NASDAQ: DBGI

The
Company and various purchasers (the “Investors”) executed a securities purchase agreement (the “SPA”) on or around
April 7, 2023, whereby the Investors purchased from the Company promissory notes in the aggregate principal amount of approximately $2,500,000
(the “Original Notes”), and the remaining balances of such Original Notes as of October 1, 2023, were exchanged by the Investors
for replacement promissory notes issued on October 1, 2023, in the aggregate principal amount of approximately $1,789,668.37 (the “2023
Notes”). On May 24, 2024, the Company entered into settlement agreements with the Investors (each a “Settlement Agreement”),
pursuant to which the Company agreed to pay aggregate cash payments equal to $1,789,668.37 to extinguish all obligations and claims under
the SPA, Original Notes, and 2023 Notes, as follows: (i) $500,000.00 on or before May 28, 2024 and (ii) $1,289,668.37 on or before September
30, 2024 (the “Final Payment”). On or around October 3, 2024, the Company entered into amendments to each Settlement Agreement
with the Investors, whereby the Final Payment due date was extended to October 31, 2024. On November 1, 2024, the Company entered into
a second amendment to each Settlement Agreement with the Investors, whereby the Final Payment due date was extended to November 4, 2024.
On November 4, 2024, the Company paid the Final Payment to extinguish all obligations and claims under the SPA, Original Notes, and 2023
Notes.

Between
July 1, 2024 and October 22, 2024, the Company issued and sold 105,125 shares of Common Stock (the “Recent ATM Share Sales”)
to H.C. Wainwright & Co., LLC (the “Agent”) as sales agent or principal, pursuant to the terms of the Company’s
previously announced At-The-Market Offering Agreement, dated December 27, 2023, between us and the Agent (the “Sales Agreement”).
The Company received net proceeds of $2,063,386 from the Recent ATM Share Sales. Between October 23, 2024 and December 17, 2024, the
Company issued and sold 65,236 shares of Common Stock to the Agent as sales agent or principal, pursuant to the terms of the Sales Agreement,
and received net proceeds of $278,160.

Between
October 3, 2024 and October 15, 2024, the Company issued 26,226 shares of the Company’s common stock (the “Shares”)
to a certain note holder upon conversion of a portion of their promissory note originally issued by the Company on or around October
1, 2023 (the “Note”). On October 16, 2024, the Company became aware that the issuance of the Shares was in error and not
permitted under the terms of the Note due to the requirement thereunder that stockholder approval be obtained prior to the issuance of
more than 19.9% of the Company’s pre-transaction shares outstanding upon conversion(s) of the Note, as referenced and specifically
required under Nasdaq Listing Rule 5635(d). The Company then notified the note holder that the Shares must be returned to the Company’s
transfer agent for cancellation. On November 5, 2024, the holder facilitated the cancellation of 26,226 shares of the Company’s
common stock in accordance with the Company’s remediation plan. The Company communicated with The Nasdaq Stock Market LLC regarding
the aforementioned erroneous issuance of the Shares and subsequent remediation actions. The Listing Qualifications Staff (the “Staff”)
of The Nasdaq Stock Market LLC considered the Company’s non-compliance with Nasdaq Listing Rule 5635(d) as an additional basis
for the delisting of the Company’s securities from Nasdaq.

3

On
October 28, 2024, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited
investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering
(the “Offering”): (i) 124,673 shares of common stock (the “Common Stock”), at a purchase price of $5.00 per share
of Common Stock, and (ii) 482,187 pre-funded warrants (“Pre-Funded Warrants”) to purchase Common Stock, at a purchase price
of $4.995 per Pre-Funded Warrant, immediately exercisable at an exercise price of $0.005 per share. The Purchase Agreement contained
customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations
of the parties. The Offering closed on October 30, 2024.

The
Company offered Pre-Funded Warrants to those Purchasers whose purchase of Common Stock in the Offering would have resulted in the Purchaser,
together with its affiliates and certain related parties, beneficially owning more than 4.99% (or at the election of the Purchaser, 9.99%)
of our Common Stock immediately following the consummation of the Offering in lieu of the Common Stock that would otherwise result in
ownership in excess of 4.99% (or at the election of the purchaser, 9.99%) of the outstanding Common Stock of the Company. The Pre-Funded
Warrants may be exercised commencing on the issuance date and do not expire. The Pre-Funded Warrants are exercisable for cash; provided,
however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement
registering, or no current prospectus available for, the issuance or resale of the Common Stock issuable upon exercise of the Pre-Funded
Warrants.

The
Common Stock, the Pre-Funded Warrants, and the Common Stock issuable upon exercise of the Pre-Funded Warrants were offered pursuant to
a registration statement on Form S-1 as filed with the SEC on October 24, 2024, as amended, and was declared effective on October 28,
2024 (the “Registration Statement”).

RBW
Capital Partners LLC, acting through Dominari Securities LLC (the “Placement Agent”), acted as the exclusive placement agent
for the Offering pursuant to a Placement Agency Agreement dated October 28, 2024 (the “Placement Agency Agreement”) by and
between the Company and the Placement Agent.

The
Offering resulted in gross proceeds to the Company of approximately $3,000,000, before deducting placement agent fees and commissions
and other offering expenses, and excluding proceeds to the Company, if any, that may result from the future exercise of the Pre-Funded
Warrants issued in the Offering. As compensation to the Placement Agent, as the exclusive placement agent in connection with the Offering,
the Company paid to the Placement Agent a cash fee of 8.0% of the aggregate gross proceeds raised in the Offering, a non-accountable
expense allowance of 1.0% of the aggregate gross proceeds raised in the Offering, reimbursement of up to $50,000 for expenses of legal
counsel and other actual out-of-pocket expenses, and up to $15,950 for clearing agent closing costs. The Company received net proceeds
of approximately $2,555,261 from the Offering (the “Public Offering Proceeds”).

