Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2022 | Aug. 15, 2022 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2022 | |
Entity File Number | 001-40400 | |
Entity Incorporation, State or Country Code | DE | |
Entity Registrant Name | Digital Brands Group, Inc. | |
Entity Tax Identification Number | 46-1942864 | |
Entity Address State Or Province | TX | |
Entity Address, Address Line One | 1400 Lavaca Street | |
Entity Address, City or Town | Austin | |
Entity Address, Postal Zip Code | 78701 | |
City Area Code | 209 | |
Local Phone Number | 651-0172 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Amendment Flag | false | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --12-31 | |
Entity Central Index Key | 0001668010 | |
Entity Common Stock, Shares Outstanding | 52,874,188 | |
Entity Shell Company | false | |
Entity Ex Transition Period | false | |
Common Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Common Stock, par value $0.0001 per share | |
Trading Symbol | DBGI | |
Security Exchange Name | NASDAQ | |
Warrants, each exercisable to purchase one share of common stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Warrants, each exercisable to purchase one share of common stock | |
Trading Symbol | DBGIW | |
Security Exchange Name | NASDAQ |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 802,724 | $ 528,394 |
Accounts receivable, net | 190,056 | 89,394 |
Due from factor, net | 929,989 | 985,288 |
Inventory | 2,883,613 | 2,755,358 |
Prepaid expenses and other current assets | 813,681 | 417,900 |
Total current assets | 5,620,063 | 4,776,334 |
Deferred offering costs | 367,696 | 367,696 |
Property, equipment and software, net | 65,235 | 97,265 |
Goodwill | 18,264,822 | 18,264,822 |
Intangible assets, net | 11,765,688 | 12,841,313 |
Deposits | 137,794 | 137,794 |
Right of use asset | 201,681 | |
Total assets | 36,422,979 | 36,485,224 |
Current liabilities: | ||
Accounts payable | 7,003,333 | 6,562,690 |
Accrued expenses and other liabilities | 3,698,717 | 2,237,145 |
Deferred revenue | 221,363 | 276,397 |
Due to related parties | 250,598 | 277,635 |
Contingent consideration liability | 19,300,716 | 12,179,476 |
Convertible notes, current | 100,000 | 100,000 |
Accrued interest payable | 1,801,303 | 1,110,679 |
Note payable - related party | 154,489 | 299,489 |
Venture debt, net of discount | 6,251,755 | 6,001,755 |
Loan payable, current | 1,489,335 | 2,502,000 |
Promissory note payable | 3,500,000 | 3,500,000 |
Right of use liability, current portion | 201,681 | |
Total current liabilities | 43,973,290 | 35,047,266 |
Convertible note payable, net | 5,986,068 | 5,501,614 |
Loan payable | 298,900 | 713,182 |
Derivative liability | 1,044,939 | 2,294,720 |
Warrant liability | 18,223 | |
Total liabilities | 51,303,197 | 43,575,005 |
Commitments and contingencies (Note 11) | ||
Stockholders' deficit: | ||
Common stock, $0.0001 par, 200,000,000 shares authorized, 152,874, and 13,001,690 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 5,287 | 1,300 |
Additional paid-in capital | 68,185,315 | 58,612,873 |
Accumulated deficit | (83,070,820) | (65,703,954) |
Total stockholders' deficit | (14,880,218) | (7,089,781) |
Total liabilities and stockholders' deficit | $ 36,422,979 | $ 36,485,224 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares | Jun. 30, 2022 | Dec. 31, 2021 |
Undesignated Preferred Stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock | ||
Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 200,000,000 | 200,000,000 |
Common Stock, Shares, Issued | 52,874,188 | 13,001,690 |
Common Stock, Shares, Outstanding | 152,874 | 13,001,690 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net revenues | $ 3,739,001 | $ 1,003,529 | $ 7,171,411 | $ 1,411,934 |
Cost of net revenues | 1,567,922 | 608,944 | 3,526,833 | 1,224,886 |
Gross profit | 2,171,079 | 394,585 | 3,644,578 | 187,048 |
Operating expenses: | ||||
General and administrative | 4,990,232 | 7,192,460 | 9,601,467 | 9,099,978 |
Sales and marketing | 1,705,291 | 923,283 | 2,745,863 | 1,094,103 |
Distribution | 221,925 | 69,864 | 424,773 | 133,442 |
Change in fair value of contingent consideration | 5,920,919 | 3,050,901 | 7,121,240 | 3,050,901 |
Total operating expenses | 12,838,367 | 11,236,508 | 19,893,343 | 13,378,424 |
Loss from operations | (10,667,288) | (10,841,923) | (16,248,765) | (13,191,376) |
Other income (expense): | ||||
Interest expense | (2,203,599) | (897,920) | (3,771,476) | (1,572,964) |
Other non-operating income (expenses) | 3,336,963 | (57,775) | 2,653,375 | (57,213) |
Total other income (expense), net | 1,133,364 | (955,695) | (1,118,101) | (1,630,177) |
Income tax benefit (provision) | (1,100,120) | (1,100,120) | ||
Net loss | $ (9,533,924) | $ (10,697,498) | $ (17,366,866) | $ (13,721,433) |
Weighted average common shares outstanding - basic | 35,822,250 | 5,435,023 | 24,591,052 | 3,062,774 |
Weighted average common shares outstanding - diluted | 35,822,250 | 5,435,023 | 24,591,052 | 3,062,774 |
Net loss per common share - basic | $ (0.27) | $ (1.97) | $ (0.71) | $ (4.48) |
Net loss per common share - diluted | $ (0.27) | $ (1.97) | $ (0.71) | $ (4.48) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Preferred Stock Series Seed Preferred Stock | Preferred Stock Series A preferred stock | Preferred Stock Series A-2 preferred stock | Preferred Stock Series A-3 preferred stock | Preferred Stock Series CF preferred stock | Preferred Stock Series B preferred stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Beginning balance (in shares) at Dec. 31, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | |||
Beginning balance at Dec. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | $ 27,481,995 | $ (33,345,997) | $ (5,857,645) |
Stock-based compensation | 36,976 | 36,976 | ||||||||
Net loss | (3,023,935) | (3,023,935) | ||||||||
Ending balance at Mar. 31, 2021 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,518,971 | (36,369,932) | (8,844,604) |
Ending balance (in shares) at Mar. 31, 2021 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | |||
Beginning balance (in shares) at Dec. 31, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | |||
Beginning balance at Dec. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,481,995 | (33,345,997) | (5,857,645) |
Conversion of preferred stock into common stock | 6,293 | |||||||||
Conversion of notes and derivative liability into common stock | 2,680,289 | |||||||||
Conversion of related party notes and payables into common stock | 257,515 | |||||||||
Net loss | (13,721,433) | |||||||||
Ending balance at Jun. 30, 2021 | $ 1,104 | 51,939,819 | (47,067,430) | 4,873,493 | ||||||
Ending balance (in shares) at Jun. 30, 2021 | 11,044,594 | |||||||||
Beginning balance (in shares) at Mar. 31, 2021 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | |||
Beginning balance at Mar. 31, 2021 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,518,971 | (36,369,932) | (8,844,604) |
Conversion of preferred stock into common stock | $ (2,071) | $ (565) | $ (593) | $ (904) | $ (83) | $ (2,075) | $ 403 | 5,888 | ||
Conversion of preferred stock into common stock (shares) | (20,714,518) | (5,654,072) | (5,932,742) | (9,032,330) | (836,331) | (20,754,717) | 4,027,181 | |||
Issuance of common stock in public offering | $ 241 | 9,999,761 | 10,000,002 | |||||||
Issuance of common stock in public offering (in shares) | 2,409,639 | |||||||||
Offering costs | (2,116,957) | (2,116,957) | ||||||||
Exercise of over-allotment option, net of offering costs | $ 36 | 1,364,961 | 1,364,997 | |||||||
Exercise of over-allotment option, net of offering costs (in shares) | 361,445 | |||||||||
Conversion of notes and derivative liability into common stock | $ 114 | 2,680,175 | 2,680,289 | |||||||
Conversion of notes and derivative liability into common stock (In shares) | 1,135,153 | |||||||||
Conversion of related party notes and payables into common stock | $ 15 | 257,500 | 257,515 | |||||||
Conversion of related party notes and payables into common stock (in shares) | 152,357 | |||||||||
Common stock and warrants issued in connection with note | $ 2 | 73,956 | 73,958 | |||||||
Common stock and warrants issued in connection with note (in shares) | 20,000 | |||||||||
Common stock issued in connection with business combination | $ 219 | 8,025,323 | 8,025,542 | |||||||
Common stock issued in connection with business combination (in shares) | 2,192,771 | |||||||||
Exercise of warrants | $ 3 | 145,693 | 145,696 | |||||||
Exercise of warrants (in shares) | 31,881 | |||||||||
Common stock issued pursuant to consulting agreement | $ 5 | 182,995 | 183,000 | |||||||
Common stock issued pursuant to consulting agreement (in shares) | 50,000 | |||||||||
