Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | Jun. 28, 2021 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2021 | |
Entity File Number | 001-40400 | |
Entity Registrant Name | DIGITAL BRANDS GROUP, INC. | |
Entity Incorporation, State or Country Code | DE | |
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 | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,975,074 | |
Entity Central Index Key | 0001668010 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 711,203 | $ 575,986 |
Accounts receivable, net | 12,832 | 35,532 |
Due from factor, net | 181,032 | 210,033 |
Inventory | 589,783 | 1,163,279 |
Prepaid expenses | 218,853 | 23,826 |
Total current assets | 1,713,703 | 2,008,656 |
Deferred offering costs | 409,409 | 214,647 |
Property, equipment and software, net | 53,293 | 62,313 |
Goodwill | 6,479,218 | 6,479,218 |
Intangible assets, net | 7,403,000 | 7,494,667 |
Deposits | 92,668 | 92,668 |
Total assets | 16,151,291 | 16,352,169 |
Current liabilities: | ||
Accounts payable | 5,964,045 | 5,668,703 |
Accrued expenses and other liabilities | 1,343,721 | 1,245,646 |
Deferred revenue | 1,667 | |
Due to related parties | 378,676 | 441,453 |
Convertible notes, current | 100,000 | 700,000 |
Accrued interest payable | 1,131,518 | 737,039 |
Note payable - related party | 137,856 | 137,856 |
Venture debt, current | 300,000 | 5,854,326 |
Loan payable, current | 1,563,000 | 992,000 |
Promissory note payable | 4,500,000 | 4,500,000 |
Total current liabilities | 15,418,816 | 20,278,690 |
Convertible notes | 2,418,013 | 1,215,815 |
Loan payable | 1,485,044 | 709,044 |
Venture debt, net of discount | 5,668,319 | |
Warrant liability | 5,703 | 6,265 |
Total liabilities | 24,995,895 | 22,209,814 |
Commitments and contingencies (Note 12) | ||
Stockholders' deficit: | ||
Undesignated preferred stock | 66 | 66 |
Additional paid-in capital | 27,518,971 | 27,481,995 |
Accumulated deficit | (36,369,932) | (33,345,997) |
Total stockholders' deficit | (8,844,604) | (5,857,645) |
Total liabilities and stockholders' deficit | 16,151,291 | 16,352,169 |
Series Seed Preferred Stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 2,071 | 2,071 |
Total stockholders' deficit | 2,071 | 2,071 |
Series A convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 565 | 565 |
Total stockholders' deficit | 565 | 565 |
Series A-2 convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 593 | 593 |
Total stockholders' deficit | 593 | 593 |
Series A-3 convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 904 | 904 |
Total stockholders' deficit | 904 | 904 |
Series CF convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 83 | 83 |
Total stockholders' deficit | 83 | 83 |
Series B convertible preferred stock | ||
Stockholders' deficit: | ||
Total stockholders' deficit | 2,075 | 2,075 |
Series B Convertible Preferred Stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | $ 2,075 | $ 2,075 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Preferred Stock, Liquidation Preference, Value | $ 27,536,206 | $ 27,536,206 |
Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 110,000,000 | 110,000,000 |
Common Stock, Shares, Issued | 664,167 | 664,167 |
Common Stock, Shares, Outstanding | 664,167 | 664,167 |
Series Seed Preferred Stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 20,714,518 | 20,714,518 |
Preferred Stock, Shares Issued | 20,714,518 | 20,714,518 |
Preferred Stock, Shares Outstanding | 20,714,518 | 20,714,518 |
Conversion of Stock, Shares Converted | 1 | 1 |
Preferred Stock, Liquidation Preference, Value | $ 5,633,855 | $ 5,633,855 |
Series A convertible preferred stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 14,481,413 | 14,481,413 |
Preferred Stock, Shares Issued | 5,654,072 | 5,654,072 |
Preferred Stock, Shares Outstanding | 5,654,072 | 5,654,072 |
Conversion of Stock, Shares Converted | 1 | 1 |
Preferred Stock, Liquidation Preference, Value | $ 2,713,955 | $ 2,713,955 |
Series A-2 convertible preferred stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Preferred Stock, Shares Issued | 5,932,742 | 5,932,742 |
Preferred Stock, Shares Outstanding | 5,932,742 | 5,932,742 |
Conversion of Stock, Shares Converted | 1 | 1 |
Preferred Stock, Liquidation Preference, Value | $ 2,966,371 | $ 2,966,371 |
Series A-3 convertible preferred stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 18,867,925 | |
Preferred Stock, Shares Issued | 9,032,330 | 9,032,330 |
Preferred Stock, Shares Outstanding | 9,032,330 | 9,032,330 |
Conversion of Stock, Shares Converted | 1 | 1 |
Preferred Stock, Liquidation Preference, Value | $ 4,787,135 | $ 4,787,135 |
Series CF convertible preferred stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 2,000,000 | 2,000,000 |
Preferred Stock, Shares Issued | 836,331 | 836,331 |
Preferred Stock, Shares Outstanding | 836,331 | 836,331 |
Conversion of Stock, Shares Converted | 1 | 1 |
Preferred Stock, Liquidation Preference, Value | $ 434,890 | $ 434,890 |
Series B Convertible Preferred Stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 20,714,517 | 20,714,517 |
Preferred Stock, Shares Issued | 20,714,517 | 20,714,517 |
Preferred Stock, Shares Outstanding | 20,714,517 | 20,714,517 |
Conversion of Stock, Shares Converted | 1 | 1 |
Preferred Stock, Liquidation Preference, Value | $ 11,000,000 | $ 11,000,000 |
Undesignated Preferred Stock [Member] | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 936,144 | 936,144 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
Net revenues | $ 408,405 | $ 2,576,685 |
Cost of net revenues | 615,942 | 1,222,793 |
Gross profit (loss) | (207,537) | 1,353,892 |
Operating expenses: | ||
General and administrative | 1,907,518 | 2,475,043 |
Sales and marketing | 170,820 | 317,876 |
Distribution | 63,578 | 138,435 |
Total operating expenses | 2,141,916 | 2,931,354 |
Loss from operations | (2,349,453) | (1,577,462) |
Other income (expense): | ||
Interest expense | (675,044) | (314,975) |
Other non-operating income (expenses) | 562 | |
Total other income (expense), net | (674,482) | (314,975) |
Provision for income taxes | 14,090 | |
Net loss | $ (3,023,935) | $ (1,906,527) |
Weighted average common shares outstanding - basic and diluted | 664,167 | 664,167 |
Net loss per common share - basic and diluted | $ (4.55) | $ (2.87) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Common Stock | Additional Paid-in Capital | Subscription Receivable | Accumulated Deficit | Series Seed Preferred Stock | Series A convertible preferred stock | Series A-2 convertible preferred stock | Series A-3 convertible preferred stock | Series CF convertible preferred stock | Series B convertible preferred stock | Total |
Beginning balance (in share) at Dec. 31, 2019 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 8,223,036 | 126,641 | |||||
Beginning balance at Dec. 31, 2019 | $ 66 | $ 15,486,050 | $ (22,677) | $ (22,617,702) | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | $ (7,150,199) | |
Stock-based compensation stock-based compensation | 49,932 | 49,932 | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | ||||||||||
Issuance of Series A-3 preferred stock | 428,845 | (117,614) | $ 81 | 311,312 | |||||||
Issuance of Series B preferred stock (in shares) | 20,754,717 | ||||||||||
Issuance of Series B preferred stock | 10,997,925 | $ 2,075 | 11,000,000 | ||||||||
Offering costs | (31,690) | (31,690) | |||||||||
Fair value of warrant issuances - venture debt | 58,421 | 58,421 | |||||||||
Net loss | (1,906,527) | (1,906,527) | |||||||||
Ending balance at Mar. 31, 2020 | $ 66 | 26,989,483 | (140,291) | (24,524,229) | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 12 | $ 2,075 | 2,331,249 |
Ending balance (in share) at Mar. 31, 2020 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 126,641 | 20,754,717 | ||||
Beginning balance (in share) at Dec. 31, 2019 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 8,223,036 | 126,641 | |||||
Beginning balance at Dec. 31, 2019 | $ 66 | 15,486,050 | $ (22,677) | (22,617,702) | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | $ (7,150,199) | |
Issuance of Series A-3 preferred stock (in shares) | 20,754,717 | 0 | |||||||||
Ending balance at Dec. 31, 2020 | $ 66 | 27,481,995 | (33,345,997) | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ (5,857,645) | |
Ending balance (in share) at Dec. 31, 2020 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | ||||
Stock-based compensation stock-based compensation | 36,976 | $ 36,976 | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | 20,754,717 | 0 | ||||||||
Issuance of Series A-3 preferred stock | $ 11,000,000 | ||||||||||
Net loss | (3,023,935) | $ (3,023,935) | |||||||||
Ending balance at Mar. 31, 2021 | $ 66 | $ 27,518,971 | $ (36,369,932) | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ (8,844,604) | |
Ending balance (in share) at Mar. 31, 2021 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Cash flows from operating activities: | |||
Net loss | $ (3,023,935) | $ (1,906,527) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 100,687 | 110,882 | |
Amortization of loan discount and fees | 223,065 | 52,140 | |
Stock-based compensation | 36,976 | 49,932 | |
Change in fair value of warrant liability | (562) | ||
Change in credit reserve | 3,335 | (58,132) | |
Changes in operating assets and liabilities: | |||
Accounts receivable, net | 22,700 | 45,637 | |
Due from factor, net | (6,950) | (67,378) | |
Inventory | 573,496 | 30,224 | |
Other current assets | (195,027) | 155,411 | |
Accounts payable | 195,528 | 1,135,762 | |
Accrued expenses and other liabilities | 98,075 | (608,047) | |
Deferred revenue | (1,667) | (15,231) | |
Accrued compensation - related party | (62,777) | (16,107) | |
Accrued interest | 394,479 | 251,230 | |
Net cash (used in) provided by operating activities | (1,642,577) | (840,204) | |
Cash flows from investing activities: | |||
Cash acquired in business combination | 106,913 | ||
Deposits | 43,510 | ||
Net cash provided by investing activities | 150,423 | ||
Cash flows from financing activities: | |||
Proceeds from related party advances | 122,414 | ||
Advances from factor | 32,617 | 180,552 | |
Proceeds from venture debt | 250,000 | ||
Issuance of loans payable | 1,347,050 | ||
Issuance of convertible notes payable | 528,650 | ||
Proceeds from Issuance of Convertible Preferred Stock | 428,926 | ||
Subscription receivable from Series A-3 preferred stock | (117,614) | ||
Offering costs | (130,523) | (43,353) | |
Net cash provided by (used in) financing activities | 1,777,794 | 820,925 | |
Net increase (decrease) in cash and cash equivalents | 135,217 | 131,144 | |
Cash and cash equivalents at beginning of period | 575,986 | 40,469 | $ 40,469 |
Cash and cash equivalents at end of period | $ 711,203 | 171,613 | $ 575,986 |
Supplemental disclosure of non-cash investing and financing activities: | |||
Venture debt issued in exchange of forgiveness of accrued interest | 209,211 | ||
Warrants issued for offering costs | 918 | ||
Warrants issued with venture debt | 58,421 | ||
Issuance of promisosry note payable in acquisition | 4,500,000 | ||
Issuance of Series B preferred stock in acquisition | $ 11,000,000 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 3 Months Ended |
Mar. 31, 2021 | |
NATURE OF OPERATIONS | |