On
December 9, 2024, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of
the State of Delaware to effectuate the 2024 Reverse Stock Split at a
ratio of 1-for-50 (the “Amendment”). The Amendment became effective at 5:00 PM ET on December 12, 2024.

On
or around January 17, 2025, the Company closed a private placement pursuant to a securities purchase agreement with a certain accredited
investor, pursuant to which the Company agreed to issue and sell, in a private placement, a promissory note in the principal amount of
$121,900 (the “January 2025 Note”). The January 2025 Note is convertible into common stock upon default at a conversion price
equal to 61% of the lowest closing bid price during the ten trading days prior to the conversion date. The January 2025 Note provides
that the total number of shares of common stock that may be issued upon conversion thereof shall not exceed 19.99% of the shares of Common
Stock outstanding as of the issuance date of the January 2025 Note.

4

On
or around January 20, 2025, the Company entered into a vendor agreement (the “Vendor Agreement”) with MavDB Consulting LLC
(the “Vendor”). The engagement of the Vendor is for a five (5) year period and the vendor services to be provided include,
but are not limited to, product content production, social media marketing, engagement of influencers and student athletes for product
awareness, and event and staffing costs (the “Services”). In consideration for the Services, the Company will pay the Vendor
a vendor fee equal to $3,000,000 (the “Cash Fee”) within thirty calendar days after the date of the Vendor Agreement (the
“Payment Period”), provided, however, that Vendor may elect to receive the Vendor Shares (as defined below) and/or Vendor
Pre-Funded Warrants (as defined below) as described below in lieu of the Cash Fee by providing written notice to the Company of such
election during the Payment Period (the “Written Notice”). The “Vendor Shares” shall mean a number of Common
Stock equal to the Cash Fee divided by $1.45, provided, however, if the issuance of any of the Vendor Shares would cause the Vendor to
exceed 4.99% of the of the outstanding Common Stock, as determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder, then the Company shall instead issue to Vendor pre-funded warrants (the “Vendor Pre-Funded Warrants”)
for the purchase of the amount of Vendor Shares in excess of the beneficial ownership limitation, provided, further, that if the Vendor
specifies in the Written Notice that the Vendor elects to receive Vendor Pre-Funded Warrants in lieu of the entire amount of the Vendor
Shares, then the Company shall instead issue to Vendor the Vendor Pre-Funded Warrants to purchase the entire amount of the Vendor Shares.
The Vendor delivered the Written Notice to the Company during the Payment Period and the Company issued the Vendor Pre-Funded Warrants
for the purchase of 2,068,965 shares of Common Stock to Vendor on January 21, 2025.

The
Vendor Pre-Funded Warrants have an initial exercise price per share of Common Stock equal to $0.01. The Vendor Pre-Funded Warrants are
immediately exercisable and will expire five (5) years after the issuance date of the Vendor Pre-Funded Warrants. The exercise price
and number of shares of Common Stock issuable upon exercise is subject to appropriate adjustment in the event of share dividends, share
splits, reorganizations or similar events. The Vendor Pre-Funded Warrants will be exercisable, at the option of the Vendor, in whole
or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock
purchased upon such exercise (except in the case of a cashless exercise). The Vendor (together with its affiliates) may not exercise
any portion of the Vendor Pre-Funded Warrants to the extent that the Vendor would own more than 4.99% of the outstanding shares of Common
Stock immediately after exercise, except that upon at least 61 days’ prior notice from the Vendor to us, the Vendor may increase
the amount of beneficial ownership of outstanding shares after exercising the Vendor’s Pre-Funded Warrants up to 9.99% of the number
of our shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined
in accordance with the terms of the Vendor Pre-Funded Warrants. In lieu of making the cash payment otherwise contemplated to be made
to us upon such exercise in payment of the aggregate exercise price, the Vendor may elect instead to receive upon such exercise (either
in whole or in part) the number of shares of Common Stock determined according to a formula set forth in the Vendor Pre-Funded Warrants.

On
January 22, 2025, the Company issued a promissory note in the principal amount of $260,000.00 (the “Second Note”) to an accredited
investor (“Investor”), pursuant to which the Investor made a loan to the Company. The Second Note carries an original issue
discount of $60,000.00, and accordingly the purchase price of the Second Note is $200,000.00. The Second Note matures on April 22, 2025,
and contains customary events of default. Upon the occurrence of any event of default under the Second Note, the Second Note will become
immediately due and payable in an amount equal to the outstanding principal and accrued interest under the Second Note plus default interest
at the rate of sixteen percent (16%) per annum.

2024
Reverse Stock Split

In
December 2024, following the approval of shareholders, we completed the 2024 Reverse Stock Split in the ratio of 1-for-50. As a
result of the 2024 Reverse Stock Split, every fifty (50) shares of the Company’s pre-reverse stock split common stock was
combined and automatically became one (1) share of common stock. The 2024 Reverse Stock Split did not (i) change the authorized
number of shares, (ii) change the par value of the common stock, or (iii) modify any voting rights of the common stock.

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Also,
at the effective time of the 2024 Reverse Stock Split, the number of shares of common stock issuable upon exercise of warrants
(including public warrants under the trading symbol “DBGIW”), preferred stock, and other convertible securities, as well
as any commitments to issue securities, that provide for adjustments in the event of a reverse stock split will be appropriately
adjusted pursuant to their applicable terms for the 2024 Reverse Stock Split. If applicable, the conversion price for each
outstanding share of preferred stock and the exercise price for each outstanding warrant will be increased, pursuant to their terms,
in inverse proportion to the 1-for-50 split ratio such that upon conversion or exercise, the aggregate conversion price for
conversion of preferred stock and the aggregate exercise price payable by the warrant holder to the Company for shares of common
stock subject to such warrant will remain approximately the same as the aggregate conversion or exercise price, as applicable, prior
to the 2024 Reverse Stock Split.

Completion
of Offering of Common Stock and Pre-Funded Warrants

On
February 13, 2025, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited
investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a best efforts offering
(the “Offering”) 11,365,340 units (the “Units”), including (i) 125,535 units consisting of one share of common
stock, par value $0.0001 per share (the “Common Stock”) and two warrants to purchase one share of Common Stock each (the
“Share Unit Warrants”), at a purchase price per unit equal to $0.66, and (ii) 11,239,805 units consisting of a pre-funded
warrant to purchase one share of Common Stock (“Pre-Funded Warrants”), immediately exercisable at an exercise price of $0.0001
per share, and two warrants to purchase one share of Common Stock each (the “PFW Unit Warrants, and collectively with the Share
Unit Warrants, the “Warrants”), at a purchase price per unit equal to $0.6599. The Warrants may be exercised for an aggregate
of 22,730,680 shares of Common Stock at an exercise price equal to $0.66 per share, subject to adjustment for stock splits and similar
events. The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers and
customary indemnification rights and obligations of the parties. The Offering closed on February 18, 2025.

The
Company offered Pre-Funded Warrants to those Purchasers whose purchase of Common Stock in the Offering would have resulted in the Purchaser,
together with its affiliates and certain related parties, beneficially owning more than 4.99% (or at the election of the Purchaser, 9.99%)
of our Common Stock immediately following the consummation of the Offering in lieu of the Common Stock that would otherwise result in
ownership in excess of 4.99% (or at the election of the purchaser, 9.99%) of the outstanding Common Stock of the Company. The Pre-Funded
Warrants may be exercised commencing on the issuance date and do not expire. The Pre-Funded Warrants are exercisable for cash; provided,
however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement
registering, or no current prospectus available for, the issuance or resale of the Common Stock issuable upon exercise of the Pre-Funded
Warrants. The exercise of the Pre-Funded Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise
thereof, if upon such exercise the holder of the Pre-Funded Warrants, its affiliates and any other persons or entities acting as a group
together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a Purchaser prior to the issuance
of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable
upon exercise of the Pre-Funded Warrant held by the applicable holder, provided that the holder may increase or decrease the beneficial
ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot be waived

The
Warrants may be exercised commencing on the issuance date and expire one year from issuance. The Warrants are exercisable for cash at
an exercise price of $0.66 per share; provided, however that they may be exercised on a cashless exercise basis if, at the time of exercise,
there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the Common
Stock issuable upon exercise of the Warrants. The exercise of the Warrants will be subject to a beneficial ownership limitation, which
will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities
acting as a group together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a Purchaser
prior to the issuance of any shares, 9.99%) of the number of Common Stock outstanding immediately after giving effect to the issuance
of Common Stock issuable upon exercise of the Warrants held by the applicable holder, provided that the holder may increase or decrease
the beneficial ownership limitation (up to a maximum of 9.99%) upon 60 days advance notice to the Company, which 60 day period cannot
be waived.

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At
the closing of the Offering, the Company issued warrants to RBW Capital Partners LLC, acting through Dawson James Securities, Inc. (the
“Placement Agent”), for the purchase of 568,267 shares of Common Stock at an exercise price of $0.759 per share (the “Placement
Agent Warrants”), which is equal to 115% of the price per Unit. The Placement Agent Warrants are exercisable at any time commencing
six (6) months from the date of commencement of sales in the Offering and expiring five (5) years from the commencement of sales in the
Offering. During the aforementioned six (6) month period, the Placement Agent Warrant may not be sold, transferred, assigned, pledged,
or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective
economic disposition of the Placement Agent Warrant pursuant to FINRA Rule 5110(e)(1)(A).

The
Common Stock, Pre-Funded Warrants, Common Stock issuable upon exercise of the Pre-Funded Warrants, Warrants, Common Stock issuable upon
exercise of the Warrants, Placement Agent Warrants, and Common Stock issuable upon exercise of the Placement Agent Warrants were offered
pursuant to a registration statement on Form S-1 (File No. 333-284508), as filed with the Securities and Exchange Commission (the “Commission”)
on January 27, 2025, as amended, and was declared effective on February 11, 2025 (the “Registration Statement”).

The
Placement Agent acted as the exclusive placement agent for the Offering pursuant to a Placement Agency Agreement dated February 13, 2025
(the “Placement Agency Agreement”) by and between the Company and the Placement Agent. The Placement Agency Agreement contains
customary conditions to closing, representations and warranties of the Company, and termination rights of the parties, as well as certain
indemnification obligations of the Company and ongoing covenants for the Company.

The
Offering resulted in gross proceeds to the Company of approximately $7,500,000, before deducting placement agent fees and commissions
and other offering expenses, and excluding proceeds to the Company, if any, that may result from the future exercise of the Pre-Funded
Warrants or Warrants issued in the Offering. As compensation to the Placement Agent, as the exclusive placement agent in connection with
the Offering, the Company paid to the Placement Agent a cash fee of 8.0% of the aggregate gross proceeds raised in the Offering (which
amount shall not include any additional proceeds the Company may receive from the exercise of the Warrants, or the Pre-Funded Warrants,
issued in this Offering) and reimbursement of up to $150,000 for expenses of legal counsel and other actual out-of-pocket expenses.

National
Securities Exchange Application

On
February 20, 2025, the Company issued a press release announcing that it has submitted an application to list its common stock on a national
securities exchange. The successful listing of the Company’s common shares is subject to the approval of the listing application
by the national securities exchange and the satisfaction of all applicable listing criteria and requirements. No assurance can be given
that the listing application will be approved or that such listing will be completed.