Stock-based compensation | 3,801,553 | 3,801,553 | ||||||||
Net loss | (10,697,498) | (10,697,498) | ||||||||
Ending balance at Jun. 30, 2021 | $ 1,104 | 51,939,819 | (47,067,430) | 4,873,493 | ||||||
Ending balance (in shares) at Jun. 30, 2021 | 11,044,594 | |||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 13,001,690 | |||||||||
Beginning balance at Dec. 31, 2021 | $ 1,300 | 58,612,873 | (65,703,954) | (7,089,781) | ||||||
Conversion of notes and derivative liability into common stock | $ 87 | 1,201,495 | 1,201,582 | |||||||
Conversion of notes and derivative liability into common stock (In shares) | 873,901 | |||||||||
Stock-based compensation | 139,093 | 139,093 | ||||||||
Net loss | (7,832,942) | (7,832,942) | ||||||||
Ending balance at Mar. 31, 2022 | $ 1,387 | 59,953,461 | (73,536,896) | (13,582,048) | ||||||
Ending balance (in shares) at Mar. 31, 2022 | 13,875,591 | |||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 13,001,690 | |||||||||
Beginning balance at Dec. 31, 2021 | $ 1,300 | 58,612,873 | (65,703,954) | (7,089,781) | ||||||
Conversion of notes and derivative liability into common stock | 1,802,372 | |||||||||
Net loss | (17,366,866) | |||||||||
Ending balance at Jun. 30, 2022 | $ 5,287 | 68,185,315 | (83,070,820) | (14,880,218) | ||||||
Ending balance (in shares) at Jun. 30, 2022 | 52,874,188 | |||||||||
Beginning balance (in shares) at Mar. 31, 2022 | 13,875,591 | |||||||||
Beginning balance at Mar. 31, 2022 | $ 1,387 | 59,953,461 | (73,536,896) | (13,582,048) | ||||||
Issuance of common stock in public offering | $ 3,739 | 9,343,711 | 9,347,450 | |||||||
Issuance of common stock in public offering (in shares) | 37,389,800 | |||||||||
Offering costs | (1,930,486) | (1,930,486) | ||||||||
Conversion of notes and derivative liability into common stock | $ 161 | 600,629 | 600,790 | |||||||
Conversion of notes and derivative liability into common stock (In shares) | 1,608,797 | |||||||||
Common stock and warrants issued in connection with note | 98,241 | 98,241 | ||||||||
Stock-based compensation | 119,759 | 119,759 | ||||||||
Net loss | (9,533,924) | (9,533,924) | ||||||||
Ending balance at Jun. 30, 2022 | $ 5,287 | $ 68,185,315 | $ (83,070,820) | $ (14,880,218) | ||||||
Ending balance (in shares) at Jun. 30, 2022 | 52,874,188 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Cash flows from operating activities: | ||
Net loss | $ (17,366,866) | $ (13,721,433) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,113,188 | 291,661 |
Amortization of loan discount and fees | 2,818,174 | 580,684 |
Stock-based compensation | 258,852 | 4,021,529 |
Fees incurred in connection with debt financings | 132,609 | |
Change in fair value of warrant liability | (18,223) | 72,445 |
Change in fair value of derivative liability | (880,388) | |
Change in fair value of contingent consideration | 7,121,240 | 3,050,901 |
Forgiveness of Payroll Protection Program | (1,760,755) | |
Deferred income tax benefit | (1,100,120) | |
Change in credit reserve | (5,053) | 9,748 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (100,662) | (261,386) |
Due from factor, net | 202,787 | 139,629 |
Inventory | (128,255) | 75,287 |
Prepaid expenses and other current assets | (395,781) | (688,893) |
Accounts payable | 435,110 | 575,513 |
Accrued expenses and other liabilities | 1,461,572 | 262,019 |
Deferred revenue | (55,034) | (99,045) |
Accrued compensation - related party | (88,550) | |
Accrued interest | 690,624 | 151,465 |
Net cash used in operating activities | (6,609,470) | (6,595,937) |
Cash flows from investing activities: | ||
Cash acquired (consideration) pursuant to business combination | (475,665) | |
Purchase of property, equipment and software | (10,276) | |
Deposits | (19,115) | |
Net cash used in investing activities | (505,056) | |
Cash flows from financing activities: | ||
Proceeds (repayments) from related party advances | (172,036) | |
Advances (repayments) from factor | (142,436) | 53,795 |
Proceeds from venture debt | 237,500 | |
Issuance of loans payable | 311,308 | 2,626,050 |
Repayments of convertible and promissory notes | (3,068,750) | (2,001,305) |
Issuance of convertible notes payable | 2,301,250 | 528,650 |
Issuance of common stock in public offering | 9,347,450 | 10,000,002 |
Exercise of over-allotment option with public offering, net | 1,364,997 | |
Exercise of warrants | 145,696 | |
Offering costs | (1,930,486) | (2,116,957) |
Net cash provided by financing activities | 6,883,800 | 10,600,928 |
Net change in cash and cash equivalents | 274,330 | 3,499,935 |
Cash and cash equivalents at beginning of period | 528,394 | 575,986 |
Cash and cash equivalents at end of period | 802,724 | 4,075,921 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 191,152 | 460,179 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Conversion of notes and derivative liability into common stock | 1,802,372 | 2,680,289 |
Right of use asset | $ 201,681 | |
Warrants issued in connection with note | 98,241 | |
Conversion of preferred stock into common stock | 6,293 | |
Conversion of related party notes and payables into common stock | 257,515 | |
Contingent consideration liability issued in connection with acquisition | $ 3,421,516 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 6 Months Ended |
Jun. 30, 2022 | |
NATURE OF OPERATIONS | |
NATURE OF OPERATIONS | 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). The Company is a curated collection of lifestyle brands, including Bailey 44, DSTLD, Harper & Jones, Stateside and ACE Studios, that offers a variety of apparel products through direct-to-consumer and wholesale distribution. 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. On May 18, 2021, the Company closed its acquisition of Harper & Jones, LLC (“H&J”) pursuant to its Membership Interest Stock Purchase Agreement with D. Jones Tailored Collection, Ltd. to purchase 100% of the issued and outstanding equity of Harper & Jones, LLC. On the acquisition date, H&J became a wholly owned subsidiary of the Company. 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. |
GOING CONCERN
GOING CONCERN | 6 Months Ended |
Jun. 30, 2022 | |
GOING CONCERN | |
GOING CONCERN | NOTE 2: GOING CONCERN The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated profits since inception, has sustained net losses of $17,366,866 and $13,721,433 for the six months ended June 30, 2022 and 2021, respectively, and has incurred negative cash flows from operations during these periods. The Company has historically lacked liquidity to satisfy obligations as they come due and as of June 30, 2022, and the Company had a working capital deficit of $38,353,227. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company requires significant capital to fund operations and meet its obligations as demands are made. 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. Management Plans In August 2021, the Company entered into an equity line of credit agreement which the investor is committed to purchase up to $17,500,000 of the Company’s common stock. The Company plans to utilize multiple drawdowns on this agreement, however, it may be unable to execute on such drawdowns due to restrictions per the agreement. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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”). Unaudited Interim Financial Information The accompanying unaudited condensed consolidated balance sheet as of June 30, 2022, the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 and of cash flows for the six months ended June 30, 2022 and 2021 have been prepared by the Company, pursuant to the rules and regulations of the SEC for the interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the consolidated results for the interim periods presented and of the consolidated financial condition as of the date of the interim consolidated balance sheet. The results of operations are not necessarily indicative of the results expected for the year ended December 31, 2022. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Form 10-K filed with SEC on March 31, 2022. Principles of Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Bailey, H&J and Stateside from the dates of acquisition. All inter-company transactions and balances have been eliminated on consolidation. Use of Estimates The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure 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 and assumptions reflected in these financial statements include, but are not limited to, inventory, impairment of long-lived assets, contingent consideration and derivative liabilities. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. 