NATURE OF OPERATIONS | NOTE 1: NATURE OF OPERATIONS Digital Brands Group, Inc. (formerly Denim.LA, Inc.) (the “Company” or “DBG”), is a corporation organized 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) On February 12, 2020, Denim.LA, Inc. entered into an Agreement and Plan of Merger with Bailey 44, LLC, a Delaware Limited Liability Company. On the acquisition date, Bailey 44, LLC became a wholly owned subsidiary of the Company. See Note 4. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a pandemic. As the global spread of COVID-19 continues, DBG remains first and foremost focused on a people-first approach that prioritizes the health and well-being of its employees, customers, trade partners and consumers. To help mitigate the spread of COVID-19, DBG has modified its business practices in accordance with legislation, executive orders and guidance from government entities and healthcare authorities (collectively, “COVID-19 Directives”). These directives include the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines. The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, and the imposition of protective public safety measures. Reverse Stock Split On May 12, 2021, the Board of Directors approved a one Initial Public Offering On May 13, 2021, the Company’s registration statement on Form S-1 relating to its initial public offering of its common stock (“the IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). In the IPO, which closed on May 18, 2021, the Company issued and sold 2,409,639 shares of common stock at a public offering price of $4.15 per share. Additionally, the Company issued warrants to purchase 2,771,084 shares, which includes 361,445 warrants sold upon the partial exercise of the over-allotment option. The aggregate net proceeds to the Company from the IPO, inclusive of the proceeds from the over-allotment exercise, were approximately $8.4 million after deducting underwriting discounts and commissions of $0.8 million and estimated offering expenses of approximately $0.8 million. Concurrent with this offering, the Company acquired Harper & Jones, LLC (See Notes 4 and 13). |
GOING CONCERN
GOING CONCERN | 3 Months Ended |
Mar. 31, 2021 | |
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 $3,023,935 and $1,906,527 for the three months ended March 31, 2021 and 2020, respectively, and has incurred negative cash flows from operations for the years ended March 31, 2021 and 2020. The Company has historically lacked liquidity to satisfy obligations as they come due and as of March 31, 2021, and the Company had a working capital deficit of $13,705,113. The Company expects to continue to generate operating losses for the foreseeable future. Management Plans As of June 28, 2021, the date of issuance of these unaudited interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents of $711,203 as of March 31, 2021, together with the approximate $9.8 million of net proceeds received from the Company’s IPO, inclusive of the proceeds from the over-allotment exercise, and measures described below, will be sufficient to fund its operating expenses, debt obligations and capital expenditure requirements for at least one year from the date these consolidated financial statements are issued. Throughout the next twelve months, the Company intends to fund its operations from the funds raised through the IPO. Additionally, the Company intends to fund operations from increased revenues as new designs and collections will be deployed in the second half of 2021, through settlement or renegotiation of aged payables and outstanding debt, and continuing its cost cutting measures. The Company also plans to continue to fund its capital funding needs through a combination of public or private equity offerings, debt financings or other sources. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
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 March 31, 2021, the unaudited condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 and of cash flows for the three months ended March 31, 2021 and 2020 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 results for the interim periods presented and of the financial condition as of the date of the interim consolidated balance sheet. 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, 2020 included in the Company’s prospectus that forms a part of the Company’s Registration Statement on Form S-1 ( File No. 333-255193). The prospectus was filed with the SEC pursuant to Rule 424(b)(4) on May 17, 2021. Principles of Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bailey 44, LLC. All inter-company transactions and balances have been eliminated on consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 March 31, 2021 and December 31, 2020, 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 FASB guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company’s financial instruments consist of cash and cash equivalents, 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. Certain of the Company’s common stock warrants are carried at fair value. The fair value of the Company’s common stock warrant liabilities has been measured under the Level 3 hierarchy using the Black-Scholes pricing model. (See Note 10). The Company’s underlying common stock has no observable market price and was valued using a market approach. Changes in common stock warrant liability during the three months ended March 31, 2021 are as follows: Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value (562) Outstanding as of March 31, 2021 $ 5,703 Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method and first-in, first-out method for Bailey. The inventory balances as of March 31, 2021 and December 31, 2020 consist substantially of finished good products purchased or produced for resale, as well as any materials the Company purchased to modify the products. As of March 31, 2021, the Company made an adjustment to mark down certain of its inventory to net realizable value. Property, Equipment, and Software Property, equipment, and software are recorded at cost. Depreciation/amortization is recorded for property, equipment, and software using the straight-line method over the estimated useful lives of assets. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. The balances at March 31, 2021 and December 31, 2020 consist of software with three (3) year lives, property and equipment with 3-10 year lives, and leasehold improvements which are depreciated over the shorter of the lease life or expected life. Depreciation and amortization charges on property, equipment, and software are included in general and administrative expenses and amounted to $9,020 and $65,048 for the three months ended March, 31, 2021 and 2020, respectively. Capital assets as of March 31, 2021 and December 31, 2020 are as follows: March 31, December 31, 2021 2020 Computer equipment $ 6,339 $ 57,810 Furniture and fixtures 182,139 207,140 Leasehold improvements 69,274 69,274 257,752 334,224 Accumulated depreciation (257,752) (334,224) Property and equipment, net $ — $ — Software $ 226,205 $ 278,405 Accumulated amortization (172,912) (216,092) Software, net $ 53,293 $ 62,313 Business Combinations The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. Goodwill represents the excess of the purchase price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. Intangible assets are established with business combinations and consist of brand names and customer relationships. Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. The estimated useful lives of amortizable intangible assets are as follows: Customer relationships 3 years Impairment of Long-Lived Assets The Company reviews its long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. 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. The quantitative impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the first quarter every year. During the three months ended March 31, 2021, management performed its annual qualitative impairment test. The Company determined no factors existed to conclude that it is more likely than not that the fair value of the reporting unit was less than its carrying amount. As such, no goodwill impairment was recognized as of March 31, 2021. Indefinite-Lived Intangible Assets Indefinite-lived intangible assets established in connection with business combinations consist of the brand name. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Convertible Instruments U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. Accounting for Preferred Stock ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity. Management is required to determine the presentation for the preferred stock as a result of the redemption and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly, liability accounting is not required by the Company. The Company has presented preferred stock within stockholders’ equity. Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock. The discount is not amortized. Revenue Recognition Revenues are recognized when performance obligations are satisfied through the transfer of promised goods to the Company’s customers. Control transfers upon shipment of product and when the title has been passed to the customers. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. The Company provides the customer the right of return on the product and revenue is adjusted based on an estimate of the expected returns based on historical rates. The Company considers the sale of products as a single performance obligation. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses. Revenue is deferred for orders received for which associated shipments have not occurred. The reserve for returns totaled $27,691 and $5,229 as of March 31, 2021 and December 31, 2020, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. Cost of Revenues Cost of revenues consists primarily of inventory sold and related freight-in. Shipping and Handling The Company recognizes shipping and handling billed to customers as a component of net revenues, and the cost of shipping and handling as a component of sales and marketing. Total shipping and handling billed to customers as a component of net revenues was approximately $0 and $3,800 for the three months ended March 31, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $60,000 and $57,000 for the three months ended March 31, 2021 and 2020, respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the three months ended March 31, 2021 and 2020 amounted to approximately $3,800 and $61,000 respectively, which is included in sales and marketing expense. Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At March 31, 2021 and December 31, 2020, the Company did not have any derivative instruments that were designated as hedges. Stock Option and Warrant Valuation Stock option and warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices for comparable entities. For warrants and stock options issued to non- employees, the Company accounts for the expected life based on the contractual life of the warrants and stock options. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. Stock-Based Compensation The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. 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 March 31, 2021 and December 31, 2020, the Company had capitalized $409,409 and $214,647, respectively, in deferred offering costs. Segment Information In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. As of March 31, 2021 our operating segments included: DSTLD and Bailey 44. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale and online channels, allowing us to execute on our omni-channel strategy. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into one reportable segment. All of the operating segments have met the aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments. Income Taxes The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. 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 March 31, 2021 and 2020, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of March 31, 2021 and 2020 are as follows: March 31, 2021 2020 Series Seed Preferred Stock (convertible to common stock) 20,714,518 20,714,518 Series A Preferred Stock (convertible to common stock) 5,654,072 5,654,072 Series A-2 Preferred Stock (convertible to common stock) 5,932,742 5,932,742 Series CF Preferred Stock (convertible to common stock) 836,331 126,641 Series A-3 Preferred Stock (convertible to common stock) 9,032,330 9,032,330 Series B Preferred Stock (convertible to common stock) 20,754,717 20,754,717 Common stock warrants 914,539 572,845 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 64,678,983 All shares of preferred stock are convertible into shares of common stock at a ratio of 15.625:1 per share. See Note 13. Concentrations The Company utilized three vendors that made up 96% of all inventory purchases during the three months ended March 31, 2021 and two vendors that made up 24% of all inventory purchases during the three months ended March 31, 2020. The loss of one of these vendors, may have a negative short-term impact on the Company’s operations; however, we believe there are acceptable substitute vendors that can be utilized longer-term. Recent Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to early adopt this ASU and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures. 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 is currently evaluating the impact of the adoption of ASU 2016-02 on its financial position, results of operations and cash flows once adopted. 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. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 3 Months Ended |
