Digital Brands Group (DBGI) risk factors, FY2024 10-K

Risks related to our financial condition and business

1. 01We have incurred significant net losses since our inception and cannot assure you that we will achieve or maintain profitable operations
2. 02We have historically incurred net losses and experienced negative cash flows from operations
3. 03With this funding, we believe we are positioned to execute our business strategy, invest in growth initiatives, and enhance our financial performance, although additional funding may be required in the future to support expansion
4. 04If our efforts to locate desirable targets are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, we may not be able to grow the business and our revenues and operating results will be adversely affected
5. 05We may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer
6. 06We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them
7. 07Our ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we may be unable to obtain on acceptable terms
8. 08As of December 31, 2024, we had an aggregate principal amount of debt outstanding of approximately $6.5 million. We believe this is an amount of indebtedness which may be considered significant for a company of our size and current revenue base
9. 09We currently have $3.5 million in notes outstanding pursuant to our Bailey acquisition. We are currently unable to repay or refinance borrowings so any such action by these lenders could force us into bankruptcy or liquidation
10. 10Our results of operations have been and could be in the future adversely affected as a result of asset impairments
11. 11If we fail to effectively manage our growth, our business, financial condition and operating results could be harmed
12. 12We are also required to manage numerous relationships with various vendors and other third parties
13. 13If we are unable to anticipate and respond to changing customer preferences and shifts in fashion and industry trends in a timely manner, our business, financial condition and operating results could be harmed
14. 14An economic downturn or economic uncertainty in the United States may adversely affect consumer discretionary spending and demand for our products
15. 15Adverse macroeconomic and geopolitical conditions, including trade policies and tariffs, may have a material adverse effect on the Company’s business, results of operations and financial condition
16. 16We operate in highly competitive markets and the size and resources of some of our competitors may allow them to compete more effectively than we can, resulting in a loss of our market share and a decrease in our net revenue
17. 17Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties
18. 18We do not prescribe what our influencers post, and if we were held responsible for the content of their posts or their actions, we could be fined or forced to alter our practices, which could have an adverse impact on our business
19. 19If we fail to retain existing customers, or fail to maintain average order value levels, we may not be able to maintain our revenue base and margins, which would have a material adverse effect on our business and operating results
20. 20We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected
21. 21Merchandise returns could harm our business
22. 22We rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity
23. 23The fabrics used in our products include synthetic fabrics whose raw materials include petroleum-based products, as well as natural fibers such as cotton. Significant price fluctuations or shortages in petroleum or other raw materials can materially adversely affect our cost of net revenues
24. 24Our operations are currently dependent on a single warehouse and distribution center, and the loss of, or disruption in, the warehouse and distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on our business and operations
25. 25Our sales and gross margins may decline as a result of increasing freight costs
26. 26Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations
27. 27Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer
28. 28Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel
29. 29If we cannot successfully protect our intellectual property, our business could suffer
30. 30If the technology-based systems that give our customers the ability to shop with us online do not function effectively, our operating results could be materially adversely affected
31. 31Organizations face growing regulatory and compliance requirements
32. 32Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity
33. 33Our business is affected by seasonality

Risks Related to our Common Stock

1. 34The price of our common stock has in the past and may in the future fluctuate substantially
2. 35These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the public offering price
3. 36If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock
4. 37Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price
5. 38Provisions in our sixth amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable
6. 39This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction
7. 40We do not expect to pay any dividends in the foreseeable future
8. 41If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline