Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2021 | |
Document and Entity Information [Abstract] | |
Document Type | S-1 |
Entity Registrant Name | DIGITAL BRANDS GROUP, INC. |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
Entity Central Index Key | 0001668010 |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS | Dec. 31, 2019USD ($) | |
Current assets: | ||
Cash and cash equivalents | $ 40,469 | |
Inventory | 1,061,969 | |
Prepaid expenses | 63,516 | |
Total current assets | 1,165,954 | |
Property, equipment and software, net | 72,593 | |
Deposits | 43,510 | |
Total assets | 1,282,057 | |
Current liabilities: | ||
Accounts payable | 1,597,770 | |
Accrued expenses and other liabilities | 1,121,317 | |
Deferred revenue | 15,231 | |
Due to related parties | 263,427 | |
Accrued interest payable | 129,982 | |
Note payable - related party | 115,000 | |
Venture debt, net of discount | 4,382,549 | |
Total current liabilities | 7,625,276 | |
Convertible notes | 799,280 | |
Warrant liability | 7,700 | |
Total liabilities | 8,432,256 | |
Commitments and contingencies (Note 13) | ||
Stockholders' deficit: | ||
Common stock, $0.0001 par, 200,000,000 shares authorized, 664,167 and 664,167 shares issued and outstanding as of both December 31, 2020 and 2019(1) | 66 | [1] |
Additional paid-in capital | 15,486,050 | |
Subscription receivable | (22,677) | |
Accumulated deficit | (22,617,702) | |
Total stockholders' equity (deficit) | (7,150,199) | |
Total liabilities and stockholders' equity (deficit) | 1,282,057 | |
Series Seed Preferred Stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 2,071 | |
Series A convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 565 | |
Series A-2 convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 593 | |
Series A-3 convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | 823 | |
Series CF convertible preferred stock | ||
Stockholders' deficit: | ||
Convertible preferred stock | $ 12 | |
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) | May 12, 2021 | Sep. 30, 2021$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2021shares | Feb. 11, 2020shares | Sep. 30, 2018shares |
Preferred Stock, Shares Authorized | 125,000,000 | 77,000,000 | |||||
Preferred Stock, Shares Outstanding | 20,714,518 | 20,714,518 | |||||
Conversion of Stock, Shares Converted | 25,080 | ||||||
Preferred Stock, Liquidation Preference, Value | $ | $ 27,536,206 | $ 15,738,253 | |||||
Common Stock, Shares Authorized | 200,000,000 | 110,000,000 | |||||
Reverse stock split ratio | 0.064 | ||||||
Subsequent Events | |||||||
Reverse stock split ratio | 15.625 | ||||||
Series Seed Preferred Stock | |||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 0 | 20,714,518 | 20,714,518 | ||||
Preferred Stock, Shares Issued | 0 | 20,714,518 | 20,714,518 | 20,714,518 | |||
Preferred Stock, Shares Outstanding | 0 | 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 | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 0 | 14,481,413 | 14,481,413 | ||||
Preferred Stock, Shares Issued | 0 | 5,654,072 | 5,654,072 | ||||
Preferred Stock, Shares Outstanding | 0 | 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 | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 0 | 20,000,000 | 20,000,000 | ||||
Preferred Stock, Shares Issued | 0 | 5,932,742 | 5,932,742 | ||||
Preferred Stock, Shares Outstanding | 0 | 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 | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 0 | 18,867,925 | 18,867,925 | ||||
Preferred Stock, Shares Issued | 0 | 9,032,330 | 8,223,036 | ||||
Preferred Stock, Shares Outstanding | 0 | 9,032,330 | 8,223,036 | ||||
Conversion of Stock, Shares Converted | 1 | 1 | |||||
Preferred Stock, Liquidation Preference, Value | $ | $ 4,787,135 | $ 4,358,209 | |||||
Series CF convertible preferred stock | |||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 0 | 2,000,000 | 2,000,000 | ||||
Preferred Stock, Shares Issued | 0 | 836,331 | 126,641 | ||||
Preferred Stock, Shares Outstanding | 0 | 836,331 | 126,641 | ||||
Conversion of Stock, Shares Converted | 1 | 1 | |||||
Preferred Stock, Liquidation Preference, Value | $ | $ 434,890 | $ 65,863 | |||||
Series B Convertible Preferred Stock | |||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 0 | 20,714,517 | 20,714,517 | ||||
Preferred Stock, Shares Issued | 0 | 20,714,517 | 0 | ||||
Preferred Stock, Shares Outstanding | 0 | 20,714,517 | 0 | ||||
Conversion of Stock, Shares Converted | 1 | 1 | |||||
Preferred Stock, Liquidation Preference, Value | $ | $ 11,000,000 | $ 0 | |||||
Undesignated Preferred Stock [Member] | |||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Preferred Stock, Shares Authorized | 10,000,000 | 936,144 | 936,144 | ||||
Preferred Stock, Shares Issued | 0 | 0 | 0 | ||||
Preferred Stock, Shares Outstanding | 0 | 0 | 0 | ||||
Common Stock | |||||||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Common Stock, Shares Authorized | 200,000,000 | 200,000,000 | 200,000,000 | ||||
Common Stock, Shares, Issued | 664,167 | 664,167 | 664,167 | ||||
Common Stock, Shares, Outstanding | 664,167 | 664,167 | 664,167 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
Net revenues | $ 2,163,280 | $ 1,234,805 | $ 3,575,214 | $ 4,475,507 | $ 5,239,437 | $ 3,034,216 | ||||||
Cost of net revenues | 954,137 | 1,729,709 | 2,179,023 | 3,884,864 | 4,685,755 | 1,626,505 | ||||||
Gross profit (loss) | 1,209,143 | (494,904) | 1,396,191 | 590,643 | 553,682 | 1,407,711 | ||||||
Operating expenses: | ||||||||||||
General and administrative | 3,720,863 | 1,356,653 | 12,820,841 | 5,258,084 | 7,149,210 | 4,584,010 | ||||||
Sales and marketing | 1,307,219 | 101,081 | 2,401,322 | 543,327 | 576,469 | 869,285 | ||||||
Distribution | 105,332 | 65,681 | 238,774 | 279,362 | 342,466 | 801,885 | ||||||
Loss on disposal of property and equipment | 593,449 | 593,449 | 848,927 | |||||||||
Impairment of intangible assets | 784,500 | 784,500 | 784,500 | |||||||||
Total operating expenses | 9,121,907 | 2,901,364 | 22,500,331 | 7,458,722 | 9,701,572 | 6,255,180 | ||||||
Loss from operations | (7,912,764) | (3,396,268) | (21,104,140) | (6,868,079) | (9,147,890) | (4,847,469) | ||||||
Other income (expense): | ||||||||||||
Interest expense | (447,842) | (550,505) | (2,020,806) | (1,239,437) | (1,599,518) | (772,592) | ||||||
Other non-operating income (expenses) | (577,441) | 32,193 | (634,654) | 32,193 | 32,754 | (33,112) | ||||||
Total other income (expense), net | (1,025,283) | (518,312) | (2,655,460) | (1,207,244) | (1,566,764) | (805,704) | ||||||
Provision for income taxes | 276 | (1,100,120) | 13,657 | 13,641 | 800 | |||||||
Net loss | $ (8,938,047) | $ (10,697,498) | $ (3,023,935) | $ (3,914,856) | $ (2,267,597) | $ (1,906,527) | $ (22,659,480) | $ (8,088,980) | $ (10,728,295) | $ (5,653,973) | ||
Weighted average vested common shares outstanding - basic and diluted | 11,786,592 | 664,167 | 6,002,669 | 664,167 | 664,167 | [1] | 664,167 | [1] | ||||
Net loss per common share - basic and diluted | $ (0.76) | $ (5.89) | $ (3.77) | $ (12.18) | $ (16.15) | $ (8.51) | ||||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS (Parentheticals) | May 12, 2021 |
Reverse stock split ratio | 0.064 |
Subsequent Events | |
Reverse stock split ratio | 15.625 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Common Stock | Preferred StockSeries Seed Preferred Stock | Preferred StockSeries A convertible preferred stock | Preferred StockSeries A-2 convertible preferred stock | Preferred StockSeries A-3 convertible preferred stock | Preferred StockSeries CF convertible preferred stock | Preferred StockSeries B convertible preferred stock | Additional Paid-in Capital | Subscription Receivable | Accumulated Deficit | Series A-3 convertible preferred stock | Series CF convertible preferred stock | Total | ||||||
Beginning balance (in shares) at Dec. 31, 2018 | 664,167 | 20,714,518 | [1] | 5,650,903 | [1] | 5,932,742 | [1] | 3,447,608 | [1] | 124,204 | [1] | ||||||||
Beginning balance at Dec. 31, 2018 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 345 | $ 12 | $ 13,242,183 | $ (8,283) | $ (16,963,729) | $ (3,726,177) | |||||||||
Stock-based compensation | 172,491 | 172,491 | |||||||||||||||||
Issuance of Series CF preferred stock (in shares) | [1] | 2,437 | |||||||||||||||||
Issuance of Series CF preferred stock | 8,283 | 8,283 | |||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 4,775,428 | [1] | 4,775,428 | ||||||||||||||||
Issuance of Series A-3 preferred stock | $ 478 | 2,530,499 | (22,677) | 2,508,300 | |||||||||||||||
Shares issued to holders in prior offerings | [1] | 3,169 | |||||||||||||||||
Offering costs | (509,051) | (509,051) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 49,928 | 49,928 | |||||||||||||||||
Net loss | (5,653,973) | (5,653,973) | |||||||||||||||||
Ending balance at Dec. 31, 2019 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Ending balance (in shares) at Dec. 31, 2019 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | ||||||||
Beginning balance (in shares) at Dec. 31, 2018 | 664,167 | 20,714,518 | [1] | 5,650,903 | [1] | 5,932,742 | [1] | 3,447,608 | [1] | 124,204 | [1] | ||||||||
Beginning balance at Dec. 31, 2018 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 345 | $ 12 | 13,242,183 | (8,283) | (16,963,729) | $ (3,726,177) | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 0 | ||||||||||||||||||
Ending balance at Dec. 31, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,481,995 | (33,345,997) | $ (5,857,645) | |||||||||
Ending balance (in shares) at Dec. 31, 2020 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | |||||||
Beginning balance (in shares) at Dec. 31, 2019 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | ||||||||
Beginning balance at Dec. 31, 2019 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
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 | $ 81 | 428,845 | (117,614) | 311,312 | |||||||||||||||
Issuance of Series B preferred stock (in shares) | 20,754,717 | ||||||||||||||||||
Issuance of Series B preferred stock | $ 2,075 | 10,997,925 | 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 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 12 | $ 2,075 | 26,989,483 | (140,291) | (24,524,229) | 2,331,249 | ||||||||
Ending balance (in shares) 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 shares) at Dec. 31, 2019 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | ||||||||
Beginning balance at Dec. 31, 2019 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | 709,690 | |||||||||||||||||
Net loss | (8,088,980) | ||||||||||||||||||
Ending balance at Sep. 30, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,384,036 | (13,454) | (30,706,682) | (3,329,743) | ||||||||
Ending balance (in shares) at Sep. 30, 2020 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2019 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | ||||||||
Beginning balance at Dec. 31, 2019 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Stock-based compensation | 144,775 | 144,775 | |||||||||||||||||
Issuance of Series CF preferred stock (in shares) | [1] | 709,690 | |||||||||||||||||
Issuance of Series CF preferred stock | $ 71 | 309,679 | 309,750 | ||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | [1] | 809,294 | 709,960 | |||||||||||||||
Issuance of Series A-3 preferred stock | $ 81 | 428,845 | 22,677 | 451,603 | |||||||||||||||
Issuance of Series B preferred stock (in shares) | 20,754,717 | ||||||||||||||||||
Issuance of Series B preferred stock | $ 2,075 | 10,997,925 | 11,000,000 | ||||||||||||||||
Offering costs | (69,470) | (69,470) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 184,191 | 184,191 | |||||||||||||||||
Net loss | (10,728,295) | (10,728,295) | |||||||||||||||||
Ending balance at Dec. 31, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,481,995 | (33,345,997) | (5,857,645) | |||||||||
Ending balance (in shares) at Dec. 31, 2020 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | |||||||
Beginning balance (in shares) 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 at Mar. 31, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 12 | $ 2,075 | 26,989,483 | (140,291) | (24,524,229) | 2,331,249 | ||||||||
Stock-based compensation | 49,932 | 49,932 | |||||||||||||||||
Issuance of Series CF preferred stock (in shares) | 709,690 | ||||||||||||||||||
Issuance of Series CF preferred stock | $ 71 | 286,447 | 286,518 | ||||||||||||||||
Issuance of Series A-3 preferred stock | 126,837 | 126,837 | |||||||||||||||||
Net loss | (2,267,597) | (2,267,597) | |||||||||||||||||
Ending balance at Jun. 30, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,325,862 | (13,454) | (26,791,826) | 526,939 | ||||||||
Ending balance (in shares) at Jun. 30, 2020 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | ||||||||||||
Stock-based compensation | 5,779 | 5,779 | |||||||||||||||||
Offering costs | (28,756) | (28,756) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 81,151 | 81,151 | |||||||||||||||||
Net loss | (3,914,856) | (3,914,856) | |||||||||||||||||
Ending balance at Sep. 30, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,384,036 | $ (13,454) | (30,706,682) | (3,329,743) | ||||||||
Ending balance (in shares) at Sep. 30, 2020 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | |||||||
Beginning balance at Dec. 31, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,481,995 | (33,345,997) | (5,857,645) | |||||||||
Stock-based compensation | 36,976 | 36,976 | |||||||||||||||||
Net loss | (3,023,935) | (3,023,935) | |||||||||||||||||
Ending balance at Mar. 31, 2021 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,518,971 | (36,369,932) | (8,844,604) | |||||||||
Ending balance (in shares) at Mar. 31, 2021 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 664,167 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | |||||||
Beginning balance at Dec. 31, 2020 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,481,995 | (33,345,997) | (5,857,645) | |||||||||
Conversion of preferred stock into common stock | 6,291 | ||||||||||||||||||
Conversion of debt into common stock | 2,680,289 | ||||||||||||||||||
Conversion of related party notes and payables into common stock | 257,515 | ||||||||||||||||||
Net loss | (22,659,480) | ||||||||||||||||||
Ending balance at Sep. 30, 2021 | $ 1,263 | 57,467,015 | (56,005,477) | 1,462,801 | |||||||||||||||
Ending balance (in shares) at Sep. 30, 2021 | 12,627,488 | ||||||||||||||||||
Beginning balance (in shares) at Mar. 31, 2021 | 664,167 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | ||||||||||||
Beginning balance at Mar. 31, 2021 | $ 66 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | 27,518,971 | (36,369,932) | (8,844,604) | |||||||||
Stock-based compensation | 3,801,553 | 3,801,553 | |||||||||||||||||
Conversion of preferred stock into common stock | $ 403 | $ (2,071) | $ (565) | $ (593) | $ (904) | $ (83) | $ (2,075) | 5,888 | |||||||||||
Conversion of preferred stock into common stock (shares) | 4,027,181 | (20,714,518) | (5,654,072) | (5,932,742) | (9,032,330) | (836,331) | (20,754,717) | ||||||||||||
Issuance of common stock in public offering | $ 241 | 9,999,761 | 10,000,002 | ||||||||||||||||
Issuance of common stock in public offering (in shares) | 2,409,639 | ||||||||||||||||||
Offering costs | (2,116,957) | (2,116,957) | |||||||||||||||||
Exercise of over-allotment option | $ 36 | 1,364,961 | 1,364,997 | ||||||||||||||||
Exercise of over-allotment option (in shares) | 361,445 | ||||||||||||||||||
Conversion of debt into common stock | $ 114 | 2,680,175 | 2,680,289 | ||||||||||||||||
Conversion of debt into common stock (in shares) | 1,135,153 | ||||||||||||||||||
Conversion of related party notes and payables into common stock | $ 15 | 257,500 | 257,515 | ||||||||||||||||
Conversion of related party notes and payables into common stock (in shares) | 152,357 | ||||||||||||||||||
Common stock and warrants issued in connection with note | $ 2 | 73,956 | 73,958 | ||||||||||||||||
Common stock and warrants issued in connection with note (in shares) | 20,000 | ||||||||||||||||||
Common stock issued in connection with business combination | $ 219 | 8,025,323 | 8,025,542 | ||||||||||||||||
Common stock issued in connection with business combination (in shares) | 2,192,771 | ||||||||||||||||||
Exercise of warrants | $ 3 | 145,693 | 145,696 | ||||||||||||||||
Exercise of warrants (in shares) | 31,881 | ||||||||||||||||||
Common stock issued pursuant to consulting agreement | $ 5 | 182,995 | 183,000 | ||||||||||||||||
Common stock issued pursuant to consulting agreement (in shares) | 50,000 | ||||||||||||||||||
Net loss | (10,697,498) | (10,697,498) | |||||||||||||||||
Ending balance at Jun. 30, 2021 | $ 1,104 | 51,939,819 | (47,067,430) | 4,873,493 | |||||||||||||||
Ending balance (in shares) at Jun. 30, 2021 | 11,044,594 | ||||||||||||||||||
Stock-based compensation | 134,113 | 134,113 | |||||||||||||||||
Common stock issued in connection with business combination | $ 110 | 3,403,086 | 3,403,196 | ||||||||||||||||
Common stock issued in connection with business combination (in shares) | 1,101,538 | ||||||||||||||||||
Exercise of warrants | $ 36 | 1,622,314 | 1,622,350 | ||||||||||||||||
Exercise of warrants (in shares) | 355,000 | ||||||||||||||||||
Net loss | (8,938,047) | (8,938,047) | |||||||||||||||||
Ending balance at Sep. 30, 2021 | $ 1,263 | $ 57,467,015 | $ (56,005,477) | $ 1,462,801 | |||||||||||||||
Ending balance (in shares) at Sep. 30, 2021 | 12,627,488 | ||||||||||||||||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Parentheticals) | May 12, 2021 |
Reverse stock split ratio | 0.064 |
Subsequent Events | |
Reverse stock split ratio | 15.625 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (10,728,295) | $ (5,653,973) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 603,857 | 48,885 |
Amortization of loan discount and fees | 241,878 | 149,948 |
Stock-based compensation | 144,775 | 172,491 |
Change in fair value of warrant liability | (2,353) | |
Impairment loss on intangible assets | 784,500 | |
Loss on disposal of property and equipment | 848,927 | |
Change in credit reserve | (207,666) | |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 1,947 | |
Due from factor, net | 1,616,939 | |
Inventory | 3,202,350 | 146,673 |
Other current assets | 168,589 | 114,898 |
Accounts payable | 673,263 | 610,216 |
Accrued expenses and other liabilities | (591,028) | 602,384 |
Deferred revenue | (13,564) | (259,728) |
Accrued compensation - related party | 178,026 | 68,859 |
Accrued interest | 1,016,268 | 129,982 |
Net cash used in operating activities | (2,061,587) | (3,869,365) |
Cash flows from investing activities: | ||
Cash acquired in business combination | 106,913 | |
Purchases of property and equipment | (864) | (7,848) |
Deposits | 98,835 | 14,490 |
Net cash provided by (used in) investing activities | 204,884 | 6,642 |
Cash flows from financing activities: | ||
Proceeds (repayment) - related party advances, net | 22,856 | (105,812) |
Repayments to factor | (1,931,369) | |
Proceeds from venture debt | 1,050,000 | 508,249 |
Proceeds from loan payable | 1,701,044 | |
Proceeds from convertible notes payable | 1,250,308 | 799,280 |
Proceeds from sale of Series A-3 preferred stock | 428,926 | 2,508,300 |
Subscription receivable from Series A-3 preferred stock | 22,677 | |
Proceeds from sale of Series CF preferred stock, net of fees | 309,750 | 8,283 |
Offering costs | (461,972) | (399,589) |
Net cash provided by financing activities | 2,392,220 | 3,318,711 |
Net increase in cash and cash equivalents | 535,517 | (544,012) |
Cash and cash equivalents at beginning of period | 40,469 | 584,481 |
Cash and cash equivalents at end of period | 575,986 | 40,469 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 264,177 | 90,000 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Warrants issued for offering costs | 918 | 6,600 |
Warrants issued with venture debt | 184,191 | $ 49,928 |
Venture debt issued in exchange of forgiveness of accrued interest | 409,211 | |
Issuance of promissory note payable in acquisition | 4,500,000 | |
Issuance of Series B preferred stock in acquisition | $ 11,000,000 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
NATURE OF OPERATIONS | ||
NATURE OF OPERATIONS | NOTE 1: NATURE OF OPERATIONS Digital Brands Group, Inc. (the “Company” or “DBG”), was organized on 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 (“Bailey”), a Delaware limited liability company. On the acquisition date, Bailey 44, LLC became a wholly owned subsidiary of the Company. See Note 4. On May 18, 2021, the Company closed its acquisition of Harper & Jones, LLC (“H&J”) pursuant to its Membership Interest Stock Purchase Agreement with D. Jones Tailored Collection, Ltd. to purchase 100% of the issued and outstanding equity of Harper & Jones, LLC. On the acquisition date, H&J became a wholly owned subsidiary of the Company. See Note 4. On August 30, 2021, the Company closed its acquisition of Mosbest, LLC dba Stateside (“Stateside”) pursuant to its Membership Interest Purchase Agreement with Moise Emquies to purchase 100% of the issued and outstanding equity of Stateside. On the acquisition date, Stateside 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-for- 15.625 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”). Further to 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, were $8.6 million after deducting underwriting discounts and commissions of $0.8 million and direct offering expenses of $0.6 million. Concurrent with this offering, the Company acquired H&J (see Note 4). The Company incurred an additional $0.6 million in offering costs related to the IPO that were not paid directly out of the proceeds from the offering. | 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. The Company does business under the names DSTLD and Digital Brands Group. The Company sells premium denim and other products direct-to-consumers. On February 12, 2020, Digital Brands Group, 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, including in response to 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. |
GOING CONCERN
GOING CONCERN | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 $22,659,480 and $8,088,980 for the nine months ended September 30, 2021 and 2020, respectively, and has incurred negative cash flows from operations for the nine months ended September 30, 2021 and 2020. The Company has historically lacked liquidity to satisfy obligations as they come due and as of September 30, 2021, and the Company had a working capital deficit of $18,194,632. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company expects to continue to generate operating losses for the foreseeable future. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty. Management Plans As of November 11, 2021, the date of issuance of these unaudited interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents of $254,527 as of September 30, 2021, together with the 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. In August 2021, the Company entered into an equity line of credit agreement which the investor is committed to purchase up to $17,500,000 of the Company’s common stock (see Note 8). The Company plans to utilize multiple drawdowns on this agreement, subject to satisfying a registration rights agreement and other restrictions. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through the equity line of credit agreement. The Company may pursue secondary offerings or debt financings to provide working capital and satisfy debt obligations. 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. | NOTE 2: GOING CONCERN The accompanying 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 $10,728,295 and $5,653,973 for the years ended December 31, 2020 and 2019, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2020 and 2019. The Company has historically lacked liquidity to satisfy obligations as they come due and as of December 31, 2020, the Company had a working capital deficit of $18,270,034. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for the next twelve months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing. No assurance can be given that the Company will be successful in these efforts. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 September 30, 2021, the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 and of cash flows for the nine months ended September 30, 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 subsidiaries Bailey, H&J and Stateside from the dates of acquisition. 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 September 30, 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, prepaid expenses, 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. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 28,195 $ — $ 28,195 Contingent consideration — — 10,527,910 10,527,910 Derivative liability — — 2,486,843 2,486,843 $ — $ 28,195 $ 13,014,753 $ 13,042,948 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ 6,265 $ 6,265 $ — $ — $ 6,265 $ 6,265 Warrant Liability Certain of the Company’s common stock warrants are carried at fair value. As of December 31, 2020, the fair value of the Company’s common stock warrant liabilities was measured under the Level 3 hierarchy using the Black-Scholes pricing model as the Company’s underlying common stock had no observable market price (see Note 10). The warrant liability was valued using a market approach. Upon the IPO, the warrant liabilities were valued using quoted prices of identical assets in active markets, and was reclassified under the Level 2 hierarchy. Changes in common stock warrant liability during the nine months ended September 30, 2021 are as follows: Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value 21,930 Outstanding as of September 30, 2021 $ 28,195 Contingent Consideration The Company records a contingent consideration liability relating to stock price guarantees included in its acquisition and consulting agreements. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the contingent consideration liability related to the Company’s business combinations is valued using the Monte Carlo simulation model. The Monte Carlo simulation inputs include the stock price, volatility of common stock, timing of settlement and resale restrictions and limits. The fair value of the contingent consideration is then calculated based on guaranteed equity values at settlement as defined in the acquisition agreements. Changes in contingent consideration liability during the nine months ended September 30, 2021 are as follows: Contingent Consideration Liability Balance as of December 31, 2020 $ — Initial recognition in connection with acquisition of Harper & Jones 3,421,516 Stock price guarantee per consulting agreement 67,000 Change in fair value 7,039,394 Outstanding as of September 30, 2021 $ 10,527,910 Derivative Liability In connection with the Company’s convertible note with Oasis Capital, LLC (“Oasis”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the nine months ended September 30, 2021 are as follows: Derivative Liability Outstanding as of December 31, 2020 $ — Initial fair value on issuance of convertible note 1,858,887 Change in fair value 627,956 Outstanding as of September 30, 2021 $ 2,486,843 Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for DSTLD and first-in, first-out method for Bailey and Stateside. The inventory balances as of September 30, 2021 and December 31, 2020 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress. 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 September 30, 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 $25,263 and $306,845 for the three months ended September 30, 2021 and 2020, and $62,061 and $487,402 for the nine months ended September 30, 2021 and 2020, respectively. 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 Contingent Consideration The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair in the consolidated statement of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. The contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid in capital in the stockholders’ equity section of the Company’s consolidated balance sheets. 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. In the first quarter of 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 September 30, 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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. As such, the Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. 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 $20,041 and $5,229 as of September 30, 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 distribution costs. Total shipping and handling billed to customers as a component of net revenues was approximately $6,500 and $3,900 for the nine months ended September 30, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $81,000 and $36,000 for the three months ended September 30, 2021 and 2020, and $200,000 and $140,000 for the nine months ended September 30, 2021 and 2020, respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the three months ended September 30, 2021 and 2020 amounted to approximately $12,000 and $0, and $16,000 and $100,000 for the nine months ended September 30, 2021 and 2020,respectively. The amounts are 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 September 30, 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 December 31, 2020, the Company had capitalized $214,647 in deferred offering costs. Upon completion of the IPO in May 2021, all capitalized deferred offering costs were charged to additional paid-in capital. As of September 30, 2021, the Company capitalized $367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). 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 September 30, 2021 our operating segments included: DSTLD, Bailey, H&J and Stateside. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale, in store 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 September 30, 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 September 30, 2021 and 2020 are as follows: September 30, 2021 2020 Convertible notes 2,240,426 — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,591,348 794,569 Preferred stock warrants — 806,903 Stock options 3,895,103 1,129,503 Total potentially dilutive shares 9,706,877 65,655,685 All shares of preferred stock were convertible into shares of common stock at a ratio of 15.625:1 per share. Upon the closing of the 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. Additionally, all preferred stock warrants converted into 51,642 common stock warrants at the same ratio as the underlying preferred stock conversion. Concentrations The Company utilized five vendors that made up 39% of all inventory purchases during the nine months ended September 30, 2021 and two vendors that made up 39% of all inventory purchases during the nine months ended September 30, 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. | 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”). Reclassifications Certain prior year accounts have been reclassified to conform with current year presentation. Principles of Consolidation These 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 December 31, 2020 and 2019, 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 year ended December 31, 2020 and 2019 are as follows: Warrant Liability Oustanding as of December 31, 2018 $ — Warrants granted 7,700 Oustanding as of December 31, 2019 7,700 Warrants granted 918 Change in fair value (2,353) Oustanding as of December 31, 2020 $ 6,265 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 December 31, 2020 and 2019 consist substantially of finished good products purchased or produced for resale, as well as any materials the Company purchased to modify the products. 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 December 31, 2020 and 2019 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 $283,024 December 31, 2020 2019 Computer equipment $ 57,810 $ 57,004 Furniture and fixtures 207,140 70,108 Leasehold improvements 69,274 40,351 334,224 167,463 Accumulated depreciation (334,224) (97,703) Property and equipment, net $ — $ 69,760 Software $ 278,405 $ 56,450 Accumulated amortization (216,092) (53,617) Software, net $ 62,313 $ 2,833 During the year ended December 31, 2020, the Company disposed of certain assets, primarily related to leasehold improvements and related fixtures, in relation to the termination of various leases and contracts that were acquired with Bailey. During the year ended December 31, 2020, a total of approximately $2,202,000 in property and equipment was disposed, resulting in a loss on disposal of $848,927 after disposal costs, which is included in operating expenses in the accompanying consolidated statement of operations. 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. Brand names and other assets with indefinite lives are not subject to amortization. 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 quantitative goodwill impairment test in the first quarter every year. During the year ended December 31, 2020, management performed a quantitative impairment test after evaluating qualitative factors due to COVID-19. The Company determined that the fair value of the reporting unit exceeded the carrying amount, and therefore no goodwill impairment was recognized as of December 31, 2020. The Company made this determination by observing average market multiples on revenue for similar companies against current and expected revenue levels of the Bailey unit acquired and comparing such against the carrying value of the Bailey unit, which resulted in the estimated fair value exceeding the carrying value. 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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. The Company calculated the estimated fair value of the brand name based on a relief of royalty model using revised revenue projections and discount rates believed to be appropriate. The Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. 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, (b) 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’ deficit. 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 certain products 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. ASC 606 has been adopted effective January 1, 2019 using the modified retrospective method with no adjustment. The reserve for returns totaled $5,229 and $100,000 as of December 31, 2020 and 2019, 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 $3,900 and $39,000 for the years ended December 31, 2020 and 2019, respectively. Total shipping and handling costs included in distribution costs were approximately $246,000 and $357,000 for the years ended December 31, 2020 and 2019, respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2020 and 2019 amounted to approximately $146,000 and $579,000, 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 December 31, 2020 and 2019, the Company did not have any derivative instruments that were designated as hedges. The Company adopted Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. 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 December 31, 2020, the Company had capitalized $214,647 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 December 31, 2020 our operating segments included: DSTLD and Bailey 44. Each operating segment has a current report 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 December 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of December 31, 2020 and 2019 are as follows: December 31, 2020 2019 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 8,223,036 Series B Preferred Stock (convertible to common stock) 20,754,717 — Common stock warrants 914,539 417,962 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 42,960,089 All shares of preferred stock are convertible into shares of common stock at a ratio of 15.625:1 per share. See Note 14. Concentrations The Company utilized three vendors that made up 41%, 31% and 28% of all inventory purchases, respectively, during the year ended December 31, 2020 and two vendors that made up 39% and 29% of all inventory purchases, respectively during the year ended December 31, 2019. 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 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. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted ASU-2018-13 as of January 1, 2020, which did not materially affect our consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350) (“ASU 2017-04”), which provides for the elimination of Step 2 from the goodwill impairment test. If impairment charges are recognized, the amount recorded will be the amount by which the carrying amount exceeds the reporting unit’s fair value with certain limitations.ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption allowed. The Company has early adopted ASU 2017-04 as of January 1, 2020. 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
BUSINESS COMBINATIONS | ||
BUSINESS COMBINATIONS | NOTE 4: BUSINESS COMBINATIONS Bailey 44 On February 12, 2020, the Company acquired 100% of the membership interests of Bailey. The purchase price consideration included (i) an aggregate of 20,754,717 shares of Series B Preferred Stock of the Company (the “Parent Stock”) and (ii) a promissory note in the principal amount of $4,500,000. 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 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 (to) 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 As of September 30, 2021, the Company has a contingent consideration liability of $7,056,479 based on the valuation shortfall as noted above. See Note 3. Harper & Jones On May 18, 2021, the Company closed its acquisition of H&J pursuant to its previously disclosed Membership Interest Stock Purchase Agreement (as amended, the “Purchase Agreement”) with D. Jones Tailored Collection, Ltd. (the “Seller”), to purchase 100% of the issued and outstanding equity of Harper & Jones LLC. The purchase price consideration included (i) an aggregate of 2,192,771 shares of the Company’s common stock and (ii) $500,000 financed from the proceeds of the IPO. Pursuant to the H&J Purchase Agreement, the Seller, as the holder of all of the outstanding membership interests of H&J, exchanged all of such membership interests for a number of common stock of the Company equal to the lesser of (i) $9.1 million at a per share price equal to the initial public offering price of the Company’s shares offered pursuant to its initial public offering or (ii) the number of Subject Acquisition Shares; “Subject Acquisition Shares” means the percentage of the aggregate number of shares of the Company’s common stock issued pursuant to the Agreement, which is the percentage that Subject Seller Dollar Value is in relation to Total Dollar Value. “Subject Seller Dollar Value” means $9.1 million. If, at the one year anniversary of the closing date of the Company’s IPO, the product of the number of shares of the Company’s common stock issued at the closing of the acquisition multiplied by the average closing price per share of the shares of the Company’s common stock as quoted on the NasdaqCM for the thirty (30) day trading period immediately preceding such date does not exceed the sum of $9.1 million less the value of any shares of the Company’s common stock cancelled further to any indemnification claims made against the Seller then the Company shall issue to Seller an additional aggregate number of shares of the Company’s common stock equal to the valuation shortfall at a per share price equal to the then closing price per share of the Company’s common stock as quoted on the NasdaqCM. The Company evaluated the acquisition of H&J pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: Cash $ 500,000 Common stock 8,025,542 Contingent consideration 3,421,516 Purchase price consideration $ 11,947,058 The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: Purchase Price Allocation Cash and cash equivalents $ 24,335 Accounts receivable, net 49,472 Inventory 77,159 Prepaid expenses 69,715 Deposits 4,415 Property, equipment and software, net 83,986 Goodwill 9,681,548 Intangible assets 3,936,030 Accounts payable (51,927) Accrued expenses and other liabilities (107,957) Deferred revenue (269,848) Due to related parties (1,361) Loan payable (148,900) Note payable - related party (299,489) Deferred tax liability (1,100,120) Purchase price consideration $ 11,947,058 The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The Company recorded an initial contingent consideration liability at a fair value of $3,421,516 based on the valuation shortfall noted above. As of September 30, 2021, the H&J contingent consideration was valued at $3,471,431. See Note 3. The results of H&J have been included in the consolidated financial statements since the date of acquisition. H&J’s net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $1,050,000 and $53,000, respectively. Stateside On August 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with Moise Emquies pursuant to which the Company acquired all of the issued and outstanding membership interests of MOSBEST, LLC, a California limited liability company (“Stateside” and such transaction, the “Stateside Acquisition”). Pursuant to the MIPA, Moise Emquies, as the holder of all of the outstanding membership interests of Stateside, exchanged all of such membership interests for $5.0 million in cash and 1,101,538 shares of the Company’s common stock (the “Shares”), which number of Shares was calculated in accordance with the terms of the MIPA. Of such amount, $375,000 in cash and a number of Shares equal to $375,000, or 82,615 shares (calculated in accordance with the terms of the MIPA), is held in escrow to secure any working capital adjustments and indemnification claims. The MIPA contains customary representations, warranties and covenants by Moise Emquies. The Company evaluated the acquisition of Stateside pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: Cash $ 5,000,000 Common stock 3,403,196 Purchase price consideration $ 8,403,196 The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: Purchase Price Allocation Cash and cash equivalents $ 32,700 Accounts receivable, net 154,678 Due from factor, net 371,247 Inventory 603,626 Prepaid expenses 105,442 Deposits 9,595 Goodwill 1,610,265 Intangible assets 5,939,140 Accounts payable (374,443) Accrued expenses and other liabilities (49,053) Purchase price consideration $ 8,403,196 The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty and income approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The results of Stateside have been included in the consolidated financial statements since the date of acquisition. Stateside’s net revenue and net income included in the consolidated financial statements since the acquisition date were approximately $530,000 and $69,000, respectively. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Bailey, H&J and Stateside acquisitions 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: Nine Months Ended September 30, 2021 2020 Net revenues $ 7,956,477 $ 11,287,932 Net loss $ (22,853,732) $ (10,080,468) Net loss per common share $ (3.81) $ (15.18) | NOTE 4: BUSINESS COMBINATIONS On February 12, 2020, Digital Brands Group, Inc. (“Denim”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between Bailey 44, LLC, a Delaware limited liability company (“Bailey”), Norwest Venture Partners XI, LP, a Delaware limited partnership (“NVP XI”), and Norwest Venture Partners XII, LP, a Delaware limited partnership (“NVP XII”, each of NVP XI and NVP XII known herein as a “Holder” and together the “Holders”), on the one hand, and the issuer, and Denim.LA Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the issuer (“Merger Sub”), on the other hand to effect the merger of Merger Sub with and into Bailey (the “Merger”). Upon the consummation of the Merger (the “Effective Time”), which occurred on the date of the Merger Agreement, Merger Sub ceased to exist and Bailey was the entity surviving the Merger. Prior to the Merger, Bailey had (a) membership interests consisting of Preferred Units, Common Units and Performance Units (collectively, the “Membership Units”) outstanding and (b) entered into certain Phantom Performance Unit Agreements (the “Phantom Performance Units”). All Preferred Units were held by the Holders. As a result of the Merger, (A) each Preferred Unit issued and outstanding immediately prior to the Effective Time of the Merger was converted (and when so converted, was automatically cancelled and retired and ceased to exist) in exchange for the right to receive a portion of (i) an aggregate of 20,754,717 newly issued shares of Series B Preferred Stock, par value $0.0001 per share, of Denim (the “Parent Stock”) and (ii) a promissory note in the principal amount of $4,500,000, (B) all other Membership Units other than the Preferred Units as well as all Phantom Performance Units were cancelled and no consideration was delivered in exchange therefor, and (C) Bailey became the wholly-owned subsidiary of Denim. The Articles of Incorporation were amended to authorize the newly issued shares of Series B Preferred Stock, par value $0.0001 per share, of Denim (the “Parent Stock”). 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”). Denim agreed that if at that date which is one year from the closing date of Denim’s initial public offering, the product of the number of shares of Parent Stock issued under the Merger Agreement multiplied by the sum of the closing price per share of the common stock of Denim on such date as quoted on Nasdaq, the New York Stock Exchange or other stock exchange or interdealer quotation system, as the case may be, 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 Denim shall issue to the Holders pro rata an additional aggregate number of shares of common stock of Denim equal to the valuation shortfall at a per share price equal to the then closing price per share of the common stock of Denim as quoted on the Nasdaq, the New York Stock Exchange or other stock exchange or interdealer quotation system, as the case may be. Concurrently, Denim will cause an equivalent number of shares of common stock or common stock equivalents held by affiliated stockholders of Denim prior to the date of the Merger Agreement to be cancelled pro rata in proportion to the number of shares of common stock of Denim held by each of them. In addition, Denim agreed that at all times from the date of the Merger Agreement until the date immediately preceding the effective date of Denim’s initial public offering, in no event will the number of shares of Parent Stock issued pursuant to the Merger Agreement represent less than 9.1% of the outstanding capital stock of Denim on a fully-diluted basis. Denim agreed that in the event that, at any time prior to the date immediately preceding the effective date of Denim’s initial public offering, the shares of Parent Stock issued pursuant to the Merger Agreement represent less than 9.1% of the outstanding capital stock of Denim on a fully-diluted basis, Denim shall promptly issue new certificates evidencing additional shares of Parent Stock to the Holders such that the total number of shares of Parent Stock issued pursuant to Denim’s Merger Agreement is not less than 9.1% of Denim’s the outstanding capital stock on a fully-diluted basis as of such date. The Company evaluated the acquisitions of Bailey pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: Series B preferred stock $ 11,000,000 Promissory note payable 4,500,000 Purchase price consideration $ 15,500,000 The Company has made a allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable 37,479 Due from/(to) factor (312,063) Inventory 3,303,660 Prepaid expenses 165,856 Deposits 187,493 Property, equipment and software 1,215,748 Goodwill 6,479,218 Intangible assets (Note 6) 8,600,000 Accounts payable (3,397,547) Accrued expenses and other liabilities (886,757) Purchase price consideration $ 15,500,000 Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The results of Bailey have been included in the consolidated financial statements since the date of acquisition. Bailey’s net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $3,975,000 and $4,500,000, respectively. 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, 2019. 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: Year Ended December 31, 2020 2019 Net revenues $ 7,259,260 $ 30,133,934 Net loss $ (12,786,695) $ (11,868,423) Net loss per common share $ (19.25) $ (17.87) Proposed Business Combination On October 14, 2020, Digital Brands Group, Inc. a Delaware corporation (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 obligations of each party to consummate the transactions contemplated by the Agreement are predicate on the closing of the initial public offering on or before December 31, 2020. Should the initial public offering not occur by that date, either the Company or Seller may terminate the Agreement. There is no penalty for either party should the initial public offering not occur, and in such instance the sale becomes null and void. We have been working with Harper & Jones to reorganize their marketing team and create targeted and return driven marketing strategies. We have also helped analyze the sales representative, customer and showroom data, which we are using to develop the brand’s growth strategies. As an example, our analysis showed that the showrooms cost $125,000 to open while generating $250,000 in store level cash flow in its first year. This 100% cash on cash return shows the opportunity to open more showrooms, but Harper & Jones does not have the cash or balance sheet to support additional store openings. We plan to use a portion of the proceeds of this offering to open additional Harper & Jones showrooms in markets where the brand already has a strong customer base. The acquisition agreement with Harper & Jones did not occur during the current (2019 and 2020) reporting period and is contingent upon an initial public offering. 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
DUE FROM FACTOR | ||
DUE FROM FACTOR | NOTE 5: DUE FROM FACTOR The Company, via its subsidiaries, Bailey and Stateside, 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% for Bailey. For Stateside, should total commission and fees payable be less than $30,000 in a single year, then the factor shall charge the difference between the actual fees in said year and $30,000 to the Company. Interest on advances is charged as of the last day of each month at a rate equal to the greater of either, (a) the Chase Prime Rate + (2.0)% or (b) (4.0)% per annum. Advances are collateralized by a security interest in substantially all of the companies’ assets. Due to/from factor consist of the following: September 30, December 31, 2021 2020 Outstanding receivables: Without recourse $ 1,022,552 $ 151,158 With recourse 58,884 42,945 Advances 119,937 56,246 Credits due customers (107,064) (40,316) $ 1,094,309 $ 210,033 | 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 from factor consist of the following: December 31, 2020 2019 Outstanding receivables: Without recourse $ 151,158 $ — With recourse 42,945 — Advances 56,246 — Credits due customers (40,316) — $ 210,033 $ — |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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, $9,681,548 in goodwill from the H&J business combination in May 2021 and $1,610,265 in goodwill from the Stateside business combination in August 2021. The following table summarizes information relating to the Company’s identifiable intangible assets as of September 30, 2021: Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 6,453,750 $ (911,544) $ 5,542,206 6,453,750 (911,544) 5,542,206 Indefinite-lived: Brand name $ 11,236,920 — 11,236,920 $ 17,690,670 $ (911,544) $ 16,779,126 The Company recorded amortization expense of $355,808 and $91,667 during the three months ended September 30, 2021 and 2020, and $590,711 and $229,167 during the nine months ended September 30, 2021 and 2020, respectively, which is included in general and administrative expenses in the consolidated statements of operations. During the nine months ended September 30, 2020, the Company recorded an impairment loss of $784,500 for the brand name as management determined circumstances existed that indicated the carrying value of the Company’s may not be recoverable. | 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 December 31, 2020: Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 1,100,000 $ (320,833) $ 779,167 Indefinite-lived: 1,100,000 (320,833) 779,167 Brand name 6,715,500 — 6,715,500 $ 7,815,500 $ (320,833) $ 7,494,667 Due to the effects of COVID-19 and related uncertainty which affected Bailey’s 2020 results and near- term demand for its products, the Company determined that there were indications for further impairment analysis. During the year ended December 31, 2020, the Company recorded an impairment loss of $784,500 for the intangible asset as management determined circumstances existed that indicated the carrying value may not be recoverable. The impairment analysis was based on the relief from royalty method using projected revenue estimates and discounts rates believed to be appropriate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. The discount rate, revenue assumptions and terminal growth rate of our reporting unit were the material assumptions utilized in the model used to estimate the fair value of the Bailey unit. The analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. The long-range plan reflects management judgment, which includes observation of expected industry trends. The Company recorded amortization expense of $320,833 during the year ended December 31, 2020, which is included in general and administrative expenses in the consolidated statements of operations. Future amortization expense at December 31, 2020 is as follows: Year Ending December 31, 2021 366,667 2022 366,667 2023 45,833 $ 779,167 |
LIABILITIES AND DEBT
LIABILITIES AND DEBT | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 September 30, 2021 and December 31, 2020: September 30, December 31, 2021 2020 Accrued expenses $ 266,646 $ 92,074 Reserve for returns 20,041 5,229 Payroll related liabilities 1,253,639 843,704 Sales tax liability 242,021 196,410 Other liabilities 71,607 108,229 $ 1,853,954 $ 1,245,646 Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of September 30, 2021 and December 31, 2020, payroll related labilities included approximately $262,000 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 the lender agreed to extend the maturity date of the credit agreement to December 31, 2022, with certain payments due as follows. If the Company consummated a follow on public offering on or before July 31, 2021, the Company was required to make a $3,000,000 payment on the loan within five five As of September 30, 2021 and December 31, 2020, the gross loan balance was $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 nine months ended September 30, 2021 and 2020, $147,389 and $144,974 of these loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $0 and $147,389 as of September 30, 2021 and December 31, 2020, respectively. Interest expense for the three and nine months ended September 30, 2021 and 2020 was $189,096 and $323,807, and $591,123 and $658,730, respectively. Effective interest rate on the loan for the nine months ended September 30, 2021 and 2020 was 13.4% and 14.0%, 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. In 2021, the Company received additional gross proceeds of $473,650. Interest was 6% per annum and the debt was due October 30, 2022. Upon closing of the IPO, the outstanding principal and accrued and unpaid interest of $16,942 was converted into 319,661 shares of common stock based on the terms of the notes. Total issuances costs were $69,627, which was recognized as a debt discount and was amortized in 2021 through the date of IPO when such debt converted. During the nine months ended September 30, 2021, $27,894 of the debt discount was amortized to interest expense. 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 was contingently convertible and contains both automatic and optional conversions. The debt converted 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. Issuance costs on the aggregate funds 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 were amortized in 2021 through the date of IPO when such debt converted. The fair value of the warrants was determined to be negligible. Upon closing of the IPO, $755,000 in outstanding principal and approximately $185,000 of the accrued and unpaid interest was converted into 453,437 shares of common stock. As of September 30, 2021, there was $100,000 remaining in outstanding principal that was not converted into equity. During the three and nine months ended September 30, 2021, $0 and $100,000 of debt discount was amortized to interest expense. The Company recorded an additional $132,609 in default interest expense upon conversion of these notes. 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. Upon closing of the IPO, the outstanding principal was converted into 362,055 shares of common stock. Convertible Promissory Note On August 27, 2021, the Company entered into a Securities Purchase Agreement with Oasis Capital, LLC (“Oasis Capital”) further to which Oasis Capital purchased a senior secured convertible note (the “Oasis Note”), with an interest rate of 6% per annum, having a face value of $5,265,000 for a total purchase price of $5,000,000, secured by an all assets of the Company. The Oasis Note, in the principal amount of $5,265,000, bears interest at 6% per annum and is due and payable 18 months from the date of issuance, unless sooner converted. The Oasis Note is convertible at the option of Oasis Capital into shares of the Company’s common stock at a conversion price (the “ Oasis Conversion Price”) which is the lesser of (i) $3.601, and (ii) 90% of the average of the two lowest volumed weighted average prices (“VWAPs’) during the five consecutive trading day period preceding the delivery of the notice of conversion. Oasis Capital is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $500,000. If the Oasis Conversion Price set forth in any conversion notice is less than $3.00 per share, the Company, at its sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of its common stock. In connection with the issuance of the Oasis Note, the Company entered into a security agreement (the “Security Agreement”) pursuant to which the Company agreed to grant Oasis Capital a security interest in substantially all of its assets to secure the obligations under the Oasis Note and a registration rights agreement with Oasis Capital (the “Oasis Note RRA”). The Oasis Note RRA provides that the Company shall file a registration statement registering the shares of common stock issuable upon conversion of the Oasis Note no later than 60 days from the date of the Oasis Note and take commercially reasonable efforts to cause such registration statement to be effective with the SEC no later than 90 days from the date of the Oasis Note. In connection with the issuance of the Oasis Note, each of the Company’s subsidiaries entered into a security agreement and a subsidiary guarantee in favor of Oasis Capital pursuant to which such subsidiaries granted Oasis Capital a security interest in substantially all their assets and guarantee the obligations of the Company under the Oasis Note. The Company received net proceeds, after the original issue discount and issuance costs, of $4,550,000 . As such, the Company recognized a debt discount of The Company evaluated the terms of the conversion features of the Oasis Note as noted above in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are not indexed to the Company’s common stock and that the conversion features meet the definition of a liability. The Oasis Note contains an indeterminate number of shares to settle with conversion options outside of the Company’s control. Therefore, the Company bifurcated the conversion feature and accounted for it as a separate derivative liability. Upon issuance of the Oasis Note, the Company recognized a derivative liability at fair value of $1,858,887, which is recorded as a debt discount and will amortized over the life of the note. During the three months ended September 30, 2021, the Company amortized $102,772 of debt discount to interest expense. As of September 30, 2021, the net balance of the Oasis Note, after unamortized debt discount of $2,471,615, was $2,793,385. Interest expense for the three months ended September 30, 2021 was $26,325. 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. In May 2021, the Company entered into an 2 nd 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. As of September 30, 2021, Harper & Jones had an outstanding loan under the EIDL program of $148,900. Loan Payable In May 2021, H&J entered into a loan payable with a bank and received proceeds of $75,000. The line bears interest at 7.76% and matures in December 2025. As of September 30, 2021, the outstanding balance was $72,269. Note Payable – Related Party As of September 30, 2021, H&J had an outstanding note payable of $299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12% 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 date of the agreement was extended from December 31, 2020 to July 31, 2021. In August 2021, the maturity date was further extended to December 31, 2022. The Company is required to make prepayments of $2,000,000 to $4,000,000 if the Company completes a secondary public offering. If a public offering is not consummated before October 31, 2021 and June 30, 2022, the Company shall repay 10% of the outstanding principal at each date. The note incurs interest at 12% per annum. Upon the IPO closing, the Company repaid $1,000,000 of the outstanding principal on this note in May 2021. As of September 30, 3021, $3,500,000 remained outstanding, of which $655,000 is included in current liabilities based on the provisions above. Interest expense was $105,000 and $135,000 for the three months ended September 30, 2021 and 2020, and $389,000 and $337,500 for the nine months ended September 30, 2021 and 2020, respectively, all of which was accrued and unpaid as of September 30, 2021. In April 2021, the Company entered into a promissory note in the principal amount of $1,000,000. The Company received $810,000 in proceeds, net of issuance costs and original issue discount. Additionally, the Company issued 120,482 warrants to the lender and 20,000 shares of common stock to the underwriter, both of which was recorded as a debt discount at the time of the loan. The fair value of the warrants and shares recorded as a debt discount was $73,958. Upon the closing of the IPO, the note was repaid in full. The entire debt discount of $263,958 was amortized to interest expense upon repayment of the note. | 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 December 31, 2020 and 2019: December 31, 2020 2019 Accrued expenses $ 92,074 $ 188,341 Reserve for returns 5,229 100,000 Payroll related liabilities 843,704 412,155 Sales tax liability 196,410 156,707 Other liabilities 108,230 264,114 $ 1,245,646 $ 1,121,317 Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of December 31, 2020, payroll related labilities included approximately $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. The initial close amount was a minimum of $1,345,000. The loan bears interest at 12.5% per annum, compounded monthly, plus fees. A 5% closing fee is due upon each closing, legal and accounting fees of up to $40,000, and management fees of $4,167-$5,000 per month. The loan requires monthly payments of interest commencing March 31, 2017, and a balloon payment for the full principal amount at the pre-amended maturity date in June 2021. 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 Repayment is accelerated upon a change in control, as defined in the agreement. The loan is senior to all other debts and obligations of the Company, is collateralized by all assets of the Company, and shares of the Company’s common stock pledged by officers of the Company. As of December 31, 2020 and 2019, the gross loan balance is $6,001,755 and $4,542,544, resulting from cash disbursed to the Company and considerations for outstanding interest of $1,459,211 and, $508,249 including loan fees of $60,000 and $34,296, charged to the loan balance, respectively. The Company failed to comply with certain debt covenants during the year ended December 31, 2020. Accordingly, as of December 31, 2020 and 2019, the venture debt is shown as a current liability. 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. During the year ended December 31, 2020, the Company granted 493,462 common stock warrants, to the lender with an exercise price of $2.50 per share and a ten-year contractual life. During 2019, the Company granted 128,667 common stock warrants to the lender with an exercise price of $2.50 per share and a ten-year contractual life. As discussed in Note 10, during the years ended December 31, 2020 and 2019, warrants associated with the venture debt were valued at $184,191 and $49,928, respectively. The relative fair value of the warrants was initially recorded as a discount to the note, which is amortized over its term. For the years ended December 31, 2020 and 2019, $241,878 and $149,948 of these loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $147,389 and $225,720 as of December 31, 2020 and 2019, 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 years ended December 31, 2020 and 2019 was $770,277 and $624,127, and 14.6% and 17.7%, 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. The terms of the Regulation CF convertible debt offering are (1) a conversion upon a Qualified Financing. In the event that the Company issues and sells shares of its equity securities (“Equity Securities”) to investors (the “Investors”) while this Note remains outstanding in an equity financing with total proceeds to the Company of not less than $1,000,000 (excluding the conversion of the Notes) (a “Qualified Financing”), then the outstanding principal amount of this Note and any unpaid accrued interest shall automatically convert in whole without any further action by the Holder into Equity Securities sold in the Qualified Financing at a conversion price equal to the price paid per share for Equity Securities by the Investors in the Qualified Financing multiplied by 0.7. The issuance of Equity Securities pursuant to the conversion of this Note shall be upon and subject to the same terms and conditions applicable to Equity Securities sold in the Qualified Financing, and (2) simple interest on the outstanding principal amount at the rate of 6% per annum. All unpaid interest and principal shall be due and payable upon request the Majority Holders on or after October 30, 2022. The gross proceeds could change based on the final closing amount that WeFunder funds from the investment commitments in escrow. As of December 31, 2020, issuance costs totaled $33,773, which is recognized as a debt discount and will be amortized over the life of the notes. 2020 Regulation D Offering Concurrently with the offering above, the Company received gross proceeds of $800,000 from a Regulation D convertible debt offering. The debt accrues 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 is not currently convertible and ultimate number of shares is not known, it is not included in dilutive share counts. As of December 31, 2020, issuance costs totaled $100,000 all of which remain unamoritzed as the related debts were received near year end. 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. 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 accrues interest at a rate of 12% per annum with a maturity date of thirty-six 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 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. Upon maturity and vote of the majority investors, principal balances can be converted into common stock at the quotient by dividing the valuation cap by the fully diluted capitalization. As the debt is not currently convertible and ultimate number of shares is not known, it is not included in dilutive share counts. 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. The PPP Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bears 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 Loan 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 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 date of the agreement was extended from December 31, 2020 to July 31, 2021. The note incurs interest at 12% per annum.Interest expense was $472,500 for the year ended December 31, 2020, all of which was accrued and unpaid as of December 31, 2020. |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 8: STOCKHOLDERS’ EQUITY (DEFICIT) 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-for-15.625 reverse stock split approved by the Company’s Board of Directors as described above. Convertible Preferred Stock During the nine months ended September 30, 2020, the Company issued 809,294 shares of Series A-3 Preferred Stock at a price of $0.53 and 709,690 shares of Series CF Preferred Stock at price per share of $0.52. During the nine months ended September 30, 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 September 30, 2021. 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. Equity Line of Credit On August 27, 2021 (“Execution Date”), the Company entered into an equity line of credit arrangement with Oasis Capital. Specifically, the Company entered into an equity purchase agreement (the “EPA”), pursuant to which Oasis Capital is committed to purchase up to $17,500,000 of the Company’s common stock over the 24-month term of the EPA. The Company is not obligated to request any portion of the $17,500,000. As of September 30, 2021, the Company has not drawn down any portion of this commitment, leaving the entire $17,500,000 available under the equity line of credit, and for which the Company has agreed, pursuant to a registration rights agreement (the “Oasis Equity RRA”), to register the shares of common stock issuable further to the equity line of credit with the SEC before any such issuances. The actual number of shares that the Company may issue pursuant to the equity line of credit is not determinable as it is based on the market price of the Company’s common stock from time to time and the number of shares desired to put to Oasis Capital. During the 24-month term of the investment agreement, the Company may request a drawdown on the equity line of credit by delivering a “put notice” to Oasis Capital stating the dollar amount of shares the Company intends to sell to Oasis Capital. The Company may make either an Option 1 or Option 2 request to Oasis Capital. Under Option 1, the purchase price Oasis Capital is required to pay for the shares is the lesser of (i) the lowest traded price of the common stock on the Nasdaq Capital Market on the Clearing Date, which is the date on which Oasis Capital receives the put shares as DWAC shares in its brokerage account, or (ii) the average of the three lowest closing sale prices of our Common Stock on the Nasdaq Capital Market during the period of twelve consecutive trading days immediately preceding the Clearing Date. The maximum amount the Company may request in an Option 1 request is $500,000. Under Option 2, the purchase price Oasis Capital is required to pay for the shares is the lesser of (i) 93% of the one (1) lowest traded price of our common stock on the Nasdaq Capital Market during the period of five (5) consecutive trading days immediately preceding the put date, or (ii) 93% of the VWAP on the Clearing Date, or (iii) 93% of the closing bid price of the Company’s common stock on the Nasdaq Capital Market on the Clearing Date. The maximum amount the Company may request in an Option 2 request is $2,000,000. 2021 Transactions 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 were $8.6 million after deducting underwriting discounts and commissions of $0.8 million and direct offering expenses of $0.6 million. 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. Upon closing of the Company’s IPO, the Company converted outstanding principal totaling $2,680,289 and certain accrued and unpaid interest of the Company’s convertible debt into an aggregate of 1,135,153 shares of common stock. See Note 7. Upon closing of the Company’s IPO, certain officers and directors converted balances due totaling $257,515 into 152,357 shares of common stock and recorded $233,184 in compensation expense for the shares issued in excess of accrued balances owed. See Note 9. In connection with the H&J and Stateside acquisitions, the Company issued 2,192,771 and 1,101,538 shares of common stock to the respective sellers. See Note 4. The Company issued 20,000 shares to the underwriter in connection with its April 2021 note financing. Pursuant to a consulting agreement, the Company issued 50,000 shares of common stock with a guaranteed equity value of $250,000. In connection with the agreement, the Company recorded a contingent consideration liability of $67,000. See Note 3. In May 2021, an aggregate of 31,881 warrants were exercised for shares of common stock for proceeds of $145,696. In July 2021, warrant holders exercised 355,000 warrants for proceeds of $1,622,350. 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 of $0.1 million. In connection with the execution of the Oasis Capital EPA, the Company issued Oasis Capital 126,354 shares of common stock (the “Commitment Shares”). Upon nine months from the Execution Date, Oasis may return a portion of the Commitment Shares. As of September 30, 2021, the Company recorded the fair value of the Commitment Shares of $367,696 as deferred offering costs as no financings under the related EPA have occurred. | NOTE 8: STOCKHOLDERS’ DEFICIT Convertible Preferred Stock In September 2018, the Company amended and restated its articles of incorporation, increasing the authorized common stock to 110,000,000 shares and increasing the authorized preferred stock to 77,000,000 shares. On February 11, 2020 the Company increased the authorized common stock to 200,000,000 and the authorized preferred stock to 125,000,000, and authorized 20,754,717 Series B Preferred Stock (“Series B”). The Company designated its preferred stock as 20,714,518 shares of Series Seed Preferred Stock, 14,481,413 shares of Series A Preferred Stock, 20,000,000 shares of Series A-2 Preferred Stock, 2,000,000 shares of Series CF Preferred Stock, 18,867,925 shares of Series A-3 Preferred Stock, 20,754,717 shares of Series B Preferred Stock and with 936,144 shares of preferred stock undesignated. The Company also amended the rights and privileges applicable to the various share classes to include the newly designated Series CF Preferred Stock and Series A-3 Preferred Stock. Series Seed Preferred Stock holders are entitled to vote on an as converted basis, while Series A Preferred Stock holders, Series A-2 Preferred Stock holders, Series CF Preferred Stock holders, Series A-3 and Series B Preferred Stock holders do not have voting privileges. The preferred stockholders have certain dividend preferences over common stockholders. The preferred stock is subject to an optional conversion right, where the preferred stock is convertible into fully paid and non- assessable shares of common stock at a 15.625:1 rate, with certain dilution protections. All classes of preferred stock are subject to automatic conversion into the Company’s common stock if and upon an initial public offering of $25,000,000 or greater. The preferred stockholders are entitled to a liquidation preference over common stockholders of the greater of: 1) the preferred stock purchase price ($0.27 per share for Series Seed Preferred Stock, $0.48 per share for Series A Preferred Stock, $0.50 per share for Series A-2 Preferred Stock, $0.52 per share for Series CF Preferred Stock, $0.53 per share for Series A-3 Preferred Stock and $0.53 per share for Series B Preferred Stock) multiplied by a multiple of 1.00 for Series A Preferred Stock, Series A-2 Preferred Stock Series CF Series B Preferred Stock Series A-3 Preferred Stock As of December 31, 2020 and 2019, 20,714,518 shares of Series Seed Preferred Stock were issued and outstanding, 5,654,072 shares of Series A Preferred Stock were issued and outstanding, 5,932,742 shares of Series A-2 Preferred Stock were issued and outstanding, 836,331 and 126,641 shares of Series CF Preferred Stock were issued outstanding issued outstanding Stock Based on circumstances in place as of, December 31, 2020 and 2019, the liquidation preference on the Series Seed Preferred Stock was subject to the 1.00 and 1.00 multiple and the liquidation preference on the Series A Preferred Stock was subject to a multiple of 1.00 and 1.00, all respectively. The total liquidation preferences as of December 31, 2020 and 2019 amounted to 27,536,206 and 15,738,253, respectively. In 2019, the Company sold 4,775,428 shares of Series A-3 Preferred Stock at a price of $0.53 per share, providing gross proceeds of $2,530,977. In 2020, the Company issued 709,960 shares of Series CF Preferred Stock at price of $0.44, providing gross proceeds of $309,750 and 809,294 shares of Series A-3 Preferred Stock at price per share of $0.53, providing gross proceeds of $428,926. In 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. Common Stock The Company had 110,000,000 shares of common stock authorized with a par value of $0.0001 as of December 31, 2019. As of December 31, 2020, the common stock authorized was increased to 200,000,000. As of December 31, 2020 and 2019, 664,167 shares of common stock were issued and outstanding. There were no shares of common stock issued during 2020 and 2019. 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | NOTE 9: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable As of September 30, 2021 and December 31, 2020, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $104,568 and $194,568 respectively, and accrued salary and expense reimbursements of $126,706 and $246,885 respectively, to current officers. Upon closing of the IPO, 25,080 shares of common stock were issued to directors as conversion of balances owed. 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. Upon closing of the IPO, 127,278 shares of common stock were issued to the CEO as conversion of the outstanding note payable and related accrued interest, accrued compensation and other consideration. As of a result of the transaction, the Company recorded an additional $233,184 in stock compensation expense, which is included in general and administrative expenses in the condensed consolidated statements of operations. As of September 30, 2021, H&J had an outstanding note payable of $299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12% per annum. As of September 30, 2021, Stateside had $97,471 in outstanding amounts advances to a company partially owned by the Stateside Seller. The advances are unsecured, non-interest bearing and due on demand. The amount is included in prepaid expenses and other current assets in the consolidated balance sheets. | NOTE 9: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable Two former officers, Corey Epstein and Mark Lynn (“Former Officers”), and one current officer, Hil Davis, of the Company deferred their salary during portions of 2014-2016 and 2019, respectively. The Company commenced repaying the Former Officers obligations during 2017; however, no additional payments were made during 2018. In 2019, the balance due to one the Former Officers, was relieved in full through offset. The second Former Officers, who is a director, received repayment on all balances that existed as of 2018 and advanced additional funds to the Company. These advances are non-interest bearing and due on demand. The current officer, Hil Davis, converted prior advances to a loan payable (see below). As of December 31, 2020 and 2019, the due to related parties account on the accompanying balance sheet include advances from the former officer, Mark Lynn, who also serves as a director, totaling $194,568, and accrued salary and expense reimbursements of $246,885 and $68,859 to current officers. An officer, Hil Davis, of the Company previously advanced funds to the Company for working capital, as described above. These prior advances were converted to a note payable totaling $115,000 as of December 31, 2020 and 2019. The loan bears an interest rate of 5% per annum. Payment Processor: The Company’s backend payment processor’s majority shareholder, Trevor Pettennude, is a director of the Company. Total expenses for the years ended December 31, 2020 and 2019 were approximately $25,000 and $140,000, respectively, and included in sales and marketing in the accompanying statements of operations. |
SHARE-BASED PAYMENTS
SHARE-BASED PAYMENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SHARE-BASED PAYMENTS | ||
SHARE-BASED PAYMENTS | NOTE 10: SHARE-BASED PAYMENTS Common Stock Warrants During the nine months ended September 30, 2020, the Company granted 374,048 common stock warrants to the venture debt lender with an exercise price of $2.50 per share. The warrants were valued at $139,572 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 Nine Months Ended September 30, 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 % Expected Life (years) 10.00 In connection with the IPO, the Company issued 2,409,639 warrants and an additional 361,445 warrants to purchase common stock per the over-allotment option. Each warrant will have an exercise price of $4.57 per share (equal to 110% of the offering price of the common stock), will be exercisable upon issuance and will expire five years from issuance. 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. The warrants may be exercised beginning on November 13, 2021 and will expire five years from issuance. In connection with the Company’s April 2021 note financing, the Company issued warrants to the lender to purchase up to 120,482 shares of common stock. The warrants have an exercise price of $4.15 per share and are exercisable immediately after issuance. In May 2021, an aggregate of 31,881 warrants were exercised for shares of common stock for proceeds of $145,696. In July 2021, warrant holders exercised 355,000 warrants for proceeds of $1,622,350. A summary of information related to common stock warrants for the nine months ended September 30, 2021 is as follows: Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 914,539 $ 2.66 Granted 3,012,048 4.58 Conversion of preferred stock warrants upon IPO 51,642 7.66 Exercised (386,881) 4.57 Forfeited — — Outstanding - September 30, 2021 3,591,348 $ 4.13 Exercisable at September 30, 2021 3,470,866 $ 4.10 Preferred Stock Warrants A summary of information related to preferred stock warrants for the nine months ended September 30, 2021 is as follows: Preferred Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 806,903 $ 0.49 Converted to common stock warrants upon IPO (806,903) 0.49 Exercised — — Forfeited — — Outstanding - September 30, 2021 — $ — Exercisable at September 30, 2021 — $ — Upon the IPO, all outstanding preferred stock warrants converted into common stock warrants at a ratio of 15.625:1. Stock Options 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. Upon the IPO, 2,712,000 options were granted to executives and directors at an exercise price of $4.15 per share. As of September 30, 2021, 588,000 options were available for future issuance. A summary of information related to stock options under our 2013 and 2020 Stock Plan for the nine months ended September 30, 2021 is as follows: Weighted Average Options Exercise Price Outstanding - December 31, 2020 1,163,103 $ 2.34 Granted 2,712,000 4.15 Exercised — — Forfeited — — Outstanding - September 30, 2021 3,875,103 $ 3.62 Exercisable at September 30, 2021 3,084,831 $ 3.61 Weighted average duration (years) to expiration of outstanding options at September 30, 2021 8.27 Stock-based compensation expense of $134,113 and $5,779 was recognized for the three months ended September 30, 2021 and 2020, and $4,155,641 and $105,643 was recognized for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, $537,550 was recorded to sales and marketing expense, and all other stock compensation was included in general and administrative expense in the condensed consolidated statements of operations. Total unrecognized compensation cost related to non-vested stock option awards as of September 30, 2021 amounted to $1,164,223 and will be recognized over a weighted average period of 2.48 years. | NOTE 10: SHARE-BASED PAYMENTS Common Stock Warrants In March 2017, the lender of venture debt was 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, see Note 7. During the year ended December 31, 2020, 493,462 common stock warrants were granted under the terms of the loan, respectively, to the lender with an exercise price of $2.50 per share and a ten-year contractual life. The 2020 warrants granted were valued at $184,191 using the below range of inputs using the Black-Scholes model. During the year ended December 31, 2019, 128,667 common stock warrants were granted under the terms of the loan, to the lender with an exercise price of $2.50 per share and a ten-year contractual life. In aggregate, these warrants were valued at $49,928 using the below range of inputs using the Black-Scholes model. During the Company’s Series A-3 Preferred Stock raise, the Company granted 21,279 common warrants to a funding platform in 2019, and an additional 2,603 granted in 2020. The warrants are fully vested with an exercise price of $8.28 per share, expiring in five years. The warrants contain a put option for the Company to redeem the warrants in cash in a change-in-control transaction, equal to the Black-Scholes value immediately prior to the fundamental event. The warrants also include other down-round and anti-dilution features if shares of common stock are issued or granted at a lesser value than the strike price which may also require additional warrants to be issued, such that the aggregate value of the strike price remains the same. The number of warrants also increase by 25% each six months after they are exercised in which an IPO has not occurred. As the warrants include a put option and embody an obligation for the Company to redeem these warrants in cash upon a contingent event, they are presented as a liability in the accompanying balance sheet. The Company valued the 2019 warrants at $7,700 and the 2020 warrants at $918 using a Black-Scholes model within the same inputs described below. The volatility rate of 100% was used as it is a floor volatility as defined by the warrants. As of December 31, 2020, the Company remeasured the fair value of the warrants to be $6,265, and recorded a gain due to the change in fair value of $2,353. Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.59 – 1.59% 1.47 – 2.49% Expected Dividend Yield 0.00% 0.00% Expected Volatility 58.0 – 100% 58.0 – 100% Expected Life (years) 10.00 5.00 For valuing the warrants noted above, the Company uses the same assumptions used for valuing employee options as noted below in the Stock Plan section, with the exception of the useful life which is either the contractual life or the estimated life. In connection with the Regulation D offerings in 2020, the Company issued 512 warrants to purchase common stock in connection with the notes at an exercise price of $2.50 per share. The issuance costs and warrants are recognized as a debt discount and will be amortized over the life of the notes. A summary of information related to common stock warrants for the years ended December 31, 2020 and 2019 is as follows: Common Weighted Stock Average Warrants Exercise Price Outstanding – December 31, 2018 268,656 $ 2.50 Granted 149,946 3.28 Exercised — — Forfeited (640) — Outstanding – December 31, 2019 417,962 $ 2.81 Granted 496,577 2.53 Exercised — — Forfeited — — Outstanding – December 31, 2020 914,539 $ 2.66 Exercisable at December 31, 2020 914,539 $ 2.66 Preferred Stock Warrants During the Company’s 2019 Series A-3 Preferred Stock raise, the company granted 261,430 warrants to purchase Series A-3 Preferred Stock to a funding platform. The warrants are fully vested with an exercise price of $0.53 per share, expiring in five years. The fair value of these warrants was calculated under the Black-Scholes method, using below variables, resulting in an aggregate fair value of $71,400 being recorded to additional paid-in capital and as offering costs within additional paid-in capital for the year ended December 31, 2019. 2019 Risk Free Interest Rate 2.49 % Expected Dividend Yield 0.00 % Expected Volatility 58.00 % Expected Life (years) 5.00 A summary of information related to preferred stock warrants for the years ended December 31, 2020 and 2019 is as follows: Preferred Weighted Stock Average Warrants Exercise Price Outstanding – December 31, 2018 545,473 $ 0.47 Granted 261,430 0.53 Exercised — — Forfeited — — Outstanding – December 31, 2019 806,903 $ 0.49 Exercised — — Forfeited — — Outstanding – December 31, 2020 806,903 $ 0.49 Exercisable at December 31, 2020 806,903 $ 0.49 There were no preferred stock warrants issued during the year ended December 31, 2020. Stock Plan The Company has adopted the 2013 Stock Plan, as amended and restated (the “Plan”), which provides for the grant of shares of stock options, stock appreciation rights, and stock awards (performance shares) to employees, non-employee directors, and non-employee consultants. The number of shares authorized by the Plan was 1,196,356 shares as December 31, 2020 and 2019. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of the grant and generally have a term of ten years. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award. Stock options comprise all of the awards granted since the Plan’s inception. Shares available for grant under the Plan amounted to 33,253 and 112,140 as of December 31, 2020 and 2019, respectively. Vesting generally occurs over a period of immediately to four years. A summary of information related to stock options for the years ended December 31, 2020 and 2019 is as follows: Weighted Average Options Exercise Price Outstanding – December 31, 2018 1,136,091 $ 2.34 Granted 168,525 3.28 Exercised — — Forfeited (220,401) — Outstanding – December 31, 2019 1,084,215 $ 2.50 Granted 91,688 0.94 Exercised — — Forfeited (12,800) 3.28 Outstanding – December 31, 2020 1,163,103 $ 2.34 Exercisable at December 31, 2020 880,955 $ 2.34 Weighted average grant date fair value of options granted during period $ 0.500 Weighted average duration (years) to expiration of outstanding options at December 31, 2020 6.02 The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company used the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of options grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option. The number of stock award forfeitures are recognized as incurred. The assumptions utilized for option grants during the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.42% – 0.51% 1.59% – 2.55% Expected Dividend Yield 0% 0% Expected Volatility 58% 58% Expected Life (years) 6.25 6.25 Weighted Average fair value of stock options granted $0.50 $0.26 The total grant-date fair value of the options granted during the years ended December 31, 2020 and 2019 was $46,253 and $39,441, respectively. Stock-based compensation expense of $144,775 and $172,491 was recognized for the years ended December 31, 2020 and 2019, 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 December 31, 2020 amounted to $238,275 and will be recognized over a weighted average period of 1.80 years. 2020 Incentive Stock Plan We have adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 3,300,000 shares of our 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. To date, no grants have been made under the 2020 Plan. |
