twelve months [124]. Debt and Working Capital - As of March 31, 2023, the company had cash of $2.0 million and a working capital deficit of $31.2 million, raising doubts about its ability to continue as a going concern [124]. - Outstanding principal on debt as of March 31, 2023, was $13.6 million, with maturity dates through 2024 [131]. Supply Chain and Costs - The company experienced increased costs in raw materials, with fabric prices rising between 10% to 100% depending on various factors [104]. - Shipping costs increased by 25% to 300% depending on the time of year and shipping origin [104]. - Supply chain disruptions have led to longer lead times for raw fabrics and increased production times [103]. Strategic Initiatives - The company aims to enhance its omnichannel strategy to drive customer acquisition and retention, leveraging both digital and physical retail channels [98]. - The company defines "closet share" as the percentage of a customer's clothing units that are from its brands, with a higher closet share indicating increased revenue potential [100]. Non-Cash Adjustments - Non-cash adjustments for the three months ended March 31, 2023, were $3.8 million, compared to $3.7 million in 2022 [125].
Digital Brands Group(DBGI) - 2023 Q1 - Quarterly Report