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 June 30, 2022 and December 31, 2021, 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. Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued expenses, due to related parties, related party note payable, and convertible debt. The carrying value of these assets and liabilities is representative of their fair market value, due to the short maturity of these instruments. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of June 30, 2022 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ — $ — Contingent consideration — — 19,300,716 19,300,716 Derivative liability — — 1,044,939 1,044,939 $ — $ — $ 20,345,655 $ 20,345,655 Fair Value Measurements as of December 31, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 18,223 $ — $ 18,223 Contingent consideration — — 12,179,476 12,179,476 Derivative liability — — 2,294,720 2,294,720 $ — $ 18,223 $ 14,474,196 $ 14,492,419 Contingent Consideration Changes in acquisition-related contingent consideration liabilities during the six months ended June 30, 2022 are as follows: Contingent Consideration Liability Outstanding as of December 31, 2021 $ 12,179,476 Change in fair value 7,121,240 Outstanding as of June 30, 2022 $ 19,300,716 The detail of contingent consideration by company is as follows: Bailey $ 10,698,475 Harper & Jones 8,602,241 $ 19,300,716 The contingent consideration liabilities were revalued as of May 18, 2022, the anniversary date of the Company’s initial public offering. As of the date of the issuance of these financial statements, the contingent consideration liabilities were not yet settled with shares. See Note 12 Subsequent Events for amendment to H&J. Derivative Liability In connection with the Company’s convertible notes with Oasis Capital, LLC (“Oasis”) and FirstFire Global Opportunities Fund, LLC (“FirstFire”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the three months ended June 30, 2022 are as follows: Derivative Liability Outstanding as of December 31, 2021 $ 2,294,720 Conversion of underlying notes into common stock (369,393) Change in fair value (880,388) Outstanding as of June 30, 2022 $ 1,044,939 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 and Stateside. The inventory balances as of June 30, 2022 and December 31, 2021 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: June 30, December 31, 2022 2021 Raw materials $ 433,616 $ 292,167 Work in process 258,626 242,673 Finished goods 2,191,371 2,220,519 Inventory $ 2,883,613 $ 2,755,358 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. Deferred Offering Costs The Company complies with the requirements of ASC 340, Other Assets and Deferred Costs, with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed As of June 30, 2022 and December 31, 2021, the Company capitalized $367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). Management is currently reviewing the feasibility of drawdowns on the equity line of credit. 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 June 30, 2022 and 2021, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of June 30, 2022 and 2021 are as follows: June 30, 2022 2021 Convertible notes 46,240,766 — Common stock warrants 6,333,392 3,946,348 Stock options 3,895,103 3,875,103 Total potentially dilutive shares 56,469,261 7,821,450 The stock options and warrants above are out-of-the-money as of June 30, 2022 net income. Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02: Leases (Topic 842). The new guidance generally requires an entity to recognize on its balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The new standard requires a modified retrospective transition for existing leases to each prior reporting period presented. The Company has elected to utilize the extended adoption period available to the Company as an emerging growth company and has not currently adopted this standard. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2021. The Company has adopted ASU 2016-02 as of January 1, 2022. See Note 10. Management does not believe that any other 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. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the H&J and Stateside acquisitions had occurred as of January 1, 2021. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The following unaudited pro forma financial information includes incremental property and equipment depreciation and intangible asset amortization as a result of the acquisitions. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: Six Months Ended June 30, 2021 Net revenues $ 4,742,558 Net loss $ (14,422,758) Net loss per common share $ (4.71) |
DUE FROM FACTOR
DUE FROM FACTOR | 6 Months Ended |
Jun. 30, 2022 | |
DUE FROM FACTOR | |
DUE FROM FACTOR | NOTE 4: DUE FROM FACTOR Due to/from factor consist of the following: June 30, December 31, 2022 2021 Outstanding receivables: Without recourse $ 517,994 $ 579,295 With recourse 220,098 361,584 Advances 264,053 121,617 Credits due customers (72,156) (77,208) $ 929,989 $ 985,288 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended |
Jun. 30, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |
GOODWILL AND INTANGIBLE ASSETS | NOTE 5: GOODWILL AND INTANGIBLE ASSETS The Company recorded $6,479,218 in goodwill from the Bailey business combination in February 2020, $9,681,548 in goodwill from the H&J business combination in May 2021 and $2,104,056 in goodwill from the Stateside business combination in August 2021. The following table summarizes information relating to the Company’s identifiable intangible assets as of June 30, 2022: Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 6,453,750 $ (2,524,982) $ 3,928,768 6,453,750 (2,524,982) 3,928,768 Indefinite-lived: Brand name $ 7,836,920 — 7,836,920 $ 14,290,670 $ (2,524,982) $ 11,765,688 The Company recorded amortization expense of $537,812 and $163,236 during the three months ended June 30, 2022 and 2021, and $1,075,625 and $254,903 during the six months ended June 30, 2022 and 2021, respectively, which is included in general and administrative expenses in the consolidated statements of operations. |
LIABILITIES AND DEBT
LIABILITIES AND DEBT | 6 Months Ended |
Jun. 30, 2022 | |
LIABILITIES AND DEBT | |
LIABILITIES AND DEBT | NOTE 6: LIABILITIES AND DEBT Accrued Expenses and Other Liabilities The Company accrued expenses and other liabilities line in the consolidated balance sheets is comprised of the following as of June 30, 2022 and December 31,2021: June 30, December 31, 2022 2021 Accrued expenses $ 970,890 $ 213,740 Reserve for returns 25,000 33,933 Payroll related liabilities 2,303,321 1,204,665 Sales tax liability 268,804 268,723 Due to seller — 396,320 Other liabilities 130,702 119,764 $ 3,698,717 $ 2,237,145 Certain liabilities including sales tax and payroll related liabilities may be subject to interest and penalties. As of June 30, 2022 and December 31, 2021, payroll related labilities included approximately $262,000 in estimated penalties associated with accrued payroll taxes. Venture Debt In February 2022, the Company received $237,500 in proceeds, including loan fees of $12,500, from the existing venture debt lender under the same terms as the existing facility. As of June 30, 2022 and December 31, 2021, the gross loan balance was $6,251,755 and $6,001,755, respectively. As of June 30, 2022, all payments have been deferred to the maturity date of the loan, December 31, 2022. As of the filing date, of these financial statements, all defaults were cured and there are no additional expected defaults. For the six months ended June 30, 2022 and 2021, $12,500 and $147,389 of loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balance of $0 as of June 30, 2022. Interest expense and effective interest rate on this loan for the three months ended June 30, 2022 and 2021, was $191,152 and $202,041, and 12.2% and 13.4% all respectively. Interest expense was $382,304 and $402,027 for the six months ended June 30, 2022 and 2021, respectively. Convertible Debt 2020 Regulation D Offering As of June 30, 2022 and December 31, 2021, there was $100,000 remaining in outstanding principal that was not converted into equity. Convertible Promissory Note During the six months ended June 30, 2022, the Company converted an aggregate of $1,432,979 in outstanding principal into 2,482,698 shares of common stock. On April 8, 2022, the Company and various purchasers executed a Securities Purchase Agreement whereby the investors purchased from the Company convertible promissory notes in the aggregate principal amount of $3,068,750, consisting of original issue discount of $613,750. The Company received net proceeds of $2,313,750 