Mar. 31, 2021 | |
BUSINESS COMBINATIONS | |
BUSINESS COMBINATIONS | NOTE 4: BUSINESS COMBINATIONS On February 12, 2020, the Company acquired 100% of the membership interests of Bailey 44, LLC, a Delaware limited liability company (“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. Of the shares of Parent Stock issued in connection with the Merger, 16,603,773 shares were delivered on the effective date of the Merger (the “Initial Shares”) and four million one hundred fifty thousand nine hundred forty four (4,150,944) shares were held back solely, and only to the extent necessary, to satisfy any indemnification obligations of Bailey or the Holders pursuant to the terms of the Merger Agreement (the “Holdback Shares”). DBG agreed that if at that date which is one year from the closing date of the Company’s 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. Series B preferred stock $ 11,000,000 Promissory note payable 4,500,000 Purchase price consideration $ 15,500,000 Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable, net 37,479 Due from factor, net (312,063) Inventory 3,303,660 Prepaid expenses 165,856 Deposits 187,493 Property, equipment and software, net 1,215,748 Goodwill 6,479,218 Intangible assets 8,600,000 Accounts payable (3,397,547) Accrued expenses and other liabilities (886,757) Purchase price consideration $ 15,500,000 Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Bailey acquisition had occurred as of January 1, 2020. 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: Three Months Ended March 31, 2020 Net revenues $ 4,596,508 Net loss $ (3,964,927) Net loss per common share $ (5.97) Completed Business Combination On October 14, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with D. Jones Tailored Collection, Ltd., a Texas limited partnership (“Seller”), to acquire all of the outstanding membership interests of Harper & Jones LLC (“H&J”) concurrent with the closing of an initial public offering by the Company (the “Transaction”). Pursuant to the Agreement, Seller, as the holder of all of the outstanding membership interests of H&J, will exchange 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. “Total Dollar Value” means the sum of Existing Holders Dollar Value plus the Bailey Holders Dollar Value plus the aggregate dollar value with respect to all other acquisitions to be completed by the Company concurrently with its initial public offering (including the Subject Seller Dollar Value). “Existing Holders Dollar Value” means $40.0 million. “Bailey Holders Dollar Value” means $11.0 million. In addition, the Company will contribute to H&J a $500,000 cash payment that will be allocated towards H&J’s debt outstanding immediately concurrent to the closing of the Transaction. Twenty percent of the shares of the Company issued to Seller at the closing will be issued into escrow to cover possible indemnification obligations of Seller and post-closing adjustments under the Agreement. If, at the one year anniversary of the closing date of the Company’s initial public offering, the product of the number of shares of the Company’s common stock issued at the closing of the Transaction 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 plus Sold Buyer Shares Gross Proceeds 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 Seller or post-closing adjustments under the Agreement, 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 “Valuation Shortfall”). Concurrently, the Company will cause a number of shares of the Company’s common stock or common stock equivalents held by certain of its affiliated stockholders prior to the closing of the Transaction to be cancelled in an equivalent Dollar amount as the Valuation Shortfall on a pro rata basis in proportion to the number of shares of the Company’s common stock or common stock equivalents held by each of them. “Sold Buyer Shares Gross Proceeds” means the aggregate gross proceeds received by Seller from sales of Sold Buyer Shares within the period that is one (1) year from the Closing Date. “Sold Buyer Shares” means shares of the Company’s common stock issued to Seller further to the Transaction and which are sold by Seller within the period that is one (1) year from the closing of the Transaction. The acquisition agreement with Harper & Jones did not occur during the current reporting period and was contingent upon an initial public offering, which occurred in May 2021 (see Note 13). According, acquisition accounting under ASC 805 has not been completed and preparation of historical financials remain in progress at the time these financial statements were available to be issued. |
DUE FROM FACTOR
DUE FROM FACTOR | 3 Months Ended |
Mar. 31, 2021 | |
DUE FROM FACTOR | |
DUE FROM FACTOR | NOTE 5: DUE FROM FACTOR The Company, via its subsidiary, Bailey, assigns a portion of its trade accounts receivable to a third- party factoring company, who assumes the credit risk with respect to the collection of non-recourse accounts receivable. The Company may request advances on the net sales factored at any time before their maturity date, and up to 50% of eligible finished goods inventories. The factor charges a commission on the net sales factored for credit and collection services. Interest on advances is charged as of the last day of each month at a rate equal to the LIBOR rate plus 2.5%. Advances are collateralized by a security interest in substantially all of Bailley’s assets. Due to/from factor consist of the following: March 31, December 31, 2021 2020 Outstanding receivables: Without recourse $ 201,870 $ 151,158 With recourse 22,812 42,945 Advances — 56,246 Credits due customers (43,650) (40,316) $ 181,032 $ 210,033 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2021 | |
GOODWILL AND INTANGIBLE ASSETS | |
GOODWILL AND INTANGIBLE ASSETS | NOTE 6: GOODWILL AND INTANGIBLE ASSETS The Company recorded $6,479,218 in goodwill from the Bailey business combination in February 2020. The following table summarizes information relating to the Company’s identifiable intangible assets as of March 31, 2021: Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 1,100,000 $ (412,500) $ 687,500 1,100,000 (412,500) 687,500 Indefinite-lived: Brand name $ 6,715,500 — 6,715,500 $ 7,815,500 $ (412,500) $ 7,403,000 The Company recorded amortization expense of $91,667 and $45,844 during the three months ended March 31, 2021 and 2020, respectively, which is included in general and administrative expenses in the consolidated statements of operations. |
LIABILITIES AND DEBT
LIABILITIES AND DEBT | 3 Months Ended |
Mar. 31, 2021 | |
LIABILITIES AND DEBT | |
LIABILITIES AND DEBT | NOTE 7: 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 March 31, 2021 and December 31, 2020: March 31, December 31, 2021 2020 Accrued expenses $ 116,222 $ 92,074 Reserve for returns 27,691 5,229 Payroll related liabilities 889,503 843,704 Sales tax liability 195,028 196,410 Other liabilities 115,277 108,230 $ 1,343,721 $ 1,245,646 Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of March 31, 2021 and December 31, 2020, payroll related labilities included approximately $217,000 and $152,000 in estimated penalties associated with accrued payroll taxes. Venture Debt In March 2017, the Company entered into a senior credit agreement with an outside lender for up to $4,000,000, dependent upon the achievement of certain milestones. Through various amendments to the agreement, the credit agreement has been increased to approximately $6,000,000. The loan bears interest at 12.5% per annum, compounded monthly, plus fees currently at $5,000 per month. In March 2021, the Company and its senior credit facility agreed to extend the maturity date of the credit agreement to December 31, 2022, with certain payments due as follows. If the Company consummates a follow on public offering on or before July 31, 2021, the Company is required to make a $3,000,000 payment on the loan within five five While the Company does not currently have a registration statement on file with the SEC to conduct a follow-on offering prior to July 31, 2021 and September 30, 2021, the Company may effect such an offering if market conditions are favorable for such an offering and should the representative agree to waive the standstill provision set forth herein. There is no assurance that even if market conditions are favorable that the representative will waive the standstill provision. In such a case the Company anticipates to make any required payments under its senior credit facility from cash generated from operations. As of March 31, 2021 and December 31, 2020, the gross loan balance is $6,001,755. The lender was also granted warrants to purchase common stock representing 1% of the fully diluted capitalization of the Company for each $1,000,000 of principal loaned under the agreement, which was increased to 1.358% during 2019. The relative fair value of the warrants is initially recorded as a discount to the note, which is amortized over its term. See Note 10 for further detail. For the three months ended March 31, 2021 and 2020, $113,993 and $52,140 of these loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $33,436 and $147,389 as of March 31, 2021 and December 31, 2020, respectively. Unamortized balances are expected to be amortized through December 2022, the maturity date of the loan. Interest expense and effective interest rate on this loan for the three months ended March 31, 2021 and 2020 was $199,986 and $164,046, and 20.9% and 18.4%, all respectively. Convertible Debt 2020 Regulation CF Offering During the year ended December 31, 2020, the Company received gross proceeds of $450,308 from a Regulation CF convertible debt offering. During the three months ended March 31, 2021, the Company received additional gross proceeds of $473,650. Interest was 6% per annum and the debt was due October 30, 2022. As of March 31, 2021 and December 31, 2020, issuance costs totaled $69,627 and $33,773, which was recognized as a debt discount and will be amortized through the date of IPO when such debt converted. During the three months ended March 31, 2021, $41,403 of the debt discount was amortized to interest expense. Subsequent to March 31, 2021 and upon closing of the IPO, the outstanding principal and accrued and unpaid interest was converted into 319,661 shares of common stock based on the terms of the notes (see Note 13). 2020 Regulation D Offering Concurrently with the offering above, in 2021 and 2020 the Company received gross proceeds of $55,000 and $800,000, respectively, from a Regulation D convertible debt offering. The debt accrued interest at a rate of 14% per annum with a maturity date of nine months from the date of issuance. The debt is contingently convertible and contains both automatic and optional conversions. The debt converts automatically upon an initial public offering of at least $10,000,000 in gross proceeds at a price per share equal to 50% of the IPO price. Upon the maturity date, the holders shall have the right to convert the debt at $23.44 per share. If, after the lock-up period, the price of the common stock is less than 50% of the IPO price, the Company shall issue additional shares to the holder as if the IPO price had been the closing price as of the day after the lock-up period. As the debt was not convertible at March 31, 2021, it was not included in dilutive share counts. As of March 31, 2021 and December 31, 2020, issuance costs totaled $100,000. In addition, the Company issued 512 warrants to purchase common stock in connection with the notes. The issuance costs and warrants are recognized as a debt discount and will be amortized over the life of the notes. The fair value of the warrants were determined to be negligible. During the three months ended March 31, 2021, $67,669 of the debt discount was amortized to interest expense. Subsequent to March 31, 2021 and upon closing of the IPO, certain of the outstanding principal and accrued and unpaid interest was converted into 453,917 shares of common stock (see Note 13). 