Q2 2024 Digital Brands Group Inc Earnings Call

Speaker Change: critics

Speaker Change: Welcome to the Digital Brands Grp 2nd Quarter 2024 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

John Mcnamara: Please note, this conference is being recorded. I will now turn the conference over to your host, John McNamara of Investor Relations. You may begin.

Speaker Change: Thank you.

john mecnamara: Good afternoon, everyone, and thank you for joining us on the Digital Brands Group 2024 Second Quarter Earnings Conference Call and Webcast.

at olddayss: With us on the line for management this afternoon is Hill Davis, Chief Executive Officer.

at olddayss: We'll begin the call with an overview of the quarter and then we will open up the line for questions.

Speaker Change: As usual, we would remind you that this call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended.

Speaker Change: This may include statements regarding, among other things, the company's business strategy and growth strategy.

Speaker Change: Expressions which identify forward-looking statements speak only as of the date the statement is made.

Speaker Change: These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control.

Speaker Change: Future developments and actual results could differ materially from those set forth in these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate.

Speaker Change: With that, I will now turn the call over to Hill Davis. Go ahead, Hill.

Speaker Change: Phil, is your phone on mute?

Speaker Change: Okay, we still have Hill's line connected. I can try to dial back out to him just one moment.

Hill Datus: Hi, sorry about that. Can you can everyone hear me? Okay.

Hill Datus: Yes.

Speaker Change: All right, sorry about that. So good afternoon, everyone. And welcome to our second quarter conference call.

Speaker Change: I think the first thing I want to highlight on today's call is that we've paid off over five million in debt and other liabilities during the first half of the year, which is very significant, as you can imagine.

Speaker Change: This was driven by conversations with strategic partners as part of our strategic review, and what they wanted to see us do was start to clean up the balance sheet, which we've done now, and that was an incredibly important attribute for them, especially as they look at potential opportunities with us.

Speaker Change: Also, I'd like to highlight that we continue to get

Speaker Change: offers for our NASDAQ shell that are between three and a half to five million dollars in value plus a percentage of whatever company would be coming in that's usually 10 to 20 million.

Speaker Change: So as you can imagine, there's there's value in our shell alone.

Speaker Change: And so one of the things as part of the strategic review process was based on feedback from strategic partners, what was most critical for them to focus on and debt cleanup, which we did, which was 5 million in debt and other liabilities was a big piece of that.

Speaker Change: As part of that too, just through our sundry acquisition and

Speaker Change: and basically focusing on those synergies, we've lowered our G&A expenses by four and a half million during the first six months.

Speaker Change: We're going to continue to see those savings in the back half of the year.

Speaker Change: And in our conversations with strategic partners, that has been incredibly well received in the private markets. As you can imagine, you get your cost a good or your cost down and then any incremental revenue really starts to float to a much higher level. And so these were 2 of the big pieces. We knew the.

Speaker Change: Operating Leverage with Commons we talked about for a while the big piece and change for us was really clean up the balance sheet especially given this environment where the consumer is softer today I think you've seen you know a ton of companies report from Home Depot to you know even Walmart saying they've seen more 100k plus household income

Speaker Change: And you've seen it across Levi's and other apparel companies.

Speaker Change: For us, you know, we don't have as much exposure to the major. So we do have one big major department store asking to bring on our brands, and another one that is increasing the number of doors we're in. So we're seeing success in the wholesale market. What we've done is we kind of shifted our direct consumer marketing spend into paying off

Speaker Change: The debt and the AP per our conversations with the strategic partners. And now we're starting to turn that back on and start to ramp.

Speaker Change: We're just very thoughtful in this environment, too, because there's no reason to lean into a soft consumer. You just want to manage through this process, which we're doing, and focused on that. And despite that, we're still seeing a 2.6 to 2.9 ROAS. So what does that mean?

Speaker Change: What that means is for every dollar we spend we're getting $2.60 and $2.90 in revenue back

Speaker Change: So that usually what you, once you get to about 2x ROAS is when you start to become break-even. And so that shows you how much room we have now to continue to basically lean in and spend on the marketing side, especially since we focused the first half of the year on the cleanup. And now we're going to start to move into the growth phase again. And again, as we said, we're going to do a strategic review. And these were the conversations we've had, and this was one of the critical things that they wanted to hear. And that's been a big piece of our strategy. And now that we're basically turned digital marketing back on, we're seeing that.

Speaker Change: Launch and then we're also seeing incredible sell-through. We had a call with one of our majors two weeks ago.

Speaker Change: And we are in their top five of sell through. We continue to sell through really well. They're increasing the number of doors. They're taking products to all doors. And then like I said, as well, we have another big major that wants to add us, which we will, we're in talks with.