INCOME TAXES
INCOME TAXES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
INCOME TAXES | ||
INCOME TAXES | NOTE 13: INCOME TAXES The Company recorded a tax benefit of $1,100,200 | NOTE 11: INCOME TAXES Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets using accelerated depreciation methods for income tax purposes, share-based compensation expense, and for net operating loss carryforwards. As of December 31, 2020 and 2019, the Company had net deferred tax assets before valuation allowance of 9,128,614 and $6,047,117, respectively. The following table presents the deferred tax assets and liabilities by source: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 9,134,447 $ 6,060,102 Stock-based compensation 40,467 36,829 Deferred tax liabilities: Depreciation timing differences (5,103) (5,103) Other (41,198) (44,711) Valuation allowance (9,128,614) (6,047,117) Net deferred tax assets $ — $ — The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due to taxable losses for the years ended December 31, 2020 and 2019, cumulative losses through December 31, 2020, and no history of generating taxable income. Therefore, valuation allowances of $9,128,614 and $6,047,117 were recorded as of December 31, 2020 and 2019, respectively. Valuation allowance increased by $3,081,497 and $1,689,947 during the years ended December 31, 2020 and 2019, respectively. Accordingly, a $13,641 and $800 provision for income taxes has been recognized for each of the years ended December 31, 2020 and 2019. Deferred tax assets were calculated using the Company’s combined effective tax rate, which it estimated to be approximately 28.0%. The effective rate is reduced to 0% for 2020 and 2019 due to the full valuation allowance on its net deferred tax assets. The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. At December 31, 2020 and 2019, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of approximately $32,680,000 and $21,650,000, which may be carried forward indefinitely. The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense. The Company is not presently subject to any income tax audit in any taxing jurisdiction, though all tax years from 2017 on remain open to examination. |
LEASE OBLIGATIONS
LEASE OBLIGATIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
LEASE OBLIGATIONS | ||
LEASE OBLIGATIONS | NOTE 11: LEASE OBLIGATIONS In April 2021, the Company entered into a lease agreement for operating space in Los Angeles, California. The lease expires in June 2023 and has monthly base rent payments of $17,257. The lease required a $19,500 deposit. H&J leases office and showroom facilities in Dallas and Houston, Texas, and New Orleans, Louisiana. The leases expire at various dates through June 2022 with base rents ranging from $3,400 to $6,500. Stateside leases office and showroom facilities in Los Angeles, California. The leases expire at various dates through November 2021 with base rents ranging from $3,100 to $9,000. Total rent expense for the three months ended September 30, 2021 and 2020 was $246,103 and $106,702, and $551,944 and $570,051 for the nine months ended September 30, 2021 and 2020, respectively. | NOTE 12: 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 minimum lease payments under the operating leases is $442,253 in 2021, $455,521 in 2022, $456,202 and $76,290 in 2023. Total rent expense for the year ended December 31, 2020 and 2019 was $541,146 and $210,352, respectively. |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
CONTINGENCIES | ||
CONTINGENCIES | NOTE 12: CONTINGENCIES 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 making payments each month and this matter will be settled by March 2022. 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. | NOTE 13: CONTINGENCIES We were in a lawsuit with our Los Angeles landlord in 2019. In February 2020, we 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 DBG vendor filed a lawsuit against DBG’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 is actively working to resolve this matter. On December 21, 2020, a DBG 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. We plan to contest any such damages vigorously. Except as may be set forth above the Company are not a party to any legal proceedings, and the Company are 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 our ordinary course of business, the resolution of which the Company do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUBSEQUENT EVENTS. | ||
SUBSEQUENT EVENTS | NOTE 14: SUBSEQUENT EVENTS Management’s Evaluation On October 1, 2021, FirstFire Global Opportunities Fund, LLC (“FirstFire”) purchased from the Company a senior secured convertible note (the “FirstFire Note”), with an interest rate of 6% per annum, having a face value of $1,575,000 for a total purchase price of $1,500,000, secured by an all assets of the Company. The Company received net proceeds of $1,380,000. The FirstFire Note, in the principal amount of $1,575,000, bears interest at 6% per annum and is due and payable 18 months from the date of issuance, unless sooner converted. The FirstFire Note is convertible at the option of FirstFire into shares of the Company’s common stock at a conversion price (the “FirstFire Conversion Price”) which is the lesser of (i) 130% of the closing price on the last trading day prior to the issue date, and (ii) 90% of the average of the two lowest VWAPs during the five consecutive trading day period preceding the delivery of the notice of conversion. FirstFire is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $500,000. If the FirstFire Conversion Price set forth in any conversion notice is less than $3.00 per share, the Company, at its sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of its common stock. | NOTE 14: SUBSEQUENT EVENTS 1) The Company received an additional $438,126 in net proceeds from its Regulation D convertible debt offering. 2) In February 2021 the Company was notified that their 2nd Round PPP Loan application was approved by the Small Business Association. Per the terms of the PPP Loan, the Company received total proceeds of $1,347,050 . The Loan matures in two years from the effective date of the Loan and has a fixed interest rate of 1% per annum. 3) In April 2021, certain officers and directors agreed to convert balances due totaling $442,597 into convertible notes on the same terms as the 2020 Regulation CF Offering described in Note 7, other than these notes carry no interest. 4) In March 2021, the Company and their senior credit facility agreed to extend the term of the credit agreement, see Note 7. On May 12, 2021, the Board of Directors approved a one-for- 15.625 Management’s Evaluation Management has evaluated subsequent events through April 12, 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) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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”). | 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 | Unaudited Interim Financial Information The accompanying unaudited condensed consolidated balance sheet as of September 30, 2021, the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 and of cash flows for the nine months ended September 30, 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. | |
Reclassifications | Reclassifications Certain prior year accounts have been reclassified to conform with current year presentation. | |
Principles of Consolidation | Principles of Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Bailey, H&J and Stateside from the dates of acquisition. All inter-company transactions and balances have been eliminated on consolidation. | Principles of Consolidation These 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. | 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 September 30, 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. | 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 December 31, 2020 and 2019, 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, prepaid expenses, 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. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 28,195 $ — $ 28,195 Contingent consideration — — 10,527,910 10,527,910 Derivative liability — — 2,486,843 2,486,843 $ — $ 28,195 $ 13,014,753 $ 13,042,948 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ 6,265 $ 6,265 $ — $ — $ 6,265 $ 6,265 Warrant Liability Certain of the Company’s common stock warrants are carried at fair value. As of December 31, 2020, the fair value of the Company’s common stock warrant liabilities was measured under the Level 3 hierarchy using the Black-Scholes pricing model as the Company’s underlying common stock had no observable market price (see Note 10). The warrant liability was valued using a market approach. Upon the IPO, the warrant liabilities were valued using quoted prices of identical assets in active markets, and was reclassified under the Level 2 hierarchy. Changes in common stock warrant liability during the nine months ended September 30, 2021 are as follows: Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value 21,930 Outstanding as of September 30, 2021 $ 28,195 Contingent Consideration The Company records a contingent consideration liability relating to stock price guarantees included in its acquisition and consulting agreements. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the contingent consideration liability related to the Company’s business combinations is valued using the Monte Carlo simulation model. The Monte Carlo simulation inputs include the stock price, volatility of common stock, timing of settlement and resale restrictions and limits. The fair value of the contingent consideration is then calculated based on guaranteed equity values at settlement as defined in the acquisition agreements. Changes in contingent consideration liability during the nine months ended September 30, 2021 are as follows: Contingent Consideration Liability Balance as of December 31, 2020 $ — Initial recognition in connection with acquisition of Harper & Jones 3,421,516 Stock price guarantee per consulting agreement 67,000 Change in fair value 7,039,394 Outstanding as of September 30, 2021 $ 10,527,910 Derivative Liability In connection with the Company’s convertible note with Oasis Capital, LLC (“Oasis”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the nine months ended September 30, 2021 are as follows: Derivative Liability Outstanding as of December 31, 2020 $ — Initial fair value on issuance of convertible note 1,858,887 Change in fair value 627,956 Outstanding as of September 30, 2021 $ 2,486,843 | 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 year ended December 31, 2020 and 2019 are as follows: Warrant Liability Oustanding as of December 31, 2018 $ — Warrants granted 7,700 Oustanding as of December 31, 2019 7,700 Warrants granted 918 Change in fair value (2,353) Oustanding as of December 31, 2020 $ 6,265 |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for DSTLD and first-in, first-out method for Bailey and Stateside. The inventory balances as of September 30, 2021 and December 31, 2020 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress. | 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 December 31, 2020 and 2019 consist substantially of finished good products purchased or produced for resale, as well as any materials the Company purchased to modify the products. |
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 September 30, 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 $25,263 and $306,845 for the three months ended September 30, 2021 and 2020, and $62,061 and $487,402 for the nine months ended September 30, 2021 and 2020, respectively. | 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 December 31, 2020 and 2019 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 $283,024 December 31, 2020 2019 Computer equipment $ 57,810 $ 57,004 Furniture and fixtures 207,140 70,108 Leasehold improvements 69,274 40,351 334,224 167,463 Accumulated depreciation (334,224) (97,703) Property and equipment, net $ — $ 69,760 Software $ 278,405 $ 56,450 Accumulated amortization (216,092) (53,617) Software, net $ 62,313 $ 2,833 During the year ended December 31, 2020, the Company disposed of certain assets, primarily related to leasehold improvements and related fixtures, in relation to the termination of various leases and contracts that were acquired with Bailey. During the year ended December 31, 2020, a total of approximately $2,202,000 in property and equipment was disposed, resulting in a loss on disposal of $848,927 after disposal costs, which is included in operating expenses in the accompanying consolidated statement of operations. |
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 | 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. Brand names and other assets with indefinite lives are not subject to amortization. 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. | 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. In the first quarter of 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 September 30, 2021. | 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 quantitative goodwill impairment test in the first quarter every year. During the year ended December 31, 2020, management performed a quantitative impairment test after evaluating qualitative factors due to COVID-19. The Company determined that the fair value of the reporting unit exceeded the carrying amount, and therefore no goodwill impairment was recognized as of December 31, 2020. The Company made this determination by observing average market multiples on revenue for similar companies against current and expected revenue levels of the Bailey unit acquired and comparing such against the carrying value of the Bailey unit, which resulted in the estimated fair value exceeding the carrying value. |
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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. As such, the Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. | 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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. The Company calculated the estimated fair value of the brand name based on a relief of royalty model using revised revenue projections and discount rates believed to be appropriate. The Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. |
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. | 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, (b) 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. | 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’ deficit. 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 $20,041 and $5,229 as of September 30, 2021 and December 31, 2020, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. | 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 certain products 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. ASC 606 has been adopted effective January 1, 2019 using the modified retrospective method with no adjustment. The reserve for returns totaled $5,229 and $100,000 as of December 31, 2020 and 2019, 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. | 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 distribution costs. Total shipping and handling billed to customers as a component of net revenues was approximately $6,500 and $3,900 for the nine months ended September 30, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $81,000 and $36,000 for the three months ended September 30, 2021 and 2020, and $200,000 and $140,000 for the nine months ended September 30, 2021 and 2020, respectively. | 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 $3,900 and $39,000 for the years ended December 31, 2020 and 2019, respectively. Total shipping and handling costs included in distribution costs were approximately $246,000 and $357,000 for the years ended December 31, 2020 and 2019, respectively. |
Advertising and Promotion | Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the three months ended September 30, 2021 and 2020 amounted to approximately $12,000 and $0, and $16,000 and $100,000 for the nine months ended September 30, 2021 and 2020,respectively. The amounts are included in sales and marketing expense. | Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2020 and 2019 amounted to approximately $146,000 and $579,000, 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 September 30, 2021 and December 31, 2020, the Company did not have any derivative instruments that were designated as hedges. | 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 December 31, 2020 and 2019, the Company did not have any derivative instruments that were designated as hedges. The Company adopted Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. |
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 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. | 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 December 31, 2020, the Company had capitalized $214,647 in deferred offering costs. Upon completion of the IPO in May 2021, all capitalized deferred offering costs were charged to additional paid-in capital. As of September 30, 2021, the Company capitalized $367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). | 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 December 31, 2020, the Company had capitalized $214,647 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 September 30, 2021 our operating segments included: DSTLD, Bailey, H&J and Stateside. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale, in store 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. | 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 December 31, 2020 our operating segments included: DSTLD and Bailey 44. Each operating segment has a current report 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. | 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 September 30, 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 September 30, 2021 and 2020 are as follows: September 30, 2021 2020 Convertible notes 2,240,426 — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,591,348 794,569 Preferred stock warrants — 806,903 Stock options 3,895,103 1,129,503 Total potentially dilutive shares 9,706,877 65,655,685 All shares of preferred stock were convertible into shares of common stock at a ratio of 15.625:1 per share. Upon the closing of the 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. Additionally, all preferred stock warrants converted into 51,642 common stock warrants at the same ratio as the underlying preferred stock conversion. | 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 December 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of December 31, 2020 and 2019 are as follows: December 31, 2020 2019 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 8,223,036 Series B Preferred Stock (convertible to common stock) 20,754,717 — Common stock warrants 914,539 417,962 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 42,960,089 All shares of preferred stock are convertible into shares of common stock at a ratio of 15.625:1 per share. See Note 14. |
Concentrations | Concentrations The Company utilized five vendors that made up 39% of all inventory purchases during the nine months ended September 30, 2021 and two vendors that made up 39% of all inventory purchases during the nine months ended September 30, 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. | Concentrations The Company utilized three vendors that made up 41%, 31% and 28% of all inventory purchases, respectively, during the year ended December 31, 2020 and two vendors that made up 39% and 29% of all inventory purchases, respectively during the year ended December 31, 2019. 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. | Recent Accounting Pronouncements 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. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted ASU-2018-13 as of January 1, 2020, which did not materially affect our consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350) (“ASU 2017-04”), which provides for the elimination of Step 2 from the goodwill impairment test. If impairment charges are recognized, the amount recorded will be the amount by which the carrying amount exceeds the reporting unit’s fair value with certain limitations.ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption allowed. The Company has early adopted ASU 2017-04 as of January 1, 2020. 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) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Schedule of financial assets and liabilities measured at fair value on recurring basis | Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 28,195 $ — $ 28,195 Contingent consideration — — 10,527,910 10,527,910 Derivative liability — — 2,486,843 2,486,843 $ — $ 28,195 $ 13,014,753 $ 13,042,948 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ 6,265 $ 6,265 $ — $ — $ 6,265 $ 6,265 | |
Schedule of changes in common stock warrant liability | Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value 21,930 Outstanding as of September 30, 2021 $ 28,195 | Warrant Liability Oustanding as of December 31, 2018 $ — Warrants granted 7,700 Oustanding as of December 31, 2019 7,700 Warrants granted 918 Change in fair value (2,353) Oustanding as of December 31, 2020 $ 6,265 |
Schedule of changes in contingent consideration | Contingent Consideration Liability Balance as of December 31, 2020 $ — Initial recognition in connection with acquisition of Harper & Jones 3,421,516 Stock price guarantee per consulting agreement 67,000 Change in fair value 7,039,394 Outstanding as of September 30, 2021 $ 10,527,910 | |
Schedule of property, equipment, and software | December 31, 2020 2019 Computer equipment $ 57,810 $ 57,004 Furniture and fixtures 207,140 70,108 Leasehold improvements 69,274 40,351 334,224 167,463 Accumulated depreciation (334,224) (97,703) Property and equipment, net $ — $ 69,760 Software $ 278,405 $ 56,450 Accumulated amortization (216,092) (53,617) Software, net $ 62,313 $ 2,833 | |
Schedule of estimated useful lives of amortizable intangible assets | Customer relationships 3 years | Customer relationships 3 years |
Schedule of potentially dilutive items outstanding | September 30, 2021 2020 Convertible notes 2,240,426 — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,591,348 794,569 Preferred stock warrants — 806,903 Stock options 3,895,103 1,129,503 Total potentially dilutive shares 9,706,877 65,655,685 | December 31, 2020 2019 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 8,223,036 Series B Preferred Stock (convertible to common stock) 20,754,717 — Common stock warrants 914,539 417,962 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 42,960,089 |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 | 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 | Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable, net 37,479 Due (to) 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 | Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable 37,479 Due from/(to) factor (312,063) Inventory 3,303,660 Prepaid expenses 165,856 Deposits 187,493 Property, equipment and software 1,215,748 Goodwill 6,479,218 Intangible assets (Note 6) 8,600,000 Accounts payable (3,397,547) Accrued expenses and other liabilities (886,757) Purchase price consideration $ 15,500,000 |
Schedule of fair value of purchase price consideration | Cash $ 500,000 Common stock 8,025,542 Contingent consideration 3,421,516 Purchase price consideration $ 11,947,058 | |
Schedule of allocation of purchase price in regard to acquisition | Purchase Price Allocation Cash and cash equivalents $ 24,335 Accounts receivable, net 49,472 Inventory 77,159 Prepaid expenses 69,715 Deposits 4,415 Property, equipment and software, net 83,986 Goodwill 9,681,548 Intangible assets 3,936,030 Accounts payable (51,927) Accrued expenses and other liabilities (107,957) Deferred revenue (269,848) Due to related parties (1,361) Loan payable (148,900) Note payable - related party (299,489) Deferred tax liability (1,100,120) Purchase price consideration $ 11,947,058 | |
Business acquisition Pro Forma information | Nine Months Ended September 30, 2021 2020 Net revenues $ 7,956,477 $ 11,287,932 Net loss $ (22,853,732) $ (10,080,468) Net loss per common share $ (3.81) $ (15.18) | Year Ended December 31, 2020 2019 Net revenues $ 7,259,260 $ 30,133,934 Net loss $ (12,786,695) $ (11,868,423) Net loss per common share $ (19.25) $ (17.87) |
DUE FROM FACTOR (Tables)
DUE FROM FACTOR (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
DUE FROM FACTOR | ||
Schedule of due from factor | September 30, December 31, 2021 2020 Outstanding receivables: Without recourse $ 1,022,552 $ 151,158 With recourse 58,884 42,945 Advances 119,937 56,246 Credits due customers (107,064) (40,316) $ 1,094,309 $ 210,033 | December 31, 2020 2019 Outstanding receivables: Without recourse $ 151,158 $ — With recourse 42,945 — Advances 56,246 — Credits due customers (40,316) — $ 210,033 $ — |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
GOODWILL AND INTANGIBLE ASSETS | |
Summary of amortized and indefinite-lived intangible assets | Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 1,100,000 $ (320,833) $ 779,167 Indefinite-lived: 1,100,000 (320,833) 779,167 Brand name 6,715,500 — 6,715,500 $ 7,815,500 $ (320,833) $ 7,494,667 |
Schedule of future amortization expense | Year Ending December 31, 2021 366,667 2022 366,667 2023 45,833 $ 779,167 |
LIABILITIES AND DEBT (Tables)
LIABILITIES AND DEBT (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
LIABILITIES AND DEBT | ||
Schedule of accrued expenses and other liabilities | September 30, December 31, 2021 2020 Accrued expenses $ 266,646 $ 92,074 Reserve for returns 20,041 5,229 Payroll related liabilities 1,253,639 843,704 Sales tax liability 242,021 196,410 Other liabilities 71,607 108,229 $ 1,853,954 $ 1,245,646 | December 31, 2020 2019 Accrued expenses $ 92,074 $ 188,341 Reserve for returns 5,229 100,000 Payroll related liabilities 843,704 412,155 Sales tax liability 196,410 156,707 Other liabilities 108,230 264,114 $ 1,245,646 $ 1,121,317 |
SHARE-BASED PAYMENTS (Tables)
SHARE-BASED PAYMENTS (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Schedule of fair value measurement inputs and valuation techniques | Nine Months Ended September 30, 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 % Expected Life (years) 10.00 | Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.42% – 0.51% 1.59% – 2.55% Expected Dividend Yield 0% 0% Expected Volatility 58% 58% Expected Life (years) 6.25 6.25 Weighted Average fair value of stock options granted $0.50 $0.26 |
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 3,012,048 4.58 Conversion of preferred stock warrants upon IPO 51,642 7.66 Exercised (386,881) 4.57 Forfeited — — Outstanding - September 30, 2021 3,591,348 $ 4.13 Exercisable at September 30, 2021 3,470,866 $ 4.10 Preferred Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 806,903 $ 0.49 Converted to common stock warrants upon IPO (806,903) 0.49 Exercised — — Forfeited — — Outstanding - September 30, 2021 — $ — Exercisable at September 30, 2021 — $ — | Weighted Average Options Exercise Price Outstanding – December 31, 2018 1,136,091 $ 2.34 Granted 168,525 3.28 Exercised — — Forfeited (220,401) — Outstanding – December 31, 2019 1,084,215 $ 2.50 Granted 91,688 0.94 Exercised — — Forfeited (12,800) 3.28 Outstanding – December 31, 2020 1,163,103 $ 2.34 Exercisable at December 31, 2020 880,955 $ 2.34 Weighted average grant date fair value of options granted during period $ 0.500 Weighted average duration (years) to expiration of outstanding options at December 31, 2020 6.02 |
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 2,712,000 4.15 Exercised — — Forfeited — — Outstanding - September 30, 2021 3,875,103 $ 3.62 Exercisable at September 30, 2021 3,084,831 $ 3.61 Weighted average duration (years) to expiration of outstanding options at September 30, 2021 8.27 | |
Common stock warrants | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Schedule of fair value measurement inputs and valuation techniques | Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.59 – 1.59% 1.47 – 2.49% Expected Dividend Yield 0.00% 0.00% Expected Volatility 58.0 – 100% 58.0 – 100% Expected Life (years) 10.00 5.00 | |
Summary of information related to common stock and preferred stock warrants | Common Weighted Stock Average Warrants Exercise Price Outstanding – December 31, 2018 268,656 $ 2.50 Granted 149,946 3.28 Exercised — — Forfeited (640) — Outstanding – December 31, 2019 417,962 $ 2.81 Granted 496,577 2.53 Exercised — — Forfeited — — Outstanding – December 31, 2020 914,539 $ 2.66 Exercisable at December 31, 2020 914,539 $ 2.66 | |
Preferred stock warrants | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Schedule of fair value measurement inputs and valuation techniques | 2019 Risk Free Interest Rate 2.49 % Expected Dividend Yield 0.00 % Expected Volatility 58.00 % Expected Life (years) 5.00 | |
Summary of information related to common stock and preferred stock warrants | Preferred Weighted Stock Average Warrants Exercise Price Outstanding – December 31, 2018 545,473 $ 0.47 Granted 261,430 0.53 Exercised — — Forfeited — — Outstanding – December 31, 2019 806,903 $ 0.49 Exercised — — Forfeited — — Outstanding – December 31, 2020 806,903 $ 0.49 Exercisable at December 31, 2020 806,903 $ 0.49 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
INCOME TAXES | |
Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | December 31, 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 9,134,447 $ 6,060,102 Stock-based compensation 40,467 36,829 Deferred tax liabilities: Depreciation timing differences (5,103) (5,103) Other (41,198) (44,711) Valuation allowance (9,128,614) (6,047,117) Net deferred tax assets $ — $ — |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) $ / shares in Units, $ in Millions | May 13, 2021USD ($)$ / sharesshares | May 12, 2021 | Dec. 31, 2020shares | May 18, 2021 |
Subsidiary, Sale of Stock [Line Items] | ||||
Reverse stock split ratio | 0.064 | |||
Number of shares issued | shares | 0 | |||
Harper & Jones LLC | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | |||
Initial Public Offering | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Number of shares issued | shares | 2,409,639 | |||
Share issue price | $ / shares | $ 4.15 | |||
Warrants issued | shares | 2,771,084 | |||
Aggregate net proceeds from the IPO, inclusive of the proceeds from the over-allotment exercise | $ | $ 8.6 | |||
Underwriting discounts and commissions | $ | 0.8 | |||
Estimated offering expenses | $ | 0.6 | |||
Additional offering costs | $ | $ 0.6 | |||
Over-allotment option | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Warrants issued | shares | 361,445 |
GOING CONCERN (Details)
GOING CONCERN (Details) - USD ($) | May 13, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Net loss | $ (22,659,480) | $ (8,088,980) | $ (10,728,295) | $ (5,653,973) | |
Working capital deficit | 18,194,632 | 18,270,034 | |||
Cash and cash equivalents | $ 254,527 | $ 575,986 | $ 40,469 | ||
Initial Public Offering | |||||
Net proceeds from IPO and Over allottment exercise | $ 8,600,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and Equivalents and Concentration of Credit Risk (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Cash and cash equivalents in bank deposit | $ 250,000 | $ 250,000 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Liabilities, Fair Value Disclosure [Abstract] | ||||
Warrant liability | $ 28,195 | $ 6,265 | ||
Contingent consideration | 10,527,910 | |||
Total | 13,042,948 | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Outstanding as at beginning | 0 | |||
Initial recognition in connection with acquisition of Harper & Jones | 3,421,516 | |||
Stock price guarantee per consulting agreement | 67,000 | |||
Change in fair value | 7,039,394 | |||
Outstanding as of September 30, 2021 | 10,527,910 | 0 | ||
Warrant Liability | ||||
Outstanding as of December 31, 2020 | 6,265 | $ 7,700 | 7,700 | |
Warrants granted | 918 | $ 7,700 | ||
Change in fair value | 21,930 | $ (1,792) | (2,353) | |
Outstanding as of September 30, 2021 | 28,195 | 6,265 | $ 7,700 | |
Level 2 | ||||
Liabilities, Fair Value Disclosure [Abstract] | ||||
Warrant liability | 28,195 | |||
Total | 28,195 | |||
Level 3 | ||||
Liabilities, Fair Value Disclosure [Abstract] | ||||
Warrant liability | $ 6,265 | |||
Contingent consideration | 10,527,910 | |||
Total | $ 13,014,753 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Equipment, and Software (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | ||||||
General and administrative expenses | $ 25,263 | $ 306,845 | $ 62,061 | $ 487,402 | $ 48,885 | |
Proceeds from sale of property plant and equipment | 2,202,000 | |||||
Loss on disposal of property and equipment | $ (593,449) | $ (593,449) | (848,927) | |||
Capital assets | ||||||
Property and equipment, net | $ 97,862 | $ 97,862 | 62,313 | 72,593 | ||
Software | 278,405 | 56,450 | ||||
Accumulated amortization | (216,092) | (53,617) | ||||
Software, net | 62,313 | 2,833 | ||||
Computer equipment | ||||||
Capital assets | ||||||
Property and equipment, gross | 57,810 | 57,004 | ||||
Furniture and fixtures | ||||||
Capital assets | ||||||
Property and equipment, gross | 207,140 | 70,108 | ||||
Leasehold improvements | ||||||
Capital assets | ||||||
Property and equipment, gross | 69,274 | 40,351 | ||||
Property and equipment | ||||||
Capital assets | ||||||
Property and equipment, gross | 334,224 | 167,463 | ||||
Accumulated depreciation | $ (334,224) | (97,703) | ||||
Property and equipment, net | $ 69,760 | |||||
Property and equipment | Minimum | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Lease life or expected life | 3 years | 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 | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Business Combinations (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful lives | 3 years | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Goodwill, Impairment Loss | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Indefinite-Lived Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Impairment of intangible assets | $ 784,500 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Reserve for returns | $ 20,041 | $ 5,229 | $ 100,000 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Shipping and Handling (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Total shipping and handling | $ 6,500 | $ 3,900 | $ 6,500 | $ 3,900 | $ 3,900 | $ 39,000 |
Total shipping and handling costs included in distribution costs | $ 81,000 | $ 36,000 | $ 200,000 | $ 140,000 | $ 246,000 | $ 357,000 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising and Promotion (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Advertising and promotional expense | $ 12,000 | $ 0 | $ 16,000 | $ 100,000 | $ 146,000 | $ 579,000 |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred Offering Costs (Details) | Dec. 31, 2020USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Deferred offering costs | $ 214,647 |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Net Loss per Share (Details) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021shares | Sep. 30, 2020shares | Dec. 31, 2020shares | Dec. 31, 2019shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 9,706,877 | 65,655,685 | 65,809,254 | 42,960,089 |
Convertible ratio | 15.625 | 15.625 | ||
Preferred stock convertible into shares of common stock | 62,924,710 | |||
Shares of common stock | 4,027,181 | |||
Common stock warrants | 51,642 | |||
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 3,895,103 | 1,129,503 | 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 | 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 | 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 | 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 | 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 | 8,223,036 | |
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 | 3,591,348 | 794,569 | 914,539 | 417,962 |
Preferred stock warrants | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 806,903 | 806,903 | 806,903 |
SUMMARY OF SIGNIFICANT ACCOU_15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations (Details) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021item | Sep. 30, 2020item | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Concentration Risk [Line Items] | ||||
Number of vendors | 5 | 2 | 3 | 2 |
Inventory, percentage | 39.00% | 39.00% | ||
Vendor One [Member] | ||||
Concentration Risk [Line Items] | ||||
Inventory, percentage | 41.00% | 39.00% | ||
Vendor Two [Member] | ||||
Concentration Risk [Line Items] | ||||
Inventory, percentage | 31.00% | 29.00% | ||
Vendor Three [Member] | ||||
Concentration Risk [Line Items] | ||||
Inventory, percentage | 28.00% |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - USD ($) | May 18, 2021 | Oct. 14, 2020 | Feb. 12, 2020 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Business Acquisition [Line Items] | |||||||||||||
Percentage of the shares of the company issued to sellers at the closing will be issued to escrow to cover possible indemnification obligations of sellers. | 20.00% | ||||||||||||
Trading day immediately preceding period | 30 days | ||||||||||||
Gross proceeds from common stock indemnification claims | $ 9,100,000 | ||||||||||||
Net revenues | $ 2,163,280 | $ 1,234,805 | $ 3,575,214 | $ 4,475,507 | $ 5,239,437 | $ 3,034,216 | |||||||
Net loss | $ (8,938,047) | $ (10,697,498) | $ (3,023,935) | $ (3,914,856) | $ (2,267,597) | $ (1,906,527) | $ (22,659,480) | $ (8,088,980) | (10,728,295) | $ (5,653,973) | |||
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 | ||||||||||||
Gross proceeds from common stock indemnification claims | $ 11,000,000 | ||||||||||||
Shares of parent stock issued based on outstanding capital stock (In percentage) | 9.10% | ||||||||||||
Net revenues | 3,975,000 | ||||||||||||
Net loss | $ 4,500,000 | ||||||||||||
Bailey 44, LLC | Series B convertible preferred stock | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | ||||||||||||
Business acquisition aggregate shares issuable | 20,754,717 | ||||||||||||
Business acquisition issuable amount | $ 4,500,000 | ||||||||||||
Harper & Jones LLC | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Business acquisition interest acquired | 100.00% | ||||||||||||
Business acquisition issuable amount | 40,000,000 | ||||||||||||
Number of shares connection with merger | 2,192,771 | ||||||||||||
Gross proceeds from common stock indemnification claims | 9,100,000 | ||||||||||||
