Digital Brands Group, Inc. - Annual Investor Update

I wrote this guide to help you understand how Digital Brands Group (DBGI) operates. My goal is to cut through the corporate jargon so you can decide if this company fits your investment goals.

1. What does this company do?

Digital Brands Group is a "house of brands" selling apparel online. Its portfolio includes Bailey 44, DSTLD, Stateside, and Sundry. These brands focus on premium, direct-to-consumer fashion. Recently, the company pivoted to Avo, a brand selling collegiate gear through Name, Image, and Likeness (NIL) partnerships. They aim to capture "closet share" by cross-selling their brands to a unified customer base.

2. The Big News: Delisting and Financial Struggles

The Nasdaq delisted the company on December 12, 2024, because its stock price fell too low. It now trades on the "OTC Pink Market" (ticker: DBGI). This is a risky environment with limited public information and wider price gaps between buyers and sellers. To boost the share price before delisting, the company executed a 1-for-50 reverse stock split on December 23, 2024. This combined 50 shares into one, increasing the price per share without changing the company’s actual value.

3. Financial Health: A Fragile Situation

The company’s finances are in a downward spiral:

• Revenue is falling: Revenue dropped from $11.6 million in 2024 to $7.4 million in 2025. This 36.2% decline shows struggles with inventory and marketing.
• Deepening losses: The company lost $28.3 million in 2025, a 116% increase over the $13.1 million loss in 2024.
• Debt and unpaid bills: The company defaulted on a $3.5 million loan that matured on December 31, 2025. It also owes $2.1 million in interest and taxes.
• Constant dilution: To pay for daily operations, the company frequently issues new shares. Between December 2025 and April 2026, it issued over 7.5 million new shares. This reduces your ownership percentage and dilutes the value of your existing investment.

4. The "Marketing Gamble"

The company is betting its future on collegiate marketing deals through its Avo brand. In 2025, it signed agreements with groups like "The Grove Collective" for manufacturing and marketing rights.

• The Risk: These deals require significant cash. Because the company lacks cash, it pays partners with stock instead. If the stock price falls, the company must issue even more shares to pay the same debt. This creates a "death spiral" where dilution accelerates as the stock price drops.

5. Legal and Operational Headaches

• Debt issues: The company sells unpaid customer invoices at a discount to get quick cash. This hurts long-term profit margins. Additionally, lenders hold rights to buy shares at below-market prices, which puts more pressure on the stock.
• Lawsuit: A landlord is suing the company for $1.4 million in unpaid rent related to its Bailey 44 subsidiary.
• Going concern: Auditors issued a "going concern" warning. This means they doubt the company can survive the next 12 months without a major cash injection or debt restructuring.

6. Tax "Assets"

The company reports $108 million in tax losses. While these could theoretically lower future tax bills, they are currently marked as having no value on the balance sheet because the company continues to lose money. They provide no immediate help to the company’s cash position.

Final Thought for Investors: When evaluating this company, focus on the "going concern" warning and the ongoing dilution. The company is currently struggling to generate enough cash to cover its basic operating costs and debt obligations. Before considering an investment, weigh whether the potential growth of the Avo brand outweighs the significant risks of default, legal challenges, and the continuous issuance of new shares that lowers the value of existing holdings.