2019 Regulation D Offering For the year ended December 31, 2019, the Company received gross proceeds of $799,280 from a Regulation D convertible debt offering. The debt accrued interest at a rate of 12% per annum with a maturity date of thirty-six months from the date of issuance. The debt was contingently convertible and contained both automatic and optional conversions. The debt converts automatically upon an initial public offering at $2.19 per share. If, prior to maturity there is a change in control event, the holders of a majority of the debt can vote to convert two times the value of the principle, with accrued interest being eliminated, at 1) the fair market value of the company’s common stock at the time of such conversion, 2) $2.19 per share, 3) dividing the valuation cap ($9,000,000) by the pre-money fully diluted capitalization. As the debt was not convertible at March 31, 2021, it was not included in dilutive share counts. Subsequent to March 31, 2021 and upon closing of the IPO, the outstanding principal was converted into 362,055 shares of common stock (see Note 13). All convertible debt that were subsequently converted into shares of common stock upon the closing of the IPO as noted above have been presented as non-current liabilities on the condensed consolidated balance sheet as of March 31, 2021. Loan Payable — PPP and SBA Loan In April 2020, the Company and Bailey each entered into a loan with a lender in an aggregate principal amount of $203,994 and $1,347,050, respectively, pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In February 2021, Bailey entered into an 2nd Round PPP Loan for a principal amount of $1,347,050. The PPP Loans are evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loans bear interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of two years, and is unsecured and guaranteed by the Small Business Administration. The Company may apply to the Lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent, and covered utility payments incurred by the Company during the applicable forgiveness period, calculated in accordance with the terms of the CARES Act. The Note provides for customary events of default including, among other things, cross-defaults on any other loan with the lender. The PPP Loans may be accelerated upon the occurrence of an event of default. The loan proceeds were used for payroll and other covered payments and is expected to be forgiven in full or in part based on current information available; however, formal forgiveness has not yet occurred as of the date of these financial statements. The CARES Act additionally extended COVID relief funding for qualified small businesses under the Economic Injury Disaster Loan (EIDL) assistance program. On June 25, 2020 the Company was notified that their EIDL application was approved by the Small Business Association (SBA). Per the terms of the EIDL agreement, the Company received total proceeds of $150,000. The Loan matures in thirty years from the effective date of the Loan and has a fixed interest rate of 3.75% per annum. Promissory Note Payable As noted in Note 4, the Company issued a promissory note in the principal amount of $4,500,000 to the Bailey Holders pursuant to the Bailey acquisition. In February 2021, the maturity note of the agreement was extended from December 31, 2020 to July 31, 2021. The note incurs interest at 12% per annum. Interest expense was $135,000 and $67,500 for the three months ended March 31, 2021 and 2020, respectively, all of which was accrued and unpaid as of March 31, 2021. |
STOCKHOLDERS' DEFICIT
STOCKHOLDERS' DEFICIT | 3 Months Ended |
Mar. 31, 2021 | |
STOCKHOLDERS' DEFICIT | |
STOCKHOLDERS' DEFICIT | NOTE 8: STOCKHOLDERS’ DEFICIT Convertible Preferred Stock As of March 31, 2021 and December 31, 2020, 20,714,518 shares of Series Seed Preferred Stock were issued and outstanding outstanding outstanding outstanding outstanding The total liquidation preferences as of both March 31, 2021 and December 31, 2020 amounted to 27,536,206. During the three months ended March 31, 2020, the Company issued 809,294 shares of Series A-3 Preferred Stock at price per share of $0.53. During the three months ended March 31, 2020 the Company issued 20,754,717 shares of Series B Preferred Stock to the Bailey Holders pursuant to the Bailey acquisition at a price per share of $0.53 for a total fair value of $11,000,000. See Note 4. Upon the closing of the Company’s IPO on May 18, 2021, all then-outstanding shares of Preferred Stock converted into an aggregate of 4,027,181 shares of common stock according to their terms. Common Stock The Company had 200,000,000 shares of common stock authorized with a par value of $0.0001 as of March 31, 2021 and December 31, 2020. As of March 31, 2021 and December 31, 2020, 664,167 shares of common stock were issued and outstanding Common stockholders have voting rights of one vote per share. The voting, dividend, and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers, and preferences of preferred stockholders. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 9: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable As of March 31, 2021 and December 31, 2020, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $194,568, and accrued salary and expense reimbursements of $184,107 and $246,885 to current officers. A portion of these balances was converted upon the IPO, see Note 13. The current CEO, Hil Davis, previously advanced funds to the Company for working capital. These prior advances were converted to a note payable totaling $115,000 as of March 31, 2021 and December 31, 2020. The loan bears an interest rate of 5% per annum. |
SHARE-BASED PAYMENTS
SHARE-BASED PAYMENTS | 3 Months Ended |
Mar. 31, 2021 | |
SHARE-BASED PAYMENTS | |
SHARE-BASED PAYMENTS | NOTE 10: SHARE-BASED PAYMENTS Common Stock Warrants During the three months ended March 31, 2020, the Company granted 152,280 common stock warrants to the venture debt lender with an exercise price of $0.16 per share. The warrants were valued at $58,421 using the below range of inputs using the Black-Scholes model. During the Company’s Series A-3 Preferred Stock raise, the Company granted 2,603 common stock warrants Three Months Ended March 31, 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 % Expected Life (years) 10.00 A summary of information related to common stock warrants for the three months ended March 31, 2021 is as follows: Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 914,539 $ 2.66 Granted — — Exercised — — Forfeited — — Outstanding - March 31, 2021 914,539 $ 2.66 Exercisable at March 31, 2021 914,539 $ 2.66 Preferred Stock Warrants A summary of information related to preferred stock warrants for the three months ended March 31, 2021 is as follows: Preferred Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 806,903 $ 0.49 Exercised — — Forfeited — — Outstanding - March 31, 2021 806,903 $ 0.49 Exercisable at March 31, 2021 806,903 $ 0.49 Stock Options A summary of information related to stock options under our 2013 Stock Plan for the three months ended March 31, 2021 is as follows: Weighted Average Options Exercise Price Outstanding - December 31, 2020 1,163,103 $ 2.34 Granted — — Exercised — — Forfeited — — Outstanding - March 31, 2021 1,163,103 $ 2.34 Exercisable at March 31, 2021 912,558 $ 2.34 Weighted average duration (years) to expiration of outstanding options at March 31, 2021 5.77 There were no options granted during the three months ended March 31, 2021 and 2020. Stock-based compensation expense of $36,976 and $49,932 was recognized for the three months ended March 31, 2021 and 2020, respectively, and was recorded to general and administrative expense in the statements of operations. Total unrecognized compensation cost related to non-vested stock option awards as of March 31, 2021 amounted to $201,299 and will be recognized over a weighted average period of 1.55 years. 2020 Incentive Stock Plan The Company has adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 3,300,000 shares of the Company’s common stock is reserved for issuance and available for awards under the 2020 Plan, including incentive stock options granted under the 2020 Plan. The 2020 Plan administrator may grant awards to any employee, director, consultant or other person providing services to us or our affiliates. As of March 31, 2021, no grants have been made under the 2020 Plan. See Note 13 for options granted to management concurrent with the IPO. |
LEASE OBLIGATIONS
LEASE OBLIGATIONS | 3 Months Ended |
Mar. 31, 2021 | |
LEASE OBLIGATIONS | |
LEASE OBLIGATIONS | NOTE 11: LEASE OBLIGATIONS In January 2018, the Company entered into a lease agreement requiring base rent payments of $14,500 per month for a 36-month term. The lease required a $43,500 deposit. The Company terminated its lease agreement in February 2020. The Company received $73,500 from the landlord, which included $43,500 from the security deposit and two-thirds of the brokerage commission payable for the sub-lease agreement. Bailey leases facilities under operating leases with unrelated parties that expire at various dates through February 2029, however in July 2020 Bailey negotiated the early termination of the leases on two of its retail locations. The third lease was vacated and no additional liability is expected. Total rent expense for the three months ended March 31, 2021 and 2020 was $132,789 and $282,197, respectively. |
CONTINGENCIES
CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
CONTINGENCIES | |
CONTINGENCIES | NOTE 12: CONTINGENCIES The Company was in a lawsuit with our Los Angeles landlord in 2019. In February 2020, the Company settled with the landlord and terminated our lease agreement. The Company received $73,500 from the landlord, which included $43,500 from the security deposit and two-thirds of the brokerage commission payable for the sub-lease agreement, which will be received in 2020. The premises have been vacated there is no additional liability. On February 28, 2020, a Company vendor filed a lawsuit against the Company’s non-payment of trade payables totaling $123,000. Such amounts, including expected interest, are included in accounts payable 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 is actively working to resolve this matter. 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 is 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. If the Company fails to meet its obligations based on the prescribed time frame, the full amount will be due with interest, less payments made. 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. Both cases are in the preliminary stages and the Company believes the claims to be without merit. At this time, the Company is unable to determine potential outcomes but does not believe risk of loss is probable. 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. The Company does not believe it will be liable for additional damages and therefore the Company does not believe additional accrual is needed over what is included in accounts payable at this time. The Company plans to contest any such damages vigorously. 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. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 13: SUBSEQUENT EVENTS Reverse Stock Split On May 12, 2021, the Company’s Board of Directors approved a one Initial Public Offering On May 13, 2021, the Company’s registration statement on Form S-1 relating to the IPO was declared effective by the SEC. In the IPO, which closed on May 18, 2021, the Company issued and sold 2,409,639 shares of common stock at a public offering price of $4.15 per share. Additionally, the Company issued warrants to purchase 2,771,084 shares, which includes 361,445 warrants sold upon the partial exercise of the over-allotment option. The aggregate net proceeds to the Company from the IPO, inclusive of the proceeds from the over-allotment exercise, were approximately $8.4 million after deducting underwriting discounts and commissions of $0.8 million and estimated offering expenses of approximately $0.8 million. On May 13, 2021, pursuant to the IPO Underwriting Agreement, the Company issued warrants to the underwriters to purchase up to an aggregate of 120,482 shares of common stock with an exercise price of $5.19 per share. Upon the closing of the Company’s IPO, all 62,924,710 shares of Preferred Stock converted into an aggregate of 4,027,181 shares of common stock according to their respective terms. Upon closing of the Company’s IPO, the Company converted outstanding principal totaling $2,418,013 and certain accrued and unpaid interest of the Company’s convertible debt into an aggregate of 1,135,633 shares of common stock. Upon closing of the Company’s IPO, certain officers and directors converted balances due totaling $442,597 into 152,358 shares of common stock. On the effective date of the IPO, the Company granted stock options to acquire up to an aggregate of 2,672,000 shares to the Chief Executive Officer, Chief Marketing Officer and Chief Financial Officer at an exercise price of $4.15 per share. On June 28, 2021, the Company’s underwriters purchased 361,445 shares of common stock at a public offering price of $4.15 per share pursuant to the exercise of the remaining portion of their over-allotment option. The Company received net proceeds of approximately $1.4 million after deducting underwriting discounts and commissions. Closing of Acquisition of Harper & Jones, LLC On May 18, 2021, the Company closed its acquisition of Harper & Jones LLC 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 “Acquisition”). Upon closing of the Acquisition and the other transactions contemplated by the Purchase Agreement, Harper & Jones LLC became a wholly-owned subsidiary of the Company. Pursuant to the Purchase Agreement, at the closing of the Acquisition, the Company paid approximately $9.6 million (subject to certain escrow arrangements set forth in the Purchase Agreement), financed with $500,000 from the proceeds of the IPO and the issuance of 2,192,771 shares of common stock based on the public offering price of the Company’s IPO. The acquisition of Harper & Jones did not occur during the current reporting period and acquisition accounting work on the business combination financials remains in process at the time of filing due to constraints on resources. Amended and Restated Certificate of Incorporation On May 18, 2021, the Company filed a Sixth Amended and Restated Certificate of Incorporation (the “Restated Certificate”) with the Secretary of State of the State of Delaware in connection with the Company’s IPO. The Company’s board of directors and stockholders previously approved the Restated Certificate to be effective immediately prior to the closing of the IPO. The Restated Certificate amends and restates the Company’s amended and restated certificate of incorporation, as amended, in its entirety to, among other things: (i) increase the authorized number of shares of common stock to 200,000,000 shares; (ii) authorize 10,000,000 shares of preferred stock that may be issued from time to time by the Company’s board of directors in one or more series; (iii) provide that directors may be removed from office only for cause by the affirmative vote of the holders of at least 66 2/3% The Restated Certificate also effected a 1 Management’s Evaluation Management has evaluated subsequent events through June 28, 2021 the date the financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in these consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
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”). |
Principles of Consolidation | Principles of Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Bailey 44, LLC. All inter-company transactions and balances have been eliminated on consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 March 31, 2021 and December 31, 2020, 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 FASB guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities. Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company’s financial instruments consist of cash and cash equivalents, 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. Certain of the Company’s common stock warrants are carried at fair value. The fair value of the Company’s common stock warrant liabilities has been measured under the Level 3 hierarchy using the Black-Scholes pricing model. (See Note 10). The Company’s underlying common stock has no observable market price and was valued using a market approach. Changes in common stock warrant liability during the three months ended March 31, 2021 are as follows: Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value (562) Outstanding as of March 31, 2021 $ 5,703 |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method and first-in, first-out method for Bailey. The inventory balances as of March 31, 2021 and December 31, 2020 consist substantially of finished good products purchased or produced for resale, as well as any materials the Company purchased to modify the products. As of March 31, 2021, the Company made an adjustment to mark down certain of its inventory to net realizable value. |
Property, Equipment, and Software | Property, Equipment, and Software Property, equipment, and software are recorded at cost. Depreciation/amortization is recorded for property, equipment, and software using the straight-line method over the estimated useful lives of assets. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. The balances at March 31, 2021 and December 31, 2020 consist of software with three (3) year lives, property and equipment with 3-10 year lives, and leasehold improvements which are depreciated over the shorter of the lease life or expected life. Depreciation and amortization charges on property, equipment, and software are included in general and administrative expenses and amounted to $9,020 and $65,048 for the three months ended March, 31, 2021 and 2020, respectively. Capital assets as of March 31, 2021 and December 31, 2020 are as follows: March 31, December 31, 2021 2020 Computer equipment $ 6,339 $ 57,810 Furniture and fixtures 182,139 207,140 Leasehold improvements 69,274 69,274 257,752 334,224 Accumulated depreciation (257,752) (334,224) Property and equipment, net $ — $ — Software $ 226,205 $ 278,405 Accumulated amortization (172,912) (216,092) Software, net $ 53,293 $ 62,313 |
Business Combinations | Business Combinations The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase. Goodwill represents the excess of the purchase price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. Intangible assets are established with business combinations and consist of brand names and customer relationships. Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. The estimated useful lives of amortizable intangible assets are as follows: Customer relationships 3 years |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews its long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. |
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. The quantitative impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the first quarter every year. During the three months ended March 31, 2021, management performed its annual qualitative impairment test. The Company determined no factors existed to conclude that it is more likely than not that the fair value of the reporting unit was less than its carrying amount. As such, no goodwill impairment was recognized as of March 31, 2021. |
Indefinite-Lived Intangible Assets | Indefinite-Lived Intangible Assets Indefinite-lived intangible assets established in connection with business combinations consist of the brand name. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. |
Convertible Instruments | Convertible Instruments U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. |
Accounting for Preferred Stock | Accounting for Preferred Stock ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity. Management is required to determine the presentation for the preferred stock as a result of the redemption and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly, liability accounting is not required by the Company. The Company has presented preferred stock within stockholders’ equity. Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock. The discount is not amortized. |
Revenue Recognition | Revenue Recognition Revenues are recognized when performance obligations are satisfied through the transfer of promised goods to the Company’s customers. Control transfers upon shipment of product and when the title has been passed to the customers. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. The Company provides the customer the right of return on the product and revenue is adjusted based on an estimate of the expected returns based on historical rates. The Company considers the sale of products as a single performance obligation. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses. Revenue is deferred for orders received for which associated shipments have not occurred. The reserve for returns totaled $27,691 and $5,229 as of March 31, 2021 and December 31, 2020, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. |
Cost of Revenues | Cost of Revenues Cost of revenues consists primarily of inventory sold and related freight-in. |
Shipping and Handling | Shipping and Handling The Company recognizes shipping and handling billed to customers as a component of net revenues, and the cost of shipping and handling as a component of sales and marketing. Total shipping and handling billed to customers as a component of net revenues was approximately $0 and $3,800 for the three months ended March 31, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $60,000 and $57,000 for the three months ended March 31, 2021 and 2020, respectively. |
Advertising and Promotion | Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the three months ended March 31, 2021 and 2020 amounted to approximately $3,800 and $61,000 respectively, which is included in sales and marketing expense. |
Common Stock Purchase Warrants and Other Derivative Financial Instruments | Common Stock Purchase Warrants and Other Derivative Financial Instruments The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At March 31, 2021 and December 31, 2020, the Company did not have any derivative instruments that were designated as hedges. |
Stock Option and Warrant Valuation | Stock Option and Warrant Valuation Stock option and warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices for comparable entities. For warrants and stock options issued to non- employees, the Company accounts for the expected life based on the contractual life of the warrants and stock options. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. |
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 March 31, 2021 and December 31, 2020, the Company had capitalized $409,409 and $214,647, respectively, in deferred offering costs. |
Segment Information | Segment Information In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. As of March 31, 2021 our operating segments included: DSTLD and Bailey 44. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale and online channels, allowing us to execute on our omni-channel strategy. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into one reportable segment. All of the operating segments have met the aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments. |