Cash | $ 500,000 | $ 500,000 | |||||||||||
Trading period | 30 days | ||||||||||||
Showrooms cost | $ 125,000 | ||||||||||||
Store level cash flow | $ 250,000 | ||||||||||||
Cash return | 100.00% | ||||||||||||
Harper & Jones LLC | Initial Public Offering | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Business acquisition issuable amount | $ 9,100,000 | $ 9,100,000 |
BUSINESS COMBINATIONS - Purchas
BUSINESS COMBINATIONS - Purchase price consideration (Details) - USD ($) | May 18, 2021 | Oct. 14, 2020 | Feb. 12, 2020 |
Harper & Jones LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | $ 11,947,058 | ||
Cash | 500,000 | $ 500,000 | |
Common stock | 8,025,542 | ||
Contingent consideration | 3,421,516 | ||
Purchase price consideration | $ 11,947,058 | ||
Bailey 44, LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | $ 15,500,000 | ||
Purchase price consideration | 15,500,000 | ||
Bailey 44, LLC | Series B convertible preferred stock | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | 11,000,000 | ||
Purchase price consideration | 11,000,000 | ||
Promissory note payable | Bailey 44, LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | 4,500,000 | ||
Purchase price consideration | $ 4,500,000 |
BUSINESS COMBINATIONS - Assets
BUSINESS COMBINATIONS - Assets acquired and Liabilities assumed (Details) - USD ($) | May 18, 2021 | Feb. 12, 2020 | Sep. 30, 2021 | Dec. 31, 2020 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 17,771,031 | $ 6,479,218 | ||
Bailey 44, LLC | ||||
Business Acquisition [Line Items] | ||||
Cash and cash equivalents | $ 106,913 | |||
Accounts receivable | 37,479 | |||
Due from/(to) factor | (312,063) | |||
Inventory | 3,303,660 | |||
Prepaid expenses | 165,856 | |||
Deposits | 187,493 | |||
Property, equipment and software | 1,215,748 | |||
Goodwill | 6,479,218 | |||
Intangible assets (Note 6) | 8,600,000 | |||
Accounts payable | (3,397,547) | |||
Accrued expenses and other liabilities | (886,757) | |||
Purchase price consideration | $ 15,500,000 | |||
Harper & Jones LLC | ||||
Business Acquisition [Line Items] | ||||
Cash and cash equivalents | $ 24,335 | |||
Accounts receivable | 49,472 | |||
Inventory | 77,159 | |||
Prepaid expenses | 69,715 | |||
Deposits | 4,415 | |||
Property, equipment and software | 83,986 | |||
Goodwill | 9,681,548 | |||
Intangible assets (Note 6) | 3,936,030 | |||
Accounts payable | (51,927) | |||
Accrued expenses and other liabilities | (107,957) | |||
Deferred revenue | (269,848) | |||
Due to related parties | (1,361) | |||
Loan payable | (148,900) | |||
Note Payable related party | (299,489) | |||
Deferred Tax Liability | (1,100,120) | |||
Purchase price consideration | $ 11,947,058 |
BUSINESS COMBINATIONS - Unaudit
BUSINESS COMBINATIONS - Unaudited Pro Forma Financial Information (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | May 18, 2021 | |
Business Acquisition [Line Items] | |||||
Contingent consideration liability | $ 10,527,910 | ||||
Contingent consideration liability | 7,056,479 | ||||
Net revenues | 7,956,477 | $ 11,287,932 | $ 7,259,260 | $ 30,133,934 | |
Net loss | $ (22,853,732) | $ (10,080,468) | $ (12,786,695) | $ (11,868,423) | |
Net loss per common share | $ (3.81) | $ (15.18) | $ (19.25) | $ (17.87) | |
Harper & Jones LLC | |||||
Business Acquisition [Line Items] | |||||
Contingent consideration liability | $ 3,471,431 | $ 3,421,516 | |||
Net revenues | 1,050,000 | ||||
Net loss | $ 53,000 |
DUE FROM FACTOR (Details)
DUE FROM FACTOR (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Debt Instrument [Line Items] | ||
Outstanding receivables, Without recourse | $ 1,022,552 | $ 151,158 |
Outstanding receivables, With recourse | 58,884 | 42,945 |
Advances | 119,937 | 56,246 |
Credits due customers | (107,064) | (40,316) |
Due from factor | $ 1,094,309 | $ 210,033 |
Debt instrument variable rate | 50.00% | |
Maximum advances on net sales can be requested, percentage | 50.00% | |
LIBOR | ||
Debt Instrument [Line Items] | ||
Debt instrument variable rate | 2.50% | |
Maximum advances on net sales can be requested, percentage | 2.50% |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
May 31, 2021 | Feb. 28, 2021 | Feb. 29, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Goodwill acquired | $ 9,681,548 | $ 6,479,218 | $ 6,479,218 | |||||
Gross Amount | $ 6,453,750 | $ 6,453,750 | $ 1,100,000 | |||||
Accumulated Amortization | (911,544) | (911,544) | (320,833) | |||||
Carrying Value-Amortized | 5,542,206 | 5,542,206 | 779,167 | |||||
Indefinite-lived | 17,690,670 | 17,690,670 | 7,815,500 | |||||
Intangible Assets, Net (Excluding Goodwill), Total | 16,779,126 | 16,779,126 | 7,494,667 | |||||
Impairment loss on intangible assets | $ 784,500 | $ 784,500 | 784,500 | |||||
Amortization expense | 355,808 | $ 91,667 | 590,711 | $ 229,167 | 320,833 | |||
Customer relationships | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Gross Amount | 6,453,750 | 6,453,750 | 1,100,000 | |||||
Accumulated Amortization | (911,544) | (911,544) | (320,833) | |||||
Carrying Value-Amortized | 5,542,206 | 5,542,206 | 779,167 | |||||
Brand name | ||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||
Indefinite-lived | 11,236,920 | 11,236,920 | 6,715,500 | |||||
Intangible Assets, Net (Excluding Goodwill), Total | $ 11,236,920 | $ 11,236,920 | $ 6,715,500 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS - FUTURE AMORTIZATION EXPENSES (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2021 | $ 366,667 | |
2022 | 366,667 | |
2023 | 45,833 | |
Finite-Lived Intangible Assets, Net | $ 5,542,206 | $ 779,167 |
LIABILITIES AND DEBT - Accrued
LIABILITIES AND DEBT - Accrued Expenses and Other Liabilities (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
LIABILITIES AND DEBT | |||
Accrued expenses | $ 266,646 | $ 92,074 | $ 188,341 |
Reserve for returns | 20,041 | 5,229 | 100,000 |
Payroll related liabilities | 1,253,639 | 843,704 | 412,155 |
Sales tax liability | 242,021 | 196,410 | 156,707 |
Other liabilities | 71,607 | 108,229 | 264,114 |
Accrued Liabilities and Other Liabilities, Total | 1,853,954 | 1,245,646 | $ 1,121,317 |
Estimated Penalties Associated With Accrued Payroll Taxes | $ 262,000 | $ 152,000 |
LIABILITIES AND DEBT - Venture
LIABILITIES AND DEBT - Venture Debt (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Jul. 31, 2021USD ($)shares | May 31, 2021USD ($)shares | Mar. 31, 2017USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Line of Credit Facility [Line Items] | |||||||||
Class of warrant or right, warrants issued | shares | 355,000 | 31,881 | |||||||
Warrants value | $ 1,622,350 | $ 145,696 | |||||||
Interest expense | $ 189,096 | $ 323,807 | $ 591,123 | $ 658,730 | $ 770,277 | $ 624,127 | |||
Interest expense and effective interest rate | 13.40% | 14.00% | 14.60% | 17.70% | |||||
Venture Debt [Member] | Secured Debt | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Maximum borrowing capacity | $ 4,000,000 | ||||||||
Minimum initial close amount | $ 1,345,000 | ||||||||
Percentage of closing fee | 5 | ||||||||
Legal and accounting fees | $ 40,000,000 | ||||||||
Interest Expense, Debt | $ 1,459,211 | $ 508,249 | |||||||
Loan fees | 60,000 | 34,296 | |||||||
Loan bears interest rate | 12.50% | ||||||||
Loan payment | $ 3,000,000 | ||||||||
Gross loan | 6,001,755 | $ 4,542,544 | |||||||
Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering Prior To September 30 2021 | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Loan payment | $ 3,000,000 | ||||||||
Line of credit facility days | 5 days | ||||||||
Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering After September 30 2021 | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Loan payment | $ 300,000 | ||||||||
Venture Debt [Member] | Secured Debt | Minimum | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Management fees | 4,167 | ||||||||
Venture Debt [Member] | Secured Debt | Maximum | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Management fees | 5,000 | ||||||||
Amended Venture Debt [Member] | Secured Debt | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Maximum borrowing capacity | $ 6,000,000 | ||||||||
Loan bears interest rate | 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 | Follow-On Public Offering | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Loan payment | $ 3,000,000 | ||||||||
Line of credit facility days | 5 days | ||||||||
Amended Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering Prior To September 30 2021 | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Loan payment | $ 3,000,000 | ||||||||
Line of credit facility days | 5 days | ||||||||
Amended Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering After September 30 2021 | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Loan payment | $ 300,000 |
LIABILITIES AND DEBT - Converti
LIABILITIES AND DEBT - Convertible Debt (Details) | Apr. 01, 2021shares | Apr. 30, 2021USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2021USD ($)shares | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)item$ / shares |
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 2,626,050 | $ 1,701,044 | |||||
Gross proceeds from converted debt conversion | $ 442,597 | ||||||
Convertible Debt 2020 Regulation CF Offering | |||||||
Debt Instrument [Line Items] | |||||||
Conversion of shares | shares | 319,661 | ||||||
Convertible Debt 2020 Regulation CF Offering | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 473,650 | $ 450,308 | |||||
Interest rate of loans | 6.00% | 6.00% | 6.00% | ||||
Issuance costs | $ 69,627 | $ 33,773 | |||||
Amortization of debt issuance costs | 27,894 | ||||||
Minimum proceeds of Common Stock | $ 1,000,000 | ||||||
Factor multiple | 0.7 | ||||||
Convertible Debt 2020 Regulation D Offering | |||||||
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 755,000 | ||||||
Amortization of debt issuance costs | $ 0 | 100,000 | |||||
Default interest expense | 132,609 | ||||||
Convertible Debt 2020 Regulation D Offering | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 55,000 | $ 800,000 | $ 800,000 | ||||
Interest rate of loans | 14.00% | 14.00% | 14.00% | ||||
Debt instrument term | 9 months | 9 months | |||||
Issuance costs | $ 100,000 | $ 100,000 | |||||
Gross proceeds from converted debt conversion | $ 10,000,000 | $ 10,000,000 | |||||
Converted percentage of IPO price | 50.00% | 50.00% | |||||
Debt conversion price | $ / shares | $ 23.44 | ||||||
Common stock warrants issued | shares | 512 | 512 | |||||
Convertible Debt 2020 Regulation D Offering | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Number of shares resulting from conversion | shares | 453,437 | ||||||
Convertible Debt 2019 Regulation D Offering | 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 | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | |||||||
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 ($) | Jun. 25, 2020 | Feb. 28, 2021 | Apr. 30, 2020 | Sep. 30, 2021 | May 31, 2021 |
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 72,269 | ||||
Harper & Jones LLC | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 299,489 | $ 75,000 | |||
Interest rate of loans | 12.00% | 7.76% | |||
Paycheck Protection Program, Cares Act | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 1,347,050 | $ 203,994 | |||
Interest rate of loans | 1.00% | 1.00% | |||
Interest deferral term | 6 months | ||||
Debt instrument term | 2 years | 2 years | |||
Paycheck Protection Program, Cares Act | Bailey | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 1,347,050 | $ 1,347,050 | $ 204,000 | ||
Economic Injury Disaster Loan | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 150,000 | $ 148,900 | |||
Interest rate of loans | 3.75% | ||||
Debt instrument term | 30 years | 30 years |
LIABILITIES AND DEBT - Promisso
LIABILITIES AND DEBT - Promissory Note Payable (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Apr. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | May 31, 2021 | |
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 72,269 | $ 72,269 | |||||
Gross proceeds received | 2,626,050 | $ 1,701,044 | |||||
Debt discount cost | 263,958 | 263,958 | |||||
Harper & Jones LLC | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 299,489 | $ 299,489 | $ 75,000 | ||||
Interest rate of loans | 12.00% | 12.00% | 7.76% | ||||
Promissory note payable | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 1,000,000 | $ 3,500,000 | $ 3,500,000 | $ 1,000,000 | |||
Gross proceeds received | $ 810,000 | ||||||
Warrants issued | 120,482 | ||||||
Debt discount cost | $ 73,958 | $ 73,958 | |||||
Promissory note payable | Common Stock | |||||||
Debt Instrument [Line Items] | |||||||
Stock issued during period | 20,000 | ||||||
Promissory note payable | Notes Payable to Banks [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Interest rate of loans | 12.00% | 12.00% | 12.00% | ||||
Interest expense | $ 105,000 | $ 135,000 | $ 389,000 | $ 337,500 | $ 472,500 | ||
Promissory note payable | Notes Payable to Banks [Member] | Bailey | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 4,500,000 | $ 4,500,000 | $ 4,500,000 |
STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT) (Details) | Jun. 28, 2021USD ($)$ / sharesshares | May 18, 2021USD ($)$ / sharesshares | May 13, 2021USD ($)shares | Jul. 31, 2021USD ($)shares | May 31, 2021USD ($)shares | Apr. 30, 2021shares | Sep. 30, 2021USD ($)$ / sharesshares | Sep. 30, 2020USD ($)$ / shares | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($)shares | Sep. 30, 2021USD ($)$ / sharesshares | Sep. 30, 2020USD ($)$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2021shares | Feb. 11, 2020shares | Sep. 30, 2018shares | ||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 125,000,000 | 77,000,000 | ||||||||||||||||||
Preferred stock outstanding (in shares) | 20,714,518 | 20,714,518 | 20,714,518 | |||||||||||||||||
Percentage of affirmative votes required to remove directors from the Board | 66.3333% | |||||||||||||||||||
Reverse stock split conversion ratio | 1-for-15.625 | |||||||||||||||||||
Conversion ratio | 15.625 | 15.625 | ||||||||||||||||||
Threshold amount of initial public offering for automatic conversion of preferred stock into common stock | $ | $ 25,000,000 | |||||||||||||||||||
Total liquidation preferences | $ | 27,536,206 | $ 15,738,253 | $ 27,536,206 | |||||||||||||||||
Value of shares issued | $ | $ 126,837 | $ 311,312 | $ 451,603 | 2,508,300 | ||||||||||||||||
Number of shares authorized | 200,000,000 | 110,000,000 | ||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 0 | |||||||||||||||||||
Common stock voting rights | one vote per share | one vote per share | ||||||||||||||||||
Stock-based compensation expense | $ | $ 134,113 | $ 5,779 | $ 4,155,641 | $ 105,643 | $ 144,775 | $ 172,491 | ||||||||||||||
Contingent consideration liability | $ | 10,527,910 | 10,527,910 | ||||||||||||||||||
Proceeds from exercise of warrants | $ | $ 1,768,046 | |||||||||||||||||||
Initial Public Offering | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 2,409,639 | |||||||||||||||||||
Warrants issued | 2,771,084 | |||||||||||||||||||
Aggregate net proceeds | $ | $ 8,600,000 | |||||||||||||||||||
Amount of debt converted into shares | $ | 2,680,289 | |||||||||||||||||||
Underwriting commissions | $ | 800,000 | |||||||||||||||||||
Direct offering expenses | $ | 600,000 | |||||||||||||||||||
Underwriting discounts and commissions | $ | $ 800,000 | |||||||||||||||||||
Initial Public Offering | Certain officers and directors | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Amount of debt converted into shares | $ | $ 257,515 | |||||||||||||||||||
Number of shares resulting from conversion | 152,357 | |||||||||||||||||||
Stock-based compensation expense | $ | $ 233,184 | |||||||||||||||||||
Over-allotment option | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Warrants issued | 361,445 | |||||||||||||||||||
April 2021 Financing | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 20,000 | |||||||||||||||||||
Consulting agreement | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 50,000 | |||||||||||||||||||
Guaranteed equity value of shares issued | $ | $ 250,000 | |||||||||||||||||||
Contingent consideration liability | $ | $ 67,000 | $ 67,000 | ||||||||||||||||||
Preferred Stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 10,000,000 | |||||||||||||||||||
Preferred Stock | Initial Public Offering | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Stock issued upon conversion (in shares) | 4,027,181 | |||||||||||||||||||
Common Stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 200,000,000 | 200,000,000 | 200,000,000 | 200,000,000 | 110,000,000 | 200,000,000 | ||||||||||||||
Common stock par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||||||||||
Common stock issued (in shares) | 664,167 | 664,167 | 664,167 | |||||||||||||||||
Common stock outstanding (in shares) | 664,167 | 664,167 | 664,167 | |||||||||||||||||
Number of warrants exercised | 355,000 | 31,881 | ||||||||||||||||||
Proceeds from exercise of warrants | $ | $ 1,622,350 | $ 145,696 | ||||||||||||||||||
Common Stock | Initial Public Offering | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 4.15 | |||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 2,409,639 | |||||||||||||||||||
Number of shares resulting from conversion | 1,135,153 | |||||||||||||||||||
Common Stock | Over-allotment option | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 4.15 | |||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 361,445 | |||||||||||||||||||
Aggregate net proceeds | $ | $ 1,400,000 | |||||||||||||||||||
Underwriting discounts and commissions | $ | $ 100,000 | |||||||||||||||||||
Series Seed Preferred Stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 0 | 0 | 20,714,518 | 20,714,518 | 20,714,518 | |||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 20,714,518 | 20,714,518 | 20,714,518 | 20,714,518 | ||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 20,714,518 | 20,714,518 | 20,714,518 | |||||||||||||||
Purchase price | $ / shares | $ 0.27 | |||||||||||||||||||
Multiple | 1 | 1 | ||||||||||||||||||
Total liquidation preferences | $ | $ 5,633,855 | $ 5,633,855 | $ 5,633,855 | |||||||||||||||||
Series Seed Preferred Stock | Minimum | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Multiple | 1 | |||||||||||||||||||
Series Seed Preferred Stock | Maximum | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Multiple | 1.25 | |||||||||||||||||||
Series A convertible preferred stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 0 | 0 | 14,481,413 | 14,481,413 | 14,481,413 | |||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 5,654,072 | 5,654,072 | 5,654,072 | |||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 5,654,072 | 5,654,072 | 5,654,072 | |||||||||||||||
Purchase price | $ / shares | $ 0.48 | |||||||||||||||||||
Multiple | 1 | 1 | ||||||||||||||||||
Total liquidation preferences | $ | $ 2,713,955 | $ 2,713,955 | $ 2,713,955 | |||||||||||||||||
Series A-2 convertible preferred stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 0 | 0 | 20,000,000 | 20,000,000 | 20,000,000 | |||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 5,932,742 | 5,932,742 | 5,932,742 | |||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 5,932,742 | 5,932,742 | 5,932,742 | |||||||||||||||
Purchase price | $ / shares | $ 0.50 | |||||||||||||||||||
Multiple | 1 | |||||||||||||||||||
Total liquidation preferences | $ | $ 2,966,371 | $ 2,966,371 | $ 2,966,371 | |||||||||||||||||
Series CF convertible preferred stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 0 | 0 | 2,000,000 | 2,000,000 | 2,000,000 | |||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 836,331 | 126,641 | 836,331 | |||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 836,331 | 126,641 | 836,331 | |||||||||||||||
Purchase price | $ / shares | $ 0.52 | |||||||||||||||||||
Multiple | 1 | |||||||||||||||||||
Total liquidation preferences | $ | $ 434,890 | $ 65,863 | $ 434,890 | |||||||||||||||||
Gross proceeds | $ | $ 309,750 | |||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 0.52 | $ 0.52 | $ 0.44 | $ 0.44 | ||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 709,690 | 709,960 | ||||||||||||||||||
Series A-3 convertible preferred stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 0 | 0 | 18,867,925 | 18,867,925 | 18,867,925 | |||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 9,032,330 | 8,223,036 | 9,032,330 | |||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 9,032,330 | 8,223,036 | 9,032,330 | |||||||||||||||
Purchase price | $ / shares | $ 0.53 | |||||||||||||||||||
Multiple | 1 | |||||||||||||||||||
Total liquidation preferences | $ | $ 4,787,135 | $ 4,358,209 | $ 4,787,135 | |||||||||||||||||
Gross proceeds | $ | $ 428,926 | $ 2,530,977 | ||||||||||||||||||
Issue price (in dollars per share) | $ / shares | 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | |||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | 809,294 | 4,775,428 | |||||||||||||||||
Series A-3 convertible preferred stock | Preferred Stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Value of shares issued | $ | $ 81 | $ 81 | $ 478 | |||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | 809,294 | [1] | 4,775,428 | [1] | |||||||||||||||
Series B convertible preferred stock | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 20,754,717 | 20,754,717 | 20,754,717 | |||||||||||||||||
Preferred stock issued (in shares) | 20,754,717 | 0 | 20,754,717 | |||||||||||||||||
Preferred stock outstanding (in shares) | 0 | |||||||||||||||||||
Purchase price | $ / shares | $ 0.53 | |||||||||||||||||||
Multiple | 1 | |||||||||||||||||||
Series B convertible preferred stock | Bailey | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | ||||||||||||||||
Value of shares issued | $ | $ 11,000,000 | $ 11,000,000 | ||||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 20,754,717 | 20,754,717 | ||||||||||||||||||
Undesignated Preferred Stock [Member] | ||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||
Number of shares authorized | 10,000,000 | 10,000,000 | 936,144 | 936,144 | 936,144 | |||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
RELATED PARTY TRANSACTIONS - Du
RELATED PARTY TRANSACTIONS - Due to Related Parties (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Due to related parties | |||
Conversion of stock, shares converted | 25,080 | ||
Advances | |||
Due to related parties | |||
Advance due to related parties | $ 104,568 | $ 194,568 | $ 194,568 |
Accrued Salary | |||
Due to related parties | |||
Advance due to related parties | $ 126,706 | 246,885 | |
Expense Reimbursements | |||
Due to related parties | |||
Advance due to related parties | $ 246,885 | $ 68,859 |
RELATED PARTY TRANSACTIONS - No
RELATED PARTY TRANSACTIONS - Note Payable (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Face value | $ 72,269 | ||
Total expenses | $ 25,000 | $ 140,000 | |
Chief Executive Officer | |||
Related Party Transaction [Line Items] | |||
Common Stock, Shares, Issued | 127,278 | ||
Additional Stock Compensation Expense | $ 233,184 | ||
Interest rate of loans | 12.00% | 5.00% | |
Notes Payable, Other Payables | Chief Executive Officer | Note Payable, Chief Executive Officer | |||
Related Party Transaction [Line Items] | |||
Increase (Decrease) in Notes Receivables | $ 115,000 | $ 115,000 | $ 115,000 |
Face value | $ 299,489 |
SHARE-BASED PAYMENTS - Common S
SHARE-BASED PAYMENTS - Common Stock Warrants - General Information (Details) - USD ($) | May 13, 2021 | Jul. 31, 2021 | May 31, 2021 | Apr. 30, 2021 | Mar. 31, 2017 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 355,000 | 31,881 | ||||||||
Warrants value | $ 1,622,350 | $ 145,696 | ||||||||
Percentage of increase in number of warrants | 25.00% | |||||||||
Fair value of warrants | $ 6,265 | |||||||||
Change in fair value of warrant liability | $ 21,930 | $ (1,792) | $ (2,353) | |||||||
Convertible Debt 2020 Regulation D Offering | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 512 | |||||||||
Note Warrant [Member] | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 493,462 | 128,667 | ||||||||
Percentage diluted capitalization | 1.358% | 1.00% | ||||||||
Principal loaned under the agreement | $ 1,000,000 | |||||||||
Warrants exercise price | $ 2.50 | $ 2.50 | ||||||||
Warrants, contractual life | 10 years | 10 years | ||||||||
Warrants value | $ 184,191 | $ 49,928 | ||||||||
Common stock warrants | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 374,048 | 493,462 | 128,667 | |||||||
Warrants exercise price | $ 2.50 | $ 2.50 | $ 2.50 | |||||||
Warrants, contractual life | 10 years | 10 years | ||||||||
Warrants value | $ 139,572 | $ 49,928 | ||||||||
Common stock warrants | Initial Public Offering | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 120,482 | 2,409,639 | ||||||||
Warrants exercise price | $ 5.19 | $ 4.57 | ||||||||
Percentage of warrants exercise price | 110.00% | |||||||||
Warrants expiration term | 5 years | 5 years | ||||||||
Common stock warrants | Note Warrant [Member] | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Percentage diluted capitalization | 1.00% | |||||||||
Principal loaned under the agreement | $ 1,000,000 | |||||||||
Common stock warrants | Over-allotment option | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 361,445 | |||||||||
Common Stock Warrants, Venture Debt Lender [Member] | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 120,482 | |||||||||
Warrants exercise price | $ 4.15 | |||||||||
Common Stock Warrants, Funding Platform, Preferred Stock Raise [Member] | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Class of warrant or right, warrants issued | 2,603 | 2,603 | 21,279 | |||||||
Warrants exercise price | $ 8.28 | $ 8.28 | ||||||||
Warrants and Rights Outstanding, Term | 5 years | |||||||||
Common Stock Warrants, Funding Platform, Preferred Stock Raise [Member] | Convertible Debt 2020 Regulation D Offering | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Warrants exercise price | $ 2.50 | |||||||||
2019 warrants | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Warrants value | $ 7,700 | |||||||||
2020 warrants | ||||||||||
Class of Warrant or Right [Line Items] | ||||||||||
Warrants value | $ 918 |
SHARE-BASED PAYMENTS - Common_2
SHARE-BASED PAYMENTS - Common Stock Warrants - Valuation (Details) | Dec. 31, 2020 | Sep. 30, 2020Y | Dec. 31, 2019 |
Risk Free Interes Rate | Minimum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.42 | 1.59 | |
Risk Free Interes Rate | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.51 | 2.55 | |
Expected Volatility | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 100 | ||
Common stock warrants | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants and Rights Outstanding, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueOptionPricingModelMember | ||
Common stock warrants | Risk Free Interes Rate | Minimum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.59 | 1.54 | 1.47 |
Common stock warrants | Risk Free Interes Rate | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 1.59 | 1.59 | 2.49 |
Common stock warrants | Expected Dividend Yield | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0 | 0 | 0 |
Common stock warrants | Expected Volatility | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 58 | ||
Common stock warrants | Expected Volatility | Minimum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 58 | 58 | |
Common stock warrants | Expected Volatility | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 100 | 100 | |
Common stock warrants | Expected Life (years) | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 10 | 10 | 5 |
Preferred stock warrants | Risk Free Interes Rate | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 2.49 | ||
Preferred stock warrants | Expected Dividend Yield | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0 | ||
Preferred stock warrants | Expected Volatility | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 58 | ||
Preferred stock warrants | Expected Life (years) | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 5 |
SHARE-BASED PAYMENTS - Warrants
SHARE-BASED PAYMENTS - Warrants Roll Forward (Details) - $ / shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Class of Warrant or Right [Line Items] | |||
Forfeited | (12,800) | (220,401) | |
Exercisable at December 31, 2020 | 3,084,831 | 880,955 | |
Forfeited | $ 3.28 | ||
Common stock warrants | |||
Class of Warrant or Right [Line Items] | |||
Warrant Outstanding Beginning Balance | 914,539 | 417,962 | 268,656 |
Granted | 3,012,048 | 496,577 | 149,946 |
Converison of stock warrants upon IPO | 51,642 | ||
Exercised | (386,881) | ||
Forfeited | (640) | ||
Warrant Outstanding Ending Balance | 3,591,348 | 914,539 | 417,962 |
Common Stock Warrants Exercisable | 3,470,866 | ||
Weighted Average Exercise Price Outstanding Beginning Balance | $ 2.66 | $ 2.81 | $ 2.50 |
Exercisable at December 31, 2020 | 914,539 | ||
Granted | $ 4.58 | $ 2.53 | 3.28 |
Converison of stock warrants upon IPO | 7.66 | ||
Exercised | $ 4.57 | ||
Weighted Average Exercise Price Outstanding Ending Balance | 4.13 | 2.66 | $ 2.81 |
Weighted Average Exercise Price Exercisable | $ 4.10 | $ 2.66 | |
Preferred stock warrants | |||
Class of Warrant or Right [Line Items] | |||
Warrant Outstanding Beginning Balance | 806,903 | 806,903 | 545,473 |
Granted | 261,430 | ||
Converison of stock warrants upon IPO | (806,903) | ||
Warrant Outstanding Ending Balance | 806,903 | 806,903 | |
Weighted Average Exercise Price Outstanding Beginning Balance | $ 0.49 | $ 0.49 | $ 0.47 |
Exercisable at December 31, 2020 | 806,903 | ||
Granted | 0.53 | ||
Converison of stock warrants upon IPO | 0.49 | ||
Weighted Average Exercise Price Outstanding Ending Balance | $ 0.49 | $ 0.49 | |
Weighted Average Exercise Price Exercisable | $ 0.49 |
SHARE-BASED PAYMENTS - Preferre
SHARE-BASED PAYMENTS - Preferred Stock Warrants (Details) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jul. 31, 2021shares | May 31, 2021shares | Sep. 30, 2021$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019$ / sharesshares | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Class of Warrant or Right, Warrants Issued | 355,000 | 31,881 | |||
Forfeited | (12,800) | (220,401) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 3,084,831 | 880,955 | |||
Forfeited | $ / shares | $ 3.28 | ||||
2019 Series A-3 Preferred Stock raise | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Class of Warrant or Right, Warrants Issued | 261,430 | ||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares | $ 0.53 | ||||
Warrants and Rights Outstanding, Term | 5 years | ||||
Fair value of the warrants | $ | $ 71,400 | ||||
Preferred stock warrants | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Warrant Outstanding Beginning Balance | 806,903 | 806,903 | 545,473 | ||
Granted | 261,430 | ||||
Warrant Outstanding Ending Balance | 806,903 | 806,903 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 806,903 | ||||
Weighted Average Exercise Price Outstanding Beginning Balance | $ / shares | $ 0.49 | $ 0.49 | $ 0.47 | ||
Granted | $ / shares | 0.53 | ||||
Weighted Average Exercise Price Outstanding Ending Balance | $ / shares | 0.49 | $ 0.49 | |||
Weighted Average Exercise Price Exercisable | $ / shares | $ 0.49 | ||||
Risk Free Interes Rate | Preferred stock warrants | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Warrants measurement input | 2.49 | ||||
Expected Dividend Yield | Preferred stock warrants | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Warrants measurement input | 0 | ||||
Expected Volatility | Preferred stock warrants | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Warrants measurement input | 58 | ||||
Expected Life (years) | Preferred stock warrants | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Warrants measurement input | 5 |
SHARE-BASED PAYMENTS - Stock Op
SHARE-BASED PAYMENTS - Stock Options - Activity (Details) - $ / shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
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 | 1,084,215 | 1,136,091 |
Granted | 2,712,000 | 91,688 | 168,525 |
Forfeited | (12,800) | (220,401) | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance | 3,875,103 | 1,163,103 | 1,084,215 |
Exercisable at December 31, 2020 | 3,084,831 | 880,955 | |
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 | $ 2.50 | $ 2.34 |
Granted | 4.15 | 0.94 | 3.28 |
Forfeited | 3.28 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance | 3.62 | 2.34 | $ 2.50 |
Exercisable at December 31, 2020 | $ 3.61 | 2.34 | |
Weighted average grant date fair value of options granted during period | $ 0.500 | ||
Weighted average duration (years) to expiration of outstanding options at December 31, 2020 | 8 years 3 months 7 days | 6 years 7 days | |
Assumptions utilized for option grants | |||
Expected Dividend Yield | 0.00% | 0.00% | |
Expected Volatility | 58.00% | 58.00% | |
Expected Life (years) | 6 years 3 months | 6 years 3 months | |
Weighted Average fair value of stock options granted | $ 0.50 | $ 0.26 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |||
Number of shares authorized by the Plan | 1,196,356 | 1,196,356 | |
Term (in years) | 10 years | ||
Shares available for grant under the Plan | 33,253 | 112,140 | |
Vesting period (in years) | 4 years | ||
Exercisable at December 31, 2020 | 3,084,831 | 880,955 | |
Exercisable at December 31, 2020 | $ 3.61 | $ 2.34 | |
Weighted average duration (years) to expiration of outstanding options at June 30, 2021 | 8 years 3 months 7 days | 6 years 7 days |
SHARE-BASED PAYMENTS - Stock-ba
SHARE-BASED PAYMENTS - Stock-based Compensation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Total grant-date fair value of the options granted | $ 46,253 | $ 39,441 | ||||
Stock-based compensation expense | $ 134,113 | $ 5,779 | $ 4,155,641 | $ 105,643 | 144,775 | $ 172,491 |
Unrecognized compensation cost related to non-vested stock option | 1,164,223 | $ 1,164,223 | $ 238,275 | |||
Share-based arrangement, non-vested weighted average period | 2 years 5 months 23 days | 1 year 9 months 18 days | ||||
Sales and Marketing Expense | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock-based compensation expense | $ 537,550 | $ 537,550 |
SHARE-BASED PAYMENTS - 2020 Inc
SHARE-BASED PAYMENTS - 2020 Incentive Stock Plan (Details) - $ / shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | May 13, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Aggregate shares of stock options granted | 2,712,000 | 91,688 | 168,525 | |
Initial Public Offering | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Exercise price | $ 4.15 | |||
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 | 3,300,000 | ||
Aggregate shares of stock options granted | 0 | |||
Omnibus Incentive Stock Plan, 2020 [Member] | Initial Public Offering | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Common stock, capital shares reserved for future issuance | 588,000 | |||
Exercise price | $ 4.15 | |||
Aggregate shares of stock options granted | 2,712,000 |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets and liabilities by source (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 9,134,447 | $ 6,060,102 |
Stock-based compensation | 40,467 | 36,829 |
Deferred tax liabilities: | ||
Depreciation timing differences | (5,103) | (5,103) |
Other | (41,198) | (44,711) |
Valuation allowance | (9,128,614) | (6,047,117) |
Net deferred tax assets before valuation allowance | $ 9,128,614 | $ 6,047,117 |
INCOME TAXES - Additional infor
INCOME TAXES - Additional information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
INCOME TAXES | |||||
Net deferred tax assets before valuation allowance | $ 9,128,614 | $ 6,047,117 | |||
Increase In valuation allowance | 3,081,497 | 1,689,947 | |||
Provision for income taxes | $ 276 | $ (1,100,120) | $ 13,657 | $ 13,641 | $ 800 |
Combined effective tax rate (in percent) | 28.00% | ||||
Effective rate (in percent) | 0.00% | 0.00% | |||
Net operating loss carryforwards available to offset future taxable income | $ 32,680,000 | $ 21,650,000 |
LEASE OBLIGATIONS (Details)
LEASE OBLIGATIONS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Apr. 30, 2021 | Jan. 31, 2018 | Sep. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Operating lease agreements | |||||||||
Rent expense | $ 17,257 | $ 246,103 | $ 106,702 | $ 551,944 | $ 570,051 | ||||
Security deposit | $ 19,500 | ||||||||
Leased retail locations | |||||||||
Operating lease agreements | |||||||||
Rent expense | $ 246,103 | $ 541,146 | $ 210,352 | ||||||
Bailey leases facilities | |||||||||
Minimum lease payments | |||||||||
Minimum lease payments under the operating leases in 2021 | 442,253 | ||||||||
Minimum lease payments under the operating leases in 2022 | 455,521 | ||||||||
Minimum lease payments under the operating leases in 2023 | 456,202 | ||||||||
Lessee, Operating Lease, Liability, to be Paid, Year Three, Payment Two | $ 76,290 | ||||||||
Leased property | |||||||||
Operating lease agreements | |||||||||
Rent expense | $ 14,500 | ||||||||
Lease term | 36 months | ||||||||
Operating lease return of security deposit and brokerage commission payable | 73,500 | ||||||||
Security deposit | $ 43,500 |
CONTINGENCIES (Details)
CONTINGENCIES (Details) | Dec. 21, 2020USD ($) | Sep. 24, 2020USD ($) | Mar. 25, 2020USD ($)item | Feb. 28, 2020USD ($) | Mar. 31, 2021USD ($)item | Aug. 31, 2020USD ($)item | Feb. 29, 2020USD ($) | Jan. 31, 2018USD ($) | Apr. 30, 2021USD ($) |
Operating lease agreements | |||||||||
Security deposit | $ 19,500 | ||||||||
Litigation Matters | |||||||||
Settlement amount payable to vendor | $ 37,000 | ||||||||
Number of monthly payments to be made | item | 10 | ||||||||
Leased property | |||||||||
Operating lease agreements | |||||||||
OperatingLeaseReturnOfSecurityDepositAndBrokerageCommissionPayable | $ 73,500 | ||||||||
Security deposit | $ 43,500 | ||||||||
Lawsuits filed related to prior services rendered | |||||||||
Litigation Matters | |||||||||
Damages sought | $ 96,900 | $ 96,900 | |||||||
Number of lawsuits filed | 2 | 2 | |||||||
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 | ||||||||
Lease Termination | Leased property | |||||||||
Operating lease agreements | |||||||||
OperatingLeaseReturnOfSecurityDepositAndBrokerageCommissionPayable | $ 73,500 | ||||||||
Security deposit | 43,500 | ||||||||
Lease liability | $ 0 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | May 12, 2021 | Apr. 30, 2021USD ($) | Feb. 28, 2021USD ($) | Apr. 30, 2020USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($) |
Subsequent Event [Line Items] | |||||||
Gross proceeds received | $ 2,626,050 | $ 1,701,044 | |||||
Face value | 72,269 | ||||||
Gross proceeds from converted debt conversion | $ 442,597 | ||||||
Reverse stock split ratio | 0.064 | ||||||
Convertible Debt 2020 Regulation D Offering | |||||||
Subsequent Event [Line Items] | |||||||
Gross proceeds received | $ 755,000 | ||||||
Convertible Debt 2020 Regulation D Offering | Convertible Debt [Member] | |||||||
Subsequent Event [Line Items] | |||||||
Gross proceeds received | $ 55,000 | $ 800,000 | $ 800,000 | ||||
Debt instrument term | 9 months | 9 months | |||||
Interest rate of loans | 14.00% | 14.00% | |||||
Gross proceeds from converted debt conversion | $ 10,000,000 | $ 10,000,000 | |||||
Paycheck Protection Program, Cares Act | |||||||
Subsequent Event [Line Items] | |||||||
Face value | $ 1,347,050 | $ 203,994 | |||||
Debt instrument term | 2 years | 2 years | |||||
Interest rate of loans | 1.00% | 1.00% | |||||
Subsequent Events | |||||||
Subsequent Event [Line Items] | |||||||
Reverse stock split ratio | 15.625 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | ||
Current assets: | |||||
Cash and cash equivalents | $ 254,527 | $ 575,986 | $ 40,469 | ||
Accounts receivable, net | 272,264 | 35,532 | |||
Due from factor, net | 1,094,309 | 210,033 | |||
Inventory | 2,327,542 | 1,163,279 | 1,061,969 | ||
Prepaid expenses and other current assets | 1,525,818 | 23,826 | 63,516 | ||
Total current assets | 5,474,460 | 2,008,656 | 1,165,954 | ||
Deferred offering costs | 367,696 | 214,647 | |||
Property, equipment and software, net | 97,862 | 62,313 | 72,593 | ||
Goodwill | 17,771,031 | 6,479,218 | |||
Intangible assets, net | 16,779,126 | 7,494,667 | |||
Deposits | 174,109 | 92,668 | 43,510 | ||
Total assets | 40,664,284 | 16,352,169 | 1,282,057 | ||
Current liabilities: | |||||
Accounts payable | 6,855,352 | 5,668,703 | 1,597,770 | ||
Accrued expenses and other liabilities | 1,853,954 | 1,245,646 | 1,121,317 | ||
Deferred revenue | 193,023 | 1,667 | 15,231 | ||
Due to related parties | 232,635 | 441,453 | 263,427 | ||
Contingent consideration liability | 10,527,910 | ||||
Convertible notes, current | 100,000 | 700,000 | |||
Accrued interest payable | 855,729 | 737,039 | 129,982 | ||
Note payable - related party | 299,489 | 137,856 | 115,000 | ||
Venture debt, current | 300,000 | 5,854,326 | 4,382,549 | ||
Loan payable, current | 1,796,000 | 992,000 | |||
Promissory note payable, current | 655,000 | 4,500,000 | |||
Total current liabilities | 23,669,092 | 20,278,690 | 7,625,276 | ||
Convertible note payable, net | 2,793,385 | 1,215,815 | 799,280 | ||
Loan payable | 1,677,213 | 709,044 | |||
Promissory note payable | 2,845,000 | ||||
Venture debt, net of discount | 5,701,755 | ||||
Derivative liability | 2,486,843 | ||||
Warrant liability | 28,195 | 6,265 | 7,700 | ||
Total liabilities | 39,201,483 | 22,209,814 | 8,432,256 | ||
Commitments and contingencies (Note 12) | |||||
Stockholders' equity (deficit): | |||||
Common stock, $0.0001 par, 200,000,000 and 110,000,000 shares authorized, 12,627,488 and 664,167 shares issued and outstanding as of both September 30, 2021 and December 31, 2020, respectively | 1,263 | 66 | [1] | 66 | [1] |
Additional paid-in capital | 57,467,015 | 27,481,995 | 15,486,050 | ||
Accumulated deficit | (56,005,477) | (33,345,997) | (22,617,702) | ||
Total stockholders' equity (deficit) | 1,462,801 | (5,857,645) | (7,150,199) | ||
Total liabilities and stockholders' equity (deficit) | $ 40,664,284 | 16,352,169 | 1,282,057 | ||
Series Seed Preferred Stock | |||||
Stockholders' equity (deficit): | |||||
Convertible preferred stock | 2,071 | 2,071 | |||
Series A convertible preferred stock | |||||
Stockholders' equity (deficit): | |||||
Convertible preferred stock | 565 | 565 | |||
Series A-2 convertible preferred stock | |||||
Stockholders' equity (deficit): | |||||
Convertible preferred stock | 593 | 593 | |||
Series A-3 convertible preferred stock | |||||
Stockholders' equity (deficit): | |||||
Convertible preferred stock | 904 | 823 | |||
Series CF convertible preferred stock | |||||
Stockholders' equity (deficit): | |||||
Convertible preferred stock | 83 | $ 12 | |||
Series B Convertible Preferred Stock | |||||
Stockholders' equity (deficit): | |||||
Convertible preferred stock | $ 2,075 | ||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2021 | Feb. 11, 2020 | Sep. 30, 2018 | |
Preferred Stock, Shares Authorized | 125,000,000 | 77,000,000 | ||||
Preferred Stock, Shares Outstanding | 20,714,518 | 20,714,518 | ||||
Conversion of Stock, Shares Converted | 25,080 | |||||
Preferred Stock, Liquidation Preference, Value | $ 27,536,206 | $ 15,738,253 | ||||
Common Stock, Shares Authorized | 200,000,000 | 110,000,000 | ||||
Series Seed Preferred Stock | ||||||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 0 | 20,714,518 | 20,714,518 | |||
Preferred Stock, Shares Issued | 0 | 20,714,518 | 20,714,518 | 20,714,518 | ||
