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BUSINESS COMBINATIONS | 12 Months Ended
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Dec. 31, 2022
BUSINESS COMBINATIONS |
BUSINESS COMBINATIONS | NOTE 4: BUSINESS COMBINATIONS AND DISPOSITION 2022 Acquisition Sundry On December 30, 2022, the Company completed its previously announced acquisition (the “ Sundry Acquisition”) of all of the issued and outstanding membership interests of Sunnyside, LLC, a California limited liability company (“Sundry”), pursuant to that certain Second Amended and Restated Membership Interest Purchase Agreement (the “ Sundry Agreement”), dated October 13, 2022, by and among Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies (“ Sundry Sellers”), George Levy as the Sundry Sellers’ representative, the Company as Buyer, and Sundry. Pursuant to the Agreement, Sellers, as the holders of all of the outstanding membership interests of Sundry, exchanged all of such membership interests for (i) $7.5 million in cash, (ii) $5.5 million in promissory notes of the Company (the “Sundry Notes”), and (iii) a number of shares of common stock of the Company equal to $1.0 million (the “Sundry Shares”), calculated in accordance with the terms of the Agreement, which consideration was paid or delivered to the Sellers, Jenny Murphy and Elodie Crichi. Each Sundry Note bears interest at eight percent (8%) per annum and matured on February 15, 2023 (see Note 7). The Company issued 3,636 shares of common stock to the Sundry Sellers on December 30, 2022 at a fair value of $1,000,000. The Company evaluated the acquisition of Sundry pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: ​
​ | ​ | ​ | ​
Cash |  | $ | 7,500,000
Promissory notes payable |  | ​ | 5,500,000
Common stock |  | ​ | 1,000,000
Purchase price consideration | ​ | $ | 14,000,000
​ The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: ​
​ | ​ | ​ | ​
​ |  | Purchase Price
​ |  | Allocation
Cash and cash equivalents | ​ | $ | 252,697
Accounts receivable, net | ​ |  | 63,956
Due from factor, net | ​ |  | 387,884
Inventory | ​ |  | 2,941,755
Prepaid expenses and other current assets | ​ |  | 32,629
Property, equipment and software, net | ​ |  | 48,985
Goodwill | ​ |  | 3,711,322
Intangible assets | ​ |  | 7,403,800
Accounts payable | ​ |  | (615,706)
Accrued expenses and other liabilities | ​ |  | (227,321)
Purchase price consideration | ​ | $ | 14,000,000
​ The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty and income approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The results of Sundry have been included in the consolidated financial statements since the date of acquisition. Previous Acquisitions Bailey On February 12, 2020, the Company acquired 100% of the membership interests of Bailey. The purchase price consideration included (i) an aggregate of 20,754,717 shares of Series B Preferred Stock of the Company (the “Parent Stock”) and (ii) a promissory note in the principal amount of $4,500,000. The total purchase price consideration was $15,500,000. DBG agreed that if at that date which is one year from the closing date of the IPO, the product of the number of shares of Parent Stock issued under the Merger multiplied by the sum of the closing price per share of the common stock of the Company on such date, plus Sold Parent Stock Gross Proceeds (as that term is defined in the Merger Agreement), does not exceed the sum of $11,000,000 less the value of any Holdback Shares cancelled further to the indemnification provisions of the Merger Agreement, then the Company shall issue to the Holders pro rata an additional aggregate number of shares of common stock of the Company equal to the valuation shortfall at a per share price equal to the then closing price per share of the common stock of the Company. ​ As of December 31, 2022 and 2021, the Company has a contingent consideration liability of $10,698,475 and $7,935,016, respectively, based on the valuation shortfall as noted above. See Note 3. Harper & Jones On May 18, 2021, the Company closed its acquisition of H&J pursuant to its previously disclosed Membership Interest Stock Purchase Agreement (as amended, the “Purchase Agreement”) with D. Jones Tailored Collection, Ltd. (the “Seller”), to purchase 100% of the issued and outstanding equity of Harper & Jones LLC. The purchase price consideration included (i) an aggregate of 87,711 shares of the Company’s common stock and (ii) $500,000 financed from the proceeds of the IPO. Pursuant to the H&J Purchase Agreement, the Seller, as the holder of all of the outstanding membership interests of H&J, exchanged all of such membership interests for a number of common stock of