Income Taxes | Income Taxes The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is unlikely that the deferred tax assets will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. |
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 March 31, 2021 and 2020, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of March 31, 2021 and 2020 are as follows: March 31, 2021 2020 Series Seed Preferred Stock (convertible to common stock) 20,714,518 20,714,518 Series A Preferred Stock (convertible to common stock) 5,654,072 5,654,072 Series A-2 Preferred Stock (convertible to common stock) 5,932,742 5,932,742 Series CF Preferred Stock (convertible to common stock) 836,331 126,641 Series A-3 Preferred Stock (convertible to common stock) 9,032,330 9,032,330 Series B Preferred Stock (convertible to common stock) 20,754,717 20,754,717 Common stock warrants 914,539 572,845 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 64,678,983 All shares of preferred stock are convertible into shares of common stock at a ratio of 15.625:1 per share. See Note 13. |
Concentrations | Concentrations The Company utilized three vendors that made up 96% of all inventory purchases during the three months ended March 31, 2021 and two vendors that made up 24% of all inventory purchases during the three months ended March 31, 2020. The loss of one of these vendors, may have a negative short-term impact on the Company’s operations; however, we believe there are acceptable substitute vendors that can be utilized longer-term. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to early adopt this ASU and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures. 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 is currently evaluating the impact of the adoption of ASU 2016-02 on its financial position, results of operations and cash flows once adopted. 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. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of changes in common stock warrant liability | Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value (562) Outstanding as of March 31, 2021 $ 5,703 |
Schedule of property, equipment, and software | March 31, December 31, 2021 2020 Computer equipment $ 6,339 $ 57,810 Furniture and fixtures 182,139 207,140 Leasehold improvements 69,274 69,274 257,752 334,224 Accumulated depreciation (257,752) (334,224) Property and equipment, net $ — $ — Software $ 226,205 $ 278,405 Accumulated amortization (172,912) (216,092) Software, net $ 53,293 $ 62,313 |
Schedule of estimated useful lives of amortizable intangible assets | Customer relationships 3 years |
Schedule of potentially dilutive items outstanding | March 31, 2021 2020 Series Seed Preferred Stock (convertible to common stock) 20,714,518 20,714,518 Series A Preferred Stock (convertible to common stock) 5,654,072 5,654,072 Series A-2 Preferred Stock (convertible to common stock) 5,932,742 5,932,742 Series CF Preferred Stock (convertible to common stock) 836,331 126,641 Series A-3 Preferred Stock (convertible to common stock) 9,032,330 9,032,330 Series B Preferred Stock (convertible to common stock) 20,754,717 20,754,717 Common stock warrants 914,539 572,845 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 64,678,983 |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
BUSINESS COMBINATIONS | |
Schedule of components of purchase price consideration | Series B preferred stock $ 11,000,000 Promissory note payable 4,500,000 Purchase price consideration $ 15,500,000 |
Schedule of assets and liabilities acquired in business combination | |
Business acquisition proForma information | Three Months Ended March 31, 2020 Net revenues $ 4,596,508 Net loss $ (3,964,927) Net loss per common share $ (5.97) |
DUE FROM FACTOR (Tables)
DUE FROM FACTOR (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
DUE FROM FACTOR | |
Schedule of due from factor | Due to/from factor consist of the following: March 31, December 31, 2021 2020 Outstanding receivables: Without recourse $ 201,870 $ 151,158 With recourse 22,812 42,945 Advances — 56,246 Credits due customers (43,650) (40,316) $ 181,032 $ 210,033 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
GOODWILL AND INTANGIBLE ASSETS | |
Summary of amortized and indefinite-lived intangible assets | Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 1,100,000 $ (412,500) $ 687,500 1,100,000 (412,500) 687,500 Indefinite-lived: Brand name $ 6,715,500 — 6,715,500 $ 7,815,500 $ (412,500) $ 7,403,000 |
LIABILITIES AND DEBT (Tables)
LIABILITIES AND DEBT (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
LIABILITIES AND DEBT | |
Schedule of accrued exepenses and other liabilities | March 31, December 31, 2021 2020 Accrued expenses $ 116,222 $ 92,074 Reserve for returns 27,691 5,229 Payroll related liabilities 889,503 843,704 Sales tax liability 195,028 196,410 Other liabilities 115,277 108,230 $ 1,343,721 $ 1,245,646 |
SHARE-BASED PAYMENTS (Tables)
SHARE-BASED PAYMENTS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
SHARE-BASED PAYMENTS | |
Schedule of fair value measurement inputs and valuation techniques | Three Months Ended March 31, 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 % Expected Life (years) 10.00 |
Summary of information related to common stock and preferred stock warrants | Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 914,539 $ 2.66 Granted — — Exercised — — Forfeited — — Outstanding - March 31, 2021 914,539 $ 2.66 Exercisable at March 31, 2021 914,539 $ 2.66 Preferred Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 806,903 $ 0.49 Exercised — — Forfeited — — Outstanding - March 31, 2021 806,903 $ 0.49 Exercisable at March 31, 2021 806,903 $ 0.49 |
Summary of information related to stock options under stock plan | Weighted Average Options Exercise Price Outstanding - December 31, 2020 1,163,103 $ 2.34 Granted — — Exercised — — Forfeited — — Outstanding - March 31, 2021 1,163,103 $ 2.34 Exercisable at March 31, 2021 912,558 $ 2.34 Weighted average duration (years) to expiration of outstanding options at March 31, 2021 5.77 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) $ / shares in Units, $ in Millions | May 13, 2021USD ($)$ / sharesshares | May 12, 2021 | Mar. 31, 2021USD ($)shares | Dec. 31, 2020shares |
Subsidiary, Sale of Stock [Line Items] | ||||
Reverse stock split ratio | 0.064 | |||
Number of shares issued | 0 | 0 | ||
Initial Public Offering | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Number of shares issued | 2,409,639 | |||
Share issue price | $ / shares | $ 4.15 | |||
Warrants issued | 2,771,084 | |||
Aggregate net proceeds from the IPO, inclusive of the proceeds from the over-allotment exercise | $ | $ 8.4 | $ 9.8 | ||
Underwriting discounts and commissions | $ | 0.8 | |||
Estimated offering expenses | $ | $ 0.8 | |||
Over-allotment option | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Warrants issued | 361,445 |
GOING CONCERN (Details)
GOING CONCERN (Details) - USD ($) | May 13, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Net loss | $ (3,023,935) | $ (1,906,527) | ||
Working capital deficit | 13,705,113 | |||
Cash and cash equivalents | 711,203 | $ 575,986 | ||
Initial Public Offering | ||||
Net proceeds from IPO and Over allottment exercise | $ 8,400,000 | $ 9,800,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and Equivalents and Concentration of Credit Risk (Details) | Mar. 31, 2021USD ($) |
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) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Outstanding as of December 31, 2020 | $ 6,265 |
Change in fair value | (562) |
Outstanding as of March 31, 2021 | $ 5,703 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Equipment, and Software (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | |||
General and administrative expenses | $ 9,020 | $ 65,048 | |
Capital assets | |||
Property and equipment, net | 53,293 | $ 62,313 | |
Software | 226,205 | 278,405 | |
Accumulated amortization | (172,912) | (216,092) | |
Software, net | 53,293 | 62,313 | |
Computer equipment | |||
Capital assets | |||
Property and equipment, gross | 6,339 | 57,810 | |
Furniture and fixtures | |||
Capital assets | |||
Property and equipment, gross | 182,139 | 207,140 | |
Leasehold improvements | |||
Capital assets | |||
Property and equipment, gross | 69,274 | 69,274 | |
Property and equipment | |||
Capital assets | |||
Property and equipment, gross | 257,752 | 334,224 | |
Accumulated depreciation/amortization | $ (257,752) | $ (334,224) | |
Property and equipment | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Lease life or expected life | 3 years | ||
Property and equipment | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Lease life or expected life | 10 years | ||
Software | |||
Property, Plant and Equipment [Line Items] | |||
Lease life or expected life | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Business Combinations (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Customer relationships | |
Finite-Lived Intangible Assets [Line Items] | |
Estimated useful lives | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Reserve for returns | $ 27,691 | $ 5,229 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Shipping and Handling (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Total shipping and handling | $ 0 | $ 3,800 |
Total shipping and handling costs included in distribution costs | $ 60,000 | $ 57,000 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising and Promotion (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Advertising and promotional expense | $ 3,800 | $ 61,000 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred Offering Costs (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred offering costs | $ 409,409 | $ 214,647 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Net Loss per Share (Details) | 3 Months Ended | |
Mar. 31, 2021shares | Mar. 31, 2020shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 65,809,254 | 64,678,983 |
Convertible ratio | 15.625 | |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 1,163,103 | 1,084,215 |
Series Seed Preferred Stock (convertible to common stock) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 20,714,518 | 20,714,518 |
Series A Preferred Stock (convertible to common stock) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 5,654,072 | 5,654,072 |
Series A-2 Preferred Stock (convertible to common stock) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 5,932,742 | 5,932,742 |
Series CF Preferred Stock (convertible to common stock) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 836,331 | 126,641 |
Series A-3 Preferred Stock (convertible to common stock) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 9,032,330 | 9,032,330 |
Series B Preferred Stock (convertible to common stock) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 20,754,717 | 20,754,717 |
Common stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 914,539 | 572,845 |
Preferred stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total potentially dilutive shares | 806,903 | 806,903 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations (Details) - item | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Number of vendors | 3 | 2 |
Inventory, percentage | 96.00% | 24.00% |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Goodwill, Impairment Loss | $ 0 |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - USD ($) | Oct. 14, 2020 | Feb. 12, 2020 | Mar. 31, 2020 |
Business Acquisition [Line Items] | |||
Trading day immediately preceding period | 30 days | ||
Gross proceeds from common stock indemnification claims | $ 9,100,000 | ||
Percentage of company shares need to be issued to escrow to cover possible indemnification obligations of sellers | 20.00% | ||
Bailey 44, LLC | |||
Business Acquisition [Line Items] | |||
Business acquisition interest acquired | 100.00% | ||
Business acquisition issuable amount | $ 11,000,000 | ||
Number of shares connection with merger | 16,603,773 | ||
Number of shares held back solely | 4,150,944 | ||