Speaker Change: to figure that out and onboard them as well sometime. So we're excited about how the product is selling. And really it was just a strategic decision in the first half of this year to focus on the balance sheet cleanup as opposed to the growth based on those conversations.

Speaker Change: Now that we're through that, we're starting to now work on and look back at to the growth side, especially on the DTC side, as the wholesale is there, as you can see.

Speaker Change: So we're excited about that. And we continue to think that's going to continue to grow. As we also announced a couple weeks ago, we tested a concept with Distilled called Build Your Own Bundle. And that's been incredibly successful with no digital advertising, zero digital advertising, we saw 114% growth.

Speaker Change: Actually, sorry, 150% growth in those in that brand by doing build your own bundle.

Speaker Change: And what that made us realize, that along with looking at brands such as True Classics, Fresh Clean Threads, which are all bundle concepts that have grown incredibly well, that there was a major opportunity in the women's category to build this same concept.

Speaker Change: So we've also been working on that. You're going to see that launch in the next couple of weeks, which we're really excited about. We've been beta testing it with a high success rate, and we've already had some stores lean in. We're shipping a big order this week to a store.

Speaker Change: And we're excited about where this brand is going to go and it's based on that, but in the women's space.

Speaker Change: And the nice thing about it is we can use our current infrastructure to do this. And so there's very little incremental cost. In fact,

Speaker Change: The fabrics that we're using right now came from the sundry acquisition that sundry doesn't sell on wholesale anymore. So we have zero costs on that fabric. And it's a great fabric. And what's exciting about that is you're talking about a $20 t shirt and women's that is a Nordstrom's quality, and we'll be able to with a bundle, it'll be 50 bucks, but a three unit or more bundle, it'll be 20 each. And so we're excited to see where that goes, given the success of those other brands, and especially our beta test with distilled, which is denim and a more expensive price point.

Speaker Change: to see where that goes.

Speaker Change: So we've got the we've got several growth drivers and then we've been really focused on cleaning up the balance sheet as we said. So with that, I'm going to get into the numbers.

Speaker Change: Net revenues were 3.4 million compared to 4.5 million a year ago. That also, by the way, was peak sundry before we had to kind of, we bought them, they'd already sold through this period and the brand was in slight decline to our next two comparisons are going to be a lot easier this year. But more importantly,

Speaker Change: The volume of that brand we've doubled the units sold at that brand

Speaker Change: The net revenues that we noticed were negatively impacted by no digital advertising spend.

Speaker Change: And so think about this, if we would have spent a million dollars during the quarter at a 2.6 to 2.9 ROAS,

Speaker Change: You're looking at an incremental $2.6 to $2.9 million in revenue. Now, if we were spending a million dollars, we'd expect that ROAS to come down to two to two and a half times.

Speaker Change: But you can see how quickly we can accelerate revenue again when we shift from the debt and old AP pay down being accounts payable back into a growth phase.

Speaker Change: andas we noted to the companyies paid over five milliondoars debtand other liabilities during the first half of two thousand andtwentyfour

Speaker Change: Our growth profit margins were 45.9% compared to 52% a year ago.

Speaker Change: The decline in this is all associated with the no digital revenue, very little digital revenue for the quarter. You know, the digital gross profit margin is around 75 to 80 percent.

Speaker Change: So you can imagine how that changes when you have the digital revenue growth through gross profit margin or gross profit dollars was 1.6 compared to 2.3.

Speaker Change: GNA expenses decreased $1.1 million to $2.9 million compared to $4.1 million a year ago.

Speaker Change: As we said, that is a significant reduction, both in the first quarter and the second quarter, and we expect that to continue.

Speaker Change: Keep in mind, GNA includes $1.8 million in non-cash expenses.

Speaker Change: which is primarily associated with depreciation and amortization. And of that, over approximately half that will roll off in the first quarter as the amortization of stateside acquisition, the goodwill of that, will go to zero. And it will no longer impact the P&Ls.

Speaker Change: Sales and Marketing, as you can imagine, was lower than a year ago at $615,000 versus $1.1 million, again due to no digital advertising.

Speaker Change: It was 18.1% compared to 24.4% a year ago, and we're going to start ramping that back up as we've cleaned up that balance sheet piece that we were talking about.

Unknown Executive: Net loss was 3.5 compared to a net loss of 5.7 million a year ago, which excludes a one-time cash benefit of 10.7 in a year ago period. Including this benefit, net income would have been 5 million a year ago versus a loss of 3.5.

Unknown Executive: It net loss was 3.5 compared to a net loss of 5.7 million a year ago, which excludes a one-time cash benefit of 10.7 in a year ago period. Including this benefit, net income would have been 5 million a year ago versus a loss of 3.5.