after the original issue discount and fees, resulting in a debt discount of $755,000. Upon the Company’s public offering in May (see below), the Company repaid $3,068,750 to the investors and the debt discount was fully amortized. In connection with the April notes, the Company issued an aggregate of 1,257,684 warrants to purchase common stock at an exercise price of $1.22 per share. The Company recognized $98,241 as a debt discount for the fair value of the warrants using the Black-Scholes option model, which was fully amortized upon the notes’ repayment in May. During the three and six months ended June 30, 2022, the Company amortized $1,724,591 and $2,783,174 of debt discount to interest expense. As of June 30, 2022 and December 31, 2021, the outstanding principal was $8,032,021 and $9,465,000, respectively. The balance of the convertible notes, after unamortized debt discount of $2,904,803, was $5,671,267 as of June 30, 2022. Loan Payable — PPP and SBA Loan As of June 30, 2022 and December 31, 2021, H&J had an outstanding loan under the EIDL program of $148,900. In April 2022, Bailey received notification of full forgiveness of its 2 nd st Note Payable – Related Party As of June 30, 2022, H&J had an outstanding note payable of $227,637 owned by the H&J Seller. The note matures on September 10, 2022 and bears interest at 12% per annum. Promissory Note Payable As of June 30, 2022 and December 31, 2021, the outstanding principal on the note to the sellers of Bailey was $3,500,000. As of June 30, 2022, the lender agreed to defer all payments to the maturity date of the loan, December 31, 2022. Interest expense was $105,000 and $120,000 for the three months ended June 30, 2022 and 2021 and $210,000 and $284,000 for the six months ended June 30, 2022 and 2021, all respectively, which was accrued and unpaid as of June 30, 2022. Merchant Cash Advances In March 2022, the Company obtained two short-term merchant advances, which totaled $500,000 and $250,000, respectively, from a single lender to fund operations. These advances included origination fees totaling $22,500 for net proceeds of $727,500. These advances are, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis The Company will repay an aggregate of $1,065,000 to the lender. These advances contain various financial and non-financial covenants. As of June 30, 2022, $255,219 remained outstanding. As of the date of these financial statements, the Company was in compliance with these covenants. |
STOCKHOLDERS' DEFICIT
STOCKHOLDERS' DEFICIT | 6 Months Ended |
Jun. 30, 2022 | |
STOCKHOLDERS' DEFICIT | |
STOCKHOLDERS' DEFICIT | NOTE 7: STOCKHOLDERS’ DEFICIT During the six months ended June 30, 2022, $1,432,979 in outstanding principal of convertible notes were converted into 2,482,698 shares of common stock. Underwriting Agreement and Public Offering On May 5, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Alexander Capital, L.P., acting as representative (the “Representative”) of the several underwriters named in the Underwriting Agreement (the “Underwriters”), relating to the Company’s underwritten the offering (the “Offering”) pursuant to which the Company agreed to issue and sell 37,389,800 shares (the “Firm Shares”) of the Company’s common stock. The Firm Shares were sold to the public at a combined public offering price of $0.25 per share and were purchased by the Underwriters from the Company at a price of $0.23 per share. The Company also granted the Underwriters a 45-day option to purchase up to an additional 5,608,470 shares of Common Stock at the same price. The shares were sold in the Offering pursuant to a Registration Statement on Form S-1, as amended (File No. 333-264347) (the “Registration Statement”), a Registration Statement on Form S-1 pursuant to 462(b) of the Securities Act of 1933, as amended (File No. 333-264775), and a related prospectus filed with the Securities and Exchange Commission. The public offering closed on May 10, 2022 and the Company sold 37,389,800 shares of Common Stock for total gross proceeds of $9.3 million. The Company received net proceeds of $8.1 million after deducting underwriters discounts and commissions of $0.7 million and direct offering expenses of $0.5 million. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2022 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 8: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable As of June 30, 2022 and December 31, 2021, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $104,568, and accrued salary and expense reimbursements of $120,350 and $126,706, respectively, to current officers. As of June 30, 2022, due to related parties also included an advance of $25,000 from the CEO. As of June 30, 2022, H&J had an outstanding note payable of $227,637 owned by the H&J Seller. |
SHARE-BASED PAYMENTS
SHARE-BASED PAYMENTS | 6 Months Ended |
Jun. 30, 2022 | |
SHARE-BASED PAYMENTS | |
SHARE-BASED PAYMENTS | NOTE 9: SHARE-BASED PAYMENTS Common Stock Warrants In connection with the April note agreement, the Company granted warrants to acquire 1,257,684 shares of common stock at an exercise price of $1.22 per share expiring in April 2027. On May 10, 2022, pursuant to the Underwriting Agreement, the Company issued the Underwriters’ Warrants to purchase up to an aggregate of 1,495,592 shares of common stock. The Underwriters’ Warrants may be exercised beginning on November 1, 2022 until May 5, 2027. The initial exercise price of each Underwriters’ Warrant is $0.325 per share, which represents 130% of the public offering price. The following is a summary of warrant activity: Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2021 3,580,116 $ 4.12 Granted 2,753,276 0.73 Exercised — — Forfeited — — Outstanding - June 30, 2022 6,333,392 $ 4.12 Exercisable at June 30, 2022 4,837,799 $ 3.37 Stock Options As of June 30, 2022 and December 31, 2021, the Company had 3,895,103 stock options outstanding with a weighted average exercise price of $3.59 per share. As of June 30, 2022, there were 3,339,173 options exercisable. Stock-based compensation expense of $119,759 and $3,568,370 was recognized for the three months ended June 30, 2022 and 2021, and $258,852 and $3,604,346 was recognized for the six months June 30, 2022 and 2021, respectively. During the six months ended June 30,2022 and 2021, $28,798 and $523,151 was recorded to sales and marketing expense, and all other stock compensation was included in general and administrative expense in the condensed consolidated statements of operations. Total unrecognized compensation cost related to non-vested stock option awards as of June 30, 2022 amounted to $798,184 and will be recognized over a weighted average period of 1.79 years. |
LEASE OBLIGATIONS
LEASE OBLIGATIONS | 6 Months Ended |
Jun. 30, 2022 | |
LEASE OBLIGATIONS | |
LEASE OBLIGATIONS | NOTE 10: LEASE OBLIGATIONS In April 2021, the Company entered into a lease agreement for operating space in Los Angeles, California. The lease expires in June 2023 and has monthly base rent payments of $17,257. The lease required a $19,500 deposit. The Company adopted ASC 842 on January 1, 2021 and recognized a right of use asset H&J leases office and showroom facilities in Dallas and Houston, Texas, and New Orleans, Louisiana. The leases expire at various dates through June 2022 with base rents ranging from $3,400 to $6,500. Stateside leases office and showroom facilities in Los Angeles, California. The leases expire at various dates through November 2022 with base rents ranging from $3,100 to $9,000. Total rent expense for the three months ended June 30, 2022 and 2021 was $195,060 and $173,052, and $469,482 and $305,841 for the six months end June 30, 2022 and 2021, respectively. |
CONTINGENCIES
CONTINGENCIES | 6 Months Ended |
Jun. 30, 2022 | |
CONTINGENCIES | |