Our
Company

Digital
Brands Group is a curated collection of lifestyle brands that offers a variety of apparel products through direct-to-consumer and wholesale
distribution. Our complementary brand portfolio provides us with the unique opportunity to cross-merchandise our brands. We aim for our
customers to wear our brands head to toe and to capture what we call “closet share” by gaining insight into their preferences
to create targeted and personalized content specific to their cohort. Operating our brands under one portfolio provides us with the ability
to better utilize our technological, human capital and operational capabilities across all brands. As a result, we have been able to
realize operational efficiencies and continue to identify additional cost saving opportunities to scale our brands and overall portfolio.

Our
portfolio currently consists of five brands that leverage our three channels: our websites, wholesale and royalty (license revenue).

●
Bailey
44 combines beautiful, luxe fabrics and on-trend designs to create sophisticated ready-to-wear capsules for women on-the-go.
Designing for real life, this brand focuses on feeling and comfort rather than how it looks on a runway. Bailey 44 is primarily a
wholesale brand, which we are transitioning to a digital, direct-to-consumer brand.

●
DSTLD
offers stylish high-quality garments without the luxury retail markup valuing customer experience over labels. DSTLD is primarily
a digital direct-to-consumer brand.

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●
Stateside
is an elevated, America first brand with all knitting, dyeing, cutting and sewing sourced and manufactured locally in Los Angeles.
The collection is influenced by the evolution of the classic t-shirt, offering a simple yet elegant look. Stateside is primarily
a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

●
Sundry
offers distinct collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms
and other accessory products. Sundry’s products are coastal casual and consist of soft, relaxed and colorful designs that feature
a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.
Sundry is primarily a wholesale brand that we will be transitioning to a digital, direct-to-consumer brand.

●
Avo
is a women’s essential brand that will offer t-shirts, sweats, dresses, sweaters and athleisure. Avo eliminates the wholesale
mark-up, so its products have a sharper price point. Avo also offers larger discounts when the customer bundles multiple products
to their cart, which allows Avo to leverage its shipping and fulfillment costs. Avo leverages the Company’s current design
and supply chain infrastructure, so we use similar or the same fabrics and contractors for Avo that we do for our other brands.

We
believe that successful apparel brands sell in all revenue channels. However, each channel offers different margin structures and requires
different customer acquisition and retention strategies. We were founded as a digital-first retailer that has strategically expanded
into select wholesale and direct retail channels. We strive to strategically create omnichannel strategies for each of our brands that
blend physical and online channels to engage consumers in the channel of their choosing. Our products are sold direct-to-consumers principally
through our websites and our own showrooms, but also through our wholesale channel, primarily in specialty stores and select department
stores. With the continued expansion of our wholesale distribution, we believe developing an omnichannel solution further strengthens
our ability to efficiently acquire and retain customers while also driving high customer lifetime value.

We
believe that by leveraging a physical footprint to acquire customers and increase brand awareness, we can use digital marketing to focus
on retention and a very tight, disciplined high value new customer acquisition strategy, especially targeting potential customers lower
in the sales funnel. Building a direct relationship with the customer as the customer transacts directly with us allows us to better
understand our customer’s preferences and shopping habits. Our substantial experience as a company originally founded as a digitally
native-first retailer gives us the ability to strategically review and analyze the customer’s data, including contact information,
browsing and shopping cart data, purchase history and style preferences. This in turn has the effect of lowering our inventory risk and
cash needs since we can order and replenish product based on the data from our online sales history, replenish specific inventory by
size, color and SKU based on real times sales data, and control our mark-down and promotional strategies versus being told what mark
downs and promotions we have to offer by the department stores and boutique retailers.

We
define “closet share” as the percentage (“share”) of a customer’s clothing units that (“of closet”)
she or he owns in her or his closet and the amount of those units that go to the brands that are selling these units. For example, if
a customer buys 20 units of clothing a year and the brands that we own represent 10 of those units purchased, then our closet share is
50% of that customer’s closet, or 10 of our branded units divided by 20 units they purchased in entirety. Closet share is a similar
concept to the widely used term wallet share, it is just specific to the customer’s closet. The higher our closet share, the higher
our revenue as higher closet share suggests the customer is purchasing more of our brands than our competitors.

We
have strategically expanded into an omnichannel brand offering these styles and content not only on-line but at selected wholesale and
retail storefronts. We believe this approach allows us opportunities to successfully drive Lifetime Value (“LTV”) while increasing
new customer growth. We define Lifetime Value or LTV as an estimate of the average revenue that a customer will generate throughout their
lifespan as our customer. This value/revenue of a customer helps us determine many economic decisions, such as marketing budgets per
marketing channel, retention versus acquisition decisions, unit level economics, profitability and revenue forecasting.

In
April of 2024, we entered into a retail store sublease for approximately 3.5 years at the Simon Premium Outlet in Allen, TX, a suburb
of Dallas. We opened the store in April 2024. The Company closed the store in October 2024 to focus on its e-commerce strategy with VaynerCommerce,
a digital marketing agency.

We
intend to continue to actively pursue acquisitions to increase and tighten customer cohorts and increase our ability to create more customized
content and personalized looks and styles for each customer cohort. We believe that customers want and trust brands that can deliver
customized content and personalized looks and styles. We expect this should result in higher customer loyalty, higher lifetime value,
higher average order value and lower customer acquisition cost.

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Organizational
Structure

We
operate the brands on a decentralized basis with an emphasis on brand level execution supported by corporate coordination. The brand’s
executive teams will continue to operate and leverage relationships with customers and suppliers, including designing and producing product
and developing marketing plans including social media, email and digital communications.