Speaker Change: net loss of three point five compared to a net loss of fivepoint seven million a year ago which excludes a onetime cash benefit at ten point seven in a year ago period including this benefit net income would have been five milliona yearago versus also three point five

Unknown Executive: Net loss per diluted share was $2.08 compared to net income per diluted share of $0.31 a year ago. But please keep in mind that included a $10.7 million benefit from a one-time non-cash gain in the quarter.

Unknown Executive: Net loss per diluted share was $2.08 compared to net income per diluted share of 31 cents a year ago. But please keep in mind that included a $10.7 million benefit from a one-time non-cash gain in the quarter.

Speaker Change: Net loss per diluted share was $2.08 compared to net income per diluted share of $0.31 a year ago. But please keep in mind that included a $10.7 million benefit from a one-time non-cash gain in the quarter.

Unknown Executive: So in closing, what I want people to realize as they look at these numbers is the first half of this year was really about cleaning up the balance sheet.

Unknown Executive: So in closing, what I want people to realize as they look at these numbers is the first half of, this year was really about cleaning up the balance sheet, and especially in the second quarter.

Speaker Change: So, in closing, what I want people to realize as they look at these numbers is, the first half of this year was really about cleaning up the balance sheet.

Unknown Executive: And especially in the second quarter, and that was driven by the fact that as everyone's reported, the consumer has been soft.

Unknown Executive: And that was driven by the fact that as everyone's reported, the consumer has been soft.

Speaker Change: and especially in the second quarter. And that was driven by the fact that as everyone's reported, the consumer has been soft. So this is the right time to really focus on the balance sheet cleanup.

Unknown Executive: So this is the right time to really focus on the balance sheet cleanup versus the growth, given what everyone's experiencing.

Unknown Executive: This is the right time to really focus on the balance sheet cleanup versus the growth given what everyone's experiencing.

Unknown Executive: As we shift into the second half of the year, especially as we move through the election and what everyone is believing will be a rate cut, we will really start to dial that growth marketing dollars back up, especially given we're getting 2.6 to 2.9 ROAS.

Unknown Executive: As we shift into the second half of the year, especially as we move through the election and what everyone is believing will be a rate cut, we will really start to dial that growth marketing dollars back up, especially given we're getting 2.6 to 2.9 ROAS.

Speaker Change: versus the growth given what everyone's experiencing. As we shift into the second half of the year, especially as we move through the election and what everyone is believing will be a rate cut, we will really start to dial that growth marketing dollars back up, especially given we're getting 2.6 to 2.9 ROAS.

Unknown Executive: I can't stress how significant that is.

Unknown Executive: I can't stress how significant that is.

Unknown Executive: Again, like for every dollar you spend, you want to continue to spend until you get to about 2X ROAS.

Speaker Change: I can't stress how

Unknown Executive: Again, like for every dollar you spend, you want to continue to spend until you get to about 2x ROAS.

Speaker Change: Significant that is.

Speaker Change: Again, like for every dollar you spend.

Unknown Executive: And there's plenty of room there.

Speaker Change: you want to continue to spend until you get to about 2x ROAS.

Unknown Executive: And there's plenty of room there.

Unknown Executive: So you've got significant room on the digital marketing side.

Speaker Change: and there's plenty of room there. So you've got significant room on the digital marketing side. You've got wholesale that continues to perform. We're in talks with a major department store about adding the brands. We're also are launching another licensed brand, Sunnyside by Sundry, where we already have our first order, which we're excited about, which will be significant licensing revenue on top of our Bailey's licensing revenue.

Unknown Executive: You've got wholesale that continues to perform.

Unknown Executive: We're in talks with a major department store about adding the brands.

Unknown Executive: We're also launching another licensed brand, Sunnyside by Sundry, where we already have our first order, which we're excited about, which will be significant licensing revenue on top of our Bailey's licensing revenue.

Unknown Executive: And then finally, we're launching the new brand in the next couple weeks, the DTC brand, that based on the distilled results as well as other brands, we believe is a huge growth driver for us. And there's zero incremental costs for us to launch that brand as we can use our current G&A structure as well as supply chain, and finally fabric that we have to really drive that going forward.

Speaker Change: And then finally, we're launching the new brand in the next couple weeks, the DTC brand that based on the distilled results as well as other brands, we believe, is a huge growth driver for us.

Speaker Change: And there's zero incremental costs for us to launch that brand as we can use our current GNA structure as well as supply chain and finally fabric that we have to really drive that going forward.

Unknown Executive: So you've got significant room on the digital marketing side.

Unknown Executive: So you've kind of got what we felt like was an important piece of our strategic review, which was focused on the balance sheet cleanup first, especially given a software consumer environment, and then start to shift back into significant growth mode as we move forward, especially given the ROAS results and then what we think will be the success of our new brand.

Speaker Change: So...