CONTINGENCIES | NOTE 11: CONTINGENCIES On March 25, 2020, a Bailey’s product vendor filed a lawsuit against Bailey for non-payment of trade payables totaling $492,390. Approximately the same amount was held in accounts payable for this vendor in the accompanying consolidated balance sheets and the Company does not believe it is probable that losses in excess of such trade payables will be incurred. The Company and product vendor have entered into a settlement, which will require the Company make ten monthly payments of approximately $37,000, starting in May 2021. Upon completion of the payment schedule, any remaining amounts will be forgiven. The payment schedule was completed in 2022. On December 21, 2020, a Company investor filed a lawsuit against DBG for reimbursement of their investment totaling $100,000. Claimed amounts are included in short-term convertible note payable in the accompanying consolidated balance sheets and the Company does not believe it is probable that losses in excess of such short-term note payable will be incurred. The Company is actively working to resolve this matter. In August 2020 and March 2021, two lawsuits were filed against Bailey’s by third-party’s related to prior services rendered. The claims (including fines, fees, and legal expenses) total an aggregate of $96,900. One matter was settled in February 2022 and the other matter is being actively worked on to achieve settlement. On September 24, 2020 a Bailey’s product vendor filed a lawsuit against Bailey’s non-payment of trade payables totaling approximately $481,000 and additional damages of approximately $296,000. Claimed amounts for trade payables are included in accounts payable in the accompanying consolidated balance sheets, net of payments made. In December 2021, the Company reached a settlement; however, the settlement terms were not met and a judgement was entered against the Company in the amount of $469,000. 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 consolidated balance sheet as of June 30, 2022. 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. Entry into a Material Definitive Agreement On June 17, 2022, the Company entered into an Amended and Restated Membership Interest Purchase Agreement (the “Agreement”) with Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (“Sellers”), Sunnyside, LLC, a California limited liability company (“Sundry”), and George Levy as the Sellers’ representative (the “Sellers’ Representative”), pursuant to which the Company will acquire all of the issued and outstanding membership interests of Sundry (such transaction, the “Acquisition”). Sellers and DBG are sometimes collectively referred to herein as the “Parties” and individually as a “Party.” Pursuant to the Agreement, Sellers, as the holders of all of the outstanding membership interests of Sundry, will exchange all of such membership interests for (i) $5 million in cash, which will be paid at Closing (as defined below), of which $2.5 million million The obligations of each Party to consummate the transactions contemplated by this Agreement are subject to certain closing conditions, including, but not limited to, (i) no governmental entity has issued an order or taken any other action that making the transactions contemplated by the Agreement illegal; (ii) no governmental entity has issued an order or taken any other action restraining or otherwise prohibiting the transactions contemplated by the Agreement; (iii) DBG shall have initiated a proxy solicitation for a shareholder vote to approve the issuance of Buyer Shares and the employment offer letters to George Levy and Matthew Leblan; and (iv) DBG shall have cash or rights under existing borrowing facilities that together are sufficient to pay the cash payable at Closing pursuant to the terms of the Agreement. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2022 | |
SUBSEQUENT EVENTS. | |
SUBSEQUENT EVENTS | NOTE 12: SUBSEQUENT EVENTS Management’s Evaluation On July 22, 2022, the Company and various purchasers (the “July Investors”) executed a Securities Purchase Agreement (the “July SPA”) whereby the Investors purchased from the Company 20% Original Issue Discount (the “OID”) promissory notes (the “July Notes”) in the aggregate principal amount of $1,250,000 (with an aggregate subscription amount of $1,000,000). The July Notes are due and payable on October 31, 2022 (the “Maturity Date”). The Company will also have the option to prepay the July Notes with no penalties at any time prior to the Maturity Date. If the Company or any subsidiary of the Company completes a debt or equity financing of less than $4,000,000, the Company is required to repay 50% of the remaining balance of the July Notes. Following such 50% repayment, the Company must also use any proceeds from any subsequent debt or equity financing to repay the July Notes. Upon the closing of any debt or equity financing of $4,000,000 or greater, the Company is required to repay 100% of the July Notes with no penalties. If the July Notes are not repaid in full by the Maturity Date or if any other event of default occurs, (1) the face value of the July Notes will be automatically increased to 120%; (2) the July Notes will begin generating an annual interest rate of 20%, which will be paid in cash monthly until the default is cured; and (3) if such default continues for 14 or more calendar days, at the Investors’ discretion, the July Notes shall become convertible at the option of the Investors into shares of the Company’s common stock at a conversion price equal to the Nasdaq closing price of the Company’s common stock on the date of the note conversion. On July 28, 2022, the Company, the existing investors and a new investor executed an Amendment to the July SPA (the “Amendment SPA”), whereby the new investor purchased from the Company a 20% original issue discount promissory note in the aggregate principal amount of $1,875,000 (with an aggregate subscription amount of $1,500,000) in substantially the same form as issued to the existing investors under the July SPA dated July 22, 2022. Pursuant to the Amendment SPA, the Company will also issue warrants to the new investor in substantially the same form as issued to the existing investors on July 22, 2022. In connection with the July SPA, the Company issued to the Investors an aggregate of 4,112,500 five-year warrants exercisable for shares of common stock at an exercise price equal to $0.152. On July 29, 2022, the Company entered into an amendment to the May 2021 purchase agreement with the H&J Seller based on the ultimate settlement of the H&J contingent consideration. Pursuant to the amendment, on May 18, 2023, the Company shall deliver to the H&J Seller additional shares of common stock. The number of shares of common stock to be delivered to H&J Seller shall be calculated as follows: $7,899,356 minus any cash payments received by Seller from any capital raises, divided by the average common stock closing price per share based on the thirty-day trading period preceding May 19, 2023. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). |
Unaudited Interim Financial Information | Unaudited Interim Financial Information The accompanying unaudited condensed consolidated balance sheet as of June 30, 2022, the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 and of cash flows for the six months ended June 30, 2022 and 2021 have been prepared by the Company, pursuant to the rules and regulations of the SEC for the interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the consolidated results for the interim periods presented and of the consolidated financial condition as of the date of the interim consolidated balance sheet. The results of operations are not necessarily indicative of the results expected for the year ended December 31, 2022. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Form 10-K filed with SEC on March 31, 2022. |
Principles of Consolidation | Principles of Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Bailey, H&J and Stateside from the dates of acquisition. All inter-company transactions and balances have been eliminated on consolidation. |
Use of Estimates | Use of Estimates The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure 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 and assumptions reflected in these financial statements include, but are not limited to, inventory, impairment of long-lived assets, contingent consideration and derivative liabilities. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates. |