the Company equal to the lesser of (i) $9.1 million at a per share price equal to the initial public offering price of the Company’s shares offered pursuant to its initial public offering or (ii) the number of Subject Acquisition Shares; “Subject Acquisition Shares” means the percentage of the aggregate number of shares of the Company’s common stock issued pursuant to the Agreement, which is the percentage that Subject Seller Dollar Value is in relation to Total Dollar Value. “Subject Seller Dollar Value” means $9.1 million. If, at the one year anniversary of the closing date of the Company’s IPO, the product of the number of shares of the Company’s common stock issued at the closing of the acquisition multiplied by the average closing price per share of the shares of the Company’s common stock as quoted on the NasdaqCM for the thirty (30) day trading period immediately preceding such date does not exceed the sum of $9.1 million less the value of any shares of the Company’s common stock cancelled further to any indemnification claims made against the Seller then the Company shall issue to Seller an additional aggregate number of shares of the Company’s common stock equal to the valuation shortfall at a per share price equal to the then closing price per share of the Company’s common stock as quoted on the NasdaqCM. The Company evaluated the acquisition of H&J pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: ​
​ | ​ | ​ | ​
Cash |  | $ | 500,000
Common stock |  | ​ | 8,025,542
Contingent consideration |  | ​ | 3,421,516
Purchase price consideration | ​ | $ | 11,947,058
​ The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: ​
​ | ​ | ​ | ​
​ | ​ | Purchase Price
​ |  | Allocation
Cash and cash equivalents | ​ | $ | 24,335
Accounts receivable, net | ​ |  | 49,472
Due from factor, net | ​ | ​ | —
Inventory | ​ |  | 77,159
Prepaid expenses and other current assets | ​ |  | 69,715
Property, equipment and software, net | ​ |  | 83,986
Goodwill | ​ |  | 9,681,548
Intangible assets | ​ |  | 3,936,030
Accounts payable | ​ |  | (51,927)
Accrued expenses and other liabilities | ​ |  | (107,957)
Purchase price consideration | ​ | $ | 11,947,058
​ The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The Company recorded an initial contingent consideration liability at a fair value of $3,421,516 based on the valuation shortfall noted above. As of December 31, 2022 and 2021, the H&J contingent consideration was valued at $1,400,000 and $4,244,460, respectively. See Note 3. The results of H&J have been included in the consolidated financial statements since the date of acquisition. H&J’s 2021 net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $1,860,000 and $390,000, respectively. June 2023 Disposition On June 21, 2023, the Company and the former owners of H&J executed a Settlement Agreement and Release (the “Settlement Agreement”) whereby contemporaneously with the parties’ execution of the Settlement Agreement (i) the Company agreed to make an aggregate cash payment of $229,000 to D. Jones Tailored Collection, Ltd. (“D. Jones”), (ii) the Company issued 78,103 shares of common stock to D. Jones, and (iii) the Company assigned and transferred one hundred percent (100%) of the Company’s membership interest in H&J to D. Jones. This transaction is known as the “H&J Settlement”. The H&J Settlement was accounted for a business disposition in accordance with ASC 810-40-40-3A. In accordance with the provisions of ASC 205-20, the Company has excluded the results of discontinued operations from its results of continuing operations in the accompanying consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 in its Form 10-Q Quarterly Report filed on August 21, 2023. Accordingly, the consolidated financial statements as of and for the years ended December 31, 2022 and 2021 have been adjusted retroactively to account for the discontinued operations classification of H&J. Significant components of H&J’s assets and liabilities consist of the following: ​
​ |  | December 31, |
​ | ​ | 2022 |  | 2021 | ​
Cash and cash equivalents | ​ | $ | 7,666 | ​ | $ | 12,598 | ​
Inventory | ​ | ​ | 102,718 | ​ | ​ | 95,155 | ​
Accounts receivable, net | ​ | ​ | 45,018 | ​ | ​ | 22,010 | ​
Goodwill | ​ | ​ | 1,130,310 | ​ | ​ | 9,681,548 | ​
Intangible assets, net | ​ | ​ | 1,521,265 | ​ | ​ | 3,578,182 | ​
Other current and non-current assets | ​ | ​ | 62,703 | ​ | ​ | 161,740 | ​
Accounts payable | ​ | ​ | 81,991 | ​ | ​ | 54,981 | ​
Accrued expenses and other liabilities | ​ | ​ | 520,195 | ​ | ​ | 381,290 | ​
Deferred revenue | ​ | ​ | 202,129 | ​ | ​ | 276,397 | ​
Due to related parties | ​ | ​ | 1,008 | ​ | ​ | 21,361 | ​