Speaker Change: You've kind of got what we felt like was an important piece of our strategic review, which was focus on the balance sheet cleanup first.

Unknown Executive: You've got wholesale that continues to perform.

Speaker Change: Especially given a software consumer environment and then start to shift back into significant growth mode as we move forward, especially given the ROAS results and then what we think will be the success of our new brand.

Unknown Executive: We're in talks with a major department store about adding the brands.

Unknown Executive: We're also launching another licensed brand, Sunnyside by Sundry, where we already have our, first order, which we're excited about, which will be significant licensing revenue on top of our Bailey's licensing revenue.

Unknown Executive: So we're excited about where we've been.

Unknown Executive: And then finally, we're launching the new brand in the next couple weeks, the DTC brand, that based on the distilled results as well as other brands, we believe is a huge growth driver for us.

Unknown Executive: And there's zero incremental calls for us to launch that brand as we can use our current GNA structure as well as supply chain and finally fabric that we have to really drive that going forward.

Unknown Executive: I know the numbers were a little bit lower, but please keep in mind that was almost all wholesale.

Speaker Change: So we're excited about where we've been. I know the numbers were a little bit lower, but please keep in mind that was almost all wholesale. There was very little digital.

Unknown Executive: There was very little digital. So if we would have focused on putting a million or half a million dollars to work in digital, we could have generated significant revenue over that timeframe.

Speaker Change: So if we would have focused on putting a million or half a million dollars to work in digital, we could have generated significant revenue over that time frame. And we did not, we focused on cleaning up the balance sheet because of strategic review, because as we reviewed what our NASDAQ shell was worth, as we reviewed what the investors would get for reverse merger, all these different things, there's significant upside that is there. And so as part of this process, that was a very important part of it. So with that, I'll turn it over to the Q&A.

Unknown Executive: So you've kind of got what we felt like was an important piece of our strategic review, which was focused on the balance sheet cleanup first, especially given a software consumer environment, and then start to shift back into significant growth mode as we move forward, especially given the ROAS results and then what we think will be the success of our new brand.

Unknown Executive: So we're excited about where we've been.

Unknown Executive: And we did not.

Unknown Executive: We focused on cleanup of the balance sheet because of the strategic review, because as we reviewed what our NASDAQ show was worth, as we reviewed what the investors would get for reverse merger, all these different things, there's significant upside that is there.

Unknown Executive: And so as part of this process, that was a very important part of it.

Unknown Executive: So with that, I'll turn it over to Q&A.

Unknown Executive: I know the numbers were a little bit lower, but please keep in mind that was almost all wholesale.

Unknown Executive: Thank you.

Unknown Executive: There was very little digital. So if we would have focused on putting a million or half a million dollars to work in digital, we could have generated significant revenue over that time frame.

Operator: At this time, we will be conducting a question and answer session.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad.

Unknown Executive: And we did not.

Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: A confirmation tone will indicate your line is in the question queue.

Unknown Executive: We focused on cleanup, the balance sheet, because it's strategic review, because it's reviewed what our NASDAQ show was worth.

Operator: You may press star 2 if you'd like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Unknown Executive: It's reviewed what the investors would get for reverse merger, all these different things.

Operator: One moment, please, while we poll for questions.

Operator: Once again, please press star 1 if you have a question or a comment.

Speaker Change: One moment please while we poll for questions. Once again, please press star 1 if you have a question or comment

Unknown Shareholder: Richard Molenski, Private Investor, Unknown Participant, USA, I am a recent shareholder of the company and my course is around $50-$60.

Unknown Executive: There's significant upside that is there.

Unknown Executive: And so as part of this process, that was a very important part of it.

Unknown Executive: So with that, I'll turn it over to Q&A.

Speaker Change: The first question comes from Richard Molenski, Private Investor. Please proceed.

Unknown Executive: Thank you.

richard melenkski: Hi, how are you?

richard melenkski: I'm a recent shareholder of the company, my course is around $1.50, $1.60, but I just was curious to find out, how do you pay off the $5 million in the debt? Was that cash that was on the balance sheet, was there an equity line on that? Just curious first how that was paid off.

Unknown Shareholder: How do you pay off the $5 million in debt?

Unknown Shareholder: Was that cash that was on the balance sheet?

Unknown Shareholder: Was there an equity line on that?

Unknown Shareholder: I am just curious how that was paid off.

Unknown Executive: It was a combination of two things primarily.

Unknown Executive: It was working capital from the business, which we continue to use to pay that down and will continue to use.

Speaker Change: Yeah, so it's a combination of two things. Primarily, it was working capital from the business, which we continue to use to pay that down, and we'll continue to use. And then secondly, except it was almost 100% toward that. And then secondly, we did that Warren exchange.

