UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of report (Date of earliest event reported)
September 29, 2022
DIGITAL BRANDS GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 001-40400 | 46-1942864 | |
| (Commission File Number) | (IRS Employer Identification No.) |
| 1400 Lavaca Street, Austin, TX | 78701 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(209) 651-0172
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
| Common Stock, par value $0.0001 | DBGI | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 1.01 | Entry into a Material Definitive Agreement. |
On September 29, 2022, Digital Brands Group, Inc. (the “Company”) and Bocm4-DSTLD-Senior Debt, LLC (Black Oak Capital) (the “Investor”) executed a Securities Purchase Agreement (the “SPA”) whereby the Company issued 6,300 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) to the Investor at $1,000 per share. The Series A Preferred Stock is convertible into a number of shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock), equal to $1,000 divided by the official closing price of the Common Stock on The Nasdaq Capital Market (the “Nasdaq”) on September 29, 2022. The shares of Series A Preferred Stock were issued in consideration for the cancellation of certain promissory notes issued by the Company to the Investor pursuant to that certain Loan Agreement with the Investor dated March 10, 2017, and as amended on February 28, 2019 (together with the other loan documents contemplated by the Loan Agreement, the “Loan Documents”).
On September 29, 2022, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the Series A Preferred Stock pursuant to the SPA. On October 4, 2022, the Company filed a Certificate of Correction (the “Correction”) to correct the terms of the voting rights under the Series A Preferred Stock, effective as of the time of filing. The Correction has no effect on the terms of the SPA.
In connection with the SPA, the Company entered into a Registration Rights Agreement with the Investor, dated September 29, 2022 (the “RRA”). The RRA provides that the Company shall use its commercially reasonable efforts within thirty (30) days after September 29, 2022 to prepare and file with the Securities Exchange Commission a Registration Statement covering the resale of 100% of the Common Stock issuable upon conversion of the Series A Preferred Stock for an offering to be made on a continuous basis pursuant to Rule 415.
Copies of the Certificate of Designation, the Correction, the RRA, and the SPA are filed as Exhibits 3.1, 3.2, 4.1, and 10.1 to this Current Report on Form 8-K, respectively, and are incorporated herein by reference. The foregoing descriptions of the SPA, the Certificate of Designation, the Correction, and the RRA do not purport to be complete and are qualified in their entirety by reference to the applicable exhibit.
Item 1.02
Item 1.01 is incorporated by reference herein. As described in Item 1.01, in consideration of the issuance of the shares of Series A Preferred Stock to the Investor pursuant to the SPA, the Loan Documents were terminated.
| Item 3.02 | Unregistered Sales of Equity Securities. |
Item 1.01 is incorporated by reference herein. As described in Item 1.01, under the terms of the SPA, the Company issued to the Investor the shares of Series A Preferred Stock, which issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws. |
Series A Convertible Preferred Stock
On September 29, 2022, the Company filed the Certificate of Designation with the Secretary of State for the State of Delaware designating up to 6,800 shares out of the authorized but unissued shares of its preferred stock as Series A Convertible Preferred Stock. On October 4, 2022, the Company filed the Correction with the Secretary of State for the State of Delaware to correct the terms of the voting rights under the Series A Preferred Stock. The following is a summary of the principal terms of the Series A Preferred Stock.
Dividends
Except for stock dividends or distributions for which adjustments are to be made pursuant to the Certificate of Designation, the holders of the Series A Preferred Stock (the “Holders”) shall be entitled to receive, and the Company shall pay, dividends on shares of the Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of the Series A Preferred Stock.
Voting Rights
The Holders are entitled to vote as a class as expressly provided in the Certificate of Designation and where required pursuant to applicable law (including, without limitation, the DGCL). The Holders are also entitled to vote with the holders of shares of Common Stock, voting together as one class, on all matters in which the Holders are permitted to vote with the class of shares of Common Stock pursuant to applicable law (including, without limitation, the DGCL.