Preferred Stock, Shares Outstanding | 0 | 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 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 0 | 14,481,413 | 14,481,413 | |||
Preferred Stock, Shares Issued | 0 | 5,654,072 | 5,654,072 | |||
Preferred Stock, Shares Outstanding | 0 | 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 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 0 | 20,000,000 | 20,000,000 | |||
Preferred Stock, Shares Issued | 0 | 5,932,742 | 5,932,742 | |||
Preferred Stock, Shares Outstanding | 0 | 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 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 0 | 18,867,925 | 18,867,925 | |||
Preferred Stock, Shares Issued | 0 | 9,032,330 | 8,223,036 | |||
Preferred Stock, Shares Outstanding | 0 | 9,032,330 | 8,223,036 | |||
Conversion of Stock, Shares Converted | 1 | 1 | ||||
Preferred Stock, Liquidation Preference, Value | $ 4,787,135 | $ 4,358,209 | ||||
Series CF convertible preferred stock | ||||||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 0 | 2,000,000 | 2,000,000 | |||
Preferred Stock, Shares Issued | 0 | 836,331 | 126,641 | |||
Preferred Stock, Shares Outstanding | 0 | 836,331 | 126,641 | |||
Conversion of Stock, Shares Converted | 1 | 1 | ||||
Preferred Stock, Liquidation Preference, Value | $ 434,890 | $ 65,863 | ||||
Series B Convertible Preferred Stock | ||||||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 0 | 20,714,517 | 20,714,517 | |||
Preferred Stock, Shares Issued | 0 | 20,714,517 | 0 | |||
Preferred Stock, Shares Outstanding | 0 | 20,714,517 | 0 | |||
Conversion of Stock, Shares Converted | 1 | 1 | ||||
Preferred Stock, Liquidation Preference, Value | $ 11,000,000 | $ 0 | ||||
Undesignated Preferred Stock [Member] | ||||||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Preferred Stock, Shares Authorized | 10,000,000 | 936,144 | 936,144 | |||
Preferred Stock, Shares Issued | 0 | 0 | 0 | |||
Preferred Stock, Shares Outstanding | 0 | 0 | 0 | |||
Common Stock | ||||||
Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Common Stock, Shares Authorized | 200,000,000 | 200,000,000 | 200,000,000 | |||
Common Stock, Shares, Issued | 664,167 | 664,167 | 664,167 | |||
Common Stock, Shares, Outstanding | 664,167 | 664,167 | 664,167 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
Net revenues | $ 2,163,280 | $ 1,234,805 | $ 3,575,214 | $ 4,475,507 | $ 5,239,437 | $ 3,034,216 | ||||||
Cost of net revenues | 954,137 | 1,729,709 | 2,179,023 | 3,884,864 | 4,685,755 | 1,626,505 | ||||||
Gross profit (loss) | 1,209,143 | (494,904) | 1,396,191 | 590,643 | 553,682 | 1,407,711 | ||||||
Operating expenses: | ||||||||||||
General and administrative | 3,720,863 | 1,356,653 | 12,820,841 | 5,258,084 | 7,149,210 | 4,584,010 | ||||||
Sales and marketing | 1,307,219 | 101,081 | 2,401,322 | 543,327 | 576,469 | 869,285 | ||||||
Distribution | 105,332 | 65,681 | 238,774 | 279,362 | 342,466 | 801,885 | ||||||
Loss on disposal of property and equipment | 593,449 | 593,449 | 848,927 | |||||||||
Impairment of intangible assets | 784,500 | 784,500 | 784,500 | |||||||||
Change in fair value of contingent consideration | 3,988,493 | 7,039,394 | ||||||||||
Total operating expenses | 9,121,907 | 2,901,364 | 22,500,331 | 7,458,722 | 9,701,572 | 6,255,180 | ||||||
Loss from operations | (7,912,764) | (3,396,268) | (21,104,140) | (6,868,079) | (9,147,890) | (4,847,469) | ||||||
Other income (expense): | ||||||||||||
Interest expense | (447,842) | (550,505) | (2,020,806) | (1,239,437) | (1,599,518) | (772,592) | ||||||
Other non-operating income (expenses) | (577,441) | 32,193 | (634,654) | 32,193 | 32,754 | (33,112) | ||||||
Total other income (expense), net | (1,025,283) | (518,312) | (2,655,460) | (1,207,244) | (1,566,764) | (805,704) | ||||||
Income tax benefit (provision) | 276 | (1,100,120) | 13,657 | 13,641 | 800 | |||||||
Net loss | $ (8,938,047) | $ (10,697,498) | $ (3,023,935) | $ (3,914,856) | $ (2,267,597) | $ (1,906,527) | $ (22,659,480) | $ (8,088,980) | $ (10,728,295) | $ (5,653,973) | ||
Weighted average common shares outstanding - basic and diluted | 11,786,592 | 664,167 | 6,002,669 | 664,167 | 664,167 | [1] | 664,167 | [1] | ||||
Net loss per common share - basic and diluted | $ (0.76) | $ (5.89) | $ (3.77) | $ (12.18) | $ (16.15) | $ (8.51) | ||||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
CONSOLIDATED STATEMENTS OF ST_3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Preferred StockSeries Seed Preferred Stock | Preferred StockSeries A convertible preferred stock | Preferred StockSeries A-2 convertible preferred stock | Preferred StockSeries A-3 convertible preferred stock | Preferred StockSeries CF convertible preferred stock | Preferred StockSeries B convertible preferred stock | Common Stock | Additional Paid-in Capital | Subscription Receivable | Accumulated Deficit | Series A-3 convertible preferred stock | Series CF convertible preferred stock | Total | ||||||
Beginning balance (in shares) at Dec. 31, 2018 | 20,714,518 | [1] | 5,650,903 | [1] | 5,932,742 | [1] | 3,447,608 | [1] | 124,204 | [1] | 664,167 | ||||||||
Beginning balance at Dec. 31, 2018 | $ 2,071 | $ 565 | $ 593 | $ 345 | $ 12 | $ 66 | $ 13,242,183 | $ (8,283) | $ (16,963,729) | $ (3,726,177) | |||||||||
Issuance of Series CF preferred stock (in shares) | [1] | 2,437 | |||||||||||||||||
Issuance of Series CF preferred stock | 8,283 | 8,283 | |||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 4,775,428 | [1] | 4,775,428 | ||||||||||||||||
Issuance of Series A-3 preferred stock | $ 478 | 2,530,499 | (22,677) | 2,508,300 | |||||||||||||||
Offering costs | (509,051) | (509,051) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 49,928 | 49,928 | |||||||||||||||||
Stock-based compensation | 172,491 | 172,491 | |||||||||||||||||
Net loss | (5,653,973) | (5,653,973) | |||||||||||||||||
Ending balance at Dec. 31, 2019 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | $ 66 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Ending balance (in shares) at Dec. 31, 2019 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | 664,167 | ||||||||
Beginning balance (in shares) at Dec. 31, 2018 | 20,714,518 | [1] | 5,650,903 | [1] | 5,932,742 | [1] | 3,447,608 | [1] | 124,204 | [1] | 664,167 | ||||||||
Beginning balance at Dec. 31, 2018 | $ 2,071 | $ 565 | $ 593 | $ 345 | $ 12 | $ 66 | 13,242,183 | (8,283) | (16,963,729) | $ (3,726,177) | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 0 | ||||||||||||||||||
Ending balance at Dec. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,481,995 | (33,345,997) | $ (5,857,645) | |||||||||
Ending balance (in shares) at Dec. 31, 2020 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | 664,167 | |||||||
Beginning balance (in shares) at Dec. 31, 2019 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | 664,167 | ||||||||
Beginning balance at Dec. 31, 2019 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | $ 66 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | ||||||||||||||||||
Issuance of Series A-3 preferred stock | $ 81 | 428,845 | (117,614) | 311,312 | |||||||||||||||
Issuance of Series B preferred stock (in shares) | 20,754,717 | ||||||||||||||||||
Issuance of Series B preferred stock | $ 2,075 | 10,997,925 | 11,000,000 | ||||||||||||||||
Offering costs | (31,690) | (31,690) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 58,421 | 58,421 | |||||||||||||||||
Stock-based compensation | 49,932 | 49,932 | |||||||||||||||||
Net loss | (1,906,527) | (1,906,527) | |||||||||||||||||
Ending balance at Mar. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 12 | $ 2,075 | $ 66 | 26,989,483 | (140,291) | (24,524,229) | 2,331,249 | ||||||||
Ending balance (in shares) at Mar. 31, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 126,641 | 20,754,717 | 664,167 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2019 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | 664,167 | ||||||||
Beginning balance at Dec. 31, 2019 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | $ 66 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | 709,690 | |||||||||||||||||
Net loss | (8,088,980) | ||||||||||||||||||
Ending balance at Sep. 30, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,384,036 | (13,454) | (30,706,682) | (3,329,743) | ||||||||
Ending balance (in shares) at Sep. 30, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2019 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 8,223,036 | [1] | 126,641 | [1] | 664,167 | ||||||||
Beginning balance at Dec. 31, 2019 | $ 2,071 | $ 565 | $ 593 | $ 823 | $ 12 | $ 66 | 15,486,050 | (22,677) | (22,617,702) | (7,150,199) | |||||||||
Issuance of Series CF preferred stock (in shares) | [1] | 709,690 | |||||||||||||||||
Issuance of Series CF preferred stock | $ 71 | 309,679 | 309,750 | ||||||||||||||||
Issuance of Series A-3 preferred stock (in shares) | 809,294 | [1] | 809,294 | 709,960 | |||||||||||||||
Issuance of Series A-3 preferred stock | $ 81 | 428,845 | 22,677 | 451,603 | |||||||||||||||
Issuance of Series B preferred stock (in shares) | 20,754,717 | ||||||||||||||||||
Issuance of Series B preferred stock | $ 2,075 | 10,997,925 | 11,000,000 | ||||||||||||||||
Offering costs | (69,470) | (69,470) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 184,191 | 184,191 | |||||||||||||||||
Stock-based compensation | 144,775 | 144,775 | |||||||||||||||||
Net loss | (10,728,295) | (10,728,295) | |||||||||||||||||
Ending balance at Dec. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,481,995 | (33,345,997) | (5,857,645) | |||||||||
Ending balance (in shares) at Dec. 31, 2020 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | 664,167 | |||||||
Beginning balance (in shares) at Mar. 31, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 126,641 | 20,754,717 | 664,167 | ||||||||||||
Beginning balance at Mar. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 12 | $ 2,075 | $ 66 | 26,989,483 | (140,291) | (24,524,229) | 2,331,249 | ||||||||
Issuance of Series CF preferred stock (in shares) | 709,690 | ||||||||||||||||||
Issuance of Series CF preferred stock | $ 71 | 286,447 | 286,518 | ||||||||||||||||
Issuance of Series A-3 preferred stock | 126,837 | 126,837 | |||||||||||||||||
Stock-based compensation | 49,932 | 49,932 | |||||||||||||||||
Net loss | (2,267,597) | (2,267,597) | |||||||||||||||||
Ending balance at Jun. 30, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,325,862 | (13,454) | (26,791,826) | 526,939 | ||||||||
Ending balance (in shares) at Jun. 30, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | ||||||||||||
Offering costs | (28,756) | (28,756) | |||||||||||||||||
Fair value of warrant issuances - venture debt | 81,151 | 81,151 | |||||||||||||||||
Stock-based compensation | 5,779 | 5,779 | |||||||||||||||||
Net loss | (3,914,856) | (3,914,856) | |||||||||||||||||
Ending balance at Sep. 30, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,384,036 | $ (13,454) | (30,706,682) | (3,329,743) | ||||||||
Ending balance (in shares) at Sep. 30, 2020 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | 664,167 | |||||||
Beginning balance at Dec. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,481,995 | (33,345,997) | (5,857,645) | |||||||||
Stock-based compensation | 36,976 | 36,976 | |||||||||||||||||
Net loss | (3,023,935) | (3,023,935) | |||||||||||||||||
Ending balance at Mar. 31, 2021 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,518,971 | (36,369,932) | (8,844,604) | |||||||||
Ending balance (in shares) at Mar. 31, 2021 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | ||||||||||||
Beginning balance (in shares) at Dec. 31, 2020 | 20,714,518 | [1] | 5,654,072 | [1] | 5,932,742 | [1] | 9,032,330 | [1] | 836,331 | [1] | 20,754,717 | 664,167 | |||||||
Beginning balance at Dec. 31, 2020 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,481,995 | (33,345,997) | (5,857,645) | |||||||||
Conversion of preferred stock into common stock | 6,291 | ||||||||||||||||||
Conversion of debt into common stock | 2,680,289 | ||||||||||||||||||
Conversion of related party notes and payables into common stock | 257,515 | ||||||||||||||||||
Issuance of common stock pursuant to equity line of credit | 367,696 | ||||||||||||||||||
Net loss | (22,659,480) | ||||||||||||||||||
Ending balance at Sep. 30, 2021 | $ 1,263 | 57,467,015 | (56,005,477) | 1,462,801 | |||||||||||||||
Ending balance (in shares) at Sep. 30, 2021 | 12,627,488 | ||||||||||||||||||
Beginning balance (in shares) at Mar. 31, 2021 | 20,714,518 | 5,654,072 | 5,932,742 | 9,032,330 | 836,331 | 20,754,717 | 664,167 | ||||||||||||
Beginning balance at Mar. 31, 2021 | $ 2,071 | $ 565 | $ 593 | $ 904 | $ 83 | $ 2,075 | $ 66 | 27,518,971 | (36,369,932) | (8,844,604) | |||||||||
Conversion of preferred stock into common stock | $ (2,071) | $ (565) | $ (593) | $ (904) | $ (83) | $ (2,075) | $ 403 | 5,888 | |||||||||||
Conversion of preferred stock into common stock (shares) | (20,714,518) | (5,654,072) | (5,932,742) | (9,032,330) | (836,331) | (20,754,717) | 4,027,181 | ||||||||||||
Issuance of common stock in public offering | $ 241 | 9,999,761 | 10,000,002 | ||||||||||||||||
Issuance of common stock in public offering (in shares) | 2,409,639 | ||||||||||||||||||
Offering costs | (2,116,957) | (2,116,957) | |||||||||||||||||
Exercise of over-allotment option | $ 36 | 1,364,961 | 1,364,997 | ||||||||||||||||
Exercise of over-allotment option (in shares) | 361,445 | ||||||||||||||||||
Conversion of debt into common stock | $ 114 | 2,680,175 | 2,680,289 | ||||||||||||||||
Conversion of debt into common stock (in shares) | 1,135,153 | ||||||||||||||||||
Conversion of related party notes and payables into common stock | $ 15 | 257,500 | 257,515 | ||||||||||||||||
Conversion of related party notes and payables into common stock (in shares) | 152,357 | ||||||||||||||||||
Common stock and warrants issued in connection with note | $ 2 | 73,956 | 73,958 | ||||||||||||||||
Common stock and warrants issued in connection with note (in shares) | 20,000 | ||||||||||||||||||
Common stock issued in connection with business combination | $ 219 | 8,025,323 | 8,025,542 | ||||||||||||||||
Common stock issued in connection with business combination (in shares) | 2,192,771 | ||||||||||||||||||
Exercise of warrants | $ 3 | 145,693 | 145,696 | ||||||||||||||||
Exercise of warrants (in shares) | 31,881 | ||||||||||||||||||
Common stock issued pursuant to consulting agreement | $ 5 | 182,995 | 183,000 | ||||||||||||||||
Common stock issued pursuant to consulting agreement (in shares) | 50,000 | ||||||||||||||||||
Stock-based compensation | 3,801,553 | 3,801,553 | |||||||||||||||||
Net loss | (10,697,498) | (10,697,498) | |||||||||||||||||
Ending balance at Jun. 30, 2021 | $ 1,104 | 51,939,819 | (47,067,430) | 4,873,493 | |||||||||||||||
Ending balance (in shares) at Jun. 30, 2021 | 11,044,594 | ||||||||||||||||||
Common stock issued in connection with business combination | $ 110 | 3,403,086 | 3,403,196 | ||||||||||||||||
Common stock issued in connection with business combination (in shares) | 1,101,538 | ||||||||||||||||||
Exercise of warrants | $ 36 | 1,622,314 | 1,622,350 | ||||||||||||||||
Exercise of warrants (in shares) | 355,000 | ||||||||||||||||||
Stock-based compensation | 134,113 | 134,113 | |||||||||||||||||
Issuance of common stock pursuant to equity line of credit | $ 13 | 367,683 | 367,696 | ||||||||||||||||
Issuance of common stock pursuant to equity line of credit (in shares) | 126,356 | ||||||||||||||||||
Net loss | (8,938,047) | (8,938,047) | |||||||||||||||||
Ending balance at Sep. 30, 2021 | $ 1,263 | $ 57,467,015 | $ (56,005,477) | $ 1,462,801 | |||||||||||||||
Ending balance (in shares) at Sep. 30, 2021 | 12,627,488 | ||||||||||||||||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (22,659,480) | $ (8,088,980) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 652,732 | 716,568 |
Amortization of loan discount and fees | 682,956 | 144,974 |
Stock-based compensation | 4,155,641 | 105,643 |
Fees incurred in connection with debt financings | 132,609 | |
Change in fair value of warrant liability | 21,930 | (1,792) |
Change in fair value of contingent consideration | 7,039,394 | |
Change in fair value of derivative liability | 627,956 | |
Deferred income tax benefit | (1,100,120) | |
Impairment of intangible assets | 784,500 | |
Loss on disposal of property and equipment | 593,449 | |
Change in credit reserve | 66,748 | (182,758) |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (32,582) | (74,256) |
Due from factor, net | (540,257) | 1,334,263 |
Inventory | (483,477) | 2,578,261 |
Prepaid expenses | (1,259,835) | (113,566) |
Accounts payable | 749,352 | 1,161,279 |
Accrued expenses and other liabilities | 451,298 | (721,062) |
Deferred revenue | (78,492) | (13,564) |
Accrued compensation - related party | (108,550) | (29,302) |
Accrued interest | 206,163 | 656,734 |
Net cash used in operating activities | (11,476,014) | (1,149,609) |
Cash flows from investing activities: | ||
Cash acquired (consideration) pursuant to business combination | (5,442,966) | 106,913 |
Issuance of related party receivable | (10,000) | |
Purchase of property, equipment and software | (13,585) | (266,390) |
Deposits | (67,431) | 98,835 |
Net cash provided by (used in) investing activities | (5,523,982) | (70,642) |
Cash flows from financing activities: | ||
Proceeds from related party advances | 22,856 | |
Repayments to factor | (39,520) | (1,684,703) |
Proceeds from venture debt | 862,500 | |
Issuance of loans payable | 2,626,050 | 1,701,044 |
Repayments of promissory notes and loans payable | (2,002,731) | |
Issuance of convertible notes payable | 5,078,650 | |
Proceeds from initial public offering | 10,000,002 | |
Exercise of warrants | 1,768,046 | |
Proceeds from sale of Series A-3 preferred stock | 355,945 | |
Exercise of over-allotment option with public offering, net | 1,364,997 | 22,677 |
Proceeds from sale of Series CF preferred stock | 286,518 | |
Offering costs | (2,116,957) | (104,996) |
Net cash provided by financing activities | 16,678,537 | 1,461,841 |
Net increase in cash and cash equivalents | (321,459) | 241,590 |
Cash and cash equivalents at beginning of period | 575,986 | 40,469 |
Cash and cash equivalents at end of period | 254,527 | 282,059 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 460,179 | |
Supplemental disclosure of non-cash investing and financing activities: | ||
Conversion of preferred stock into common stock | 6,291 | |
Conversion of related party notes and payables into common stock | 257,515 | |
Conversion of debt into common stock | 2,680,289 | |
Derivative liability in connection with convertible note | 1,858,887 | |
Common shares issued pursuant to equity line of credit | $ 367,696 | |
Venture debt issued in exchange of forgiveness of accrued interest | 209,211 | |
Warrants issued for offering costs | 918 | |
Warrants issued with venture debt | 139,572 | |
Issuance of promissory note payable in acquisition | 4,500,000 | |
Issuance of Series B preferred stock in acquisition | 11,000,000 | |
Subscription receivable for Series A preferred stock | $ 13,454 |
NATURE OF OPERATIONS_2
NATURE OF OPERATIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
NATURE OF OPERATIONS | ||
NATURE OF OPERATIONS | NOTE 1: NATURE OF OPERATIONS Digital Brands Group, Inc. (the “Company” or “DBG”), was organized on 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 (“Bailey”), a Delaware limited liability company. On the acquisition date, Bailey 44, LLC became a wholly owned subsidiary of the Company. See Note 4. On May 18, 2021, the Company closed its acquisition of Harper & Jones, LLC (“H&J”) pursuant to its Membership Interest Stock Purchase Agreement with D. Jones Tailored Collection, Ltd. to purchase 100% of the issued and outstanding equity of Harper & Jones, LLC. On the acquisition date, H&J became a wholly owned subsidiary of the Company. See Note 4. On August 30, 2021, the Company closed its acquisition of Mosbest, LLC dba Stateside (“Stateside”) pursuant to its Membership Interest Purchase Agreement with Moise Emquies to purchase 100% of the issued and outstanding equity of Stateside. On the acquisition date, Stateside 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-for- 15.625 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”). Further to 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, were $8.6 million after deducting underwriting discounts and commissions of $0.8 million and direct offering expenses of $0.6 million. Concurrent with this offering, the Company acquired H&J (see Note 4). The Company incurred an additional $0.6 million in offering costs related to the IPO that were not paid directly out of the proceeds from the offering. | 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. The Company does business under the names DSTLD and Digital Brands Group. The Company sells premium denim and other products direct-to-consumers. On February 12, 2020, Digital Brands Group, 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, including in response to 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. |
GOING CONCERN_2
GOING CONCERN | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 $22,659,480 and $8,088,980 for the nine months ended September 30, 2021 and 2020, respectively, and has incurred negative cash flows from operations for the nine months ended September 30, 2021 and 2020. The Company has historically lacked liquidity to satisfy obligations as they come due and as of September 30, 2021, and the Company had a working capital deficit of $18,194,632. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company expects to continue to generate operating losses for the foreseeable future. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty. Management Plans As of November 11, 2021, the date of issuance of these unaudited interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents of $254,527 as of September 30, 2021, together with the 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. In August 2021, the Company entered into an equity line of credit agreement which the investor is committed to purchase up to $17,500,000 of the Company’s common stock (see Note 8). The Company plans to utilize multiple drawdowns on this agreement, subject to satisfying a registration rights agreement and other restrictions. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through the equity line of credit agreement. The Company may pursue secondary offerings or debt financings to provide working capital and satisfy debt obligations. 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. | NOTE 2: GOING CONCERN The accompanying 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 $10,728,295 and $5,653,973 for the years ended December 31, 2020 and 2019, respectively, and has incurred negative cash flows from operations for the years ended December 31, 2020 and 2019. The Company has historically lacked liquidity to satisfy obligations as they come due and as of December 31, 2020, the Company had a working capital deficit of $18,270,034. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for the next twelve months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or to obtain additional capital financing. No assurance can be given that the Company will be successful in these efforts. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty. |
SUMMARY OF SIGNIFICANT ACCOU_16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 September 30, 2021, the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 and of cash flows for the nine months ended September 30, 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 subsidiaries Bailey, H&J and Stateside from the dates of acquisition. 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 September 30, 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, prepaid expenses, 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. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 28,195 $ — $ 28,195 Contingent consideration — — 10,527,910 10,527,910 Derivative liability — — 2,486,843 2,486,843 $ — $ 28,195 $ 13,014,753 $ 13,042,948 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ 6,265 $ 6,265 $ — $ — $ 6,265 $ 6,265 Warrant Liability Certain of the Company’s common stock warrants are carried at fair value. As of December 31, 2020, the fair value of the Company’s common stock warrant liabilities was measured under the Level 3 hierarchy using the Black-Scholes pricing model as the Company’s underlying common stock had no observable market price (see Note 10). The warrant liability was valued using a market approach. Upon the IPO, the warrant liabilities were valued using quoted prices of identical assets in active markets, and was reclassified under the Level 2 hierarchy. Changes in common stock warrant liability during the nine months ended September 30, 2021 are as follows: Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value 21,930 Outstanding as of September 30, 2021 $ 28,195 Contingent Consideration The Company records a contingent consideration liability relating to stock price guarantees included in its acquisition and consulting agreements. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the contingent consideration liability related to the Company’s business combinations is valued using the Monte Carlo simulation model. The Monte Carlo simulation inputs include the stock price, volatility of common stock, timing of settlement and resale restrictions and limits. The fair value of the contingent consideration is then calculated based on guaranteed equity values at settlement as defined in the acquisition agreements. Changes in contingent consideration liability during the nine months ended September 30, 2021 are as follows: Contingent Consideration Liability Balance as of December 31, 2020 $ — Initial recognition in connection with acquisition of Harper & Jones 3,421,516 Stock price guarantee per consulting agreement 67,000 Change in fair value 7,039,394 Outstanding as of September 30, 2021 $ 10,527,910 Derivative Liability In connection with the Company’s convertible note with Oasis Capital, LLC (“Oasis”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the nine months ended September 30, 2021 are as follows: Derivative Liability Outstanding as of December 31, 2020 $ — Initial fair value on issuance of convertible note 1,858,887 Change in fair value 627,956 Outstanding as of September 30, 2021 $ 2,486,843 Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for DSTLD and first-in, first-out method for Bailey and Stateside. The inventory balances as of September 30, 2021 and December 31, 2020 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress. 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 September 30, 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 $25,263 and $306,845 for the three months ended September 30, 2021 and 2020, and $62,061 and $487,402 for the nine months ended September 30, 2021 and 2020, respectively. 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 Contingent Consideration The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair in the consolidated statement of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. The contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid in capital in the stockholders’ equity section of the Company’s consolidated balance sheets. 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. In the first quarter of 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 September 30, 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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. As such, the Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. 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 $20,041 and $5,229 as of September 30, 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 distribution costs. Total shipping and handling billed to customers as a component of net revenues was approximately $6,500 and $3,900 for the nine months ended September 30, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $81,000 and $36,000 for the three months ended September 30, 2021 and 2020, and $200,000 and $140,000 for the nine months ended September 30, 2021 and 2020, respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the three months ended September 30, 2021 and 2020 amounted to approximately $12,000 and $0, and $16,000 and $100,000 for the nine months ended September 30, 2021 and 2020,respectively. The amounts are 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 September 30, 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 December 31, 2020, the Company had capitalized $214,647 in deferred offering costs. Upon completion of the IPO in May 2021, all capitalized deferred offering costs were charged to additional paid-in capital. As of September 30, 2021, the Company capitalized $367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). 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 September 30, 2021 our operating segments included: DSTLD, Bailey, H&J and Stateside. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale, in store 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 September 30, 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 September 30, 2021 and 2020 are as follows: September 30, 2021 2020 Convertible notes 2,240,426 — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,591,348 794,569 Preferred stock warrants — 806,903 Stock options 3,895,103 1,129,503 Total potentially dilutive shares 9,706,877 65,655,685 All shares of preferred stock were convertible into shares of common stock at a ratio of 15.625:1 per share. Upon the closing of the 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. Additionally, all preferred stock warrants converted into 51,642 common stock warrants at the same ratio as the underlying preferred stock conversion. Concentrations The Company utilized five vendors that made up 39% of all inventory purchases during the nine months ended September 30, 2021 and two vendors that made up 39% of all inventory purchases during the nine months ended September 30, 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. | 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”). Reclassifications Certain prior year accounts have been reclassified to conform with current year presentation. Principles of Consolidation These 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 December 31, 2020 and 2019, 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 year ended December 31, 2020 and 2019 are as follows: Warrant Liability Oustanding as of December 31, 2018 $ — Warrants granted 7,700 Oustanding as of December 31, 2019 7,700 Warrants granted 918 Change in fair value (2,353) Oustanding as of December 31, 2020 $ 6,265 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 December 31, 2020 and 2019 consist substantially of finished good products purchased or produced for resale, as well as any materials the Company purchased to modify the products. 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 December 31, 2020 and 2019 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 $283,024 December 31, 2020 2019 Computer equipment $ 57,810 $ 57,004 Furniture and fixtures 207,140 70,108 Leasehold improvements 69,274 40,351 334,224 167,463 Accumulated depreciation (334,224) (97,703) Property and equipment, net $ — $ 69,760 Software $ 278,405 $ 56,450 Accumulated amortization (216,092) (53,617) Software, net $ 62,313 $ 2,833 During the year ended December 31, 2020, the Company disposed of certain assets, primarily related to leasehold improvements and related fixtures, in relation to the termination of various leases and contracts that were acquired with Bailey. During the year ended December 31, 2020, a total of approximately $2,202,000 in property and equipment was disposed, resulting in a loss on disposal of $848,927 after disposal costs, which is included in operating expenses in the accompanying consolidated statement of operations. 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. Brand names and other assets with indefinite lives are not subject to amortization. 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 quantitative goodwill impairment test in the first quarter every year. During the year ended December 31, 2020, management performed a quantitative impairment test after evaluating qualitative factors due to COVID-19. The Company determined that the fair value of the reporting unit exceeded the carrying amount, and therefore no goodwill impairment was recognized as of December 31, 2020. The Company made this determination by observing average market multiples on revenue for similar companies against current and expected revenue levels of the Bailey unit acquired and comparing such against the carrying value of the Bailey unit, which resulted in the estimated fair value exceeding the carrying value. 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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. The Company calculated the estimated fair value of the brand name based on a relief of royalty model using revised revenue projections and discount rates believed to be appropriate. The Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. 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, (b) 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’ deficit. 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 certain products 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. ASC 606 has been adopted effective January 1, 2019 using the modified retrospective method with no adjustment. The reserve for returns totaled $5,229 and $100,000 as of December 31, 2020 and 2019, 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 $3,900 and $39,000 for the years ended December 31, 2020 and 2019, respectively. Total shipping and handling costs included in distribution costs were approximately $246,000 and $357,000 for the years ended December 31, 2020 and 2019, respectively. Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2020 and 2019 amounted to approximately $146,000 and $579,000, 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 December 31, 2020 and 2019, the Company did not have any derivative instruments that were designated as hedges. The Company adopted Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. 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 December 31, 2020, the Company had capitalized $214,647 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 December 31, 2020 our operating segments included: DSTLD and Bailey 44. Each operating segment has a current report 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 December 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of December 31, 2020 and 2019 are as follows: December 31, 2020 2019 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 8,223,036 Series B Preferred Stock (convertible to common stock) 20,754,717 — Common stock warrants 914,539 417,962 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 42,960,089 All shares of preferred stock are convertible into shares of common stock at a ratio of 15.625:1 per share. See Note 14. Concentrations The Company utilized three vendors that made up 41%, 31% and 28% of all inventory purchases, respectively, during the year ended December 31, 2020 and two vendors that made up 39% and 29% of all inventory purchases, respectively during the year ended December 31, 2019. 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 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. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted ASU-2018-13 as of January 1, 2020, which did not materially affect our consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350) (“ASU 2017-04”), which provides for the elimination of Step 2 from the goodwill impairment test. If impairment charges are recognized, the amount recorded will be the amount by which the carrying amount exceeds the reporting unit’s fair value with certain limitations.ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption allowed. The Company has early adopted ASU 2017-04 as of January 1, 2020. 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_2
BUSINESS COMBINATIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
BUSINESS COMBINATIONS | ||
BUSINESS COMBINATIONS | NOTE 4: BUSINESS COMBINATIONS Bailey 44 On February 12, 2020, the Company acquired 100% of the membership interests of Bailey. The purchase price consideration included (i) an aggregate of 20,754,717 shares of Series B Preferred Stock of the Company (the “Parent Stock”) and (ii) a promissory note in the principal amount of $4,500,000. 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 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 (to) 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 As of September 30, 2021, the Company has a contingent consideration liability of $7,056,479 based on the valuation shortfall as noted above. See Note 3. Harper & Jones On May 18, 2021, the Company closed its acquisition of H&J pursuant to its previously disclosed Membership Interest Stock Purchase Agreement (as amended, the “Purchase Agreement”) with D. Jones Tailored Collection, Ltd. (the “Seller”), to purchase 100% of the issued and outstanding equity of Harper & Jones LLC. The purchase price consideration included (i) an aggregate of 2,192,771 shares of the Company’s common stock and (ii) $500,000 financed from the proceeds of the IPO. Pursuant to the H&J Purchase Agreement, the Seller, as the holder of all of the outstanding membership interests of H&J, exchanged all of such membership interests for a number of common stock of the Company equal to the lesser of (i) $9.1 million at a per share price equal to the initial public offering price of the Company’s shares offered pursuant to its initial public offering or (ii) the number of Subject Acquisition Shares; “Subject Acquisition Shares” means the percentage of the aggregate number of shares of the Company’s common stock issued pursuant to the Agreement, which is the percentage that Subject Seller Dollar Value is in relation to Total Dollar Value. “Subject Seller Dollar Value” means $9.1 million. If, at the one year anniversary of the closing date of the Company’s IPO, the product of the number of shares of the Company’s common stock issued at the closing of the acquisition multiplied by the average closing price per share of the shares of the Company’s common stock as quoted on the NasdaqCM for the thirty (30) day trading period immediately preceding such date does not exceed the sum of $9.1 million less the value of any shares of the Company’s common stock cancelled further to any indemnification claims made against the Seller then the Company shall issue to Seller an additional aggregate number of shares of the Company’s common stock equal to the valuation shortfall at a per share price equal to the then closing price per share of the Company’s common stock as quoted on the NasdaqCM. The Company evaluated the acquisition of H&J pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: Cash $ 500,000 Common stock 8,025,542 Contingent consideration 3,421,516 Purchase price consideration $ 11,947,058 The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: Purchase Price Allocation Cash and cash equivalents $ 24,335 Accounts receivable, net 49,472 Inventory 77,159 Prepaid expenses 69,715 Deposits 4,415 Property, equipment and software, net 83,986 Goodwill 9,681,548 Intangible assets 3,936,030 Accounts payable (51,927) Accrued expenses and other liabilities (107,957) Deferred revenue (269,848) Due to related parties (1,361) Loan payable (148,900) Note payable - related party (299,489) Deferred tax liability (1,100,120) Purchase price consideration $ 11,947,058 The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The Company recorded an initial contingent consideration liability at a fair value of $3,421,516 based on the valuation shortfall noted above. As of September 30, 2021, the H&J contingent consideration was valued at $3,471,431. See Note 3. The results of H&J have been included in the consolidated financial statements since the date of acquisition. H&J’s net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $1,050,000 and $53,000, respectively. Stateside On August 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with Moise Emquies pursuant to which the Company acquired all of the issued and outstanding membership interests of MOSBEST, LLC, a California limited liability company (“Stateside” and such transaction, the “Stateside Acquisition”). Pursuant to the MIPA, Moise Emquies, as the holder of all of the outstanding membership interests of Stateside, exchanged all of such membership interests for $5.0 million in cash and 1,101,538 shares of the Company’s common stock (the “Shares”), which number of Shares was calculated in accordance with the terms of the MIPA. Of such amount, $375,000 in cash and a number of Shares equal to $375,000, or 82,615 shares (calculated in accordance with the terms of the MIPA), is held in escrow to secure any working capital adjustments and indemnification claims. The MIPA contains customary representations, warranties and covenants by Moise Emquies. The Company evaluated the acquisition of Stateside pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: Cash $ 5,000,000 Common stock 3,403,196 Purchase price consideration $ 8,403,196 The Company has made an allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: Purchase Price Allocation Cash and cash equivalents $ 32,700 Accounts receivable, net 154,678 Due from factor, net 371,247 Inventory 603,626 Prepaid expenses 105,442 Deposits 9,595 Goodwill 1,610,265 Intangible assets 5,939,140 Accounts payable (374,443) Accrued expenses and other liabilities (49,053) Purchase price consideration $ 8,403,196 The customer relationships and will be amortized on a straight-line basis over their estimated useful lives of three years. The brand name is indefinite-lived. The Company used the relief of royalty and income approach to estimate the fair value of intangible assets acquired. Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The results of Stateside have been included in the consolidated financial statements since the date of acquisition. Stateside’s net revenue and net income included in the consolidated financial statements since the acquisition date were approximately $530,000 and $69,000, respectively. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the Company’s financial results as if the Bailey, H&J and Stateside acquisitions 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: Nine Months Ended September 30, 2021 2020 Net revenues $ 7,956,477 $ 11,287,932 Net loss $ (22,853,732) $ (10,080,468) Net loss per common share $ (3.81) $ (15.18) | NOTE 4: BUSINESS COMBINATIONS On February 12, 2020, Digital Brands Group, Inc. (“Denim”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between Bailey 44, LLC, a Delaware limited liability company (“Bailey”), Norwest Venture Partners XI, LP, a Delaware limited partnership (“NVP XI”), and Norwest Venture Partners XII, LP, a Delaware limited partnership (“NVP XII”, each of NVP XI and NVP XII known herein as a “Holder” and together the “Holders”), on the one hand, and the issuer, and Denim.LA Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the issuer (“Merger Sub”), on the other hand to effect the merger of Merger Sub with and into Bailey (the “Merger”). Upon the consummation of the Merger (the “Effective Time”), which occurred on the date of the Merger Agreement, Merger Sub ceased to exist and Bailey was the entity surviving the Merger. Prior to the Merger, Bailey had (a) membership interests consisting of Preferred Units, Common Units and Performance Units (collectively, the “Membership Units”) outstanding and (b) entered into certain Phantom Performance Unit Agreements (the “Phantom Performance Units”). All Preferred Units were held by the Holders. As a result of the Merger, (A) each Preferred Unit issued and outstanding immediately prior to the Effective Time of the Merger was converted (and when so converted, was automatically cancelled and retired and ceased to exist) in exchange for the right to receive a portion of (i) an aggregate of 20,754,717 newly issued shares of Series B Preferred Stock, par value $0.0001 per share, of Denim (the “Parent Stock”) and (ii) a promissory note in the principal amount of $4,500,000, (B) all other Membership Units other than the Preferred Units as well as all Phantom Performance Units were cancelled and no consideration was delivered in exchange therefor, and (C) Bailey became the wholly-owned subsidiary of Denim. The Articles of Incorporation were amended to authorize the newly issued shares of Series B Preferred Stock, par value $0.0001 per share, of Denim (the “Parent Stock”). 