Unknown Executive: Secondly, we did that Warren Exchange in May and we used a lot of that. It was $3.3 million before all the fees and everything else. It was approximately $2.8 million after all fees and expenses.

Speaker Change: in May, and we used a lot of that, you know, it was 3.3 million before, you know, all the fees and everything else is approximately 2.8 after all fees and expenses. And that was the that was a piece of it. So it's both working capital as well as that piece. Okay.

Unknown Executive: That was a piece of it.

Unknown Executive: It was both working capital as well as that piece.

Unknown Shareholder: My biggest concern is also when you look at the balance sheet, you see the current assets, over current liabilities.

Speaker Change: My biggest concern is also, when you look at the balance sheet, you see the current assets over current liabilities.

Unknown Shareholder: I like the business that you have and I think what you are saying in the second half, could be very exciting for me as a shareholder in the company.

Speaker Change: You know, I like the business that you have. And I think what you're saying the second half could be very exciting for me as a shareholder in the company.

Unknown Shareholder: My biggest concern is are you going to be okay with the capital that you currently have, or have you publicly disclosed that you are going to be looking to raise more money in the second half of this year to have that growth?

Speaker Change: but my biggest concern is are you going to be okay with the capital that you currently have or have you publicly disclosed that you're going to be looking to raise more money in the second half of this year to have that growth, you know, do you have enough at this point?

Unknown Shareholder: Do you have enough at this point?

Unknown Executive: I think we are just taking it week by week.

Unknown Executive: We are looking at everything that is going on and what makes sense and what doesn't, make sense.

Speaker Change: Yeah, I think we're just taking it week by week. You know, we're looking at everything that's going on and what makes sense and what doesn't make sense. We know the warning exchange came out of just kind of an offer out of nowhere, and it gave us an opportunity to clean up some stuff. Sure. So we'll be proactive where it makes sense.

Unknown Executive: The Warren Exchange came out of nowhere and it gave us an opportunity to clean up, some stuff.

Unknown Executive: We will be proactive where it makes sense.

Unknown Executive: I think the other thing as we look at it is what do we ever get credit for?

Speaker Change: I think the other thing as as we look at it is, you know, what do we ever get credit for? you know, we got to start getting credit for something and

Unknown Executive: We have to start getting credit for something. Especially in talks in the private markets, they look at the business, they look at the, baseline business and they feel like the interesting thing is the valuation we get in the private market seems drastically different than what we get in the public markets to the positive in the private markets.

Speaker Change: And so that's, you know, especially in talks in the private markets, you know, they look at the business, they look at the baseline business, and they feel like

Speaker Change: The interesting thing is the valuation we get in the private market seems drastically different than when we get in the public markets to the positive in the private markets, which there shouldn't be such a disassociation between those two markets, especially when it's private values you more than the public.

Unknown Executive: There shouldn't be such a disassociation between those two markets, especially when, private values you more than the public.

Unknown Executive: I understand that.

Unknown Executive: At the end of the day, they do see the last quarter was off, we are still losing money.

Speaker Change: No, I understand that. But at the end of the day, you know, they do see the last quarter was was off, we're still losing money. My biggest concern is that can we can you

Unknown Executive: My biggest concern is can you go the next six months and prove to Wall Street that what, you are discussing publicly is a chance that is going to happen?

Speaker Change: Go the next six months and prove to Wall Street that, look, what you're discussing publicly.

Unknown Executive: We are going to see a nice ramp up.

Unknown Executive: Now you don't have the debt expense.

Speaker Change: is a chance that's going to happen. We're going to see a nice ramp up, you know? And now you don't have the debt expense, but I'm just concerned that, you know, do you have that capital? If we didn't have to raise money, do you have enough at this point? Because you did get that warrant money, you know?

Unknown Executive: I'm just concerned that do you have that capital?

Unknown Executive: If we didn't have to raise money, do you have enough at this point because you did, get that Warren money?

Unknown Executive: We can continue to go along this pace.

Unknown Executive: The question is what makes the most sense for the business?

Speaker Change: Yeah, we can continue to go along this pace. The question is what, what makes the most sense for the business? And that's why we're always reviewing, right? I mean, that's why, you know, we're always in talks with private investors and looking at all the different option sets, debt, convertible debt.

Unknown Executive: That's why we are always reviewing.

Unknown Executive: That's why we are always in talks with private investors and looking at all the different, option sets, debt, convertible debt, nothing, raising capital not.

Unknown Executive: It's all very fluid.

Speaker Change: nothing, uh, raising capital, not it's, it's always, it's all very fluid and we're looking at all of it. So I can't answer the question because it's always, the last thing I'll just mention is just one good thing is that if you do a raise, it's always good to see in size.

Unknown Executive: We are looking at all of it.

Unknown Executive: I can't answer the question.