Cash and Equivalents and Concentration of Credit Risk | 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 June 30, 2022 and December 31, 2021, 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued expenses, due to related parties, related party note payable, and convertible debt. The carrying value of these assets and liabilities is representative of their fair market value, due to the short maturity of these instruments. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of June 30, 2022 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ — $ — Contingent consideration — — 19,300,716 19,300,716 Derivative liability — — 1,044,939 1,044,939 $ — $ — $ 20,345,655 $ 20,345,655 Fair Value Measurements as of December 31, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 18,223 $ — $ 18,223 Contingent consideration — — 12,179,476 12,179,476 Derivative liability — — 2,294,720 2,294,720 $ — $ 18,223 $ 14,474,196 $ 14,492,419 Contingent Consideration Changes in acquisition-related contingent consideration liabilities during the six months ended June 30, 2022 are as follows: Contingent Consideration Liability Outstanding as of December 31, 2021 $ 12,179,476 Change in fair value 7,121,240 Outstanding as of June 30, 2022 $ 19,300,716 The detail of contingent consideration by company is as follows: Bailey $ 10,698,475 Harper & Jones 8,602,241 $ 19,300,716 The contingent consideration liabilities were revalued as of May 18, 2022, the anniversary date of the Company’s initial public offering. As of the date of the issuance of these financial statements, the contingent consideration liabilities were not yet settled with shares. See Note 12 Subsequent Events for amendment to H&J. Derivative Liability In connection with the Company’s convertible notes with Oasis Capital, LLC (“Oasis”) and FirstFire Global Opportunities Fund, LLC (“FirstFire”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the three months ended June 30, 2022 are as follows: Derivative Liability Outstanding as of December 31, 2021 $ 2,294,720 Conversion of underlying notes into common stock (369,393) Change in fair value (880,388) Outstanding as of June 30, 2022 $ 1,044,939 |
Inventory | 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 and Stateside. The inventory balances as of June 30, 2022 and December 31, 2021 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: June 30, December 31, 2022 2021 Raw materials $ 433,616 $ 292,167 Work in process 258,626 242,673 Finished goods 2,191,371 2,220,519 Inventory $ 2,883,613 $ 2,755,358 |
Goodwill | 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. |
Deferred Offering Costs | Deferred Offering Costs The Company complies with the requirements of ASC 340, Other Assets and Deferred Costs, with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs are charged to additional paid-in capital or as a discount to debt, as applicable, upon the completion of an offering or to expense if the offering is not completed As of June 30, 2022 and December 31, 2021, the Company capitalized $367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). Management is currently reviewing the feasibility of drawdowns on the equity line of credit. |
Net Loss per Share | 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 June 30, 2022 and 2021, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of June 30, 2022 and 2021 are as follows: June 30, 2022 2021 Convertible notes 46,240,766 — Common stock warrants 6,333,392 3,946,348 Stock options 3,895,103 3,875,103 Total potentially dilutive shares 56,469,261 7,821,450 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02: Leases (Topic 842). The new guidance generally requires an entity to recognize on its balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The new standard requires a modified retrospective transition for existing leases to each prior reporting period presented. The Company has elected to utilize the extended adoption period available to the Company as an emerging growth company and has not currently adopted this standard. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2021. The Company has adopted ASU 2016-02 as of January 1, 2022. See Note 10. Management does not believe that any other 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. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the H&J and Stateside acquisitions had occurred as of January 1, 2021. The unaudited pro forma financial information is not necessarily indicative of what the financial results actually would have been had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The following unaudited pro forma financial information includes incremental property and equipment depreciation and intangible asset amortization as a result of the acquisitions. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: Six Months Ended June 30, 2021 Net revenues $ 4,742,558 Net loss $ (14,422,758) Net loss per common share $ (4.71) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of financial assets and liabilities measured at fair value on recurring basis | Fair Value Measurements as of June 30, 2022 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ — $ — Contingent consideration — — 19,300,716 19,300,716 Derivative liability — — 1,044,939 1,044,939 $ — $ — $ 20,345,655 $ 20,345,655 Fair Value Measurements as of December 31, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 18,223 $ — $ 18,223 Contingent consideration — — 12,179,476 12,179,476 Derivative liability — — 2,294,720 2,294,720 $ — $ 18,223 $ 14,474,196 $ 14,492,419 |
Schedule of changes in acquisition-related contingent consideration | Contingent Consideration Liability Outstanding as of December 31, 2021 $ 12,179,476 Change in fair value 7,121,240 Outstanding as of June 30, 2022 $ 19,300,716 Bailey $ 10,698,475 Harper & Jones 8,602,241 $ 19,300,716 |
Summary of changes in derivative liability | Derivative Liability Outstanding as of December 31, 2021 $ 2,294,720 Conversion of underlying notes into common stock (369,393) Change in fair value (880,388) Outstanding as of June 30, 2022 $ 1,044,939 |
Schedule of inventory | June 30, December 31, 2022 2021 Raw materials $ 433,616 $ 292,167 Work in process 258,626 242,673 Finished goods 2,191,371 2,220,519 Inventory $ 2,883,613 $ 2,755,358 |
Schedule of potentially dilutive items outstanding | June 30, 2022 2021 Convertible notes 46,240,766 — Common stock warrants 6,333,392 3,946,348 Stock options 3,895,103 3,875,103 Total potentially dilutive shares 56,469,261 7,821,450 |
Schedule of business acquisition pro forma information | Six Months Ended June 30, 2021 Net revenues $ 4,742,558 Net loss $ (14,422,758) Net loss per common share $ (4.71) |
DUE FROM FACTOR (Tables)
DUE FROM FACTOR (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
DUE FROM FACTOR | |
Schedule of due from factor | June 30, December 31, 2022 2021 Outstanding receivables: Without recourse $ 517,994 $ 579,295 With recourse 220,098 361,584 Advances 264,053 121,617 Credits due customers (72,156) (77,208) $ 929,989 $ 985,288 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |
Summary of amortized and indefinite-lived intangible assets | Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 6,453,750 $ (2,524,982) $ 3,928,768 6,453,750 (2,524,982) 3,928,768 Indefinite-lived: Brand name $ 7,836,920 — 7,836,920 $ 14,290,670 $ (2,524,982) $ 11,765,688 |
LIABILITIES AND DEBT (Tables)
LIABILITIES AND DEBT (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
LIABILITIES AND DEBT | |
Schedule of accrued expenses and other liabilities | June 30, December 31, 2022 2021 Accrued expenses $ 970,890 $ 213,740 Reserve for returns 25,000 33,933 Payroll related liabilities 2,303,321 1,204,665 Sales tax liability 268,804 268,723 Due to seller — 396,320 Other liabilities 130,702 119,764 $ 3,698,717 $ 2,237,145 |
SHARE-BASED PAYMENTS (Tables)
SHARE-BASED PAYMENTS (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
SHARE-BASED PAYMENTS | |
Summary of information related to common stock and preferred stock warrants | Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2021 3,580,116 $ 4.12 Granted 2,753,276 0.73 Exercised — — Forfeited — — Outstanding - June 30, 2022 6,333,392 $ 4.12 Exercisable at June 30, 2022 4,837,799 $ 3.37 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | Aug. 30, 2021 | May 18, 2021 |
Harper & Jones LLC | ||
Subsidiary, Sale of Stock [Line Items] | ||
Percentage of equity acquired | 100% | |
Stateside | ||
Subsidiary, Sale of Stock [Line Items] | ||
Percentage of equity acquired | 100% |
GOING CONCERN (Details)
GOING CONCERN (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2021 | Mar. 31, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Aug. 31, 2021 | |
Net loss | $ (9,533,924) | $ (7,832,942) | $ (10,697,498) | $ (3,023,935) | $ (17,366,866) | $ (13,721,433) | |
Working capital deficit | $ 38,353,227 | $ 38,353,227 | |||||
Equity purchase agreement | |||||||
Value of common stock to be issued under the agreement | $ 17,500,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and Equivalents and Concentration of Credit Risk (Details) | Jun. 30, 2022 USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Cash and cash equivalents in bank deposit | $ 250,000 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2022 | Dec. 31, 2021 | |
Liabilities: | ||
Warrant liability | $ 18,223 | |
Contingent consideration | $ 19,300,716 | 12,179,476 |
Derivative liability | 1,044,939 | 2,294,720 |
Total | 20,345,655 | 14,492,419 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Outstanding as of December 31, 2021 | 12,179,476 | |
Change in fair value | 7,121,240 | |
Outstanding as of June 30, 2022 | 19,300,716 | 12,179,476 |
Harper & Jones, LLC | ||