We
consolidate marketing and tech contracts as we have done with Bailey’s contracts, which has provided significant cost savings.
We review the fabric mills and factories used by each brand to see if we can consolidate or cross utilize these mills and factories,
which will drive increased volumes, lower production costs and higher gross margins. We are also consolidating production into a few
factories in Europe from China and the U.S., which lowers our average production cost per unit.

We
leverage the Digital Brands Group marketing and data analytics team to create cross-marketing campaigns based on the customer data respective
to each brand’s customer base. As an example, the Digital Brand Group’s marketing and data team reviews the customer data
across all our portfolio brands and will work with each brand to identify the new customers from our other portfolio brands that they
can target and what styles and looks should be created for each of those customer cohorts. The brand level employees then execute the
looks and styles and create the customized customer communication based on the information and data from the Digital Brand Group marketing
and data teams.

Certain
administrative functions are centralized on a regional and, in certain circumstances, a national basis following, including but not limited
to accounting support functions, corporate strategy and acquisitions, human resources, information technology, insurance, marketing,
data analytics and customer cross-merchandising, advertising buys, contract negotiations, safety, systems support and transactional processing.

Principal
Products and Services

Bailey
— Brand Summary

In
February 2020, we acquired Bailey. Bailey delivers distinct high-quality, well-fitting, on-trend contemporary apparel using an entry
contemporary price point. Bailey combines beautiful, luxe fabrics and on-trend designs to offer clean, sophisticated ready-to-wear separates
that easily transition from day to night and for date night. Bailey offers fashionable staples with timeless design features, making
them wearable for any occasion — the majority of products are tops, sweaters and dresses.

Bailey’s
full seasonal collections of dresses, tops, jumpsuits, bottoms, sets, jackets and rompers retail at price points between $90 and $350.
We believe that we can create more compelling price points as we leverage our direct-to-consumer expertise. As we increase the direct-to-consumer
revenue mix, we believe we will have opportunities to increase our margins, which will mostly be passed along to the customer with lower
price points.

With
our acquisition of Bailey 44, LLC, we view the following as tangible near term growth opportunities:

●
Increase
emphasis on email and SMS communications allowing for personalized direct customer engagement, retention and repurchases.

●
Increase
market share in existing and new wholesale, including specialty boutiques due to the well-known and respected designer we hired in
June 2020.

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●
Increase
digital spend, social media presence, and brand and influencer collaborations.

●
Selective
opportunity to roll out proven retail concept in well defined, strategic locations.

●
International
expansion and licensing opportunities in select categories.

Stateside
— Brand Summary

We
acquired Stateside in August 2021. Stateside is a collection of elevated American basics influenced by the evolution of the classic T-shirt.
All garments are designed and produced in Los Angeles from the finest fabrics. All knitting, dyeing, cutting and sewing is sourced and
manufactured locally in Los Angeles.

Stateside
is known for delivering high quality, luxury T-shirts, tops and bottoms. Stateside is primarily a wholesale brand with very limited online
revenue. Their T-shirt prices range from $68 to $94, their other tops range from $98 to $130, and their bottoms from $80 to $144.

With
our acquisition of Stateside, we view the following as tangible near-term growth opportunities:

●
Increase
online revenues significantly as we have spent very little resources on developing its online sales opportunity from the website
optimization to photography to email marketing to online advertising to digital customer acquisition and retention.

●
Increase
gross margins by ordering larger quantities as we pay meaningful upcharges for minimum order quantities.

●
Launch
seasonal new product categories such as women’s knits and wovens in the top category and women’s wovens in the bottom
category. We believe knits and wovens tops are one of the larger product categories in womenswear, with higher price points and dollar
profit.

Sundry — Brand
Summary

We
acquired Sundry in December 2022. Sundry offers distinct collections of women’s clothing, including dresses, shirts, sweaters,
skirts, shorts, athleisure bottoms and other accessory products. Sundry’s products are coastal casual and consist of soft, relaxed
and colorful designs that feature a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice
Beach in Southern California. The products are designed and mostly produced in Los Angeles from the finest fabrics. The majority of the
knitting, dyeing, cutting and sewing is sourced and manufactured locally in Los Angeles, with some sweaters made overseas.

Sundry
is known for delivering high quality novelty and resort style T-shirts, tops and bottoms. Sundry is mostly a wholesale brand with meaningful
online revenue. Their T-shirt prices range from $68 to $98, their other tops range from $98 to $198, and their bottoms range from $80
to $228.

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With
our acquisition of Sundry, we view the following as tangible near-term growth opportunities:

●
Increase
online revenues significantly as we cross-market their customer base with the customer bases from our other brands.

●
Increase
gross margin dollars by updating the product line and driving increased volume through the wholesale and online channels.

●
Launch
a new product category for 2025 in women’s athleisure. We believe athleisure is one of the largest product categories in womenswear,
with high repeat spend and closet share.

DSTLD
— Brand Summary

DSTLD
focuses on minimalist design, superior quality, and only the essential wardrobe pieces. We deliver casual luxury rooted in denim; garments
that are made with exhaustive attention to detail from the finest materials for a closet of timeless, functional staples. Our brand name
“DSTLD” is derived from the word ‘distilled,’ meaning to extract only the essentials. As such, DSTLD boasts a
line of key wardrobe pieces in a fundamental color palette of black, white, grey, and denim.

Our
denim prices generally range from $75 to $95; similar quality brands produced at the same factories wholesale for approximately $95 to
$125 and retail for $185 to $350. Our t-shirts and tops range from $30 to $90, while similar quality brands produced at the same factories
wholesale for approximately $25 to $75 and retail for $60 to $250. Our casual pants range from $85 to $109, with similar quality brands
produced at the same factories wholesaling for approximately $85 to $115 and retailing for $175 to $250.