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”). Denim agreed that if at that date which is one year from the closing date of Denim’s initial public offering, the product of the number of shares of Parent Stock issued under the Merger Agreement multiplied by the sum of the closing price per share of the common stock of Denim on such date as quoted on Nasdaq, the New York Stock Exchange or other stock exchange or interdealer quotation system, as the case may be, 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 Denim shall issue to the Holders pro rata an additional aggregate number of shares of common stock of Denim equal to the valuation shortfall at a per share price equal to the then closing price per share of the common stock of Denim as quoted on the Nasdaq, the New York Stock Exchange or other stock exchange or interdealer quotation system, as the case may be. Concurrently, Denim will cause an equivalent number of shares of common stock or common stock equivalents held by affiliated stockholders of Denim prior to the date of the Merger Agreement to be cancelled pro rata in proportion to the number of shares of common stock of Denim held by each of them. In addition, Denim agreed that at all times from the date of the Merger Agreement until the date immediately preceding the effective date of Denim’s initial public offering, in no event will the number of shares of Parent Stock issued pursuant to the Merger Agreement represent less than 9.1% of the outstanding capital stock of Denim on a fully-diluted basis. Denim agreed that in the event that, at any time prior to the date immediately preceding the effective date of Denim’s initial public offering, the shares of Parent Stock issued pursuant to the Merger Agreement represent less than 9.1% of the outstanding capital stock of Denim on a fully-diluted basis, Denim shall promptly issue new certificates evidencing additional shares of Parent Stock to the Holders such that the total number of shares of Parent Stock issued pursuant to Denim’s Merger Agreement is not less than 9.1% of Denim’s the outstanding capital stock on a fully-diluted basis as of such date. The Company evaluated the acquisitions of Bailey pursuant to ASC 805 and ASU 2017-01, Topic 805, Business Combinations. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their estimated respective fair values as of the closing date of the acquisition. Goodwill recognized in connection with this transaction represents primarily the potential economic benefits that the Company believes may arise from the acquisition. Total fair value of the purchase price consideration was determined as follows: Series B preferred stock $ 11,000,000 Promissory note payable 4,500,000 Purchase price consideration $ 15,500,000 The Company has made a allocation of the purchase price in regard to the acquisition related to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation: Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable 37,479 Due from/(to) factor (312,063) Inventory 3,303,660 Prepaid expenses 165,856 Deposits 187,493 Property, equipment and software 1,215,748 Goodwill 6,479,218 Intangible assets (Note 6) 8,600,000 Accounts payable (3,397,547) Accrued expenses and other liabilities (886,757) Purchase price consideration $ 15,500,000 Goodwill is primarily attributable to the go-to-market synergies that are expected to arise as a result of the acquisition and other intangible assets that do not qualify for separate recognition. The goodwill is not deductible for tax purposes. The results of Bailey have been included in the consolidated financial statements since the date of acquisition. Bailey’s net revenue and net loss included in the consolidated financial statements since the acquisition date were approximately $3,975,000 and $4,500,000, respectively. 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, 2019. 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: Year Ended December 31, 2020 2019 Net revenues $ 7,259,260 $ 30,133,934 Net loss $ (12,786,695) $ (11,868,423) Net loss per common share $ (19.25) $ (17.87) Proposed Business Combination On October 14, 2020, Digital Brands Group, Inc. a Delaware corporation (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 obligations of each party to consummate the transactions contemplated by the Agreement are predicate on the closing of the initial public offering on or before December 31, 2020. Should the initial public offering not occur by that date, either the Company or Seller may terminate the Agreement. There is no penalty for either party should the initial public offering not occur, and in such instance the sale becomes null and void. We have been working with Harper & Jones to reorganize their marketing team and create targeted and return driven marketing strategies. We have also helped analyze the sales representative, customer and showroom data, which we are using to develop the brand’s growth strategies. As an example, our analysis showed that the showrooms cost $125,000 to open while generating $250,000 in store level cash flow in its first year. This 100% cash on cash return shows the opportunity to open more showrooms, but Harper & Jones does not have the cash or balance sheet to support additional store openings. We plan to use a portion of the proceeds of this offering to open additional Harper & Jones showrooms in markets where the brand already has a strong customer base. The acquisition agreement with Harper & Jones did not occur during the current (2019 and 2020) reporting period and is contingent upon an initial public offering. 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_2
DUE FROM FACTOR | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
DUE FROM FACTOR | ||
DUE FROM FACTOR | NOTE 5: DUE FROM FACTOR The Company, via its subsidiaries, Bailey and Stateside, 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% for Bailey. For Stateside, should total commission and fees payable be less than $30,000 in a single year, then the factor shall charge the difference between the actual fees in said year and $30,000 to the Company. Interest on advances is charged as of the last day of each month at a rate equal to the greater of either, (a) the Chase Prime Rate + (2.0)% or (b) (4.0)% per annum. Advances are collateralized by a security interest in substantially all of the companies’ assets. Due to/from factor consist of the following: September 30, December 31, 2021 2020 Outstanding receivables: Without recourse $ 1,022,552 $ 151,158 With recourse 58,884 42,945 Advances 119,937 56,246 Credits due customers (107,064) (40,316) $ 1,094,309 $ 210,033 | 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 from factor consist of the following: December 31, 2020 2019 Outstanding receivables: Without recourse $ 151,158 $ — With recourse 42,945 — Advances 56,246 — Credits due customers (40,316) — $ 210,033 $ — |
GOODWILL AND INTANGIBLE ASSET_4
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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, $9,681,548 in goodwill from the H&J business combination in May 2021 and $1,610,265 in goodwill from the Stateside business combination in August 2021. The following table summarizes information relating to the Company’s identifiable intangible assets as of September 30, 2021: Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 6,453,750 $ (911,544) $ 5,542,206 6,453,750 (911,544) 5,542,206 Indefinite-lived: Brand name $ 11,236,920 — 11,236,920 $ 17,690,670 $ (911,544) $ 16,779,126 The Company recorded amortization expense of $355,808 and $91,667 during the three months ended September 30, 2021 and 2020, and $590,711 and $229,167 during the nine months ended September 30, 2021 and 2020, respectively, which is included in general and administrative expenses in the consolidated statements of operations. During the nine months ended September 30, 2020, the Company recorded an impairment loss of $784,500 for the brand name as management determined circumstances existed that indicated the carrying value of the Company’s may not be recoverable. | 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 December 31, 2020: Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 1,100,000 $ (320,833) $ 779,167 Indefinite-lived: 1,100,000 (320,833) 779,167 Brand name 6,715,500 — 6,715,500 $ 7,815,500 $ (320,833) $ 7,494,667 Due to the effects of COVID-19 and related uncertainty which affected Bailey’s 2020 results and near- term demand for its products, the Company determined that there were indications for further impairment analysis. During the year ended December 31, 2020, the Company recorded an impairment loss of $784,500 for the intangible asset as management determined circumstances existed that indicated the carrying value may not be recoverable. The impairment analysis was based on the relief from royalty method using projected revenue estimates and discounts rates believed to be appropriate. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. The discount rate, revenue assumptions and terminal growth rate of our reporting unit were the material assumptions utilized in the model used to estimate the fair value of the Bailey unit. The analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. The long-range plan reflects management judgment, which includes observation of expected industry trends. The Company recorded amortization expense of $320,833 during the year ended December 31, 2020, which is included in general and administrative expenses in the consolidated statements of operations. Future amortization expense at December 31, 2020 is as follows: Year Ending December 31, 2021 366,667 2022 366,667 2023 45,833 $ 779,167 |
LIABILITIES AND DEBT_2
LIABILITIES AND DEBT | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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 September 30, 2021 and December 31, 2020: September 30, December 31, 2021 2020 Accrued expenses $ 266,646 $ 92,074 Reserve for returns 20,041 5,229 Payroll related liabilities 1,253,639 843,704 Sales tax liability 242,021 196,410 Other liabilities 71,607 108,229 $ 1,853,954 $ 1,245,646 Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of September 30, 2021 and December 31, 2020, payroll related labilities included approximately $262,000 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 the lender agreed to extend the maturity date of the credit agreement to December 31, 2022, with certain payments due as follows. If the Company consummated a follow on public offering on or before July 31, 2021, the Company was required to make a $3,000,000 payment on the loan within five five As of September 30, 2021 and December 31, 2020, the gross loan balance was $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 nine months ended September 30, 2021 and 2020, $147,389 and $144,974 of these loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $0 and $147,389 as of September 30, 2021 and December 31, 2020, respectively. Interest expense for the three and nine months ended September 30, 2021 and 2020 was $189,096 and $323,807, and $591,123 and $658,730, respectively. Effective interest rate on the loan for the nine months ended September 30, 2021 and 2020 was 13.4% and 14.0%, 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. In 2021, the Company received additional gross proceeds of $473,650. Interest was 6% per annum and the debt was due October 30, 2022. Upon closing of the IPO, the outstanding principal and accrued and unpaid interest of $16,942 was converted into 319,661 shares of common stock based on the terms of the notes. Total issuances costs were $69,627, which was recognized as a debt discount and was amortized in 2021 through the date of IPO when such debt converted. During the nine months ended September 30, 2021, $27,894 of the debt discount was amortized to interest expense. 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 was contingently convertible and contains both automatic and optional conversions. The debt converted 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. Issuance costs on the aggregate funds 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 were amortized in 2021 through the date of IPO when such debt converted. The fair value of the warrants was determined to be negligible. Upon closing of the IPO, $755,000 in outstanding principal and approximately $185,000 of the accrued and unpaid interest was converted into 453,437 shares of common stock. As of September 30, 2021, there was $100,000 remaining in outstanding principal that was not converted into equity. During the three and nine months ended September 30, 2021, $0 and $100,000 of debt discount was amortized to interest expense. The Company recorded an additional $132,609 in default interest expense upon conversion of these notes. 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. Upon closing of the IPO, the outstanding principal was converted into 362,055 shares of common stock. Convertible Promissory Note On August 27, 2021, the Company entered into a Securities Purchase Agreement with Oasis Capital, LLC (“Oasis Capital”) further to which Oasis Capital purchased a senior secured convertible note (the “Oasis Note”), with an interest rate of 6% per annum, having a face value of $5,265,000 for a total purchase price of $5,000,000, secured by an all assets of the Company. The Oasis Note, in the principal amount of $5,265,000, bears interest at 6% per annum and is due and payable 18 months from the date of issuance, unless sooner converted. The Oasis Note is convertible at the option of Oasis Capital into shares of the Company’s common stock at a conversion price (the “ Oasis Conversion Price”) which is the lesser of (i) $3.601, and (ii) 90% of the average of the two lowest volumed weighted average prices (“VWAPs’) during the five consecutive trading day period preceding the delivery of the notice of conversion. Oasis Capital is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $500,000. If the Oasis Conversion Price set forth in any conversion notice is less than $3.00 per share, the Company, at its sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of its common stock. In connection with the issuance of the Oasis Note, the Company entered into a security agreement (the “Security Agreement”) pursuant to which the Company agreed to grant Oasis Capital a security interest in substantially all of its assets to secure the obligations under the Oasis Note and a registration rights agreement with Oasis Capital (the “Oasis Note RRA”). The Oasis Note RRA provides that the Company shall file a registration statement registering the shares of common stock issuable upon conversion of the Oasis Note no later than 60 days from the date of the Oasis Note and take commercially reasonable efforts to cause such registration statement to be effective with the SEC no later than 90 days from the date of the Oasis Note. In connection with the issuance of the Oasis Note, each of the Company’s subsidiaries entered into a security agreement and a subsidiary guarantee in favor of Oasis Capital pursuant to which such subsidiaries granted Oasis Capital a security interest in substantially all their assets and guarantee the obligations of the Company under the Oasis Note. The Company received net proceeds, after the original issue discount and issuance costs, of $4,550,000 . As such, the Company recognized a debt discount of The Company evaluated the terms of the conversion features of the Oasis Note as noted above in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock, and determined they are not indexed to the Company’s common stock and that the conversion features meet the definition of a liability. The Oasis Note contains an indeterminate number of shares to settle with conversion options outside of the Company’s control. Therefore, the Company bifurcated the conversion feature and accounted for it as a separate derivative liability. Upon issuance of the Oasis Note, the Company recognized a derivative liability at fair value of $1,858,887, which is recorded as a debt discount and will amortized over the life of the note. During the three months ended September 30, 2021, the Company amortized $102,772 of debt discount to interest expense. As of September 30, 2021, the net balance of the Oasis Note, after unamortized debt discount of $2,471,615, was $2,793,385. Interest expense for the three months ended September 30, 2021 was $26,325. 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. In May 2021, the Company entered into an 2 nd 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. As of September 30, 2021, Harper & Jones had an outstanding loan under the EIDL program of $148,900. Loan Payable In May 2021, H&J entered into a loan payable with a bank and received proceeds of $75,000. The line bears interest at 7.76% and matures in December 2025. As of September 30, 2021, the outstanding balance was $72,269. Note Payable – Related Party As of September 30, 2021, H&J had an outstanding note payable of $299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12% 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 date of the agreement was extended from December 31, 2020 to July 31, 2021. In August 2021, the maturity date was further extended to December 31, 2022. The Company is required to make prepayments of $2,000,000 to $4,000,000 if the Company completes a secondary public offering. If a public offering is not consummated before October 31, 2021 and June 30, 2022, the Company shall repay 10% of the outstanding principal at each date. The note incurs interest at 12% per annum. Upon the IPO closing, the Company repaid $1,000,000 of the outstanding principal on this note in May 2021. As of September 30, 3021, $3,500,000 remained outstanding, of which $655,000 is included in current liabilities based on the provisions above. Interest expense was $105,000 and $135,000 for the three months ended September 30, 2021 and 2020, and $389,000 and $337,500 for the nine months ended September 30, 2021 and 2020, respectively, all of which was accrued and unpaid as of September 30, 2021. In April 2021, the Company entered into a promissory note in the principal amount of $1,000,000. The Company received $810,000 in proceeds, net of issuance costs and original issue discount. Additionally, the Company issued 120,482 warrants to the lender and 20,000 shares of common stock to the underwriter, both of which was recorded as a debt discount at the time of the loan. The fair value of the warrants and shares recorded as a debt discount was $73,958. Upon the closing of the IPO, the note was repaid in full. The entire debt discount of $263,958 was amortized to interest expense upon repayment of the note. | 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 December 31, 2020 and 2019: December 31, 2020 2019 Accrued expenses $ 92,074 $ 188,341 Reserve for returns 5,229 100,000 Payroll related liabilities 843,704 412,155 Sales tax liability 196,410 156,707 Other liabilities 108,230 264,114 $ 1,245,646 $ 1,121,317 Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of December 31, 2020, payroll related labilities included approximately $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. The initial close amount was a minimum of $1,345,000. The loan bears interest at 12.5% per annum, compounded monthly, plus fees. A 5% closing fee is due upon each closing, legal and accounting fees of up to $40,000, and management fees of $4,167-$5,000 per month. The loan requires monthly payments of interest commencing March 31, 2017, and a balloon payment for the full principal amount at the pre-amended maturity date in June 2021. 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 Repayment is accelerated upon a change in control, as defined in the agreement. The loan is senior to all other debts and obligations of the Company, is collateralized by all assets of the Company, and shares of the Company’s common stock pledged by officers of the Company. As of December 31, 2020 and 2019, the gross loan balance is $6,001,755 and $4,542,544, resulting from cash disbursed to the Company and considerations for outstanding interest of $1,459,211 and, $508,249 including loan fees of $60,000 and $34,296, charged to the loan balance, respectively. The Company failed to comply with certain debt covenants during the year ended December 31, 2020. Accordingly, as of December 31, 2020 and 2019, the venture debt is shown as a current liability. 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. During the year ended December 31, 2020, the Company granted 493,462 common stock warrants, to the lender with an exercise price of $2.50 per share and a ten-year contractual life. During 2019, the Company granted 128,667 common stock warrants to the lender with an exercise price of $2.50 per share and a ten-year contractual life. As discussed in Note 10, during the years ended December 31, 2020 and 2019, warrants associated with the venture debt were valued at $184,191 and $49,928, respectively. The relative fair value of the warrants was initially recorded as a discount to the note, which is amortized over its term. For the years ended December 31, 2020 and 2019, $241,878 and $149,948 of these loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $147,389 and $225,720 as of December 31, 2020 and 2019, 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 years ended December 31, 2020 and 2019 was $770,277 and $624,127, and 14.6% and 17.7%, 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. The terms of the Regulation CF convertible debt offering are (1) a conversion upon a Qualified Financing. In the event that the Company issues and sells shares of its equity securities (“Equity Securities”) to investors (the “Investors”) while this Note remains outstanding in an equity financing with total proceeds to the Company of not less than $1,000,000 (excluding the conversion of the Notes) (a “Qualified Financing”), then the outstanding principal amount of this Note and any unpaid accrued interest shall automatically convert in whole without any further action by the Holder into Equity Securities sold in the Qualified Financing at a conversion price equal to the price paid per share for Equity Securities by the Investors in the Qualified Financing multiplied by 0.7. The issuance of Equity Securities pursuant to the conversion of this Note shall be upon and subject to the same terms and conditions applicable to Equity Securities sold in the Qualified Financing, and (2) simple interest on the outstanding principal amount at the rate of 6% per annum. All unpaid interest and principal shall be due and payable upon request the Majority Holders on or after October 30, 2022. The gross proceeds could change based on the final closing amount that WeFunder funds from the investment commitments in escrow. As of December 31, 2020, issuance costs totaled $33,773, which is recognized as a debt discount and will be amortized over the life of the notes. 2020 Regulation D Offering Concurrently with the offering above, the Company received gross proceeds of $800,000 from a Regulation D convertible debt offering. The debt accrues 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 is not currently convertible and ultimate number of shares is not known, it is not included in dilutive share counts. As of December 31, 2020, issuance costs totaled $100,000 all of which remain unamoritzed as the related debts were received near year end. 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. 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 accrues interest at a rate of 12% per annum with a maturity date of thirty-six 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 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. Upon maturity and vote of the majority investors, principal balances can be converted into common stock at the quotient by dividing the valuation cap by the fully diluted capitalization. As the debt is not currently convertible and ultimate number of shares is not known, it is not included in dilutive share counts. 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. The PPP Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bears 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 Loan 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 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 date of the agreement was extended from December 31, 2020 to July 31, 2021. The note incurs interest at 12% per annum.Interest expense was $472,500 for the year ended December 31, 2020, all of which was accrued and unpaid as of December 31, 2020. |
STOCKHOLDERS' EQUITY (DEFICIT_2
STOCKHOLDERS' EQUITY (DEFICIT) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
STOCKHOLDERS' EQUITY (DEFICIT) | NOTE 8: STOCKHOLDERS’ EQUITY (DEFICIT) 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-for-15.625 reverse stock split approved by the Company’s Board of Directors as described above. Convertible Preferred Stock During the nine months ended September 30, 2020, the Company issued 809,294 shares of Series A-3 Preferred Stock at a price of $0.53 and 709,690 shares of Series CF Preferred Stock at price per share of $0.52. During the nine months ended September 30, 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 September 30, 2021. 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. Equity Line of Credit On August 27, 2021 (“Execution Date”), the Company entered into an equity line of credit arrangement with Oasis Capital. Specifically, the Company entered into an equity purchase agreement (the “EPA”), pursuant to which Oasis Capital is committed to purchase up to $17,500,000 of the Company’s common stock over the 24-month term of the EPA. The Company is not obligated to request any portion of the $17,500,000. As of September 30, 2021, the Company has not drawn down any portion of this commitment, leaving the entire $17,500,000 available under the equity line of credit, and for which the Company has agreed, pursuant to a registration rights agreement (the “Oasis Equity RRA”), to register the shares of common stock issuable further to the equity line of credit with the SEC before any such issuances. The actual number of shares that the Company may issue pursuant to the equity line of credit is not determinable as it is based on the market price of the Company’s common stock from time to time and the number of shares desired to put to Oasis Capital. During the 24-month term of the investment agreement, the Company may request a drawdown on the equity line of credit by delivering a “put notice” to Oasis Capital stating the dollar amount of shares the Company intends to sell to Oasis Capital. The Company may make either an Option 1 or Option 2 request to Oasis Capital. Under Option 1, the purchase price Oasis Capital is required to pay for the shares is the lesser of (i) the lowest traded price of the common stock on the Nasdaq Capital Market on the Clearing Date, which is the date on which Oasis Capital receives the put shares as DWAC shares in its brokerage account, or (ii) the average of the three lowest closing sale prices of our Common Stock on the Nasdaq Capital Market during the period of twelve consecutive trading days immediately preceding the Clearing Date. The maximum amount the Company may request in an Option 1 request is $500,000. Under Option 2, the purchase price Oasis Capital is required to pay for the shares is the lesser of (i) 93% of the one (1) lowest traded price of our common stock on the Nasdaq Capital Market during the period of five (5) consecutive trading days immediately preceding the put date, or (ii) 93% of the VWAP on the Clearing Date, or (iii) 93% of the closing bid price of the Company’s common stock on the Nasdaq Capital Market on the Clearing Date. The maximum amount the Company may request in an Option 2 request is $2,000,000. 2021 Transactions 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 were $8.6 million after deducting underwriting discounts and commissions of $0.8 million and direct offering expenses of $0.6 million. 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. Upon closing of the Company’s IPO, the Company converted outstanding principal totaling $2,680,289 and certain accrued and unpaid interest of the Company’s convertible debt into an aggregate of 1,135,153 shares of common stock. See Note 7. Upon closing of the Company’s IPO, certain officers and directors converted balances due totaling $257,515 into 152,357 shares of common stock and recorded $233,184 in compensation expense for the shares issued in excess of accrued balances owed. See Note 9. In connection with the H&J and Stateside acquisitions, the Company issued 2,192,771 and 1,101,538 shares of common stock to the respective sellers. See Note 4. The Company issued 20,000 shares to the underwriter in connection with its April 2021 note financing. Pursuant to a consulting agreement, the Company issued 50,000 shares of common stock with a guaranteed equity value of $250,000. In connection with the agreement, the Company recorded a contingent consideration liability of $67,000. See Note 3. In May 2021, an aggregate of 31,881 warrants were exercised for shares of common stock for proceeds of $145,696. In July 2021, warrant holders exercised 355,000 warrants for proceeds of $1,622,350. 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 of $0.1 million. In connection with the execution of the Oasis Capital EPA, the Company issued Oasis Capital 126,354 shares of common stock (the “Commitment Shares”). Upon nine months from the Execution Date, Oasis may return a portion of the Commitment Shares. As of September 30, 2021, the Company recorded the fair value of the Commitment Shares of $367,696 as deferred offering costs as no financings under the related EPA have occurred. | NOTE 8: STOCKHOLDERS’ DEFICIT Convertible Preferred Stock In September 2018, the Company amended and restated its articles of incorporation, increasing the authorized common stock to 110,000,000 shares and increasing the authorized preferred stock to 77,000,000 shares. On February 11, 2020 the Company increased the authorized common stock to 200,000,000 and the authorized preferred stock to 125,000,000, and authorized 20,754,717 Series B Preferred Stock (“Series B”). The Company designated its preferred stock as 20,714,518 shares of Series Seed Preferred Stock, 14,481,413 shares of Series A Preferred Stock, 20,000,000 shares of Series A-2 Preferred Stock, 2,000,000 shares of Series CF Preferred Stock, 18,867,925 shares of Series A-3 Preferred Stock, 20,754,717 shares of Series B Preferred Stock and with 936,144 shares of preferred stock undesignated. The Company also amended the rights and privileges applicable to the various share classes to include the newly designated Series CF Preferred Stock and Series A-3 Preferred Stock. Series Seed Preferred Stock holders are entitled to vote on an as converted basis, while Series A Preferred Stock holders, Series A-2 Preferred Stock holders, Series CF Preferred Stock holders, Series A-3 and Series B Preferred Stock holders do not have voting privileges. The preferred stockholders have certain dividend preferences over common stockholders. The preferred stock is subject to an optional conversion right, where the preferred stock is convertible into fully paid and non- assessable shares of common stock at a 15.625:1 rate, with certain dilution protections. All classes of preferred stock are subject to automatic conversion into the Company’s common stock if and upon an initial public offering of $25,000,000 or greater. The preferred stockholders are entitled to a liquidation preference over common stockholders of the greater of: 1) the preferred stock purchase price ($0.27 per share for Series Seed Preferred Stock, $0.48 per share for Series A Preferred Stock, $0.50 per share for Series A-2 Preferred Stock, $0.52 per share for Series CF Preferred Stock, $0.53 per share for Series A-3 Preferred Stock and $0.53 per share for Series B Preferred Stock) multiplied by a multiple of 1.00 for Series A Preferred Stock, Series A-2 Preferred Stock Series CF Series B Preferred Stock Series A-3 Preferred Stock As of December 31, 2020 and 2019, 20,714,518 shares of Series Seed Preferred Stock were issued and outstanding, 5,654,072 shares of Series A Preferred Stock were issued and outstanding, 5,932,742 shares of Series A-2 Preferred Stock were issued and outstanding, 836,331 and 126,641 shares of Series CF Preferred Stock were issued outstanding issued outstanding Stock Based on circumstances in place as of, December 31, 2020 and 2019, the liquidation preference on the Series Seed Preferred Stock was subject to the 1.00 and 1.00 multiple and the liquidation preference on the Series A Preferred Stock was subject to a multiple of 1.00 and 1.00, all respectively. The total liquidation preferences as of December 31, 2020 and 2019 amounted to 27,536,206 and 15,738,253, respectively. In 2019, the Company sold 4,775,428 shares of Series A-3 Preferred Stock at a price of $0.53 per share, providing gross proceeds of $2,530,977. In 2020, the Company issued 709,960 shares of Series CF Preferred Stock at price of $0.44, providing gross proceeds of $309,750 and 809,294 shares of Series A-3 Preferred Stock at price per share of $0.53, providing gross proceeds of $428,926. In 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. Common Stock The Company had 110,000,000 shares of common stock authorized with a par value of $0.0001 as of December 31, 2019. As of December 31, 2020, the common stock authorized was increased to 200,000,000. As of December 31, 2020 and 2019, 664,167 shares of common stock were issued and outstanding. There were no shares of common stock issued during 2020 and 2019. 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_2
RELATED PARTY TRANSACTIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
RELATED PARTY TRANSACTIONS | ||
RELATED PARTY TRANSACTIONS | NOTE 9: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable As of September 30, 2021 and December 31, 2020, due to related parties includes advances from the former officer, Mark Lynn, who also serves as a director, totaling $104,568 and $194,568 respectively, and accrued salary and expense reimbursements of $126,706 and $246,885 respectively, to current officers. Upon closing of the IPO, 25,080 shares of common stock were issued to directors as conversion of balances owed. 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. Upon closing of the IPO, 127,278 shares of common stock were issued to the CEO as conversion of the outstanding note payable and related accrued interest, accrued compensation and other consideration. As of a result of the transaction, the Company recorded an additional $233,184 in stock compensation expense, which is included in general and administrative expenses in the condensed consolidated statements of operations. As of September 30, 2021, H&J had an outstanding note payable of $299,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12% per annum. As of September 30, 2021, Stateside had $97,471 in outstanding amounts advances to a company partially owned by the Stateside Seller. The advances are unsecured, non-interest bearing and due on demand. The amount is included in prepaid expenses and other current assets in the consolidated balance sheets. | NOTE 9: RELATED PARTY TRANSACTIONS Employee Backpay, Loans Receivable and Loans Payable Two former officers, Corey Epstein and Mark Lynn (“Former Officers”), and one current officer, Hil Davis, of the Company deferred their salary during portions of 2014-2016 and 2019, respectively. The Company commenced repaying the Former Officers obligations during 2017; however, no additional payments were made during 2018. In 2019, the balance due to one the Former Officers, was relieved in full through offset. The second Former Officers, who is a director, received repayment on all balances that existed as of 2018 and advanced additional funds to the Company. These advances are non-interest bearing and due on demand. The current officer, Hil Davis, converted prior advances to a loan payable (see below). As of December 31, 2020 and 2019, the due to related parties account on the accompanying balance sheet include advances from the former officer, Mark Lynn, who also serves as a director, totaling $194,568, and accrued salary and expense reimbursements of $246,885 and $68,859 to current officers. An officer, Hil Davis, of the Company previously advanced funds to the Company for working capital, as described above. These prior advances were converted to a note payable totaling $115,000 as of December 31, 2020 and 2019. The loan bears an interest rate of 5% per annum. Payment Processor: The Company’s backend payment processor’s majority shareholder, Trevor Pettennude, is a director of the Company. Total expenses for the years ended December 31, 2020 and 2019 were approximately $25,000 and $140,000, respectively, and included in sales and marketing in the accompanying statements of operations. |
SHARE-BASED PAYMENTS_2
SHARE-BASED PAYMENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SHARE-BASED PAYMENTS | ||