Liabilities: | ||
Contingent consideration | 8,602,241 | |
Bailey LLC. | ||
Liabilities: | ||
Contingent consideration | 10,698,475 | |
Level 2 | ||
Liabilities: | ||
Warrant liability | 18,223 | |
Total | 18,223 | |
Level 3 | ||
Liabilities: | ||
Contingent consideration | 19,300,716 | 12,179,476 |
Derivative liability | 1,044,939 | 2,294,720 |
Total | $ 20,345,655 | $ 14,474,196 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Derivative Liability (Details) | 6 Months Ended |
Jun. 30, 2022 USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Outstanding as of December 31, 2021 | $ 12,179,476 |
Change in fair value | 7,121,240 |
Outstanding as of June 30, 2022 | 19,300,716 |
Derivative Liability | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Outstanding as of December 31, 2021 | 2,294,720 |
Conversion of underlying notes into common stock | (369,393) |
Change in fair value | (880,388) |
Outstanding as of June 30, 2022 | $ 1,044,939 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventory (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Raw materials | $ 433,616 | $ 292,167 |
Work in process | 258,626 | 242,673 |
Finished goods | 2,191,371 | 2,220,519 |
Inventory | $ 2,883,613 | $ 2,755,358 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred Offering Costs (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred offering costs capitalized | $ 367,696 | $ 367,696 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Net Loss per Share (Details) - shares | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 56,469,261 | 7,821,450 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 3,895,103 | 3,875,103 |
Convertible notes | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 46,240,766 | |
Common stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 6,333,392 | 3,946,348 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Unaudited Pro Forma Financial Information (Details) | 6 Months Ended |
Jun. 30, 2021 USD ($) $ / shares | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Net revenues | $ 4,742,558 |
Net loss | $ (14,422,758) |
Net loss per common share | $ / shares | $ (4.71) |
DUE FROM FACTOR (Details)
DUE FROM FACTOR (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Outstanding receivables: | ||
Without recourse | $ 517,994 | $ 579,295 |
With recourse | 220,098 | 361,584 |
Advances | 264,053 | 121,617 |
Credits due customers | (72,156) | (77,208) |
Due from factor | $ 929,989 | $ 985,288 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||||
May 31, 2021 | Feb. 29, 2020 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | Aug. 31, 2021 | |
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Gross Amount | $ 6,453,750 | $ 6,453,750 | ||||||
Accumulated Amortization | (2,524,982) | (2,524,982) | ||||||
Carrying Value | 3,928,768 | 3,928,768 | ||||||
Indefinite-lived | 14,290,670 | 14,290,670 | ||||||
Intangible Assets, Net (Excluding Goodwill), Total | 11,765,688 | 11,765,688 | $ 12,841,313 | |||||
Amortization expense | 537,812 | $ 163,236 | 1,075,625 | $ 254,903 | ||||
Goodwill | 18,264,822 | 18,264,822 | $ 18,264,822 | |||||
Bailey | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Goodwill acquired | $ 6,479,218 | |||||||
H&J acquisition | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Goodwill acquired | $ 9,681,548 | |||||||
Stateside | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Goodwill | $ 2,104,056 | |||||||
Customer relationships | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Gross Amount | 6,453,750 | 6,453,750 | ||||||
Accumulated Amortization | (2,524,982) | (2,524,982) | ||||||
Carrying Value | 3,928,768 | 3,928,768 | ||||||
Brand name | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Indefinite-lived | 7,836,920 | 7,836,920 | ||||||
Intangible Assets, Net (Excluding Goodwill), Total | $ 7,836,920 | $ 7,836,920 |
LIABILITIES AND DEBT - Accrued
LIABILITIES AND DEBT - Accrued Expenses and Other Liabilities (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
LIABILITIES AND DEBT | ||
Accrued expenses | $ 970,890 | $ 213,740 |
Reserve for returns | 25,000 | 33,933 |
Payroll related liabilities | 2,303,321 | 1,204,665 |
Sales tax liability | 268,804 | 268,723 |
Due to seller | 396,320 | |
Other liabilities | 130,702 | 119,764 |
Accrued Liabilities and Other Liabilities, Total | 3,698,717 | 2,237,145 |
Estimated Penalties Associated With Accrued Payroll Taxes | $ 262,000 | $ 262,000 |
LIABILITIES AND DEBT - Venture
LIABILITIES AND DEBT - Venture Debt (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Line of Credit Facility [Line Items] | ||||||
Gross proceeds received | $ 237,500 | |||||
Interest expense | 382,304 | $ 402,027 | ||||
Note Warrant [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Loan fees and discounts from warrants unamortized balance | 0 | |||||
Venture Debt [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Interest expense | $ 191,152 | $ 202,041 | ||||
Interest expense and effective interest rate | 12.20% | 13.40% | ||||
Venture Debt [Member] | Note Warrant [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Loan fees and discounts from warrants were amortized to interest expense | 12,500 | $ 147,389 | ||||
Venture Debt [Member] | Secured Debt | ||||||
Line of Credit Facility [Line Items] | ||||||
Gross proceeds received | $ 237,500 | |||||
Amended Venture Debt [Member] | Secured Debt | ||||||
Line of Credit Facility [Line Items] | ||||||
Loan fees | $ 12,500 | |||||
Gross loan | $ 6,251,755 | $ 6,251,755 | $ 6,001,755 |
LIABILITIES AND DEBT - Converti
LIABILITIES AND DEBT - Convertible Debt (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Convertible Debt 2020 Regulation D Offering | ||
Debt Instrument [Line Items] | ||
Outstanding principal and accrued interest upon closing of IPO | $ 100,000 | $ 100,000 |
LIABILITIES AND DEBT - Conver_2
LIABILITIES AND DEBT - Convertible Promissory Note (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Apr. 08, 2022 | Jun. 30, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Debt Instrument [Line Items] | |||||
Repayments of debt | $ 3,068,750 | $ 2,001,305 | |||
Number of shares resulting from conversion | 2,482,698 | ||||
Outstanding principal amount of convertible debt converted | $ 1,432,979 | ||||
Derivative liability at fair value | $ 1,044,939 | 1,044,939 | $ 2,294,720 | ||
Net proceeds, after the original issue discount and issuance costs | 8,032,021 | $ 9,465,000 | |||
Oasis Note | |||||
Debt Instrument [Line Items] | |||||
Amortization of debt discount | 5,671,267 | ||||
Derivative liability at fair value | 2,904,803 | 2,904,803 | |||
Convertible Promissory Note | |||||
Debt Instrument [Line Items] | |||||
Amortization of debt discount | $ 1,724,591 | $ 2,783,174 | |||
Convertible Promissory Note | Securities Purchase Agreement | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 3,068,750 | ||||
Original issue discount | 613,750 | ||||
Net proceeds after the original issue discount and fees | 2,313,750 | ||||
Debt discount | 755,000 | ||||
Repayments of debt | 3,068,750 | ||||
April notes | |||||
Debt Instrument [Line Items] | |||||
Debt discount | $ 98,241 | ||||
Warrants issued to purchase common stock | 1,257,684 | 1,257,684 | 1,257,684 | ||
Exercise price of warrants | $ 1.22 | $ 1.22 | $ 1.22 |
LIABILITIES AND DEBT - Loan Pay
LIABILITIES AND DEBT - Loan Payable - PPP and SBA Loan (Details) - USD ($) | 1 Months Ended | ||
Apr. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | |
Harper & Jones LLC | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 227,637 | ||
Interest rate of loans | 12% | ||
Economic Injury Disaster Loan | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 148,900 | $ 148,900 | |
1st PPP loan | Bailey LLC. | |||
Debt Instrument [Line Items] | |||
Loan forgiveness amount | $ 413,705 | ||
2nd PPP loan | Bailey LLC. | |||
Debt Instrument [Line Items] | |||
Loan forgiveness amount | $ 1,347,050 |
LIABILITIES AND DEBT - Promisso
LIABILITIES AND DEBT - Promissory Note Payable (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Debt Instrument [Line Items] | ||||||
Gross proceeds received | $ 237,500 | |||||
Outstanding balance | $ 1,489,335 | 1,489,335 | $ 2,502,000 | |||
Promissory note payable | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount | $ 500,000 | |||||
Repayment of outstanding principal amount | 1,065,000 | |||||
Gross proceeds received | $ 250,000 | |||||
Warrants issued | 22,500 | |||||
Outstanding balance | 255,219 | 255,219 | ||||
Promissory note payable | Common Stock | ||||||
Debt Instrument [Line Items] | ||||||
Stock issued during period | 727,500 | |||||