Avo
— Brand Summary

Avo
is a women’s essential brand that will offer t-shirts, sweats, dresses, sweaters and athleisure. Avo eliminates the wholesale mark-up,
so its products have a sharper price point. Avo also offers larger discounts when the customer bundles multiple products to their cart,
which allows Avo to leverage its shipping and fulfillment costs. Avo leverages the Company’s current design and supply chain infrastructure,
so we use similar or the same fabrics and contractors for Avo that we do for our other brands.

Avo
launched in late August 2024 and prices for t-shirts range from $20 to $50 based on the size of the customer’s bundle. Other product
prices will range from $17.50 for tanks to $198 for sweaters with no retail price above $99 if the customer bundles three units or more.
If the customer bundles two units then they receive a 40% discount and if they bundle three units or more the customer receives a 60%
discount.

ACE
Studios — Brand Summary

ACE
Studios will design and offer luxury men’s suiting with superior performance, superb fits, and excellent quality at an exceptional
value. We will offer men’s classic tailored apparel with premium and luxury fabrics and manufacturing. We work with the same high-quality
mills and factories in the world as the leading luxury brands. We believe most customers have different shapes and sizes, so we plan
to offer multiple fits for our products. We sidestep the middleman and sell our products ourselves, allowing us to offer top-tier quality
without the standard retail markup.

Our
suits had range from $295 to $495; similar quality brands produced at the same factories wholesale for approximately $300 to $600 and
retail for $600 to $1,200. Our dress shirts will range $55 to $65, similar quality brands produced at the same factories wholesale for
approximately $50 to $75 and retail for $95 to $150. Our casual pants will range $85 to $109, similar quality brands produced at the
same factories wholesale for approximately $85 to $115 and retail for $175 to $250.

We
discontinued the operations of the ACE Studios brand in the second quarter of 2024 as a digitally native first brand.

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Sales
and Distribution

DSTLD
and Avo products are sold primarily direct-to-consumer, via our website. We utilize a build your own bundle strategy to increase the
cart size and create cost savings per unit sold. By selling direct-to-consumer, we are able to eliminate the wholesale mark-up and offer
sharper pricing to the customer.

Bailey
products are distributed through wholesale and direct-to-consumer channels. The wholesale channel includes premium department stores,
select independent boutiques and third-party online stores.

Stateside
and Sundry products are distributed through wholesale and direct-to-consumer channels includes premium department stores and national
chains, select independent boutiques and third-party online stores.

We
do not have material terms or arrangements with our third-party distributors. As is customary in the wholesale side of the retail apparel
industry, we work with the wholesale buyers for every product collection and season to develop a purchase order based on quantities,
pricing, profit margin and any future mark- down agreements. Historically, these factors are driven by the wholesale buyer’s belief
of how well they think the product will sell at their stores. For example, if the collection is considered very strong by the wholesale
buyer, we usually achieve higher quantities, higher margins and lower future markdown guarantees. Conversely, when the wholesale buyer
considers the collection to be weak, we experience lower quantities, lower margins and higher mark-down guarantees.

Our
direct-to-consumer channels include our own website. Old season stock is sold through selected off- price retailers, with additional
sales generated through specifically cut product for select off-price retailers.

All
of our DSTLD, Avo, Bailey and Stateside and Sundry sellable product is stored at our corporate warehouse and distribution center in Los
Angeles, CA, which also houses our corporate office. In addition to storing product, we also receive and process new product deliveries,
process and ship outbound orders, and process and ship customer returns in this same facility.

We
offer free shipping and returns above to all our customers in the United States once they achieve a cart size amount of $50 for all brands
but Avo and $99 for Avo. We also offer customers the option to upgrade to 2-Day or Overnight Shipping for an additional cost.

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Design
and Development

Our
products are designed at the headquarters of each brand, which are in Los Angeles, CA. Each brand’s design efforts are supported
by well-established product development and production teams. The continued collaboration between design and merchandising ensures we
respond to consumer preferences and market trends with new innovative product offerings while maintaining our core fashion foundation.
In-house design and production teams in Los Angeles perform development of the sample line, allowing for speed to market, flexibility
and quality of fit.

We
analyze trends, markets, and social media feedback along and utilize historical data and industry tools to identify essential styles
and proper replenishment timing and quantities.

We
rely on a limited number of suppliers to provide our finished products, so we can aggregate pricing power. As we continue to increase
our volumes, we will source additional factories to spread out our risks.

While
we have developed long-standing relationships with a number of our suppliers and manufacturing sources and take great care to ensure
that they share our commitment to quality and ethics, we do not have any long-term term contracts with these parties for the production
and supply of our fabrics and products. We require that all of our manufacturers adhere to a vendor code of ethics regarding social and
environmental sustainability practices. Our product quality and sustainability team partners with leading inspection and verification
firms to closely monitor each supplier’s compliance with applicable laws and our vendor code of ethics.

Currently,
our Bailey, DSTLD, Avo and Stateside and Sundry products are shipped from our suppliers to our distribution center in Los Angeles, CA
which currently handles all our warehousing, fulfillment, outbound shipping and returns processing. Our Sundry products will be shipped
from our suppliers to our distribution center in Los Angeles, CA which will handle all our warehousing, fulfillment, outbound shipping
and returns processing. During 2025, we will review maintaining our own distribution centers versus using a third-party solution.

Product
Suppliers: Sourcing and Manufacturing

We
work with a variety of apparel manufacturers in North America, Asia and Europe. We only work with full package suppliers, which supply
fabric, trims, along with cut/sew/wash services, only invoicing us for the final full cost of each garment. This allows us the ability
to maximize cash flows and optimize operations. We do not have long-term written contracts with manufacturers, though we have long-standing
relationships with a diverse base of vendors.