SHARE-BASED PAYMENTS | NOTE 10: SHARE-BASED PAYMENTS Common Stock Warrants During the nine months ended September 30, 2020, the Company granted 374,048 common stock warrants to the venture debt lender with an exercise price of $2.50 per share. The warrants were valued at $139,572 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 Nine Months Ended September 30, 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 % Expected Life (years) 10.00 In connection with the IPO, the Company issued 2,409,639 warrants and an additional 361,445 warrants to purchase common stock per the over-allotment option. Each warrant will have an exercise price of $4.57 per share (equal to 110% of the offering price of the common stock), will be exercisable upon issuance and will expire five years from issuance. 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. The warrants may be exercised beginning on November 13, 2021 and will expire five years from issuance. In connection with the Company’s April 2021 note financing, the Company issued warrants to the lender to purchase up to 120,482 shares of common stock. The warrants have an exercise price of $4.15 per share and are exercisable immediately after issuance. In May 2021, an aggregate of 31,881 warrants were exercised for shares of common stock for proceeds of $145,696. In July 2021, warrant holders exercised 355,000 warrants for proceeds of $1,622,350. A summary of information related to common stock warrants for the nine months ended September 30, 2021 is as follows: Common Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 914,539 $ 2.66 Granted 3,012,048 4.58 Conversion of preferred stock warrants upon IPO 51,642 7.66 Exercised (386,881) 4.57 Forfeited — — Outstanding - September 30, 2021 3,591,348 $ 4.13 Exercisable at September 30, 2021 3,470,866 $ 4.10 Preferred Stock Warrants A summary of information related to preferred stock warrants for the nine months ended September 30, 2021 is as follows: Preferred Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 806,903 $ 0.49 Converted to common stock warrants upon IPO (806,903) 0.49 Exercised — — Forfeited — — Outstanding - September 30, 2021 — $ — Exercisable at September 30, 2021 — $ — Upon the IPO, all outstanding preferred stock warrants converted into common stock warrants at a ratio of 15.625:1. Stock Options 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. Upon the IPO, 2,712,000 options were granted to executives and directors at an exercise price of $4.15 per share. As of September 30, 2021, 588,000 options were available for future issuance. A summary of information related to stock options under our 2013 and 2020 Stock Plan for the nine months ended September 30, 2021 is as follows: Weighted Average Options Exercise Price Outstanding - December 31, 2020 1,163,103 $ 2.34 Granted 2,712,000 4.15 Exercised — — Forfeited — — Outstanding - September 30, 2021 3,875,103 $ 3.62 Exercisable at September 30, 2021 3,084,831 $ 3.61 Weighted average duration (years) to expiration of outstanding options at September 30, 2021 8.27 Stock-based compensation expense of $134,113 and $5,779 was recognized for the three months ended September 30, 2021 and 2020, and $4,155,641 and $105,643 was recognized for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, $537,550 was recorded to sales and marketing expense, and all other stock compensation was included in general and administrative expense in the condensed consolidated statements of operations. Total unrecognized compensation cost related to non-vested stock option awards as of September 30, 2021 amounted to $1,164,223 and will be recognized over a weighted average period of 2.48 years. | NOTE 10: SHARE-BASED PAYMENTS Common Stock Warrants In March 2017, the lender of venture debt was 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, see Note 7. During the year ended December 31, 2020, 493,462 common stock warrants were granted under the terms of the loan, respectively, to the lender with an exercise price of $2.50 per share and a ten-year contractual life. The 2020 warrants granted were valued at $184,191 using the below range of inputs using the Black-Scholes model. During the year ended December 31, 2019, 128,667 common stock warrants were granted under the terms of the loan, to the lender with an exercise price of $2.50 per share and a ten-year contractual life. In aggregate, these warrants were valued at $49,928 using the below range of inputs using the Black-Scholes model. During the Company’s Series A-3 Preferred Stock raise, the Company granted 21,279 common warrants to a funding platform in 2019, and an additional 2,603 granted in 2020. The warrants are fully vested with an exercise price of $8.28 per share, expiring in five years. The warrants contain a put option for the Company to redeem the warrants in cash in a change-in-control transaction, equal to the Black-Scholes value immediately prior to the fundamental event. The warrants also include other down-round and anti-dilution features if shares of common stock are issued or granted at a lesser value than the strike price which may also require additional warrants to be issued, such that the aggregate value of the strike price remains the same. The number of warrants also increase by 25% each six months after they are exercised in which an IPO has not occurred. As the warrants include a put option and embody an obligation for the Company to redeem these warrants in cash upon a contingent event, they are presented as a liability in the accompanying balance sheet. The Company valued the 2019 warrants at $7,700 and the 2020 warrants at $918 using a Black-Scholes model within the same inputs described below. The volatility rate of 100% was used as it is a floor volatility as defined by the warrants. As of December 31, 2020, the Company remeasured the fair value of the warrants to be $6,265, and recorded a gain due to the change in fair value of $2,353. Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.59 – 1.59% 1.47 – 2.49% Expected Dividend Yield 0.00% 0.00% Expected Volatility 58.0 – 100% 58.0 – 100% Expected Life (years) 10.00 5.00 For valuing the warrants noted above, the Company uses the same assumptions used for valuing employee options as noted below in the Stock Plan section, with the exception of the useful life which is either the contractual life or the estimated life. In connection with the Regulation D offerings in 2020, the Company issued 512 warrants to purchase common stock in connection with the notes at an exercise price of $2.50 per share. The issuance costs and warrants are recognized as a debt discount and will be amortized over the life of the notes. A summary of information related to common stock warrants for the years ended December 31, 2020 and 2019 is as follows: Common Weighted Stock Average Warrants Exercise Price Outstanding – December 31, 2018 268,656 $ 2.50 Granted 149,946 3.28 Exercised — — Forfeited (640) — Outstanding – December 31, 2019 417,962 $ 2.81 Granted 496,577 2.53 Exercised — — Forfeited — — Outstanding – December 31, 2020 914,539 $ 2.66 Exercisable at December 31, 2020 914,539 $ 2.66 Preferred Stock Warrants During the Company’s 2019 Series A-3 Preferred Stock raise, the company granted 261,430 warrants to purchase Series A-3 Preferred Stock to a funding platform. The warrants are fully vested with an exercise price of $0.53 per share, expiring in five years. The fair value of these warrants was calculated under the Black-Scholes method, using below variables, resulting in an aggregate fair value of $71,400 being recorded to additional paid-in capital and as offering costs within additional paid-in capital for the year ended December 31, 2019. 2019 Risk Free Interest Rate 2.49 % Expected Dividend Yield 0.00 % Expected Volatility 58.00 % Expected Life (years) 5.00 A summary of information related to preferred stock warrants for the years ended December 31, 2020 and 2019 is as follows: Preferred Weighted Stock Average Warrants Exercise Price Outstanding – December 31, 2018 545,473 $ 0.47 Granted 261,430 0.53 Exercised — — Forfeited — — Outstanding – December 31, 2019 806,903 $ 0.49 Exercised — — Forfeited — — Outstanding – December 31, 2020 806,903 $ 0.49 Exercisable at December 31, 2020 806,903 $ 0.49 There were no preferred stock warrants issued during the year ended December 31, 2020. Stock Plan The Company has adopted the 2013 Stock Plan, as amended and restated (the “Plan”), which provides for the grant of shares of stock options, stock appreciation rights, and stock awards (performance shares) to employees, non-employee directors, and non-employee consultants. The number of shares authorized by the Plan was 1,196,356 shares as December 31, 2020 and 2019. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of the grant and generally have a term of ten years. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award. Stock options comprise all of the awards granted since the Plan’s inception. Shares available for grant under the Plan amounted to 33,253 and 112,140 as of December 31, 2020 and 2019, respectively. Vesting generally occurs over a period of immediately to four years. A summary of information related to stock options for the years ended December 31, 2020 and 2019 is as follows: Weighted Average Options Exercise Price Outstanding – December 31, 2018 1,136,091 $ 2.34 Granted 168,525 3.28 Exercised — — Forfeited (220,401) — Outstanding – December 31, 2019 1,084,215 $ 2.50 Granted 91,688 0.94 Exercised — — Forfeited (12,800) 3.28 Outstanding – December 31, 2020 1,163,103 $ 2.34 Exercisable at December 31, 2020 880,955 $ 2.34 Weighted average grant date fair value of options granted during period $ 0.500 Weighted average duration (years) to expiration of outstanding options at December 31, 2020 6.02 The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company used the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of options grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option. The number of stock award forfeitures are recognized as incurred. The assumptions utilized for option grants during the years ended December 31, 2020 and 2019 are as follows: Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.42% – 0.51% 1.59% – 2.55% Expected Dividend Yield 0% 0% Expected Volatility 58% 58% Expected Life (years) 6.25 6.25 Weighted Average fair value of stock options granted $0.50 $0.26 The total grant-date fair value of the options granted during the years ended December 31, 2020 and 2019 was $46,253 and $39,441, respectively. Stock-based compensation expense of $144,775 and $172,491 was recognized for the years ended December 31, 2020 and 2019, 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 December 31, 2020 amounted to $238,275 and will be recognized over a weighted average period of 1.80 years. 2020 Incentive Stock Plan We have adopted a 2020 Omnibus Incentive Stock Plan (the “2020 Plan”). An aggregate of 3,300,000 shares of our 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. To date, no grants have been made under the 2020 Plan. |
LEASE OBLIGATIONS_2
LEASE OBLIGATIONS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
LEASE OBLIGATIONS | ||
LEASE OBLIGATIONS | NOTE 11: LEASE OBLIGATIONS In April 2021, the Company entered into a lease agreement for operating space in Los Angeles, California. The lease expires in June 2023 and has monthly base rent payments of $17,257. The lease required a $19,500 deposit. H&J leases office and showroom facilities in Dallas and Houston, Texas, and New Orleans, Louisiana. The leases expire at various dates through June 2022 with base rents ranging from $3,400 to $6,500. Stateside leases office and showroom facilities in Los Angeles, California. The leases expire at various dates through November 2021 with base rents ranging from $3,100 to $9,000. Total rent expense for the three months ended September 30, 2021 and 2020 was $246,103 and $106,702, and $551,944 and $570,051 for the nine months ended September 30, 2021 and 2020, respectively. | NOTE 12: 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 minimum lease payments under the operating leases is $442,253 in 2021, $455,521 in 2022, $456,202 and $76,290 in 2023. Total rent expense for the year ended December 31, 2020 and 2019 was $541,146 and $210,352, respectively. |
CONTINGENCIES_2
CONTINGENCIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
CONTINGENCIES | ||
CONTINGENCIES | NOTE 12: CONTINGENCIES 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 making payments each month and this matter will be settled by March 2022. 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. | NOTE 13: CONTINGENCIES We were in a lawsuit with our Los Angeles landlord in 2019. In February 2020, we 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 DBG vendor filed a lawsuit against DBG’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 is actively working to resolve this matter. On December 21, 2020, a DBG 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. We plan to contest any such damages vigorously. Except as may be set forth above the Company are not a party to any legal proceedings, and the Company are 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 our ordinary course of business, the resolution of which the Company do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. |
INCOME TAXES_2
INCOME TAXES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
INCOME TAXES | ||
INCOME TAXES | NOTE 13: INCOME TAXES The Company recorded a tax benefit of $1,100,200 | NOTE 11: INCOME TAXES Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets using accelerated depreciation methods for income tax purposes, share-based compensation expense, and for net operating loss carryforwards. As of December 31, 2020 and 2019, the Company had net deferred tax assets before valuation allowance of 9,128,614 and $6,047,117, respectively. The following table presents the deferred tax assets and liabilities by source: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 9,134,447 $ 6,060,102 Stock-based compensation 40,467 36,829 Deferred tax liabilities: Depreciation timing differences (5,103) (5,103) Other (41,198) (44,711) Valuation allowance (9,128,614) (6,047,117) Net deferred tax assets $ — $ — The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due to taxable losses for the years ended December 31, 2020 and 2019, cumulative losses through December 31, 2020, and no history of generating taxable income. Therefore, valuation allowances of $9,128,614 and $6,047,117 were recorded as of December 31, 2020 and 2019, respectively. Valuation allowance increased by $3,081,497 and $1,689,947 during the years ended December 31, 2020 and 2019, respectively. Accordingly, a $13,641 and $800 provision for income taxes has been recognized for each of the years ended December 31, 2020 and 2019. Deferred tax assets were calculated using the Company’s combined effective tax rate, which it estimated to be approximately 28.0%. The effective rate is reduced to 0% for 2020 and 2019 due to the full valuation allowance on its net deferred tax assets. The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. At December 31, 2020 and 2019, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of approximately $32,680,000 and $21,650,000, which may be carried forward indefinitely. The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense. The Company is not presently subject to any income tax audit in any taxing jurisdiction, though all tax years from 2017 on remain open to examination. |
SUBSEQUENT EVENTS_2
SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUBSEQUENT EVENTS. | ||
SUBSEQUENT EVENTS | NOTE 14: SUBSEQUENT EVENTS Management’s Evaluation On October 1, 2021, FirstFire Global Opportunities Fund, LLC (“FirstFire”) purchased from the Company a senior secured convertible note (the “FirstFire Note”), with an interest rate of 6% per annum, having a face value of $1,575,000 for a total purchase price of $1,500,000, secured by an all assets of the Company. The Company received net proceeds of $1,380,000. The FirstFire Note, in the principal amount of $1,575,000, bears interest at 6% per annum and is due and payable 18 months from the date of issuance, unless sooner converted. The FirstFire Note is convertible at the option of FirstFire into shares of the Company’s common stock at a conversion price (the “FirstFire Conversion Price”) which is the lesser of (i) 130% of the closing price on the last trading day prior to the issue date, and (ii) 90% of the average of the two lowest VWAPs during the five consecutive trading day period preceding the delivery of the notice of conversion. FirstFire is not permitted to submit conversion notices in any thirty day period having conversion amounts equaling, in the aggregate, in excess of $500,000. If the FirstFire Conversion Price set forth in any conversion notice is less than $3.00 per share, the Company, at its sole option, may elect to pay the applicable conversion amount in cash rather than issue shares of its common stock. | NOTE 14: SUBSEQUENT EVENTS 1) The Company received an additional $438,126 in net proceeds from its Regulation D convertible debt offering. 2) In February 2021 the Company was notified that their 2nd Round PPP Loan application was approved by the Small Business Association. Per the terms of the PPP Loan, the Company received total proceeds of $1,347,050 . The Loan matures in two years from the effective date of the Loan and has a fixed interest rate of 1% per annum. 3) In April 2021, certain officers and directors agreed to convert balances due totaling $442,597 into convertible notes on the same terms as the 2020 Regulation CF Offering described in Note 7, other than these notes carry no interest. 4) In March 2021, the Company and their senior credit facility agreed to extend the term of the credit agreement, see Note 7. On May 12, 2021, the Board of Directors approved a one-for- 15.625 Management’s Evaluation Management has evaluated subsequent events through April 12, 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 ACCOU_17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
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”). | 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 | Unaudited Interim Financial Information The accompanying unaudited condensed consolidated balance sheet as of September 30, 2021, the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 and of cash flows for the nine months ended September 30, 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 | Principles of Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Bailey, H&J and Stateside from the dates of acquisition. All inter-company transactions and balances have been eliminated on consolidation. | Principles of Consolidation These 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. | 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 September 30, 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. | 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 December 31, 2020 and 2019, 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, prepaid expenses, 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. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values: Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 28,195 $ — $ 28,195 Contingent consideration — — 10,527,910 10,527,910 Derivative liability — — 2,486,843 2,486,843 $ — $ 28,195 $ 13,014,753 $ 13,042,948 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ 6,265 $ 6,265 $ — $ — $ 6,265 $ 6,265 Warrant Liability Certain of the Company’s common stock warrants are carried at fair value. As of December 31, 2020, the fair value of the Company’s common stock warrant liabilities was measured under the Level 3 hierarchy using the Black-Scholes pricing model as the Company’s underlying common stock had no observable market price (see Note 10). The warrant liability was valued using a market approach. Upon the IPO, the warrant liabilities were valued using quoted prices of identical assets in active markets, and was reclassified under the Level 2 hierarchy. Changes in common stock warrant liability during the nine months ended September 30, 2021 are as follows: Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value 21,930 Outstanding as of September 30, 2021 $ 28,195 Contingent Consideration The Company records a contingent consideration liability relating to stock price guarantees included in its acquisition and consulting agreements. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the contingent consideration liability related to the Company’s business combinations is valued using the Monte Carlo simulation model. The Monte Carlo simulation inputs include the stock price, volatility of common stock, timing of settlement and resale restrictions and limits. The fair value of the contingent consideration is then calculated based on guaranteed equity values at settlement as defined in the acquisition agreements. Changes in contingent consideration liability during the nine months ended September 30, 2021 are as follows: Contingent Consideration Liability Balance as of December 31, 2020 $ — Initial recognition in connection with acquisition of Harper & Jones 3,421,516 Stock price guarantee per consulting agreement 67,000 Change in fair value 7,039,394 Outstanding as of September 30, 2021 $ 10,527,910 Derivative Liability In connection with the Company’s convertible note with Oasis Capital, LLC (“Oasis”), the Company recorded a derivative liability (see Note 7). The estimated fair value of the derivative liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The fair value of the derivative liability is valued using a multinomial lattice model. The multinomial lattice inputs include the underlying stock price, volatility of common stock and remaining term of the convertible note. Changes in derivative liability during the nine months ended September 30, 2021 are as follows: Derivative Liability Outstanding as of December 31, 2020 $ — Initial fair value on issuance of convertible note 1,858,887 Change in fair value 627,956 Outstanding as of September 30, 2021 $ 2,486,843 | 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 year ended December 31, 2020 and 2019 are as follows: Warrant Liability Oustanding as of December 31, 2018 $ — Warrants granted 7,700 Oustanding as of December 31, 2019 7,700 Warrants granted 918 Change in fair value (2,353) Oustanding as of December 31, 2020 $ 6,265 |
Inventory | Inventory Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for DSTLD and first-in, first-out method for Bailey and Stateside. The inventory balances as of September 30, 2021 and December 31, 2020 consist substantially of finished good products purchased or produced for resale, as well as any raw materials the Company purchased to modify the products and work in progress. | 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 December 31, 2020 and 2019 consist substantially of finished good products purchased or produced for resale, as well as any materials the Company purchased to modify the products. |
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 September 30, 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 $25,263 and $306,845 for the three months ended September 30, 2021 and 2020, and $62,061 and $487,402 for the nine months ended September 30, 2021 and 2020, respectively. | 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 December 31, 2020 and 2019 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 $283,024 December 31, 2020 2019 Computer equipment $ 57,810 $ 57,004 Furniture and fixtures 207,140 70,108 Leasehold improvements 69,274 40,351 334,224 167,463 Accumulated depreciation (334,224) (97,703) Property and equipment, net $ — $ 69,760 Software $ 278,405 $ 56,450 Accumulated amortization (216,092) (53,617) Software, net $ 62,313 $ 2,833 During the year ended December 31, 2020, the Company disposed of certain assets, primarily related to leasehold improvements and related fixtures, in relation to the termination of various leases and contracts that were acquired with Bailey. During the year ended December 31, 2020, a total of approximately $2,202,000 in property and equipment was disposed, resulting in a loss on disposal of $848,927 after disposal costs, which is included in operating expenses in the accompanying consolidated statement of operations. |
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 | 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. Brand names and other assets with indefinite lives are not subject to amortization. The estimated useful lives of amortizable intangible assets are as follows: Customer relationships 3 years |
Contingent Consideration | Contingent Consideration The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair in the consolidated statement of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. The contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid in capital in the stockholders’ equity section of the Company’s consolidated balance sheets. | |
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. | 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. In the first quarter of 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 September 30, 2021. | 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 quantitative goodwill impairment test in the first quarter every year. During the year ended December 31, 2020, management performed a quantitative impairment test after evaluating qualitative factors due to COVID-19. The Company determined that the fair value of the reporting unit exceeded the carrying amount, and therefore no goodwill impairment was recognized as of December 31, 2020. The Company made this determination by observing average market multiples on revenue for similar companies against current and expected revenue levels of the Bailey unit acquired and comparing such against the carrying value of the Bailey unit, which resulted in the estimated fair value exceeding the carrying value. |
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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. As such, the Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. | 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. At September 30, 2020, management determined that certain events and circumstances occurred, primarily the reduction in revenues due to COVID-19, that indicated that the carrying value of the Company’s brand name asset may not be recoverable. The Company calculated the estimated fair value of the brand name based on a relief of royalty model using revised revenue projections and discount rates believed to be appropriate. The Company compared the estimated fair value of the brand name with its carrying value and recorded an impairment loss of $784,500 in the consolidated statements of operations. |
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. | 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, (b) 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. | 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’ deficit. 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 $20,041 and $5,229 as of September 30, 2021 and December 31, 2020, respectively, and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. | 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 certain products 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. ASC 606 has been adopted effective January 1, 2019 using the modified retrospective method with no adjustment. The reserve for returns totaled $5,229 and $100,000 as of December 31, 2020 and 2019, 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. | 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 distribution costs. Total shipping and handling billed to customers as a component of net revenues was approximately $6,500 and $3,900 for the nine months ended September 30, 2021 and 2020, respectively. Total shipping and handling costs included in distribution costs were approximately $81,000 and $36,000 for the three months ended September 30, 2021 and 2020, and $200,000 and $140,000 for the nine months ended September 30, 2021 and 2020, respectively. | 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 $3,900 and $39,000 for the years ended December 31, 2020 and 2019, respectively. Total shipping and handling costs included in distribution costs were approximately $246,000 and $357,000 for the years ended December 31, 2020 and 2019, respectively. |
Advertising and Promotion | Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the three months ended September 30, 2021 and 2020 amounted to approximately $12,000 and $0, and $16,000 and $100,000 for the nine months ended September 30, 2021 and 2020,respectively. The amounts are included in sales and marketing expense. | Advertising and Promotion Advertising and promotional costs are expensed as incurred. Advertising and promotional expense for the years ended December 31, 2020 and 2019 amounted to approximately $146,000 and $579,000, 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 September 30, 2021 and December 31, 2020, the Company did not have any derivative instruments that were designated as hedges. | 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 December 31, 2020 and 2019, the Company did not have any derivative instruments that were designated as hedges. The Company adopted Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. |
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 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. | 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 December 31, 2020, the Company had capitalized $214,647 in deferred offering costs. Upon completion of the IPO in May 2021, all capitalized deferred offering costs were charged to additional paid-in capital. As of September 30, 2021, the Company capitalized $367,696 in deferred offering costs pertaining to its equity line of credit agreement with Oasis (Note 8). | 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 December 31, 2020, the Company had capitalized $214,647 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 September 30, 2021 our operating segments included: DSTLD, Bailey, H&J and Stateside. Each operating segment currently reports to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale, in store 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. | 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 December 31, 2020 our operating segments included: DSTLD and Bailey 44. Each operating segment has a current report 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. | 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 September 30, 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 September 30, 2021 and 2020 are as follows: September 30, 2021 2020 Convertible notes 2,240,426 — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,591,348 794,569 Preferred stock warrants — 806,903 Stock options 3,895,103 1,129,503 Total potentially dilutive shares 9,706,877 65,655,685 All shares of preferred stock were convertible into shares of common stock at a ratio of 15.625:1 per share. Upon the closing of the 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. Additionally, all preferred stock warrants converted into 51,642 common stock warrants at the same ratio as the underlying preferred stock conversion. | 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 December 31, 2020 and 2019, diluted net loss per share is the same as basic net loss per share for each year. Potentially dilutive items outstanding as of December 31, 2020 and 2019 are as follows: December 31, 2020 2019 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 8,223,036 Series B Preferred Stock (convertible to common stock) 20,754,717 — Common stock warrants 914,539 417,962 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 42,960,089 All shares of preferred stock are convertible into shares of common stock at a ratio of 15.625:1 per share. See Note 14. |
Concentrations | Concentrations The Company utilized five vendors that made up 39% of all inventory purchases during the nine months ended September 30, 2021 and two vendors that made up 39% of all inventory purchases during the nine months ended September 30, 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. | Concentrations The Company utilized three vendors that made up 41%, 31% and 28% of all inventory purchases, respectively, during the year ended December 31, 2020 and two vendors that made up 39% and 29% of all inventory purchases, respectively during the year ended December 31, 2019. 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. | Recent Accounting Pronouncements 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. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted ASU-2018-13 as of January 1, 2020, which did not materially affect our consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350) (“ASU 2017-04”), which provides for the elimination of Step 2 from the goodwill impairment test. If impairment charges are recognized, the amount recorded will be the amount by which the carrying amount exceeds the reporting unit’s fair value with certain limitations.ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 with early adoption allowed. The Company has early adopted ASU 2017-04 as of January 1, 2020. 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 ACCOU_18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Schedule of financial assets and liabilities measured at fair value on recurring basis | Fair Value Measurements as of September 30, 2021 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ 28,195 $ — $ 28,195 Contingent consideration — — 10,527,910 10,527,910 Derivative liability — — 2,486,843 2,486,843 $ — $ 28,195 $ 13,014,753 $ 13,042,948 Fair Value Measurements as of December 31, 2020 Using: Level 1 Level 2 Level 3 Total Liabilities: Warrant liability $ — $ — $ 6,265 $ 6,265 $ — $ — $ 6,265 $ 6,265 | |
Schedule of changes in common stock warrant liability | Warrant Liability Outstanding as of December 31, 2020 $ 6,265 Change in fair value 21,930 Outstanding as of September 30, 2021 $ 28,195 | Warrant Liability Oustanding as of December 31, 2018 $ — Warrants granted 7,700 Oustanding as of December 31, 2019 7,700 Warrants granted 918 Change in fair value (2,353) Oustanding as of December 31, 2020 $ 6,265 |
Schedule of changes in contingent consideration | Contingent Consideration Liability Balance as of December 31, 2020 $ — Initial recognition in connection with acquisition of Harper & Jones 3,421,516 Stock price guarantee per consulting agreement 67,000 Change in fair value 7,039,394 Outstanding as of September 30, 2021 $ 10,527,910 | |
Summary of changed in derivative liability | Derivative Liability Outstanding as of December 31, 2020 $ — Initial fair value on issuance of convertible note 1,858,887 Change in fair value 627,956 Outstanding as of September 30, 2021 $ 2,486,843 | |
Schedule of property, equipment, and software | December 31, 2020 2019 Computer equipment $ 57,810 $ 57,004 Furniture and fixtures 207,140 70,108 Leasehold improvements 69,274 40,351 334,224 167,463 Accumulated depreciation (334,224) (97,703) Property and equipment, net $ — $ 69,760 Software $ 278,405 $ 56,450 Accumulated amortization (216,092) (53,617) Software, net $ 62,313 $ 2,833 | |
Schedule of estimated useful lives of amortizable intangible assets | Customer relationships 3 years | Customer relationships 3 years |
Schedule of potentially dilutive items outstanding | September 30, 2021 2020 Convertible notes 2,240,426 — Series Seed Preferred Stock (convertible to common stock) — 20,714,518 Series A Preferred Stock (convertible to common stock) — 5,654,072 Series A-2 Preferred Stock (convertible to common stock) — 5,932,742 Series CF Preferred Stock (convertible to common stock) — 836,331 Series A-3 Preferred Stock (convertible to common stock) — 9,032,330 Series B Preferred Stock (convertible to common stock) — 20,754,717 Common stock warrants 3,591,348 794,569 Preferred stock warrants — 806,903 Stock options 3,895,103 1,129,503 Total potentially dilutive shares 9,706,877 65,655,685 | December 31, 2020 2019 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 8,223,036 Series B Preferred Stock (convertible to common stock) 20,754,717 — Common stock warrants 914,539 417,962 Preferred stock warrants 806,903 806,903 Stock options 1,163,103 1,084,215 Total potentially dilutive shares 65,809,254 42,960,089 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Business Acquisition [Line Items] | ||
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 | 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 | Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable, net 37,479 Due (to) 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 | Purchase Price Allocation Cash and cash equivalents $ 106,913 Accounts receivable 37,479 Due from/(to) factor (312,063) Inventory 3,303,660 Prepaid expenses 165,856 Deposits 187,493 Property, equipment and software 1,215,748 Goodwill 6,479,218 Intangible assets (Note 6) 8,600,000 Accounts payable (3,397,547) Accrued expenses and other liabilities (886,757) Purchase price consideration $ 15,500,000 |
Schedule of fair value of purchase price consideration | Cash $ 500,000 Common stock 8,025,542 Contingent consideration 3,421,516 Purchase price consideration $ 11,947,058 | |
Schedule of allocation of purchase price in regard to acquisition | Purchase Price Allocation Cash and cash equivalents $ 24,335 Accounts receivable, net 49,472 Inventory 77,159 Prepaid expenses 69,715 Deposits 4,415 Property, equipment and software, net 83,986 Goodwill 9,681,548 Intangible assets 3,936,030 Accounts payable (51,927) Accrued expenses and other liabilities (107,957) Deferred revenue (269,848) Due to related parties (1,361) Loan payable (148,900) Note payable - related party (299,489) Deferred tax liability (1,100,120) Purchase price consideration $ 11,947,058 | |
Business acquisition Pro Forma information | Nine Months Ended September 30, 2021 2020 Net revenues $ 7,956,477 $ 11,287,932 Net loss $ (22,853,732) $ (10,080,468) Net loss per common share $ (3.81) $ (15.18) | Year Ended December 31, 2020 2019 Net revenues $ 7,259,260 $ 30,133,934 Net loss $ (12,786,695) $ (11,868,423) Net loss per common share $ (19.25) $ (17.87) |
State side [Member] | ||
Business Acquisition [Line Items] | ||
Schedule of fair value of purchase price consideration | Cash $ 5,000,000 Common stock 3,403,196 Purchase price consideration $ 8,403,196 | |
Schedule of allocation of purchase price in regard to acquisition | Purchase Price Allocation Cash and cash equivalents $ 32,700 Accounts receivable, net 154,678 Due from factor, net 371,247 Inventory 603,626 Prepaid expenses 105,442 Deposits 9,595 Goodwill 1,610,265 Intangible assets 5,939,140 Accounts payable (374,443) Accrued expenses and other liabilities (49,053) Purchase price consideration $ 8,403,196 |
DUE FROM FACTOR (Tables)_2
DUE FROM FACTOR (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
DUE FROM FACTOR | ||
Schedule of due from factor | September 30, December 31, 2021 2020 Outstanding receivables: Without recourse $ 1,022,552 $ 151,158 With recourse 58,884 42,945 Advances 119,937 56,246 Credits due customers (107,064) (40,316) $ 1,094,309 $ 210,033 | December 31, 2020 2019 Outstanding receivables: Without recourse $ 151,158 $ — With recourse 42,945 — Advances 56,246 — Credits due customers (40,316) — $ 210,033 $ — |
GOODWILL AND INTANGIBLE ASSET_5
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
GOODWILL AND INTANGIBLE ASSETS | |
Summary of amortized and indefinite-lived intangible assets | Gross Accumulated Carrying Amount Amortization Value Amortized: Customer relationships $ 6,453,750 $ (911,544) $ 5,542,206 6,453,750 (911,544) 5,542,206 Indefinite-lived: Brand name $ 11,236,920 — 11,236,920 $ 17,690,670 $ (911,544) $ 16,779,126 |
LIABILITIES AND DEBT (Tables)_2
LIABILITIES AND DEBT (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
LIABILITIES AND DEBT | ||
Schedule of accrued expenses and other liabilities | September 30, December 31, 2021 2020 Accrued expenses $ 266,646 $ 92,074 Reserve for returns 20,041 5,229 Payroll related liabilities 1,253,639 843,704 Sales tax liability 242,021 196,410 Other liabilities 71,607 108,229 $ 1,853,954 $ 1,245,646 | December 31, 2020 2019 Accrued expenses $ 92,074 $ 188,341 Reserve for returns 5,229 100,000 Payroll related liabilities 843,704 412,155 Sales tax liability 196,410 156,707 Other liabilities 108,230 264,114 $ 1,245,646 $ 1,121,317 |
SHARE-BASED PAYMENTS (Tables)_2
SHARE-BASED PAYMENTS (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SHARE-BASED PAYMENTS | ||
Schedule of fair value measurement inputs and valuation techniques | Nine Months Ended September 30, 2020 Risk Free Interest Rate 1.54 - 1.59 % Expected Dividend Yield 0.00 % Expected Volatility 58.0 % Expected Life (years) 10.00 | Year Ended December 31, 2020 2019 Risk Free Interest Rate 0.42% – 0.51% 1.59% – 2.55% Expected Dividend Yield 0% 0% Expected Volatility 58% 58% Expected Life (years) 6.25 6.25 Weighted Average fair value of stock options granted $0.50 $0.26 |
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 3,012,048 4.58 Conversion of preferred stock warrants upon IPO 51,642 7.66 Exercised (386,881) 4.57 Forfeited — — Outstanding - September 30, 2021 3,591,348 $ 4.13 Exercisable at September 30, 2021 3,470,866 $ 4.10 Preferred Weighted Stock Average Warrants Exercise Price Outstanding - December 31, 2020 806,903 $ 0.49 Converted to common stock warrants upon IPO (806,903) 0.49 Exercised — — Forfeited — — Outstanding - September 30, 2021 — $ — Exercisable at September 30, 2021 — $ — | Weighted Average Options Exercise Price Outstanding – December 31, 2018 1,136,091 $ 2.34 Granted 168,525 3.28 Exercised — — Forfeited (220,401) — Outstanding – December 31, 2019 1,084,215 $ 2.50 Granted 91,688 0.94 Exercised — — Forfeited (12,800) 3.28 Outstanding – December 31, 2020 1,163,103 $ 2.34 Exercisable at December 31, 2020 880,955 $ 2.34 Weighted average grant date fair value of options granted during period $ 0.500 Weighted average duration (years) to expiration of outstanding options at December 31, 2020 6.02 |
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 2,712,000 4.15 Exercised — — Forfeited — — Outstanding - September 30, 2021 3,875,103 $ 3.62 Exercisable at September 30, 2021 3,084,831 $ 3.61 Weighted average duration (years) to expiration of outstanding options at September 30, 2021 8.27 |
NATURE OF OPERATIONS (Details_2
NATURE OF OPERATIONS (Details) $ / shares in Units, $ in Millions | May 13, 2021USD ($)$ / sharesshares | May 12, 2021 | Dec. 31, 2020shares | Aug. 30, 2021 | May 18, 2021 |
Subsidiary, Sale of Stock [Line Items] | |||||
Reverse stock split ratio | 0.064 | ||||
Number of shares issued | shares | 0 | ||||
Harper & Jones LLC | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | ||||
State side [Member] | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | ||||
Initial Public Offering | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Number of shares issued | shares | 2,409,639 | ||||
Share issue price | $ / shares | $ 4.15 | ||||
Warrants issued | shares | 2,771,084 | ||||
Aggregate net proceeds from the IPO, inclusive of the proceeds from the over-allotment exercise | $ | $ 8.6 | ||||
Underwriting discounts and commissions | $ | 0.8 | ||||
Estimated offering expenses | $ | 0.6 | ||||
Additional offering costs | $ | $ 0.6 | ||||
Over-allotment option | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Warrants issued | shares | 361,445 |
GOING CONCERN (Details)_2
GOING CONCERN (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Aug. 31, 2021 | Aug. 27, 2021 | |
Net loss | $ (22,659,480) | $ (8,088,980) | $ (10,728,295) | $ (5,653,973) | ||
Working capital deficit | 18,194,632 | 18,270,034 | ||||
Cash and cash equivalents | $ 254,527 | $ 575,986 | $ 40,469 | |||
Equity Purchase Agreement [Member] | ||||||
Value of Common stock to be issued under the agreement | $ 17,500,000 | $ 17,500,000 |
SUMMARY OF SIGNIFICANT ACCOU_19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and Equivalents and Concentration of Credit Risk (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Cash and cash equivalents in bank deposit | $ 250,000 | $ 250,000 |
SUMMARY OF SIGNIFICANT ACCOU_20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Liabilities, Fair Value Disclosure [Abstract] | |||
Warrant liability | $ 28,195 | $ 6,265 | |
Contingent consideration | 10,527,910 | ||
Derivative liability | 2,486,843 | ||
Total | 13,042,948 | ||
Warrant Liability | |||
Outstanding as of December 31, 2020 | 6,265 | $ 7,700 | 7,700 |
Change in fair value | 21,930 | $ (1,792) | (2,353) |
Outstanding as of September 30, 2021 | 28,195 | 6,265 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Outstanding as at beginning | 0 | ||
Initial recognition in connection with acquisition of Harper & Jones | 3,421,516 | ||
Stock price guarantee per consulting agreement | 67,000 | ||
Change in fair value | 7,039,394 | ||
Outstanding as of September 30, 2021 | 10,527,910 | 0 | |
Level 2 | |||
Liabilities, Fair Value Disclosure [Abstract] | |||
Warrant liability | 28,195 | ||
Total | 28,195 | ||
Level 3 | |||
Liabilities, Fair Value Disclosure [Abstract] | |||
Warrant liability | $ 6,265 | ||
Contingent consideration | 10,527,910 | ||
Derivative liability | 2,486,843 | ||
Total | $ 13,014,753 |
SUMMARY OF SIGNIFICANT ACCOU_21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Derivative Liability (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Outstanding as at beginning | $ 0 |
Change in fair value | 7,039,394 |
Outstanding as of September 30, 2021 | 10,527,910 |
Derivative Financial Instruments, Liabilities [Member] | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Initial fair value on issuance of convertible note | 1,858,887 |
Change in fair value | 627,956 |
Outstanding as of September 30, 2021 | $ 2,486,843 |
SUMMARY OF SIGNIFICANT ACCOU_22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Equipment, and Software (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||||
General and administrative expenses | $ 25,263 | $ 306,845 | $ 62,061 | $ 487,402 | $ 48,885 |
Capital assets | |||||
Software | 278,405 | 56,450 | |||
Accumulated amortization | (216,092) | (53,617) | |||
Software, net | 62,313 | 2,833 | |||
Computer equipment | |||||
Capital assets | |||||
Property and equipment, gross | 57,810 | 57,004 | |||
Furniture and fixtures | |||||
Capital assets | |||||
Property and equipment, gross | 207,140 | 70,108 | |||
Leasehold improvements | |||||
Capital assets | |||||
Property and equipment, gross | 69,274 | 40,351 | |||
Property and equipment | |||||
Capital assets | |||||
Property and equipment, gross | 334,224 | 167,463 | |||
Accumulated depreciation | $ (334,224) | $ (97,703) | |||
Property and equipment | Minimum | |||||
Property, Plant and Equipment [Line Items] | |||||
Lease life or expected life | 3 years | 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 | 3 years |
SUMMARY OF SIGNIFICANT ACCOU_23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Business Combinations (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful lives | 3 years | 3 years |
SUMMARY OF SIGNIFICANT ACCOU_24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Goodwill, Impairment Loss | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOU_25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Indefinite-Lived Intangible Assets (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Indefinite-lived Intangible Assets [Line Items] | |||
Impairment loss of indefinite-lived intangible assets | $ 784,500 | ||
Brand name | |||
Indefinite-lived Intangible Assets [Line Items] | |||
Impairment loss of indefinite-lived intangible assets | $ 784,500 | $ 784,500 |
SUMMARY OF SIGNIFICANT ACCOU_26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Reserve for returns | $ 20,041 | $ 5,229 | $ 100,000 |
SUMMARY OF SIGNIFICANT ACCOU_27
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Shipping and Handling (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Total shipping and handling | $ 6,500 | $ 3,900 | $ 6,500 | $ 3,900 | $ 3,900 | $ 39,000 |
Total shipping and handling costs included in distribution costs | $ 81,000 | $ 36,000 | $ 200,000 | $ 140,000 | $ 246,000 | $ 357,000 |
SUMMARY OF SIGNIFICANT ACCOU_28
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising and Promotion (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Advertising and promotional expense | $ 12,000 | $ 0 | $ 16,000 | $ 100,000 | $ 146,000 | $ 579,000 |
SUMMARY OF SIGNIFICANT ACCOU_29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred Offering Costs (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred offering costs | $ 214,647 | |
Deferred offering costs capitalized | $ 367,696 | $ 214,647 |