Unknown Executive: The last thing I will mention is one good thing is if you do a raise, it's always good, to see insiders participating in the raise.

Unknown Shareholder: I'm always interested in that when insiders are participating.

Speaker Change: Participating the raise and that was always you know, I'm always interested in that when you guys are participating too, but look I'm looking forward to the future and seeing you know, you execute on the plan, you know that you discussed

Unknown Shareholder: I'm looking forward to the future and seeing you execute on the plan that you discussed.

Unknown Executive: It should be interesting.

Unknown Executive: Just so everyone understands on the insider, I agree with that.

Speaker Change: Should be interesting. Yeah, and I think just just don't want to understand too on the on the insider and I agree with that. The problem is, is because we are in these strategic discussions, we're

Unknown Executive: The problem is because we are in these strategic discussions, we are privy to material and, public information.

Unknown Executive: That prevents us from doing anything.

Speaker Change: Privy to material non-public information and so that prevents us from doing anything So it's kind of a double-edged sword, right? Like it's doing a strategic review and and in talks and I mean we get an offer

Unknown Executive: It's kind of a double-edged sword.

Unknown Executive: It's doing a strategic review and in talks.

Unknown Executive: We get an offer once a week to reverse.

Unknown Executive: In this market, no one can really get public.

Speaker Change: Once.

Speaker Change: a week

Speaker Change: to reverse.

Unknown Executive: The shell is worth a lot of money to people, which is really interesting.

Speaker Change: I mean, there's there's no in this market, you know, no one can really get public.

Unknown Executive: We think we have a growth concept and we think we are working.

Speaker Change: for the shells worth a lot of money to people which is really interesting you know we think we have a growth concept and we think we're working and mean you know you look at our i guess what we put up almost seven milliona revenue in in the first half of the year and we're trading what a fraction of even that

Unknown Executive: You look at what we put up, almost $7 million in revenue in the first half of the year.

Unknown Executive: We are trading a fraction of even that.

Unknown Executive: It's kind of a good idea.

Unknown Shareholder: Oh, sorry, go ahead.

Speaker Change: So, yeah. And it's kind of an idea too, it's, oh sorry, go ahead.

Unknown Shareholder: No, here's the good news on your part.

Unknown Shareholder: Because there's a few shares out, there's not many shares outstanding on the company.

Speaker Change: No, here's the good news on your part, because there's a few shares out, there's not many shares outstanding on the company.

Unknown Shareholder: There was a company like last week, it only had like a million shares outstanding called Sealate. Stock was trading below $2 a share, and it went up to over $20 in just a couple of days because it was a small float, and they came out with some good news.

Speaker Change: There was a company like Best Week, it only had like a million shares outstanding called C-Late. Stock was trading below $2 a share, and it went up to over $20 in just a couple of days because it was a small float, and they came out with some good news. So I don't know when that's going to happen, but if you continue to come out with contracts or news,

Unknown Shareholder: So I don't know when that's gonna happen, but if you continue to come out with contracts or news, you're gonna get caught.

Unknown Shareholder: I think that someone's gonna recognize that, look, this is a small float that has exciting potential.

Speaker Change: You're going to get caught. I think that someone's going to recognize that, look, this is a small float that has exciting potential. And even Sigma traded like a billion dollars worth of stock, you know, it was amazing, you know, what happened, but it was a small float and people got excited about it, you know? So the small float is very positive, you know.

Unknown Shareholder: And even Signalite traded like a billion dollars, worth of stock.

Unknown Shareholder: You know, it was amazing, you know, what happened?

Unknown Shareholder: But it was a small float, and people got excited about it, you know?

Unknown Shareholder: So the small float is very positive, you know?

Unknown Shareholder: Well, there is a cutting edge, like it does.

Unknown Shareholder: Now, I don't think you have a lot of institutional investors, that are market cap sniffing around, but when they do, they do wanna see a larger float.

Speaker Change: There is a cutting edge like it, it, it does now. I don't think you have a lot of institutional investors that are market cap sniffing around, but when they do, they do want to see a larger, uh,

Unknown Shareholder: Having said that, you know, we're just gonna, you know, it's fine.

Speaker Change: Float, having said that.

Unknown Shareholder: We're not gonna make a decision based on float, to your point, right?

Speaker Change: Yeah, we're just gonna, you know, it's, it's fine. We're not going to make a decision based on float, to your point, right? No, no, no. Like I said, there's so... Yeah.

Unknown Shareholder: You're not gonna say- Like I said, there's so many companies with small floats that have had runs over the last year or so that people love it for some reason it's got caught up.

Speaker Change: There's so many companies with small floats that have had runs.

Unknown Shareholder: So that's an advantage, not a disadvantage, you know?