We
do not own or operate any manufacturing facilities and rely solely on third-party contract manufacturers operating primarily in Europe,
United States, and the Asia Pacific region for the production of our products depending on the brand. All of our contract manufacturers
are evaluated for quality systems, social compliance and financial strength by our internal teams prior to being selected and on an ongoing
basis. Where appropriate, we strive to qualify multiple manufacturers for particular product types and fabrications.

All
of our garments are produced according to each brand’s specifications, and we require that all manufacturers adhere to strict regulatory
compliance and standards of conduct. The vendors’ factories are monitored by each brand’s production team to ensure quality
control, and they are monitored by independent third-party inspectors we employ for compliance with local manufacturing standards and
regulations on an annual basis. We also monitor our vendors’ manufacturing facilities regularly, providing technical assistance
and performing in-line and final audits to ensure the highest possible quality.

We
source our products from a variety of domestic and international manufacturers. When deciding which factory to source a specific product
from, we take into account the following factors:

●
Cost
of garment

●
Retail
price for end consumer

●
Production
time

●
Minimum
order quantity

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●
Shipping/delivery
time

●
Payment
terms

By
taking all of these into consideration, we can focus on making sure we have access to in-demand and high quality products available for
sale to our customers at competitive price points and sustainable margins for our business.

Marketing

We
believe marketing is a critical element in creating brand awareness and an emotional connection, as well as driving new customer acquisition
and retention. Each brand has its own in-house marketing department, which creates and produces marketing initiatives specific to each
marketing channel and based on the specific purpose, such as acquisition, retention or brand building. We also have an in-house marketing
team at the DBG portfolio level, which reviews these brand initiatives, develops and helps initiate cross merchandising strategies, manages
the data analytics and negotiates contracts using all our brands to lower the cost.

Our
goal at the brand and the portfolio level is to increase brand awareness and reach, customer engagement, increase new customer conversion
and repurchase rates and average order size. We utilize a multi-pronged marketing strategy to connect with our customers and drive traffic
to our online platform, comprised of the following:

Customer
Acquisition Marketing

Paid
Social Media Marketing: This is our primary customer acquisition channel, and it is composed almost entirely of paid Facebook and
Instagram marketing. We believe our core customers rely on the opinions of their peers, often expressed through social media. Social
media platforms are viral marketing platforms that allow our brands to communicate directly with our customers while also allowing customers
to interact with us and provide feedback on our products and service. We make regular posts highlighting new products, brand stories,
and other topics and images we deem “on brand”. By being a verified brand, our followers can shop products directly from
our posts. We are also able to link to products in the stories feature.

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Affiliate
Marketing: With select online publications and influencers, we’ve sought to establish CPA or revenue sharing agreements. We
believe these agreements are effective in incentivizing influencers or media to push our product and allowing us to only pay partners
based on performance.

Email
Marketing: We utilize email marketing to build awareness and drive repeat purchases. We believe this can be the most personalized
customer communication channel for our brands, and therefore should continue to be one of our highest performing channels. We use an
email service provider that enables us to send out a variety of promotional, transactional, and retargeting emails, with the main goal
of driving increased site traffic and purchases. We maintain a database through which we track and utilize key metrics such as customer
acquisition cost, lifetime value per customer, cost per impression and cost per click.

Retargeting:
We engage the services of certain retargeting engines that allow us to dynamically target our visitors on third-party websites via
banner/content ads.

Content
Marketing: We use content marketing platforms that allow us to serve up native ads in the form of articles promoting our brand story
and specific products.

Search
Engine Optimization: This is the process of maximizing the number of visitors to our website by increasing our rankings in the search
results on internet search engines. This is done by optimizing our onsite content, by making sure our pages, titles, tags, links, and
blog content is structured to increase our search results on certain keywords, and our offsite content, which is the number of external
websites linking to our website, usually through press articles and other advertising channels.

Print
Advertising: We also intend to utilize print advertisements in magazines or billboards in major metropolitan areas to drive increased
site traffic and brand awareness.

Video
/ Blog Content: We plan to offer videos and blog posts as a way to engage and educate the customer on our brands, how to wear different
looks and styles, and create confidence and trust between our brands and customers. Videos and blog posts will include interviews with
our designers, a behind-the- scenes look at how products are made, features of other artists or creatives, and photo shoots.

Instagram
and Influencer Marketing

Instagram
and influencer marketing is one of our largest initiatives. On a weekly basis, we reach out to and receive requests from tastemakers
in fashion, lifestyle, and photography. We have developed a certain set of criteria for working with influencers (for example, engagement
level, aesthetic, audience demographic) that have enabled us to garner impactful impressions. Our focus is not on the size of an account,
but on creating organic relationships with influencers who are excited to tell our story. While most of our collaborations are compensated
solely through product gifts, we also offer an affiliate commission of up to 20% through the influencer platform reward Style, which
is the parent company of LiketoKnow.it, the first influencer platform to make Instagram shopable (users receive an email directly to
their inbox with complete outfit details when they “Like” a photo with LiketoKnow.it technology).

Public
Relations

To
generate ongoing organic and word-of-mouth awareness, we intend to work with print and online media outlets to announce new products
and develop timely news stories. We are in contact with leading fashion, business, and tech writers in order to capitalize on celebrity
fashion features, e-commerce trend pieces, or general brand awareness articles. We may utilize outside agencies from time to time. We
visit the major fashion, tech, and news outlets in New York City on a quarterly basis to keep them up to date on our latest launches
and any relevant company developments. We also plan to host local Los Angeles press at our office space.

Celebrity
Gifting

We
approach celebrity gifting in a strategic, discerning manner. We have longstanding, personal relationships with the industry’s
top stylists; we do not send clothing blindly or unsolicited. We have successfully placed clothing (and as a result, fashion press) on
a number of well-known A-list celebrities.