SUMMARY OF SIGNIFICANT ACCOU_30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Net Loss per Share (Details) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021shares | Sep. 30, 2020shares | Dec. 31, 2020shares | Dec. 31, 2019shares | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 9,706,877 | 65,655,685 | 65,809,254 | 42,960,089 |
Convertible ratio | 15.625 | 15.625 | ||
Preferred stock convertible into shares of common stock | 62,924,710 | |||
Shares of common stock | 4,027,181 | |||
Common stock warrants | 51,642 | |||
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 3,895,103 | 1,129,503 | 1,163,103 | 1,084,215 |
Convertible Notes Payable [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 2,240,426 | |||
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 | 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 | 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 | 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 | 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 | 8,223,036 | |
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 | 3,591,348 | 794,569 | 914,539 | 417,962 |
Preferred stock warrants | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total potentially dilutive shares | 806,903 | 806,903 | 806,903 |
SUMMARY OF SIGNIFICANT ACCOU_31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentrations (Details) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021item | Sep. 30, 2020item | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Number of vendors | 5 | 2 | 3 | 2 |
Inventory, percentage | 39.00% | 39.00% |
BUSINESS COMBINATIONS (Detail_2
BUSINESS COMBINATIONS (Details) - USD ($) | May 18, 2021 | Oct. 14, 2020 | Feb. 12, 2020 |
Business Acquisition [Line Items] | |||
Trading day immediately preceding period | 30 days | ||
Gross proceeds from common stock indemnification claims | $ 9,100,000 | ||
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 | ||
Gross proceeds from common stock indemnification claims | $ 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 interest acquired | 100.00% | ||
Business acquisition issuable amount | 40,000,000 | ||
Number of shares connection with merger | 2,192,771 | ||
Gross proceeds from common stock indemnification claims | 9,100,000 | ||
Harper & Jones LLC | Initial Public Offering | |||
Business Acquisition [Line Items] | |||
Business acquisition issuable amount | $ 9,100,000 | $ 9,100,000 | |
Cash payments | $ 500,000 |
BUSINESS COMBINATIONS - Purch_2
BUSINESS COMBINATIONS - Purchase price consideration (Details) - USD ($) | May 18, 2021 | Oct. 14, 2020 | Feb. 12, 2020 |
Harper & Jones LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | $ 11,947,058 | ||
Cash | 500,000 | $ 500,000 | |
Common stock | 8,025,542 | ||
Contingent consideration | 3,421,516 | ||
Purchase price consideration | $ 11,947,058 | ||
Bailey 44, LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | $ 15,500,000 | ||
Purchase price consideration | 15,500,000 | ||
Series B convertible preferred stock | Bailey 44, LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | 11,000,000 | ||
Purchase price consideration | 11,000,000 | ||
Promissory note payable | Bailey 44, LLC | |||
Business Acquisition [Line Items] | |||
Purchase price consideration | 4,500,000 | ||
Purchase price consideration | $ 4,500,000 |
BUSINESS COMBINATIONS - Asset_2
BUSINESS COMBINATIONS - Assets acquired and Liabilities assumed (Details) - USD ($) | May 18, 2021 | Feb. 12, 2020 | Sep. 30, 2021 | Dec. 31, 2020 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 17,771,031 | $ 6,479,218 | ||
Bailey 44, LLC | ||||
Business Acquisition [Line Items] | ||||
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 | |||
Harper & Jones LLC | ||||
Business Acquisition [Line Items] | ||||
Cash and cash equivalents | $ 24,335 | |||
Accounts receivable, net | 49,472 | |||
Inventory | 77,159 | |||
Prepaid expenses | 69,715 | |||
Deposits | 4,415 | |||
Property, equipment and software, net | 83,986 | |||
Goodwill | 9,681,548 | |||
Intangible assets | 3,936,030 | |||
Accounts payable | (51,927) | |||
Accrued expenses and other liabilities | (107,957) | |||
Deferred revenue | (269,848) | |||
Due to related parties | (1,361) | |||
Loan payable | (148,900) | |||
Note Payable related party | (299,489) | |||
Deferred Tax Liability | (1,100,120) | |||
Purchase price consideration | $ 11,947,058 |
BUSINESS COMBINATIONS - Statesi
BUSINESS COMBINATIONS - Stateside (Details) - State side [Member] | Aug. 30, 2021USD ($)shares |
Business Acquisition [Line Items] | |
Membership interests acquired in cash | $ 5,000,000 |
Value of shares of common stock transferred | shares | 1,101,538 |
Cash held in escrow | $ 375,000 |
Value of shares held in escrow | $ 375,000 |
Number of shares held in escrow | shares | 82,615 |
BUSINESS COMBINATIONS - State_2
BUSINESS COMBINATIONS - Stateside purchase price consideration (Details) - State side [Member] | Aug. 30, 2021USD ($) |
Fair value of the purchase price consideration | |
Cash | $ 5,000,000 |
Common stock | 3,403,196 |
Purchase price consideration | $ 8,403,196 |
BUSINESS COMBINATIONS - State_3
BUSINESS COMBINATIONS - Stateside Assets acquired and Liabilities assumed (Details) - USD ($) | Aug. 30, 2021 | Sep. 30, 2021 | Aug. 31, 2021 | Dec. 31, 2020 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 17,771,031 | $ 6,479,218 | ||
State side [Member] | ||||
Business Acquisition [Line Items] | ||||
Cash and cash equivalents | $ 32,700 | |||
Accounts receivable, net | 154,678 | |||
Due from factor, net | 371,247 | |||
Inventory | 603,626 | |||
Prepaid expenses | 105,442 | |||
Deposits | 9,595 | |||
Goodwill | 1,610,265 | $ 1,610,265 | ||
Intangible assets | 5,939,140 | |||
Accounts payable | (374,443) | |||
Accrued expenses and other liabilities | (49,053) | |||
Purchase price consideration | $ 8,403,196 |
BUSINESS COMBINATIONS - State_4
BUSINESS COMBINATIONS - Stateside Additional information (Details) - USD ($) | Aug. 30, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Customer relationships | |||
Business Acquisition [Line Items] | |||
Estimated useful lives | 3 years | 3 years | |
State side [Member] | |||
Business Acquisition [Line Items] | |||
Net revenue since the acquisition date | $ 530,000 | ||
Net income since the acquisition date | $ 69,000 | ||
State side [Member] | Customer relationships | |||
Business Acquisition [Line Items] | |||
Estimated useful lives | 3 years |
BUSINESS COMBINATIONS - Unaud_2
BUSINESS COMBINATIONS - Unaudited Pro Forma Financial Information (Details) - USD ($) | May 18, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Business Acquisition [Line Items] | |||||
Contingent consideration liability | $ 10,527,910 | ||||
Contingent consideration liability | 7,056,479 | ||||
Net revenues | 7,956,477 | $ 11,287,932 | $ 7,259,260 | $ 30,133,934 | |
Net loss | $ (22,853,732) | $ (10,080,468) | $ (12,786,695) | $ (11,868,423) | |
Net loss per common share | $ (3.81) | $ (15.18) | $ (19.25) | $ (17.87) | |
Harper & Jones LLC | |||||
Business Acquisition [Line Items] | |||||
Contingent consideration liability | $ 3,421,516 | $ 3,471,431 | |||
Net revenues | 1,050,000 | ||||
Net loss | $ 53,000 | ||||
Customer relationships | |||||
Business Acquisition [Line Items] | |||||
Estimated useful lives | 3 years | 3 years | |||
Customer relationships | Harper & Jones LLC | |||||
Business Acquisition [Line Items] | |||||
Estimated useful lives | 3 years |
DUE FROM FACTOR (Details)_2
DUE FROM FACTOR (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Debt Instrument [Line Items] | ||
Outstanding receivables, Without recourse | $ 1,022,552 | $ 151,158 |
Outstanding receivables, With recourse | 58,884 | 42,945 |
Advances | 119,937 | 56,246 |
Credits due customers | (107,064) | (40,316) |
Due from factor | $ 1,094,309 | $ 210,033 |
Debt instrument variable rate | 50.00% | |
Maximum advances on net sales can be requested, percentage | 50.00% | |
Spread on variable interest rate | 50.00% | |
LIBOR | ||
Debt Instrument [Line Items] | ||
Debt instrument variable rate | 2.50% | |
Maximum advances on net sales can be requested, percentage | 2.50% | |
Spread on variable interest rate | 2.50% | |
State side [Member] | ||
Debt Instrument [Line Items] | ||
Maximum commission and fees payable | $ 30,000 | |
Interest rate | 4.00% | |
State side [Member] | Prime Rate [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument variable rate | 2.00% | |
Maximum commission and fees payable | $ 30,000 | |
Spread on variable interest rate | 2.00% |
GOODWILL AND INTANGIBLE ASSET_6
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
May 31, 2021 | Feb. 28, 2021 | Feb. 29, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Aug. 31, 2021 | Aug. 30, 2021 | |
Indefinite-lived Intangible Assets [Line Items] | ||||||||||
Goodwill acquired | $ 9,681,548 | $ 6,479,218 | $ 6,479,218 | |||||||
Gross Amount | $ 6,453,750 | $ 6,453,750 | $ 1,100,000 | |||||||
Accumulated Amortization | (911,544) | (911,544) | (320,833) | |||||||
Carrying Value-Amortized | 5,542,206 | 5,542,206 | 779,167 | |||||||
Indefinite-lived | 17,690,670 | 17,690,670 | 7,815,500 | |||||||
Intangible Assets, Net (Excluding Goodwill), Total | 16,779,126 | 16,779,126 | 7,494,667 | |||||||
Amortization expense | 355,808 | $ 91,667 | 590,711 | $ 229,167 | 320,833 | |||||
Goodwill | 17,771,031 | 17,771,031 | 6,479,218 | |||||||
Impairment loss of indefinite-lived intangible assets | 784,500 | |||||||||
State side [Member] | ||||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||||
Goodwill | $ 1,610,265 | $ 1,610,265 | ||||||||
Customer relationships | ||||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||||
Gross Amount | 6,453,750 | 6,453,750 | 1,100,000 | |||||||
Accumulated Amortization | (911,544) | (911,544) | (320,833) | |||||||
Carrying Value-Amortized | 5,542,206 | 5,542,206 | 779,167 | |||||||
Brand name | ||||||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||||||
Indefinite-lived | 11,236,920 | 11,236,920 | 6,715,500 | |||||||
Intangible Assets, Net (Excluding Goodwill), Total | $ 11,236,920 | 11,236,920 | $ 6,715,500 | |||||||
Impairment loss of indefinite-lived intangible assets | $ 784,500 | $ 784,500 |
LIABILITIES AND DEBT - Accrue_2
LIABILITIES AND DEBT - Accrued Expenses and Other Liabilities (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
LIABILITIES AND DEBT | |||
Accrued expenses | $ 266,646 | $ 92,074 | $ 188,341 |
Reserve for returns | 20,041 | 5,229 | 100,000 |
Payroll related liabilities | 1,253,639 | 843,704 | 412,155 |
Sales tax liability | 242,021 | 196,410 | 156,707 |
Other liabilities | 71,607 | 108,229 | 264,114 |
Accrued Liabilities and Other Liabilities, Total | 1,853,954 | 1,245,646 | $ 1,121,317 |
Estimated Penalties Associated With Accrued Payroll Taxes | $ 262,000 | $ 152,000 |
LIABILITIES AND DEBT - Ventur_2
LIABILITIES AND DEBT - Venture Debt (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Mar. 31, 2017 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Line of Credit Facility [Line Items] | ||||||||
Interest expense | $ 189,096 | $ 323,807 | $ 591,123 | $ 658,730 | $ 770,277 | $ 624,127 | ||
Interest expense and effective interest rate | 13.40% | 14.00% | 14.60% | 17.70% | ||||
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 | $ 147,389 | $ 144,974 | $ 241,878 | 149,948 | ||||
Loan fees and discounts from warrants unamortized balance | 0 | 147,389 | 225,720 | |||||
Venture Debt [Member] | Secured Debt | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Maximum borrowing capacity | $ 4,000,000 | |||||||
Loan bears interest rate | 12.50% | |||||||
Loan payment | $ 3,000,000 | |||||||
Gross loan | 6,001,755 | $ 4,542,544 | ||||||
Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering Prior To September 30 2021 | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Loan payment | $ 3,000,000 | |||||||
Line of credit facility days | 5 days | |||||||
Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering After September 30 2021 | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Loan payment | $ 300,000 | |||||||
Amended Venture Debt [Member] | Secured Debt | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Maximum borrowing capacity | $ 6,000,000 | |||||||
Loan bears interest rate | 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 | Follow-On Public Offering | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Loan payment | $ 3,000,000 | |||||||
Line of credit facility days | 5 days | |||||||
Amended Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering Prior To September 30 2021 | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Loan payment | $ 3,000,000 | |||||||
Line of credit facility days | 5 days | |||||||
Amended Venture Debt [Member] | Secured Debt | Secondary Follow-On Public Offering After September 30 2021 | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Loan payment | $ 300,000 |
LIABILITIES AND DEBT - Conver_2
LIABILITIES AND DEBT - Convertible Debt (Details) | Apr. 01, 2021shares | Apr. 30, 2021USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2021USD ($)shares | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)item$ / shares |
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 2,626,050 | $ 1,701,044 | |||||
Gross proceeds from converted debt conversion | $ 442,597 | ||||||
Convertible Debt 2020 Regulation CF Offering | |||||||
Debt Instrument [Line Items] | |||||||
Outstanding principal and accrued interest upon closing of IPO | $ 16,942 | ||||||
Conversion of shares | shares | 319,661 | ||||||
Convertible Debt 2020 Regulation CF Offering | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 473,650 | $ 450,308 | |||||
Interest rate of loans | 6.00% | 6.00% | 6.00% | ||||
Issuance costs | $ 69,627 | $ 33,773 | |||||
Amortization of debt issuance costs | 27,894 | ||||||
Convertible Debt 2020 Regulation D Offering | |||||||
Debt Instrument [Line Items] | |||||||
Gross proceeds received | 755,000 | ||||||
Outstanding principal and accrued interest upon closing of IPO | $ 100,000 | 100,000 | 185,000 | ||||
Amortization of debt issuance costs | $ 0 | 100,000 | |||||
Default interest expense | 132,609 | ||||||
Convertible Debt 2020 Regulation D Offering | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Gross proceeds received | $ 55,000 | $ 800,000 | $ 800,000 | ||||
Interest rate of loans | 14.00% | 14.00% | 14.00% | ||||
Debt instrument term | 9 months | 9 months | |||||
Issuance costs | $ 100,000 | $ 100,000 | |||||
Gross proceeds from converted debt conversion | $ 10,000,000 | $ 10,000,000 | |||||
Converted percentage of IPO price | 50.00% | 50.00% | |||||
Debt conversion price | $ / shares | $ 23.44 | ||||||
Common stock warrants issued | shares | 512 | 512 | |||||
Convertible Debt 2020 Regulation D Offering | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Number of shares resulting from conversion | shares | 453,437 | ||||||
Convertible Debt 2019 Regulation D Offering | 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 | Debt Converted Into Common Stock [Member] | Convertible Debt [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Number of shares resulting from conversion | shares | 362,055 |
LIABILITIES AND DEBT - Conver_3
LIABILITIES AND DEBT - Convertible Promissory Note (Details) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2021USD ($)$ / shares | Sep. 30, 2021USD ($)D$ / shares | Aug. 27, 2021USD ($) | |
Debt Instrument [Line Items] | |||
Face value | $ 72,269 | $ 72,269 | |
Derivative liability at fair value | 2,486,843 | 2,486,843 | |
Unamortized debt discount | $ 263,958 | $ 263,958 | |
Oasis Note [Member] | |||
Debt Instrument [Line Items] | |||
Interest rate | 6.00% | 6.00% | 6.00% |
Face value | $ 5,265,000 | $ 5,265,000 | $ 5,265,000 |
Total purchase price | $ 5,000,000 | ||
Term of debt | 18 months | ||
Oasis Conversion Price | $ / shares | $ 3.601 | $ 3.601 | |
Percentage of average of two lowest VWAPs during the five consecutive trading day | 90.00% | ||
Number of lowest VWAPs during the five consecutive trading day period preceding the delivery of the notice of conversion | D | 2 | ||
Number of consecutive trading days | D | 5 | ||
Period when oasis capital is not permitted to submit conversion notices | 30 days | ||
Minimum conversion amount when oasis capital is not permitted to submit conversion notices | $ 500,000 | $ 500,000 | |
Maximum conversion price for entity to elect to pay applicable conversion amount in cash rather than issue shares of its common stock | $ / shares | $ 3 | $ 3 | |
Net proceeds, after the original issue discount and issuance costs | $ 4,550,000 | ||
Debt discount which will be amortized over the life of the note | 715,000 | ||
Derivative liability at fair value | $ 1,858,887 | 1,858,887 | |
Amortization of debt discount | 102,772 | ||
Unamortized debt discount | 2,471,615 | 2,471,615 | |
Net balance after unamortized debt discount | 2,793,385 | $ 2,793,385 | |
Interest expense | $ 26,325 |
LIABILITIES AND DEBT - Loan P_2
LIABILITIES AND DEBT - Loan Payable - PPP and SBA Loan (Details) - USD ($) | Jun. 25, 2020 | Feb. 28, 2021 | Apr. 30, 2020 | Sep. 30, 2021 | May 31, 2021 |
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 72,269 | ||||
Harper & Jones LLC | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 299,489 | $ 75,000 | |||
Interest rate of loans | 12.00% | 7.76% | |||
Paycheck Protection Program, Cares Act | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 1,347,050 | $ 203,994 | |||
Interest rate of loans | 1.00% | 1.00% | |||
Interest deferral term | 6 months | ||||
Debt instrument term | 2 years | 2 years | |||
Paycheck Protection Program, Cares Act | Bailey | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 1,347,050 | $ 1,347,050 | $ 204,000 | ||
Economic Injury Disaster Loan | |||||
Debt Instrument [Line Items] | |||||
Aggregate principal amount | $ 150,000 | $ 148,900 | |||
Interest rate of loans | 3.75% | ||||
Debt instrument term | 30 years | 30 years |
LIABILITIES AND DEBT - Promis_2
LIABILITIES AND DEBT - Promissory Note Payable (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Apr. 30, 2021USD ($)shares | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($) | May 31, 2021USD ($) | |
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 72,269 | $ 72,269 | |||||
Gross proceeds received | 2,626,050 | $ 1,701,044 | |||||
Debt discount cost | 263,958 | 263,958 | |||||
Promissory note payable, current | 655,000 | 655,000 | $ 4,500,000 | ||||
Harper & Jones LLC | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 299,489 | $ 299,489 | $ 75,000 | ||||
Interest rate of loans | 12.00% | 12.00% | 7.76% | ||||
Promissory note payable | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 1,000,000 | $ 3,500,000 | $ 3,500,000 | $ 1,000,000 | |||
Gross proceeds received | $ 810,000 | ||||||
Warrants issued | shares | 120,482 | ||||||
Debt discount cost | 73,958 | 73,958 | |||||
Promissory note payable, current | 655,000 | $ 655,000 | |||||
Promissory note payable | Common Stock | |||||||
Debt Instrument [Line Items] | |||||||
Stock issued during period | shares | 20,000 | ||||||
Promissory note payable | Secondary Public Offering [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Percentage of outstanding principal | 10 | ||||||
Promissory note payable | Secondary Public Offering [Member] | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | 4,000,000 | $ 4,000,000 | |||||
Promissory note payable | Secondary Public Offering [Member] | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 2,000,000 | $ 2,000,000 | |||||
Promissory note payable | Notes Payable to Banks [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Interest rate of loans | 12.00% | 12.00% | 12.00% | ||||
Interest expense | $ 105,000 | $ 135,000 | $ 389,000 | $ 337,500 | $ 472,500 | ||
Promissory note payable | Notes Payable to Banks [Member] | Bailey | |||||||
Debt Instrument [Line Items] | |||||||
Aggregate principal amount | $ 4,500,000 | $ 4,500,000 | $ 4,500,000 |
STOCKHOLDERS' EQUITY (DEFICIT_3
STOCKHOLDERS' EQUITY (DEFICIT) (Details) | Aug. 27, 2021USD ($) | Jun. 28, 2021USD ($)$ / sharesshares | May 18, 2021USD ($)$ / sharesshares | May 13, 2021USD ($)shares | Jul. 31, 2021USD ($)shares | May 31, 2021USD ($)shares | Apr. 30, 2021shares | Sep. 30, 2021USD ($)D$ / sharesshares | Sep. 30, 2020USD ($)$ / shares | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($)shares | Sep. 30, 2021USD ($)D$ / sharesshares | Sep. 30, 2020USD ($)$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2021shares | Aug. 31, 2021USD ($) | Feb. 11, 2020shares | Sep. 30, 2018shares | ||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 125,000,000 | 77,000,000 | ||||||||||||||||||||
Preferred stock outstanding (in shares) | 20,714,518 | 20,714,518 | 20,714,518 | |||||||||||||||||||
Preferred stock liquidation preference | $ | $ 27,536,206 | $ 15,738,253 | $ 27,536,206 | |||||||||||||||||||
Percentage of affirmative votes required to remove directors from the Board | 66.3333% | |||||||||||||||||||||
Reverse stock split conversion ratio | 1-for-15.625 | |||||||||||||||||||||
Number of shares issued | 0 | |||||||||||||||||||||
Value of shares issued | $ | $ 126,837 | $ 311,312 | $ 451,603 | 2,508,300 | ||||||||||||||||||
Common stock authorized (in shares) | 200,000,000 | 110,000,000 | ||||||||||||||||||||
Common stock voting rights | one vote per share | one vote per share | ||||||||||||||||||||
Stock-based compensation expense | $ | $ 134,113 | $ 5,779 | $ 4,155,641 | $ 105,643 | $ 144,775 | $ 172,491 | ||||||||||||||||
Contingent consideration liability | $ | 10,527,910 | 10,527,910 | ||||||||||||||||||||
Proceeds from exercise of warrants | $ | 1,768,046 | |||||||||||||||||||||
Deferred offering costs | $ | 367,696 | $ 367,696 | $ 214,647 | $ 214,647 | ||||||||||||||||||
Equity Purchase Agreement [Member] | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 126,354 | |||||||||||||||||||||
Value of Common stock to be issued under the agreement | $ | $ 17,500,000 | $ 17,500,000 | ||||||||||||||||||||
Term of agreement | 24 months | |||||||||||||||||||||
Available under the equity line of credit | $ | $ 17,500,000 | $ 17,500,000 | ||||||||||||||||||||
Number of lowest closing sale prices of Common Stock during the period of twelve consecutive trading days | D | 12 | 12 | ||||||||||||||||||||
Number of consecutive trading days when there is three lowest closing sale prices of Common Stock | D | 3 | 3 | ||||||||||||||||||||
Number of consecutive trading days immediately preceding the put date | D | 5 | 5 | ||||||||||||||||||||
Maximum amount the Company may request | $ | $ 17,500,000 | |||||||||||||||||||||
Deferred offering costs | $ | $ 367,696 | $ 367,696 | ||||||||||||||||||||
Option One [Member] | Equity Purchase Agreement [Member] | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Maximum amount the Company may request | $ | $ 500,000 | $ 500,000 | ||||||||||||||||||||
Option Two [Member] | Equity Purchase Agreement [Member] | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Percentage of one lowest traded price of our common stock on the Nasdaq Capital Market | 93.00% | 93.00% | ||||||||||||||||||||
Percentage of VWAP on the Clearing Date | 93.00% | 93.00% | ||||||||||||||||||||
Percentage of closing bid price of the common stock on the Nasdaq Capital Market on the Clearing Date | 93.00% | 93.00% | ||||||||||||||||||||
Maximum amount the Company may request | $ | $ 2,000,000 | $ 2,000,000 | ||||||||||||||||||||
Initial Public Offering | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 2,409,639 | |||||||||||||||||||||
Warrants issued | 2,771,084 | |||||||||||||||||||||
Aggregate net proceeds | $ | $ 8,600,000 | |||||||||||||||||||||
Amount of debt converted into shares | $ | 2,680,289 | |||||||||||||||||||||
Underwriting commissions | $ | 800,000 | |||||||||||||||||||||
Direct offering expenses | $ | 600,000 | |||||||||||||||||||||
Underwriting discounts and commissions | $ | $ 800,000 | |||||||||||||||||||||
Initial Public Offering | Certain officers and directors | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Amount of debt converted into shares | $ | $ 257,515 | |||||||||||||||||||||
Number of shares resulting from conversion | 152,357 | |||||||||||||||||||||
Stock-based compensation expense | $ | $ 233,184 | |||||||||||||||||||||
Over-allotment option | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Warrants issued | 361,445 | |||||||||||||||||||||
April 2021 Financing | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 20,000 | |||||||||||||||||||||
Consulting agreement | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 50,000 | |||||||||||||||||||||
Guaranteed equity value of shares issued | $ | $ 250,000 | |||||||||||||||||||||
Contingent consideration liability | $ | $ 67,000 | $ 67,000 | ||||||||||||||||||||
Preferred Stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 10,000,000 | |||||||||||||||||||||
Preferred Stock | Initial Public Offering | ||||||||||||||||||||||
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 | 200,000,000 | 200,000,000 | 110,000,000 | 200,000,000 | ||||||||||||||||
Common stock par value (in dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||||||||||||
Common stock issued (in shares) | 664,167 | 664,167 | 664,167 | |||||||||||||||||||
Common stock outstanding (in shares) | 664,167 | 664,167 | 664,167 | |||||||||||||||||||
Number of warrants exercised | 355,000 | 31,881 | ||||||||||||||||||||
Proceeds from exercise of warrants | $ | $ 1,622,350 | $ 145,696 | ||||||||||||||||||||
Common Stock | H&J acquisition | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Shares issued in connection with acquisition | 2,192,771 | |||||||||||||||||||||
Common Stock | State side [Member] | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Shares issued in connection with acquisition | 1,101,538 | |||||||||||||||||||||
Common Stock | Initial Public Offering | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 2,409,639 | |||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 4.15 | |||||||||||||||||||||
Number of shares resulting from conversion | 1,135,153 | |||||||||||||||||||||
Common Stock | Over-allotment option | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 361,445 | |||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 4.15 | |||||||||||||||||||||
Aggregate net proceeds | $ | $ 1,400,000 | |||||||||||||||||||||
Underwriting discounts and commissions | $ | $ 100,000 | |||||||||||||||||||||
Series Seed Preferred Stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 0 | 0 | 20,714,518 | 20,714,518 | 20,714,518 | |||||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 20,714,518 | 20,714,518 | 20,714,518 | 20,714,518 | ||||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 20,714,518 | 20,714,518 | 20,714,518 | |||||||||||||||||
Preferred stock liquidation preference | $ | $ 5,633,855 | $ 5,633,855 | $ 5,633,855 | |||||||||||||||||||
Series A convertible preferred stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 0 | 0 | 14,481,413 | 14,481,413 | 14,481,413 | |||||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 5,654,072 | 5,654,072 | 5,654,072 | |||||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 5,654,072 | 5,654,072 | 5,654,072 | |||||||||||||||||
Preferred stock liquidation preference | $ | $ 2,713,955 | $ 2,713,955 | $ 2,713,955 | |||||||||||||||||||
Series A-2 convertible preferred stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 0 | 0 | 20,000,000 | 20,000,000 | 20,000,000 | |||||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 5,932,742 | 5,932,742 | 5,932,742 | |||||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 5,932,742 | 5,932,742 | 5,932,742 | |||||||||||||||||
Preferred stock liquidation preference | $ | $ 2,966,371 | $ 2,966,371 | $ 2,966,371 | |||||||||||||||||||
Series CF convertible preferred stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 0 | 0 | 2,000,000 | 2,000,000 | 2,000,000 | |||||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 836,331 | 126,641 | 836,331 | |||||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 836,331 | 126,641 | 836,331 | |||||||||||||||||
Preferred stock liquidation preference | $ | $ 434,890 | $ 65,863 | $ 434,890 | |||||||||||||||||||
Number of shares issued | 709,690 | 709,960 | ||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 0.52 | $ 0.52 | $ 0.44 | $ 0.44 | ||||||||||||||||||
Series A-3 convertible preferred stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 0 | 0 | 18,867,925 | 18,867,925 | 18,867,925 | |||||||||||||||||
Preferred stock issued (in shares) | 0 | 0 | 9,032,330 | 8,223,036 | 9,032,330 | |||||||||||||||||
Preferred stock outstanding (in shares) | 0 | 0 | 9,032,330 | 8,223,036 | 9,032,330 | |||||||||||||||||
Preferred stock liquidation preference | $ | $ 4,787,135 | $ 4,358,209 | $ 4,787,135 | |||||||||||||||||||
Number of shares issued | 809,294 | 809,294 | 4,775,428 | |||||||||||||||||||
Issue price (in dollars per share) | $ / shares | 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | |||||||||||||||||
Series A-3 convertible preferred stock | Preferred Stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 809,294 | 809,294 | [1] | 4,775,428 | [1] | |||||||||||||||||
Value of shares issued | $ | $ 81 | $ 81 | $ 478 | |||||||||||||||||||
Series B convertible preferred stock | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Preferred Stock, Shares Authorized | 20,754,717 | 20,754,717 | 20,754,717 | |||||||||||||||||||
Preferred stock issued (in shares) | 20,754,717 | 0 | 20,754,717 | |||||||||||||||||||
Preferred stock outstanding (in shares) | 0 | |||||||||||||||||||||
Series B convertible preferred stock | Bailey | ||||||||||||||||||||||
Class of Stock [Line Items] | ||||||||||||||||||||||
Number of shares issued | 20,754,717 | 20,754,717 | ||||||||||||||||||||
Issue price (in dollars per share) | $ / shares | $ 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | ||||||||||||||||||
Value of shares issued | $ | $ 11,000,000 | $ 11,000,000 | ||||||||||||||||||||
[1] | The shares have been retroactively restated to reflect the 1-for- 15.625 reverse stock split approved by the board of directors and shareholders in May 2021, of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock (see Note 14) |
RELATED PARTY TRANSACTIONS - _2
RELATED PARTY TRANSACTIONS - Due to Related Parties (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Due to related parties | |||
Conversion of stock, shares converted | 25,080 | ||
Advances | |||
Due to related parties | |||
Advance due to related parties | $ 104,568 | $ 194,568 | $ 194,568 |
Accrued Salary | |||
Due to related parties | |||
Advance due to related parties | $ 126,706 | 246,885 | |
Expense Reimbursements | |||
Due to related parties | |||
Advance due to related parties | $ 246,885 | $ 68,859 |
RELATED PARTY TRANSACTIONS - _3
RELATED PARTY TRANSACTIONS - Note Payable (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Face value | $ 72,269 | ||
Due from Related Parties, Current | $ 1,094,309 | $ 210,033 | |
Chief Executive Officer | |||
Related Party Transaction [Line Items] | |||
Common Stock, Shares, Issued | 127,278 | ||
Additional Stock Compensation Expense | $ 233,184 | ||
Interest rate of loans | 12.00% | 5.00% | |
State side [Member] | |||
Related Party Transaction [Line Items] | |||
Due from Related Parties, Current | $ 97,471 | ||
Notes Payable, Other Payables | Chief Executive Officer | Note Payable, Chief Executive Officer | |||
Related Party Transaction [Line Items] | |||
Increase (Decrease) in Notes Receivables | 115,000 | $ 115,000 | $ 115,000 |
Face value | $ 299,489 |
SHARE-BASED PAYMENTS - Common_3
SHARE-BASED PAYMENTS - Common Stock Warrants - General Information (Details) - USD ($) | May 13, 2021 | Jul. 31, 2021 | May 31, 2021 | Apr. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Class of Warrant or Right [Line Items] | ||||||||
Class of warrant or right, warrants issued | 355,000 | 31,881 | ||||||
Warrants value | $ 1,622,350 | $ 145,696 | ||||||
Common stock warrants | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Class of warrant or right, warrants issued | 374,048 | 493,462 | 128,667 | |||||
Warrants exercise price | $ 2.50 | $ 2.50 | $ 2.50 | |||||
Warrants value | $ 139,572 | $ 49,928 | ||||||
Common stock warrants | Initial Public Offering | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Class of warrant or right, warrants issued | 120,482 | 2,409,639 | ||||||
Warrants exercise price | $ 5.19 | $ 4.57 | ||||||
Percentage of warrants exercise price | 110.00% | |||||||
Warrants expiration term | 5 years | 5 years | ||||||
Common stock warrants | Over-allotment option | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Class of warrant or right, warrants issued | 361,445 | |||||||
Common Stock Warrants, Venture Debt Lender [Member] | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Class of warrant or right, warrants issued | 120,482 | |||||||
Warrants exercise price | $ 4.15 | |||||||
Common Stock Warrants, Funding Platform, Preferred Stock Raise [Member] | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Class of warrant or right, warrants issued | 2,603 | 2,603 | 21,279 | |||||
Warrants exercise price | $ 8.28 | $ 8.28 |
SHARE-BASED PAYMENTS - Common_4
SHARE-BASED PAYMENTS - Common Stock Warrants - Valuation (Details) | Dec. 31, 2020 | Sep. 30, 2020Y | Dec. 31, 2019 |
Risk Free Interes Rate | Minimum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.42 | 1.59 | |
Risk Free Interes Rate | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.51 | 2.55 | |
Expected Volatility | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 100 | ||
Common stock warrants | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants and Rights Outstanding, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueOptionPricingModelMember | ||
Common stock warrants | Risk Free Interes Rate | Minimum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.59 | 1.54 | 1.47 |
Common stock warrants | Risk Free Interes Rate | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 1.59 | 1.59 | 2.49 |
Common stock warrants | Expected Dividend Yield | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0 | 0 | 0 |
Common stock warrants | Expected Volatility | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 58 | ||
Common stock warrants | Expected Volatility | Minimum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 58 | 58 | |
Common stock warrants | Expected Volatility | Maximum | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 100 | 100 | |
Common stock warrants | Expected Life (years) | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 10 | 10 | 5 |
SHARE-BASED PAYMENTS - Warran_2
SHARE-BASED PAYMENTS - Warrants Roll Forward (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021$ / sharesshares | Dec. 31, 2020$ / sharesshares | Dec. 31, 2019$ / sharesshares | |
Class of Warrant or Right [Line Items] | |||
Convertible ratio | 15.625 | 15.625 | |
Common stock warrants | |||
Class of Warrant or Right [Line Items] | |||
Warrant Outstanding Beginning Balance | shares | 914,539 | 417,962 | 268,656 |
Granted | shares | 3,012,048 | 496,577 | 149,946 |
Conversion of stock warrants upon IPO | shares | 51,642 | ||
Exercised | shares | (386,881) | ||
Warrant Outstanding Ending Balance | shares | 3,591,348 | 914,539 | 417,962 |
Common Stock Warrants Exercisable | shares | 3,470,866 | ||
Weighted Average Exercise Price Outstanding Beginning Balance | $ 2.66 | $ 2.81 | $ 2.50 |
Granted | $ 4.58 | 2.53 | 3.28 |
Conversion of stock warrants upon IPO | 7.66 | ||
Exercised | $ 4.57 | ||
Weighted Average Exercise Price Outstanding Ending Balance | 4.13 | 2.66 | $ 2.81 |
Weighted Average Exercise Price Exercisable | $ 4.10 | $ 2.66 | |
Preferred stock warrants | |||
Class of Warrant or Right [Line Items] | |||
Warrant Outstanding Beginning Balance | shares | 806,903 | 806,903 | 545,473 |
Granted | shares | 261,430 | ||
Conversion of stock warrants upon IPO | shares | (806,903) | ||
Warrant Outstanding Ending Balance | shares | 806,903 | 806,903 | |
Weighted Average Exercise Price Outstanding Beginning Balance | $ 0.49 | $ 0.49 | $ 0.47 |
Granted | 0.53 | ||
Conversion of stock warrants upon IPO | 0.49 | ||
Weighted Average Exercise Price Outstanding Ending Balance | 0.49 | $ 0.49 | |
Weighted Average Exercise Price Exercisable | $ 0.49 |
SHARE-BASED PAYMENTS - Stock _2
SHARE-BASED PAYMENTS - Stock Options - Activity (Details) - $ / shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
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 | 1,084,215 | 1,136,091 |
Granted | 2,712,000 | 91,688 | 168,525 |
Forfeited | 12,800 | 220,401 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance | 3,875,103 | 1,163,103 | 1,084,215 |
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 | $ 2.50 | $ 2.34 |
Granted | 4.15 | 0.94 | 3.28 |
Forfeited | 3.28 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance | $ 3.62 | $ 2.34 | $ 2.50 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |||
Share-based Compensation Arrangement by Share-based Option Exercisable at June 30, 2021 | 3,084,831 | 880,955 | |
Share-based Compensation Arrangement by Weighted Average Exercise Price at June 30, 2021 | $ 3.61 | $ 2.34 | |
Weighted average duration (years) to expiration of outstanding options at June 30, 2021 | 8 years 3 months 7 days | 6 years 7 days |
SHARE-BASED PAYMENTS - Stock-_2
SHARE-BASED PAYMENTS - Stock-based Compensation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock-based compensation expense | $ 134,113 | $ 5,779 | $ 4,155,641 | $ 105,643 | $ 144,775 | $ 172,491 |
Unrecognized compensation cost related to non-vested stock option | 1,164,223 | $ 1,164,223 | $ 238,275 | |||
Share-based arrangement, non-vested weighted average period | 2 years 5 months 23 days | 1 year 9 months 18 days | ||||
Sales and Marketing Expense | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock-based compensation expense | $ 537,550 | $ 537,550 |
SHARE-BASED PAYMENTS - 2020 I_2
SHARE-BASED PAYMENTS - 2020 Incentive Stock Plan (Details) - $ / shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | May 13, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Aggregate shares of stock options granted | 2,712,000 | 91,688 | 168,525 | |
Initial Public Offering | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Exercise price | $ 4.15 | |||
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 | 3,300,000 | ||
Aggregate shares of stock options granted | 0 | |||
Omnibus Incentive Stock Plan, 2020 [Member] | Initial Public Offering | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract] | ||||
Common stock, capital shares reserved for future issuance | 588,000 | |||
Exercise price | $ 4.15 | |||
Aggregate shares of stock options granted | 2,712,000 |
SHARE-BASED PAYMENTS - Unrecogn
SHARE-BASED PAYMENTS - Unrecognized Compensation Cost (Details) (Imported) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized [Abstract] | ||
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | $ 1,164,223 | $ 238,275 |
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 2 years 5 months 23 days | 1 year 9 months 18 days |
SHARE-BASED PAYMENTS - Stock _3
SHARE-BASED PAYMENTS - Stock Options - Grants (Details) - shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
SHARE-BASED PAYMENTS | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 2,712,000 | 91,688 | 168,525 |
LEASE OBLIGATIONS (Details)_2
LEASE OBLIGATIONS (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Apr. 30, 2021 | Jan. 31, 2018 | Sep. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Operating lease agreements | |||||||||
Rent expense | $ 17,257 | $ 246,103 | $ 106,702 | $ 551,944 | $ 570,051 | ||||
Minimum Rent base | 3,400 | ||||||||
Maximum Rent base | 6,500 | ||||||||
Security deposit | $ 19,500 | ||||||||
State side [Member] | |||||||||
Operating lease agreements | |||||||||
Minimum Rent base | 3,100 | ||||||||
Maximum Rent base | $ 9,000 | ||||||||
Leased property | |||||||||
Operating lease agreements | |||||||||
Rent expense | $ 14,500 | ||||||||
Lease term | 36 months | ||||||||
Security deposit | $ 43,500 | ||||||||
Leased retail locations | |||||||||
Operating lease agreements | |||||||||
Rent expense | $ 246,103 | $ 541,146 | $ 210,352 |
CONTINGENCIES (Details)_2
CONTINGENCIES (Details) | Dec. 21, 2020USD ($) | Sep. 24, 2020USD ($) | Mar. 25, 2020USD ($)item | Feb. 28, 2020USD ($) | Mar. 31, 2021USD ($)item | Aug. 31, 2020USD ($)item | Feb. 29, 2020USD ($) |
Litigation Matters | |||||||
Settlement amount payable to vendor | $ 37,000 | ||||||
Number of monthly payments to be made | item | 10 | ||||||
Lawsuits filed related to prior services rendered | |||||||
Litigation Matters | |||||||
Damages sought | $ 96,900 | $ 96,900 | |||||
Number of lawsuits filed | 2 | 2 | |||||
Lease Termination | Leased property | |||||||
Operating lease agreements | |||||||
Lease liability | $ 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 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
INCOME TAXES | |||||
Income Tax Expense (Benefit) | $ 276 | $ (1,100,120) | $ 13,657 | $ 13,641 | $ 800 |
SUBSEQUENT EVENTS (Details)_2
SUBSEQUENT EVENTS (Details) | Oct. 01, 2021USD ($)D$ / shares | Sep. 30, 2021USD ($) |
Subsequent Event [Line Items] | ||
Face value | $ 72,269 | |
Subsequent Events | ||
Subsequent Event [Line Items] | ||
Percentage of closing price on the last trading day prior to the issue date | 130.00% | |
Percentage of average of two lowest VWAPs during the five consecutive trading day | 90.00% | |
Number of lowest VWAPs during the five consecutive trading day period preceding the delivery of the notice of conversion | D | 2 | |
Number of consecutive trading days | D | 5 | |
Period when oasis capital is not permitted to submit conversion notices | 30 days | |
Minimum conversion amount when oasis capital is not permitted to submit conversion notices | $ 500,000 | |
Maximum conversion price for entity to elect to pay applicable conversion amount in cash rather than issue shares of its common stock | $ / shares | $ 3 | |
Senior Notes [Member] | Subsequent Events | ||
Subsequent Event [Line Items] | ||
Interest rate | 6.00% | |
Face value | $ 1,575,000 | |
Total purchase price | 1,500,000 | |
Net proceeds | $ 1,380,000 | |
Debt instrument term | 18 months |
SUMMARY OF SIGNIFICANT ACCOU_32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Equipment, and Software (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | ||||||
General and administrative expenses | $ 25,263 | $ 306,845 | $ 62,061 | $ 487,402 | $ 48,885 | |
Proceeds from sale of property plant and equipment | 2,202,000 | |||||
Loss on disposal of property and equipment | $ (593,449) | $ (593,449) | (848,927) | |||
Capital assets | ||||||
Property and equipment, net | $ 97,862 | $ 97,862 | 62,313 | 72,593 | ||
Software | 278,405 | 56,450 | ||||
Accumulated amortization | (216,092) | (53,617) | ||||
Software, net | 62,313 | 2,833 | ||||
Computer equipment | ||||||
Capital assets | ||||||
Property and equipment, gross | 57,810 | 57,004 | ||||
Furniture and fixtures | ||||||
Capital assets | ||||||
Property and equipment, gross | 207,140 | 70,108 | ||||
Leasehold improvements | ||||||
Capital assets | ||||||
Property and equipment, gross | 69,274 | 40,351 | ||||
Property and equipment | ||||||
Capital assets | ||||||
Property and equipment, gross | 334,224 | 167,463 | ||||
Accumulated depreciation | $ (334,224) | (97,703) | ||||
Property and equipment, net | $ 69,760 | |||||
Property and equipment | Minimum | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Lease life or expected life | 3 years | 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 | 3 years |