Speaker Change: over the last year or so that people love it. For some reason, it's got caught up. So that's an advantage, not a disadvantage, you know, and then when it runs up, then you could raise money at your price, you know, but hopefully you'll see that soon enough, you know, as you announce developments.

Unknown Shareholder: And then when it runs up, then you could raise money at your price, you know?

Unknown Shareholder: But hopefully you'll see that soon enough, you know, as you announce developments.

Unknown Shareholder: All right, but I appreciate your time.

Unknown Shareholder: I know I'm taking up too much time, you know?

Speaker Change: All right, but I appreciate your time. I know I'm taking up too much time, you know. Oh, sorry. No, I appreciate the questions

Unknown Executive: No, I appreciate the questions.

Unknown Shareholder: All right, thank you very much and good luck.

Unknown Shareholder: Take care.

Speaker Change: Alright, thank you very much and good luck.

Unknown Executive: Yeah, thank you.

Unknown Executive: Thank you, bye.

Operator: At this time, we will be conducting a question and answer session.

Operator: Once again, if you have a question or a comment, please indicate so by pressing star one.

Speaker Change: Yeah, thank you. Thank you. Bye.

Operator: If you would like to, ask a question, please press star one on your telephone keypad.

Speaker Change: Once again, if you have a question or a comment, please indicate so by pressing star one. Up next, we have Timothy Indactor, Private Investor. Timothy, please proceed.

Operator: A confirmation tone will indicate your line is in the question queue.

Operator: Up next, we have Timothy Indactor, private investor.

Operator: You may press star two if you'd like to remove your question from the queue.

Unknown Shareholder: Timothy, please proceed.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions.

Unknown Shareholder: The only question I have, yes, I'm here.

Operator: Once again, please press star one if you have a question or a comment.

Unknown Shareholder: The only question I have is I'm a longtime investor.

Operator: The first question comes from Richard Molenski, private investor.

Timothy: The only question I have is, I'm a long time investor.

Richard Molenski: Please proceed.

Richard Molenski: Hi, How are you?

Richard Molenski: I'm a shareholder.

Unknown Shareholder: I'm not rich.

Richard Molenski: The company that they I'm recent shareholder of the company, my courses around buck 50, buck 60.

Unknown Shareholder: I've dumped a bunch of money into this thing.

Richard Molenski: But he is.

Richard Molenski: I just was curious to find out how to pay off the five million in the debt with that cash that was on the balance sheet.

Unknown Shareholder: What are you gonna do to prevent this from RSing, from reverse splitting?

Richard Molenski: Was there an equity line on that?

Speaker Change: I'm not rich. I've dumped a bunch of money into this thing. What are you going to do?

Richard Molenski: Curious, how that was paid off?

Unknown Executive: Yeah, so it's a combination of two things.

Unknown Shareholder: I mean, are you going to start, maybe doing a stock buyback?

Speaker Change: to prevent this from RS-ing, from reverse splitting? I mean, are you going to start maybe doing a stock buyback? Are you going to, do you have any plan to prevent this from reverse splitting again?

Unknown Shareholder: Are you gonna, do you have any plan, to prevent this from reverse splitting again?

Unknown Executive: Well, I think all we can do, is continue to focus on the fundamentals, right?

Unknown Executive: I mean, that's the thing.

Speaker Change: I think all we can do is continue to focus on the fundamentals, right? I mean, that's that's the thing. It's like it's I mean, look at our market cap relative to where we are.

Unknown Executive: I mean, look at our market cap relative to where we are.

Unknown Executive: It's definitely a dislocation, and that's not lost on people in the private markets, right?

Speaker Change: It's definitely a dislocation and that's that's not lost on people in the private markets, right? Because with especially our leverage on our fixed costs.

Unknown Executive: Because with, especially our leverage on our fixed costs, I mean, we're $250,000 a month, $300,000 a month in revenue, away from being cashflow break-even.

Speaker Change: I mean, we're, we're $250,000 a month, $300,000 a month in revenue away from being cash flow breakeven. That's not a massive increase in anything, right? It's not like we've got to get up to, you know, $100 million in revenue to break even.

Operator: 14, 2024 Conference Call.

Operator: 14, 2024 Conference Call. At this time, all participants are listening only mode. A question and answer session will follow the formal presentation. Then anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

Unknown Executive: That's not a massive increase in anything, right?

Operator: At this time, all participants are listening only mode.

Unknown Executive: It's not like we've got to get up to, you know, $100 million in revenue to break even.

Unknown Executive: And so we're just gonna continue to focus on that.

Unknown Executive: We just kind of felt the big thing for us, is with the Avvo opportunity, the new brand we're launching, is, you know, there's a, in this market right now, there is value wins.

