DIGITAL BRANDS GROUP, INC. : Entry into a Material Definitive Agreement, Unregistered Sale of Equity Securities, Financial Statements and Exhibits (form 8-K)

Item 1.01 Entry into a Material Definitive Agreement.

On December 29, 2022, Digital Brands Group, Inc. (the "Company") and various purchasers (the "Investors") executed a Securities Purchase Agreement (the "SPA") whereby the Investors purchased from the Company 20% Original Issue Discount (the "OID") promissory notes (the "Notes") in the aggregate principal amount of $4,000,000 (with an aggregate subscription amount of $3,200,000). Revere Securities LLC and Spartan Capital, LLC acted as placement agents for the offering of notes and warrants contemplated by the SPA.

The Form of Note

The Notes are due and payable on February 15, 2023 (the "Maturity Date"). The Company will also have the option to prepay the Notes with no penalties at any time prior to the Maturity Date. If the Company or any subsidiary of the Company completes a debt or equity financing of less than $4,000,000, the Company is required to repay 50% of the remaining balance of the Notes. Following such 50% repayment, the Company must also use any proceeds from any subsequent debt or equity financing to repay the Notes. Upon the closing of any debt or equity financing of $4,000,000 or greater, the Company is required to repay 100% of the Notes with no penalties.

If the Notes are not repaid in full by the Maturity Date or if any other event of default occurs, (1) the face value of the Notes will be automatically increased to 120%; (2) the Notes will begin generating an annual interest rate of 20%, which will be paid in cash monthly until the default is cured; and (3) if such default continues for 14 or more calendar days, at the Investors' discretion, the Notes shall become convertible at the option of the Investors into shares of the Company's Common Stock ("Conversion Shares") at a conversion price (the "Conversion Price") equal to the Nasdaq closing price of the Company's common stock, par value $0.0001 per share (the "Common Stock"), on the Nasdaq Capital Market (as reflected on Nasdaq.com) on the date of the note conversion (the "Default Conversion Election").

If the Investors elect such Default Conversion Election, (1) the Company shall use commercially reasonable efforts to submit to its stockholders as soon as practicable in order to obtain as soon as practicable stockholder approval for the Company to issue the number of Conversion Shares necessary to complete such conversion (inclusive of the OID) at the Conversion Price in accordance with Nasdaq Rule 5635(a)(1) and/or 5635(d) (as applicable, the "20% Rule"), Delaware corporate law and the Securities Exchange Act of 1934, as amended; (2) if such stockholder approval is obtained, such conversion shall be effected within one business day of such approval at the Conversion Price; (3) to the extent that, prior to obtaining such stockholder approval, the Company may then issue Conversion Shares at the Conversion Price without violating the 20% Rule (the "Maximum Amount"), the Company shall issue to the Investors the Maximum Amount of Conversion Shares at the Conversion Price; and (4) if such stockholder approval is not obtained within 14 calendar days of the conversion date, then the Company shall cause (i) all members of its management team to pledge their shares of common stock to the Investors to secure the repayment of amounts due under the Notes, and (ii) the Chief Executive Officer to personally guarantee the repayment of all amounts due thereunder.

The Form of Warrant and Commitment Shares

In connection with the SPA, the Company issued to the Investors an aggregate of 469,480 five-year Warrants exercisable for shares of common stock at an exercise price equal to $4.26, and 60,000 shares of Common Stock of the Company (the "Incentive Shares").

The Registration Rights Agreement

In addition, the Company entered into a Registration Rights Agreement with the Investors, dated December 29, 2022 (the "RRA"). The RRA provides that if the Notes are not repaid by the Maturity Date, the Company must file a registration statement within 45 days thereafter to register the shares of common stock then issuable upon the conversion of the Notes.

Copies of the SPA, the form of Note, and the form of Warrant are filed as Exhibits 10.1, 10.2, and 10.3 to this Current Report on Form 8-K, respectively, and are incorporated herein by reference. A copy of the RRA is filed as Exhibit 4.1 to this Current Report on Form 8-K, and is incorporated herein by reference. The foregoing descriptions of the SPA, the Notes, the Warrants, and the RRA do not purport to be complete and are qualified in their entirety by reference to the applicable exhibit.

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 Investors the Notes, Warrants, and Incentive Shares - which issuances are exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits



Exhibit
Number   Description
  4.1      Registration Rights Agreement, dated December 29, 2022, by and among
         Digital Brands Group, Inc. and the Investors
  10.1     Securities Purchase Agreement, dated December 29, 2022, by and among
         Digital Brands Group, Inc. and the Investors
  10.2     Form of Promissory Note, dated December 29, 2022, by Digital Brands
         Group, Inc. in favor each Investor
  10.3     Form of Warrant, dated December 29, 2022, by Digital Brands Group, Inc.
         in favor each Investor
104      Cover Page Interactive Data File (embedded within the Inline XBRL
         document)

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