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Loyalty
Program

We
plan to develop and launch a company-wide loyalty program, which would include all our brands. Our customer loyalty program will be designed
to engage and reward our customers in a direct and targeted manner, and to cross merchandise our portfolio brands to our customers. Customers
will earn reward points that can be used to purchase products. We will also use loyalty point multipliers to create customer purchases,
especially, which is a strategy beauty retailer have effectively used.

Competition

Our
business depends on our ability to create consumer demand for our brands and products. We focus on designing products that we hope exceed
consumer expectations, which should result in retention and repurchases. We plan to invest in cross merchandising brands to customers
through customized customer communications and personalized styles and looks utilizing products across all our portfolio brands, which
we believe creates a competitive advantage for our brands versus single brands. The markets in which we compete are highly competitive.
Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market
share, any of which could substantially harm our business and results of operations. We compete directly against wholesalers and direct
retailers of apparel, including large, diversified apparel companies with substantial market share and strong worldwide brand recognition.
Many of our competitors, including Vince, James Perse, Rag & Bone, Madewell, AG, FRAME, All Saints, Zegna and Ralph Lauren, have
significant competitive advantages, including longer operating histories, larger and broader customer bases, more established relationships
with a broader set of suppliers, greater brand recognition and greater financial, research and development, marketing, distribution,
and other resources than we do.

As
a result, these competitors may be better equipped than we are to influence consumer preferences or otherwise increase their market share
by:

●
quickly
adapting to changes in customer requirements or consumer preferences;

●
discounting
excess inventory that has been written down or written off;

●
devoting
resources to the marketing and sale of their products, including significant advertising campaigns, media placement, partnerships
and product endorsement; and

●
engaging
in lengthy and costly intellectual property and other disputes.

Seasonality

Our quarterly operating results vary due to the seasonality of our individual brands, and are historically stronger
in the second half of the calendar year.

Government
Regulation

Our
business is subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the Internet,
many of which are still evolving and could be interpreted in ways that could harm our business. These laws and regulations include federal
and state consumer protection laws and regulations, which address, among other things, the privacy and security of consumer information,
sending of commercial email, and unfair and deceptive trade practices.

Under
applicable federal and state laws and regulations addressing privacy and data security, we must provide notice to consumers of our policies
with respect to the collection and use of personal information, and our sharing of personal information with third parties, and notice
of any changes to our data handling practices. In some instances, we may be obligated to give customers the right to prevent sharing
of their personal information with third parties. Under applicable federal and state laws, we also are required to adhere to a number
of requirements when sending commercial email to consumers, including identifying advertising and promotional emails as such, ensuring
that subject lines are not deceptive, giving consumers an opportunity to opt-out of further communications and clearly disclosing our
name and physical address in each commercial email. Regulation of privacy and data security matters is an evolving area, with new laws
and regulations enacted frequently. For example, California recently enacted legislation that, among other things, will require new disclosures
to California consumers, and afford such consumers new abilities to opt out of certain sales of personal information. In addition, under
applicable federal and state unfair competition laws, including the California Consumer Legal Remedies Act, and U.S. Federal Trade Commission,
or FTC, regulations, we must, and our network of influencers may be required to, accurately identify product offerings, not make misleading
claims on our websites or in advertising, and use qualifying disclosures where and when appropriate. The growth and demand for eCommerce
could result in more stringent domestic and foreign consumer protection laws that impose additional compliance burdens on companies that
transact substantial business on the Internet.

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Our
international business is subject to additional laws and regulations, including restrictions on imports from, exports to, and services
provided to persons located in certain countries and territories, as well as foreign laws and regulations addressing topics such as advertising
and marketing practices, customs duties and taxes, privacy, data protection, information security and consumer rights, any of which might
apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories.
Many foreign jurisdictions have laws, regulations, or other requirements relating to privacy, data protection, and consumer protection,
and countries and territories are adopting new legislation or other obligations with increasing frequency.

In
many jurisdictions, there is great uncertainty whether or how existing laws governing issues such as property ownership, sales and other
taxes, libel and personal privacy apply to the Internet and eCommerce. New legislation or regulation, the application of laws and regulations
from jurisdictions whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet
and eCommerce could result in significant additional obligations on our business or may necessitate changes to our business practices.
These obligations or required changes could have an adverse effect on our cash flows and results of operations. Further, any actual or
alleged failure to comply with any of these laws or regulations by us, our vendors or our network of influencers could hurt our reputation,
brand and business, force us to incur significant expenses in defending against proceedings or investigations, distract our management,
increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties.

Employees

As
of December 31, 2024, we had 41 employees, all of whom were full-time employees. None of our employees is currently covered by a collective
bargaining agreement. We have had no labor-related work stoppages and we believe our relationship with our employees is strong.

We
believe that a diverse workforce is important to our success. We will continue to focus on the hiring, retention and advancement of women
and underrepresented populations, and to cultivate an inclusive and diverse corporate culture. In the future, we intend to continue to
evaluate our use of human capital measures or objectives in managing our business such as the factors we employ or seek to employ in
the development, attraction and retention of personnel and maintenance of diversity in our workforce.

The
success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety
and wellness of our employees. We provide our employees and their families with access to a variety of innovative, flexible and convenient
health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events
that may require time away from work or that impact their financial well-being; that support their physical and mental health by providing
tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer
choice where possible so they can customize their benefits to meet their needs and the needs of their families.

We
also provide robust compensation and benefits programs to help meet the needs of our employees.

Available
Information

Our
Internet address is https://www.digitalbrandsgroup.co. Our website and the information contained on, or that can be accessed through,
the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. Our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements
and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Exchange Act are available on the
SEC’s website http://www.sec.gov. All statements made in any of our securities filings, including all forward-looking statements
or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation
to update any of those statements or documents unless we are required to do so by law.

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