Note payable - related party | ​ | ​ | 129,489 | ​ | ​ | 299,489 | ​
Loan payable | ​ | ​ | 284,059 | ​ | ​ | 148,900 | ​
​ The results of the discontinued operations of H&J for the years ended December 31, 2022 and 2021 consist of the following: ​
​ | ​ | Year Ended | ​
​ | ​ | December 31, | ​
​ | ​ | 2022 |  | 2021 | ​
​ | ​ | ​ | ​ | ​ | ​
Net revenues | ​ | $ | 3,637,620 | ​ | $ | 1,819,896 | ​
Cost of net revenues | ​ | ​ | 1,241,594 | ​ | ​ | 1,888,091 | ​
Gross profit (loss) | ​ | ​ | 2,396,026 | ​ | ​ | (68,195) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating expenses: | ​ | ​ | ​ | ​ | ​ | ​ | ​
General and administrative | ​ | ​ | 2,303,854 | ​ | ​ | 603,007 | ​
Sales and marketing | ​ | ​ | 931,650 | ​ | ​ | 540,873 | ​
Impairment | ​ | ​ | 10,036,238 | ​ | ​ | — | ​
Total operating expenses | ​ | ​ | 13,271,742 | ​ | ​ | 1,143,880 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loss from operations | ​ | ​ | (10,875,716) | ​ | ​ | (1,212,075) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other income (expense): | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest expense | ​ | ​ | (52,927) | ​ | ​ | (44,828) | ​
Other non-operating income (expenses) | ​ | ​ | — | ​ | ​ | 233,030 | ​
Total other income (expense), net | ​ | ​ | (52,927) | ​ | ​ | 188,202 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax benefit (provision) | ​ | ​ | — | ​ | ​ | — | ​
Net loss from discontinued operations | ​ | $ | (10,928,643) | ​ | $ | (1,023,873) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average common shares outstanding - basic and diluted | ​ | ​ | 30,852 | ​ | ​ | 3,052 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net loss from discontinued operations per common share - basic | ​ | $ | (354.23) | ​ | $ | (335.52) | ​
​ Stateside On August 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with Moise Emquies pursuant to which the Company acquired all of the issued and outstanding membership interests of MOSBEST, LLC, a California limited liability company (“Stateside” and such transaction, the “Stateside Acquisition”). Pursuant to the MIPA, Moise Emquies, as the holder of all of the outstanding membership interests of Stateside, exchanged all of such membership interests for $5.0 million in cash and 44,062 shares of the Company’s common stock (the “Shares”), which number of Shares was calculated in accordance with the terms of the MIPA. Of such amount, $375,000 in cash and a number of Shares equal to $375,000, or 3,305 shares (calculated in accordance with the terms of the MIPA), is held in escrow to secure any working capital adjustments and indemnification claims. The MIPA contains customary representations, warranties and covenants by Moise Emquies. The Company evaluated the acquisition of Stateside pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: ​
​ | ​ | ​ | ​
Cash |  | $ | 5,000,000
Common stock | ​ |  | 3,403,196
Purchase price consideration | ​ | $ | 8,403,196
​ The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: ​
​ | ​ | ​ | ​
​ | ​ | Purchase Price
​ |  | Allocation
Cash and cash equivalents | ​ | ​ | 32,700
Accounts receivable, net | ​ |  | 154,678
Due from factor, net | ​ |  | 371,247
Inventory | ​ |  | 603,625
Prepaid expenses and other current assets | ​ |  | 7,970
Deposits | ​ |  | 9,595
Property, equipment and software, net | ​ | ​ | —
Goodwill | ​ |  | 2,104,056
Intangible assets | ​ |  | 5,939,140
Accounts payable | ​ |  | (374,443)
Accrued expenses and other liabilities | ​ |  | (445,372)
​ | ​ | $ | 8,403,196
​ The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty and income approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. Per the terms of the MIPA, a working capital adjustment of $493,791 was recorded during the fourth quarter. Net amounts due to the seller are $396,320 at December 31, 2021 (Note 7). The results of Stateside have been included in the consolidated financial statements since the date of acquisition. Stateside’s 2021 net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $1,695,000 and $285,000, respectively. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Bailey, H&J, Stateside and Sundry 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 unaudited pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the acquisition: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Year Ended
​ | ​ | December 31,
​ | ​ | 2022 | ​ | 2021
Net revenues | ​ | $ | 28,519,261 | ​ | $ | 34,635,426
Net loss | ​ | $ | (42,001,415) | ​ | $ | (33,171,473)
Net loss per common share | ​ | $ | (1,361.50) | ​ | $ | (10,870.25)
​

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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