Business combination indemnification provisions | $ 11,000,000 | ||
Bailey 44, LLC | Series B convertible preferred stock | |||
Business Acquisition [Line Items] | |||
Business acquisition aggregate shares issuable | 20,754,717 | ||
Business acquisition issuable amount | $ 4,500,000 | ||
Harper & Jones LLC | |||
Business Acquisition [Line Items] | |||
Business acquisition issuable amount | 40,000,000 | ||
Cash payments | 500,000 | ||
Harper & Jones LLC | Initial Public Offering | |||
Business Acquisition [Line Items] | |||
Business acquisition issuable amount | $ 9,100,000 |
BUSINESS COMBINATIONS - Purchas
BUSINESS COMBINATIONS - Purchase price consideration (Details) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Business Acquisition [Line Items] | |
Purchase price consideration | $ 15,500,000 |
Series B convertible preferred stock | |
Business Acquisition [Line Items] | |
Purchase price consideration | 11,000,000 |
Promissory note payable | |
Business Acquisition [Line Items] | |
Purchase price consideration | $ 4,500,000 |
BUSINESS COMBINATIONS - Assets
BUSINESS COMBINATIONS - Assets acquired and Liabilties assumed (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
BUSINESS COMBINATIONS | ||
Cash and cash equivalents | $ 106,913 | |
Accounts receivable, net | 37,479 | |
Due from factor, net | (312,063) | |
Inventory | 3,303,660 | |
Prepaid expenses | 165,856 | |
Deposits | 187,493 | |
Property, equipment and software, net | 1,215,748 | |
Goodwill | 6,479,218 | $ 6,479,218 |
Intangible assets | 8,600,000 | |
Accounts payable | (3,397,547) | |
Accrued expenses and other liabilities | (886,757) | |
Purchase price consideration | $ 15,500,000 |
BUSINESS COMBINATIONS - Unaudit
BUSINESS COMBINATIONS - Unaudited Pro Forma Financial Information (Details) | 3 Months Ended |
Mar. 31, 2021USD ($)$ / shares | |
BUSINESS COMBINATIONS | |
Net revenues | $ 4,596,508 |
Net loss | $ (3,964,927) |
Net loss per common share | $ / shares | $ (5.97) |
DUE FROM FACTOR (Details)
DUE FROM FACTOR (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Debt Instrument [Line Items] | ||
Outstanding receivables, Without recourse | $ 201,870 | $ 151,158 |
Outstanding receivables, With recourse | 22,812 | 42,945 |
Advances | 56,246 | |
Credits due customers | (43,650) | (40,316) |
Due from factor | $ 181,032 | $ 210,033 |
Maximum advances on net sales can be requested, percentage | 50.00% | |
LIBOR | ||
Debt Instrument [Line Items] | ||
Debt instrument variable rate | 2.50% |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Feb. 28, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Indefinite-lived Intangible Assets [Line Items] | ||||
Goodwill acquired | $ 6,479,218 | |||
Gross Amount | $ 1,100,000 | |||
Accumulated Amortization | (412,500) | |||
Carrying Value-Amortized | 687,500 | |||
Indefinite-lived | 7,815,500 | |||
Intangible Assets, Net (Excluding Goodwill), Total | 7,403,000 | $ 7,494,667 | ||
Amortization expense | 91,667 | $ 45,844 | ||
Customer relationships | ||||
Indefinite-lived Intangible Assets [Line Items] | ||||
Gross Amount | 1,100,000 | |||
Accumulated Amortization | (412,500) | |||
Carrying Value-Amortized | 687,500 | |||
Brand name | ||||
Indefinite-lived Intangible Assets [Line Items] | ||||
Indefinite-lived | 6,715,500 | |||
Intangible Assets, Net (Excluding Goodwill), Total | $ 6,715,500 |
LIABILITIES AND DEBT - Accrued
LIABILITIES AND DEBT - Accrued Expenses and Other Liabilities (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
LIABILITIES AND DEBT | ||
Accrued expenses | $ 116,222 | $ 92,074 |
Reserve for returns | 27,691 | 5,229 |
Payroll related liabilities | 889,503 | 843,704 |
Sales tax liability | 195,028 | 196,410 |
Other liabilities | 115,277 | 108,230 |
Accrued Liabilities and Other Liabilities, Total | 1,343,721 | 1,245,646 |
Estimated Penalties Associated With Accrued Payroll Taxes | $ 217,000 | $ 152,000 |
LIABILITIES AND DEBT - Venture
LIABILITIES AND DEBT - Venture Debt (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2020 | Mar. 31, 2017 | |
Line of Credit Facility [Line Items] | |||||||
Interest expense | $ 199,986 | $ 164,046 | |||||
Interest expense and effective interest rate | 20.90% | 18.40% | |||||
Note Warrant [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Percentage diluted capitalization | 1.358% | 1.00% | |||||
Principal loaned under the agreement | $ 1,000,000 | ||||||
Loan fees and discounts from warrants were amortized to interest expense | $ 113,993 | $ 52,140 | |||||
Lioan fees and discounts from warrants unamortized balance | 33,436 | $ 147,389 | |||||
Venture Debt [Member] | Secured Debt [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Maximum borrowing capacity | $ 4,000,000 | ||||||
Amended Venture Debt [Member] | Secured Debt [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Maximum borrowing capacity | $ 6,000,000 | $ 6,000,000 | |||||
Loan bearsinterest rate | 12.50% | 12.50% | |||||
Compounded monthly fees | $ 5,000 | ||||||
Line of credit, current | $ 300,000 | 300,000 | |||||
Gross loan | $ 6,001,755 | $ 6,001,755 | $ 6,001,755 | ||||
Amended Venture Debt [Member] | Secured Debt [Member] | Follow-On Public Offering [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Line of credit facility, frequency of payments | If the Company consummates a follow on public offering on or before July 31, 2021, the Company is required to make a $3,000,000 payment on the loan within five business days after such public offering | ||||||
Loan payment | $ 3,000,000 | ||||||
Line of credit facility days | 5 days | ||||||
Amended Venture Debt [Member] | Secured Debt [Member] | Secondary Follow-On Public Offering Prior To September 30 2021 [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Line of credit facility, frequency of payments | if the Company consummates an additional follow-on offering thereafter on or before September 30, 2021, the Company is required to make another $3,000,000 payment on the loan within five business days after such public offering | ||||||
Loan payment | $ 3,000,000 | ||||||
Line of credit facility days | 5 days | ||||||
Amended Venture Debt [Member] | Secured Debt [Member] | Secondary Follow-On Public Offering After September 30 2021 [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Line of credit facility, frequency of payments | If the Company does not consummate the initial follow on offering or, if the Company does but does not consummate the aforementioned second follow-on offering by September 30, 2021, the Company is required to make a $300,000 payment on the loan by September 30, 2021 | ||||||
Loan payment | $ 300,000 |
LIABILITIES AND DEBT - Converti
LIABILITIES AND DEBT - Convertible Debt (Details) | Apr. 01, 2021shares | Mar. 31, 2021USD ($)$ / sharesshares | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($)item$ / shares |
Debt Instrument [Line Items] | ||||
Gross proceeds received | $ 1,347,050 | |||
Convertible Debt 2020 Regulation CF Offering [Member] | Convertible Debt [Member] | ||||
Debt Instrument [Line Items] | ||||
Gross proceeds received | $ 473,650 | $ 450,308 | ||
Interest rate of loans | 6.00% | |||
Issuance costs | $ 69,627 | 33,773 | ||
Amortization of debt issuance costs | 41,403 | |||
Convertible Debt 2020 Regulation CF Offering [Member] | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | Subsequent Events | ||||
Debt Instrument [Line Items] | ||||
Number of shares resulting from conversion | shares | 319,661 | |||
Convertible Debt 2020 Regulation D Offering [Member] | Convertible Debt [Member] | ||||
Debt Instrument [Line Items] | ||||
Gross proceeds received | $ 55,000 | 800,000 | ||
Interest rate of loans | 14.00% | |||
Debt instrument term | 9 months | |||
Issuance costs | $ 100,000 | $ 100,000 | ||
Amortization of debt issuance costs | 67,669 | |||
Gross proceeds from converted debt conversion | $ 10,000,000 | |||
Converted percentage of IPO price | 50.00% | |||
Debt conversion price | $ / shares | $ 23.44 | |||
Common stock warrants issued | shares | 512 | |||
Convertible Debt 2020 Regulation D Offering [Member] | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | Subsequent Events | ||||
Debt Instrument [Line Items] | ||||
Number of shares resulting from conversion | shares | 453,917 | |||
Convertible Debt 2019 Regulation D Offering [Member] | Convertible Debt [Member] | ||||
Debt Instrument [Line Items] | ||||
Gross proceeds received | $ 799,280 | |||
Interest rate of loans | 12.00% | |||
Debt instrument term | 36 months | |||
Debt conversion price | $ / shares | $ 2.19 | |||
Debt conversion share price triggering conversion | $ / shares | $ 2.19 | |||
Debt conversion based on value of the principle | item | 2 | |||
Valuation cap | $ 9,000,000 | |||
Convertible Debt 2019 Regulation D Offering [Member] | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | Subsequent Events | ||||
Debt Instrument [Line Items] | ||||
Number of shares resulting from conversion | shares | 362,055 |
LIABILITIES AND DEBT - Loan Pay
LIABILITIES AND DEBT - Loan Payable - PPP and SBA Loan (Details) - USD ($) | 1 Months Ended | ||
Apr. 30, 2020 | Feb. 28, 2021 | Jun. 25, 2020 | |
Paycheck Protection Program, Cares Act [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 203,994 | ||
Interest rate of loans | 1.00% | ||
Interest deferral term | 6 months | ||
Debt instrument term | 2 years | ||
Paycheck Protection Program, Cares Act [Member] | Bailey [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 1,347,050 | $ 1,347,050 | |
Economic Injury Disaster Loan [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 150,000 | ||
Interest rate of loans | 3.75% |
LIABILITIES AND DEBT - Promisso
LIABILITIES AND DEBT - Promissory Note Payable (Details) - Promissory note payable - Notes Payable to Banks [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Debt Instrument [Line Items] | ||
Aggregate principal amount | $ 4,500,000 | |
Interest rate of loans | 12.00% | |
Interest expense | $ 135,000 | $ 67,500 |
STOCKHOLDERS' DEFICIT (Details)
STOCKHOLDERS' DEFICIT (Details) - USD ($) | May 18, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 |
Class of Stock [Line Items] | ||||
Preferred stock liquidation preference | $ 27,536,206 | $ 27,536,206 | ||
Issuance of Series A-3 preferred stock (in shares) | 0 | 0 | ||
Issuance of Series A-3 preferred stock | $ 311,312 | |||
Common stock authorized (in shares) | 110,000,000 | 110,000,000 | ||
Common stock par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||
Common stock issued (in shares) | 664,167 | 664,167 | ||
Common stock outstanding (in shares) | 664,167 | 664,167 | ||
Common stock voting rights | one | |||
Number of shares issued | 0 | 0 | ||
Preferred Stock | ||||
Class of Stock [Line Items] | ||||
Stock issued upon conversion (in shares) | 4,027,181 | |||
Common Stock | ||||
Class of Stock [Line Items] | ||||
Common stock authorized (in shares) | 200,000,000 | 200,000,000 | ||
Common stock par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||
Common stock issued (in shares) | 664,167 | |||
Common stock outstanding (in shares) | 664,167 | |||
Series Seed Preferred Stock | ||||
Class of Stock [Line Items] | ||||
Preferred stock issued (in shares) | 20,714,518 | 20,714,518 | ||
Preferred stock outstanding (in shares) | 20,714,518 | 20,714,518 | ||
Preferred stock liquidation preference | $ 5,633,855 | $ 5,633,855 | ||
Series A convertible preferred stock | ||||
Class of Stock [Line Items] | ||||
Preferred stock issued (in shares) | 5,654,072 | 5,654,072 | ||
Preferred stock outstanding (in shares) | 5,654,072 | 5,654,072 | ||
Preferred stock liquidation preference | $ 2,713,955 | $ 2,713,955 | ||
Series A-2 convertible preferred stock | ||||
Class of Stock [Line Items] | ||||
Preferred stock issued (in shares) | 5,932,742 | 5,932,742 | ||
Preferred stock outstanding (in shares) | 5,932,742 | 5,932,742 | ||
Preferred stock liquidation preference | $ 2,966,371 | $ 2,966,371 | ||
Series CF convertible preferred stock | ||||
Class of Stock [Line Items] | ||||
Preferred stock issued (in shares) | 836,331 | 836,331 | ||