Promissory note payable | Notes Payable to Banks [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest expense | 105,000 | $ 120,000 | 210,000 | $ 284,000 | ||
Promissory note payable | Notes Payable to Banks [Member] | Bailey LLC. | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount | $ 3,500,000 | $ 3,500,000 | $ 3,500,000 |
STOCKHOLDERS' DEFICIT (Details)
STOCKHOLDERS' DEFICIT (Details) - USD ($) | 6 Months Ended | ||
May 10, 2022 | May 05, 2022 | Jun. 30, 2022 | |
Class of Stock [Line Items] | |||
Outstanding principal amount of convertible debt converted | $ 1,432,979 | ||
Number of shares resulting from conversion | 2,482,698 | ||
Proceeds from Issuance of Common Stock | $ 8,100,000 | ||
Net proceeds of after deducting underwriting discounts and commissions | 700,000 | ||
Direct offering expenses | $ 500,000 | ||
Initial Public Offering | |||
Class of Stock [Line Items] | |||
Number of shares agreed to issued and sell | 37,389,800 | ||
Share issue price | $ 0.25 | ||
Issue price (in dollars per share) | $ 0.23 | ||
Number of option days granted to purchase an additional shares | 45 days | ||
Number of share sold or issued on closing of Public Offering | 37,389,800 | ||
Maximum number of additional shares allowed to purchase within 45 option days | 5,608,470 | ||
Gross proceeds from the offering | $ 9,300,000 |
RELATED PARTY TRANSACTIONS - Du
RELATED PARTY TRANSACTIONS - Due to Related Parties (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
Advances | ||
Due to related parties | ||
Advance due to related parties | $ 104,568 | $ 104,568 |
Accrued Salary | ||
Due to related parties | ||
Advance due to related parties | $ 120,350 | |
Expense Reimbursements | ||
Due to related parties | ||
Advance due to related parties | $ 126,706 |
RELATED PARTY TRANSACTIONS - No
RELATED PARTY TRANSACTIONS - Note Payable (Details) - Chief Executive Officer | Jun. 30, 2022 USD ($) |
Related Party Transaction [Line Items] | |
Due to Related Parties | $ 25,000 |
Notes Payable, Other Payables | Note Payable, Chief Executive Officer | |
Related Party Transaction [Line Items] | |
Aggregate principal amount | $ 227,637 |
SHARE-BASED PAYMENTS - Common S
SHARE-BASED PAYMENTS - Common Stock Warrants - General Information (Details) - $ / shares | May 10, 2022 | Jun. 30, 2022 | Apr. 08, 2022 | Dec. 31, 2021 |
Class of Warrant or Right [Line Items] | ||||
Option outstanding exercise price (in dollars per share) | 3,895,103 | 3,895,103 | ||
Option outstanding | $ 3.59 | $ 3.59 | ||
Share-based Compensation Arrangement by Share-based Option Exercisable | 3,339,173 | |||
April notes | ||||
Class of Warrant or Right [Line Items] | ||||
Number of common shares to be acquired on exercise of warrants | 1,257,684 | 1,257,684 | ||
Warrants exercise price | $ 1.22 | $ 1.22 | ||
Underwriters Warrants | ||||
Class of Warrant or Right [Line Items] | ||||
Number of common shares to be acquired on exercise of warrants | 1,495,592 | |||
Percentage of Warrants Per Share | 130% | |||
Warrants exercise price | $ 0.325 |
SHARE-BASED PAYMENTS - Stock-ba
SHARE-BASED PAYMENTS - Stock-based Compensation - Stock options granted (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 119,759 | $ 3,568,370 | $ 258,852 | $ 3,604,346 |
Unrecognized compensation cost related to non-vested stock option | $ 798,184 | $ 798,184 | ||
Share-based arrangement, non-vested weighted average period | 1 year 9 months 14 days | |||
Sales and Marketing Expense | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 28,798 | $ 523,151 |
SHARE-BASED PAYMENTS - Warrants
SHARE-BASED PAYMENTS - Warrants Roll Forward (Details) - Common stock warrants | 6 Months Ended |
Jun. 30, 2022 $ / shares shares | |
Class of Warrant or Right [Line Items] | |
Warrant Outstanding Beginning Balance | shares | 3,580,116 |
Granted | shares | 2,753,276 |
Warrant Outstanding Ending Balance | shares | 6,333,392 |
Common Stock Warrants Exercisable | shares | 4,837,799 |
Weighted Average Exercise Price Outstanding Beginning Balance | $ / shares | $ 4.12 |
Granted | $ / shares | 0.73 |
Weighted Average Exercise Price Outstanding Ending Balance | $ / shares | 4.12 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 3.37 |
LEASE OBLIGATIONS (Details)
LEASE OBLIGATIONS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Operating lease agreements | |||||
Rent expense | $ 17,257 | $ 195,060 | $ 173,052 | $ 469,482 | $ 305,841 |
Security deposit | $ 19,500 | ||||
Right of use asset | $ 201,681 | 201,681 | |||
Discount rate | 6% | ||||
Minimum Rent base | 3,400 | ||||
Maximum Rent base | 6,500 | ||||
Accounting Standards Update 2016-02 | |||||
Operating lease agreements | |||||
Operating lease liability | $ 250,244 | ||||
Right of use asset | $ 250,244 | ||||
Stateside | |||||
Operating lease agreements | |||||
Minimum Rent base | 3,100 | ||||
Maximum Rent base | $ 9,000 |
CONTINGENCIES (Details)
CONTINGENCIES (Details) | 1 Months Ended | 12 Months Ended | ||||||
Jul. 17, 2022 USD ($) $ / shares | Dec. 21, 2020 USD ($) | Sep. 24, 2020 USD ($) | Mar. 25, 2020 USD ($) item | Feb. 28, 2022 item | Mar. 31, 2021 USD ($) item | Aug. 31, 2020 USD ($) item | Dec. 31, 2021 USD ($) | |
Litigation Matters | ||||||||
Settlement amount payable to vendor | $ 37,000 | |||||||
Number of monthly payments to be made | item | 10 | |||||||
Material Definitive Agreement | ||||||||
Litigation Matters | ||||||||
Payments to acquire membership interests | $ 5,000,000 | |||||||
Shares issued to acquire membership interests | $ 7,000,000 | |||||||
Common stock par value (in dollars per share) | $ / shares | $ 0.0001 | |||||||
Closing price per share | $ / shares | $ 0.19 | |||||||
Material Definitive Agreement | George Levy | ||||||||
Litigation Matters | ||||||||
Payments to acquire membership interests | $ 2,500,000 | |||||||
Material Definitive Agreement | Matthieu Leblan | ||||||||
Litigation Matters | ||||||||
Payments to acquire membership interests | 2,500,000 | |||||||
Material Definitive Agreement | Jenny Murphy | ||||||||
Litigation Matters | ||||||||
Payments to acquire membership interests | 7,000,000 | |||||||
Material Definitive Agreement | Elodie Crichi | ||||||||
Litigation Matters | ||||||||
Payments to acquire membership interests | 7,000,000 | |||||||
Material Definitive Agreement | Jenny Murphy and Elodie Crichi | ||||||||
Litigation Matters | ||||||||
Shares issued to acquire membership interests | $ 20,000,000 | |||||||
Lawsuits filed related to prior services rendered | ||||||||
Litigation Matters | ||||||||
Damages sought | $ 96,900 | $ 96,900 | ||||||
Number of lawsuits filed | item | 2 | 2 | ||||||
Number of lawsuit settled | item | 1 | |||||||
Non-payment of trade payables | ||||||||
Litigation Matters | ||||||||
Damages sought | $ 492,390 | |||||||
Non-payment of trade payables | Lawsuits filed related to prior services rendered | ||||||||
Litigation Matters | ||||||||
Damages sought | $ 481,000 | |||||||
Additional damages sought | $ 296,000 | |||||||
Judgement received | $ 469,000 | |||||||
Reimbursement Of Investment | ||||||||
Litigation Matters | ||||||||
Damages sought | $ 100,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Events - USD ($) | Jul. 29, 2022 | Jul. 28, 2022 | Jul. 22, 2022 |
H&J acquisition | |||
Subsequent Event [Line Items] | |||
Amount of cash paid | $ 7,899,356 | ||
Securities Purchase Agreement | |||
Subsequent Event [Line Items] | |||
Aggregate amount issued to investor | 4,112,500 | ||
Warrants exercisable term | 5 years | ||
Warrants exercise price | $ 0.152 | ||
Promissory note | |||
Subsequent Event [Line Items] | |||
Aggregate principal amount | $ 1,875,000 | ||
Percentage of discount on issue of promissory note | 20% | ||
July notes | |||
Subsequent Event [Line Items] | |||
Percentage of original issue discount. | 20% | ||
Aggregate Subscription Amount | $ 1,000,000 | ||
Aggregate principal amount | $ 1,250,000 | ||
Percentage of increase in face value | 120% | ||
Percentage of annual interest rate | 20% | ||
July notes | Promissory note | |||
Subsequent Event [Line Items] | |||
Subscription amount | $ 1,500,000 | ||
July notes | Debt or Equity Financing of Less Than $4,000,000 [Member] | |||
Subsequent Event [Line Items] | |||
Percentage of notes required to repay | 50% | ||
July notes | Debt or Equity Financing of Less Than $4,000,000 [Member] | Maximum | |||
Subsequent Event [Line Items] | |||
Debt or equity financing | $ 4,000,000 | ||
July notes | Debt or Equity Financing of $4,000,000 or Greater [Member] | |||
Subsequent Event [Line Items] | |||
Percentage of notes required to repay | 100% | ||
July notes | Debt or Equity Financing of $4,000,000 or Greater [Member] | Minimum | |||
Subsequent Event [Line Items] | |||
Debt or equity financing | $ 4,000,000 |