With respect to any vote with the class of Common Stock, each share of the Series A Preferred Stock shall entitle the Holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible (subject to the ownership limitations specified in the Certificate of Designation) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the conversion price is calculated. To the extent that under the DGCL the vote of the Holders, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Required Holders (as defined in the Certificate of Designation) of the shares of the Preferred Stock, voting together in the aggregate and not in separate series unless required under the DGCL, represented at a duly held meeting at which a quorum is presented or by written consent of the Required Holders (except as otherwise may be required under the DGCL), voting together in the aggregate and not in separate series unless required under the DGCL, shall constitute the approval of such action by both the class or the series, as applicable. Holders shall be entitled to written notice of all stockholder meetings or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would be entitled to vote, which notice would be provided pursuant to the Company’s bylaws and the DGCL.
Ranking and Liquidation
The Series A Preferred Stock shall rank (i) senior to all of the Common Stock; (ii) senior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms junior to any Preferred Stock (“Junior Securities”); (iii) on parity with any class or series of capital stock of the Corporation created specifically ranking by its terms on parity with the Preferred Stock (“Parity Securities”); and (iv) junior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to any Preferred Stock (“Senior Securities”), in each case, as to dividends or distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily. Subject to any superior liquidation rights of the holders of any Senior Securities of the Company and the rights of the Company’s existing and future creditors, upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), each Holder shall be entitled to be paid out of the assets of the Company legally available for distribution to stockholders, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Parity Securities, an amount equal to the Stated Value (as defined in the Certificate of Designation) for each share of the Series A Preferred Stock held by such Holder and an amount equal to any accrued and unpaid dividends thereon, and thereafter the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of Common Stock would receive if the Series A Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock. The Company shall mail written notice of any such Liquidation, not less than sixty (60) days prior to the payment date stated therein, to each Holder.
Conversion
Each share of the Series A Preferred Stock shall be convertible, at any time and from time to time from and after September 29, 2022 at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d) of the Certificate of Designation) determined by dividing the Stated Value of such share of the Series A Preferred Stock ($1,000 as of September 29, 2022) by the Conversion Price (as defined below) subject to certain terms of the beneficial ownership limitation described in this Certificate of Designation. The conversion price for each share of the Series A Preferred Stock is the Nasdaq official closing price of the Common Stock on The Nasdaq Capital Market (as reflected on Nasdaq.com) on September 29, 2022, subject to adjustment herein (the “Conversion Price”).
Certain Adjustments
If the Company, at any time while the Series A Preferred Stock is outstanding, pays a stock dividend, issues stock splits, effects any subsequent rights offerings, or makes any dividend or other distribution of its assets, then the Holder can adjust the Conversion Price of the Series A Preferred Stock, acquire the purchase rights of the Company’s securities, or participate in the distribution of the Company’s assets pursuant to Section 7 of the Certificate of Designation.
Preemptive Rights
No holders will have any preemptive rights to purchase or subscribe for the Company’s Common Stock or any of its other securities.
Redemption
The Company has the option to redeem any or all of the then outstanding Series A Preferred Stock at 112% of the then Stated Value any time after September 29, 2022 and so long as there is an effective Registration Statement covering the shares issuable upon conversion of the Series A Preferred Stock.
Trading Market
The Holders can liquidate or convert the Series A Preferred Shares according to the terms of this Certificate of Designation. However, there is no established trading market for any of the Series A Preferred Stock, and the Company does not expect a market to develop. The Company does not intend to apply for a listing for any of the Series A Preferred Stock on any securities exchange or other nationally recognized trading system.
| Item 8.01 | Other Events. |
On October 3, 2022, the Company issued a press release announcing the closing of the transactions contemplated by the SPA. A copy of the press release is filed herewith as Exhibit 99.1.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DIGITAL BRANDS GROUP, INC. | ||
| Date: October 5, 2022 | ||
| By: | /s/ John Hilburn Davis IV | |
| Name: | John Hilburn Davis IV | |
| Title: | President and Chief Executive Officer | |