Preferred stock outstanding (in shares) | 836,331 | 836,331 | ||
Preferred stock liquidation preference | $ 434,890 | $ 434,890 | ||
Series A-3 convertible preferred stock | ||||
Class of Stock [Line Items] | ||||
Preferred stock issued (in shares) | 9,032,330 | 9,032,330 | ||
Preferred stock outstanding (in shares) | 9,032,330 | 9,032,330 | ||
Preferred stock liquidation preference | $ 4,787,135 | $ 4,787,135 | ||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | 809,294 | ||
Issue price (in dollars per share) | $ 0.53 | |||
Issuance of Series A-3 preferred stock | $ 81 | |||
Number of shares issued | 809,294 | 809,294 | ||
Series B convertible preferred stock | ||||
Class of Stock [Line Items] | ||||
Issuance of Series A-3 preferred stock (in shares) | 20,754,717 | 20,754,717 | ||
Issue price (in dollars per share) | $ 0.53 | |||
Issuance of Series A-3 preferred stock | $ 11,000,000 | |||
Number of shares issued | 20,754,717 | 20,754,717 |
RELATED PARTY TRANSACTIONS - Du
RELATED PARTY TRANSACTIONS - Due to Related Parties (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Advances | ||
Due to related parties | ||
Advance due to related parties | $ 194,568 | |
Accrued Salary | ||
Due to related parties | ||
Advance due to related parties | $ 184,107 | |
Expense Reimbursements | ||
Due to related parties | ||
Advance due to related parties | $ 246,885 |
RELATED PARTY TRANSACTIONS - No
RELATED PARTY TRANSACTIONS - Note Payable (Details) - Chief Executive Officer - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Related Party Transaction [Line Items] | ||
Interest rate of loans | 5.00% | |
Notes Payable, Other Payables | Note Payable, Chief Executive Officer | ||
Related Party Transaction [Line Items] | ||
Note payable total | $ 115,000 | $ 115,000 |
SHARE-BASED PAYMENTS - Common S
SHARE-BASED PAYMENTS - Common Stock Warrants - General Information (Details) | 3 Months Ended |
Mar. 31, 2020USD ($)$ / sharesshares | |
Common stock warrants | |
Class of Warrant or Right [Line Items] | |
Warrants granted | shares | 152,280 |
Warrants exercise price | $ / shares | $ 0.16 |
Warrants value | $ | $ 58,421 |
Common Stock Warrants, Funding Platform, Preferred Stock Raise [Member] | |
Class of Warrant or Right [Line Items] | |
Warrants granted | shares | 2,603 |
Warrants exercise price | $ / shares | $ 0.53 |
SHARE-BASED PAYMENTS - Common_2
SHARE-BASED PAYMENTS - Common Stock Warrants - Valuation (Details) - Common stock warrants | Mar. 31, 2020Y |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants and Rights Outstanding, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueOptionPricingModelMember |
Risk Free Interes Rate | Minimum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants measurement input | 1.54 |
Risk Free Interes Rate | Maximum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants measurement input | 1.59 |
Expected Dividend Yield | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants measurement input | 0 |
Expected Volatility | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants measurement input | 58 |
Expected Life (years) | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants measurement input | 10 |
SHARE-BASED PAYMENTS - Warrants
SHARE-BASED PAYMENTS - Warrants Roll Forward (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Common stock warrants | |
Class of Warrant or Right [Line Items] | |
Warrant Outstanding Beginning Balance | shares | 914,539 |
Warrant Outstanding Ending Balance | shares | 914,539 |
Common Stock Warrants Exercisable | shares | 914,539 |
Weighted Average Exercise Price Outstanding Beginning Balance | $ / shares | $ 2.66 |
Weighted Average Exercise Price Outstanding Ending Balance | $ / shares | 2.66 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 2.66 |
Preferred stock warrants | |
Class of Warrant or Right [Line Items] | |
Warrant Outstanding Beginning Balance | shares | 806,903 |
Warrant Outstanding Ending Balance | shares | 806,903 |
Common Stock Warrants Exercisable | shares | 806,903 |
Weighted Average Exercise Price Outstanding Beginning Balance | $ / shares | $ 0.49 |
Weighted Average Exercise Price Outstanding Ending Balance | $ / shares | 0.49 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 0.49 |
SHARE-BASED PAYMENTS - Stock Op
SHARE-BASED PAYMENTS - Stock Options - Activity (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance | 1,163,103 | |
Granted | 0 | 0 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance | 1,163,103 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Beginning Balance | $ 2.34 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance | $ 2.34 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||
Share-based Compensation Arrangement by Share-based Option Exercisable at March 31, 2021 | 912,558 | |
Share-based Compensation Arrangement by Weighted Average Exercise Price at March 31, 2021 | $ 2.34 | |
Weighted average duration (years) to expiration of outstanding options at March 31, 2021 | 5 years 9 months 7 days |
SHARE-BASED PAYMENTS - Stock-ba
SHARE-BASED PAYMENTS - Stock-based Compensation (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
SHARE-BASED PAYMENTS | ||
Stock-based compensation expense | $ 36,976 | $ 49,932 |
Unrecognized compensation cost related to non-vested stock option | $ 201,299 | |
Share-based arrangement, non-vested weighted average period | 1 year 6 months 18 days |
SHARE-BASED PAYMENTS - 2020 Inc
SHARE-BASED PAYMENTS - 2020 Incentive Stock Plan (Details) - shares | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||
Aggregate shares of stock options granted | 0 | 0 |
Omnibus Incentive Stock Plan, 2020 [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||
Common stock, capital shares reserved for future issuance | 3,300,000 | |
Aggregate shares of stock options granted | 0 |
LEASE OBLIGATIONS (Details)
LEASE OBLIGATIONS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Jan. 31, 2018 | Mar. 31, 2021 | Mar. 31, 2020 | |
Leased property | |||
Operating lease agreements | |||
Rent expense | $ 14,500 | ||
Lease term | 36 months | ||
Security deposit | $ 43,500 | ||
Operating Lease Return Of Security Deposit And Brokerage Commission Payable | $ 73,500 | ||
Leased retail locations | |||
Operating lease agreements | |||
Rent expense | $ 132,789 | $ 282,197 | |
Leased retail location, lease was vacated | |||
Minimum lease payments | |||
Lease liability | $ 0 |
CONTINGENCIES (Details)
CONTINGENCIES (Details) | Dec. 21, 2020USD ($) | Sep. 24, 2020USD ($) | Mar. 25, 2020USD ($) | Feb. 28, 2020USD ($) | Mar. 31, 2021USD ($)item | Aug. 31, 2020item | Feb. 29, 2020USD ($) | Jan. 31, 2018USD ($) | Mar. 31, 2021USD ($)item |
Litigation Matters | |||||||||
Settlement amount payable to vendor | $ 37,000 | ||||||||
Number of monthly payments to be made | item | 10 | 10 | |||||||
Lawsuits filed related to prior services rendered | |||||||||
Litigation Matters | |||||||||
Damages sought | $ 96,900 | ||||||||
Number of lawsuits filed | item | 2 | 2 | |||||||
Leased property | |||||||||
Operating lease agreements | |||||||||
Lease refund of security deposit and portion of brokerage commission payable | $ 73,500 | ||||||||
Security deposit | $ 43,500 | ||||||||
Lease termination | Leased property | |||||||||
Operating lease agreements | |||||||||
Lease refund of security deposit and portion of brokerage commission payable | $ 73,500 | ||||||||
Security deposit | $ 43,500 | ||||||||
Lease liability | $ 0 | $ 0 | |||||||
Non-payment of trade payables | |||||||||
Litigation Matters | |||||||||
Damages sought | $ 492,390 | $ 123,000 | |||||||
Non-payment of trade payables | Lawsuits filed related to prior services rendered | |||||||||
Litigation Matters | |||||||||
Damages sought | $ 481,000 | ||||||||
Additional damages sought | $ 296,000 | ||||||||
Reimbursement of investment | |||||||||
Litigation Matters | |||||||||
Damages sought | $ 100,000 |
SUBSEQUENT EVENTS - Initial Pub
SUBSEQUENT EVENTS - Initial Public Offering (Details) | Jun. 28, 2021USD ($)$ / sharesshares | May 18, 2021USD ($)$ / sharesshares | May 13, 2021USD ($)$ / sharesshares | May 12, 2021 | Mar. 31, 2021shares | Mar. 31, 2020shares | Dec. 31, 2020shares |
Subsequent Event [Line Items] | |||||||
Reverse stock split | 0.064 | ||||||
Number of shares issued | 0 | 0 | |||||
Aggregate shares of stock options granted | 0 | 0 | |||||
Initial Public Offering | |||||||
Subsequent Event [Line Items] | |||||||
Number of shares issued | 2,409,639 | ||||||
Subsequent Events | |||||||
Subsequent Event [Line Items] | |||||||
Reverse stock split | 0.064 | 0.064 | |||||
Subsequent Events | Officers and Directors | |||||||
Subsequent Event [Line Items] | |||||||
Outstanding principal and accrued and unpaid interest of convertible debt converted | $ | $ 442,597 | ||||||
Number of shares resulting from conversion | 152,358 | ||||||
Subsequent Events | Preferred Stock | |||||||
Subsequent Event [Line Items] | |||||||
Conversion of stock, shares issued | 62,924,710 | ||||||
Subsequent Events | Common Stock | |||||||
Subsequent Event [Line Items] | |||||||
Conversion of stock, shares issued | 4,027,181 | ||||||
Subsequent Events | Initial Public Offering | |||||||
Subsequent Event [Line Items] | |||||||
Number of shares issued | 2,409,639 | ||||||
Issue price (in dollars per share) | $ / shares | $ 4.15 | ||||||
Number of securities into which warrant may be converted | 2,771,084 | ||||||
Number of warrants sold | 361,445 | ||||||
Net proceeds | $ | $ 8,400,000 | ||||||
Underwriting discounts and commissions | $ | 800,000 | ||||||
Other offering expenses | $ | $ 800,000 | ||||||
Net proceeds of after deducting underwriting discounts and commissions | $ | $ 1,400,000 | ||||||
Outstanding principal and accrued and unpaid interest of convertible debt converted | $ | $ 2,418,013 | ||||||
Number of shares resulting from conversion | 1,135,633 | ||||||
Subsequent Events | Initial Public Offering | Chief Executive Officer, Chief Marketing Officer and Chief Financial Officer | |||||||
Subsequent Event [Line Items] | |||||||
Aggregate shares of stock options granted | 2,672,000 | ||||||
Exercise price of stock options granted | $ / shares | $ 4.15 | ||||||
Subsequent Events | Initial Public Offering | Common Stock | |||||||
Subsequent Event [Line Items] | |||||||
Underwriters purchase of shares | 361,445 | ||||||
Underwriters per share price | $ / shares | $ 4.15 | ||||||
Subsequent Events | Initial Public Offering | Warrants to Underwriters | |||||||
Subsequent Event [Line Items] | |||||||
Aggregate shares of stock options granted | 120,482 | ||||||
Exercise price of stock options granted | $ / shares | $ 5.19 |
SUBSEQUENT EVENTS - Closing of
SUBSEQUENT EVENTS - Closing of Acquisition of Harper & Jones, LLC (Details) - USD ($) | May 18, 2021 | Mar. 31, 2021 | Dec. 31, 2020 |
Subsequent Event [Line Items] | |||
Total consideration paid | $ 15,500,000 | ||
Common Stock, Shares Issued | 664,167 | 664,167 | |
Subsequent Events | Harper & Jones, LLC | |||
Subsequent Event [Line Items] | |||
Percentage of equity acquired | 100.00% | ||
Subsequent Events | Harper & Jones, LLC | Initial Public Offering | |||
Subsequent Event [Line Items] | |||
Total consideration paid | $ 9,600,000 | ||
Cash proceeds paid | $ 500,000 | ||
Common Stock, Shares Issued | 2,192,771 |
SUBSEQUENT EVENTS - Amended and
SUBSEQUENT EVENTS - Amended and Restated Certificate of Incorporation (Details) | May 18, 2021shares | May 12, 2021 | Mar. 31, 2021shares | Dec. 31, 2020shares |
Subsequent Event [Line Items] | ||||
Common stock authorized (in shares) | 110,000,000 | 110,000,000 | ||
Reverse stock split | 0.064 | |||
Common Stock | ||||
Subsequent Event [Line Items] | ||||
Common stock authorized (in shares) | 200,000,000 | 200,000,000 | ||
Subsequent Events | ||||
Subsequent Event [Line Items] | ||||
Preferred Stock, Shares Authorized | 10,000,000 | |||
Percentage of capital stock voting power to remove directors | 66.67% | |||
Reverse stock split | 0.064 | 0.064 | ||
Subsequent Events | Common Stock | ||||
Subsequent Event [Line Items] | ||||
Common stock authorized (in shares) | 200,000,000 |