Speaker Change: And so we're just going to continue to focus on that. We just kind of felt the big thing for us is with the Avvo opportunity, the new brand we're launching is, you know, there's a in this market right now.

John Mcnamara: I will now turn the conference over to your host, John McNamara, of Investor Relations. You may begin. Thank you.

Operator: A question and answer session will follow the formal presentation.

Unknown Executive: Good afternoon, everyone, and thank you for just on the Digital Brands Group, 2024, second quarter earnings conference call and webcast.

Unknown Executive: I mean, when Walmart tells you they have, more 100,000 plus household income shoppers shopping at Walmart than they've ever seen in their history, that tells you where the consumer is.

Speaker Change: There is value wins. I mean, when Walmart tells you they have more 100,000 plus household income shoppers shopping at Walmart than they've ever seen in their history, that tells you where the consumer is. So we had a decision. Do we continue to?

Unknown Executive: So we had a decision.

Unknown Executive: With us on the line for management this afternoon is L Davis, Chief Executive Officer. We will begin the call with an overview of the quarter and then we will open up the lines, questions.

Unknown Executive: Do we continue to do what we're doing, which we're gonna do, or do we also step back and say, hey, how can we participate in this shift that consumers are experiencing?

Speaker Change: do what we're doing, which we're going to do? Or do we also step back and say, Hey, how can we participate?

Unknown Executive: As usual, we would remind you that this call may contain forward-looking statements as defined in section 27A of the Security Jack of 1933 as amended. This may include statements regarding among other things the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties some which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in these forward-looking statements. In light of these risks and uncertainties there can be no assurance that the forward-looking information will prove to be accurate.

Unknown Executive: And given that we already have a supply chain, given that we already have, you know, fabrics and products, how can we step back and figure out how to take advantage of that?

Speaker Change: in this shift that consumers are experiencing and

Speaker Change: Given that we already have a supply chain, given that we already have, you know, fabrics and products, how can we step back and figure out how to take advantage of that? And so that's what we're doing. And all that becomes incremental to us.

Unknown Executive: And so that's what we're doing.

Unknown Executive: And all that becomes incremental to us.

Unknown Executive: And I think that's what really gets exciting.

Unknown Executive: I mean, you look at our revenue, and we've had very little growth capital in a year and a half. It's all gone back to service debt and old AP.

Speaker Change: And I think that's what really gets exciting. I mean, you look at our revenue, and we've had very little growth capital in a year and a half. It's all gone back to service debt and old AP.

Unknown Executive: Primarily, it was working capital from the, business, which we continue to use to pay that down and will continue to use.

Unknown Executive: And then secondly, except it was almost 100% toward that.

Unknown Executive: So imagine as we shift into more of that mode, what can happen?

Unknown Executive: So there's not, I don't know if a share buyback, is the best use of capital right now versus starting to see where the growth is, especially after cleaning up the balance sheet, but we're gonna just focus on executing the business and see where it goes and really focus on driving that top line because we're knocking on the door of profitability.

Speaker Change: So imagine as we shift into more of that mode, what can happen? So there's not, I don't know if share buyback is the best use of capital right now versus

Speaker Change: I'm starting to see where the...

Speaker Change: where the growth is, especially after cleaning up the balance sheet, but we're going to just focus on executing the business and and see where it goes and really focus on driving that top line because

Unknown Executive: With that, I will now turn the call over to Hill Davis. Go ahead, Hill. Hill is your phone on mute. Hill, your line is live. Okay, we still have Hill's line connected. I can try to dial back out to him just one moment. All right, sorry about that. Can everyone hear me okay? Yes. All right, sorry about that.

Unknown Executive: It's not very far away.

Unknown Executive: And we believe we can achieve it, especially as we shift from cleanup balance sheet to, you know, growth, especially post-election.

Speaker Change: We're knocking on the door of possibility. It's not very far away, and we believe we can, uh,

Speaker Change: We can achieve it, especially as we shift from cleanup balance sheet to, you know, growth, especially post election. You know, the election creates a lot of hangover when you talk to people. And then I think everyone kind of feels like a Fed rate cut is coming, which I think will also help. And as those things start to get behind us, that gets really interesting for us.

Unknown Executive: You know, the election creates a lot of hangover, when you talk to people.

Unknown Executive: And then secondly, we did that Warren exchange in May, and we used a lot of that, you know, it was 3.3 million before, you know, all the fees and everything else is approximately 2.8 after all fees and expenses.

Unknown Executive: And then I think everyone kind of feels, like a Fed rate cut is coming, which I think will also help.

Unknown Executive: And that was the that was a piece of it.

Unknown Executive: So it's both working capital as well as that piece.

Richard Molenski: Okay.

Richard Molenski: My biggest concern is also when you look at the balance sheet, you see the current assets, over current liabilities.

Richard Molenski: You know, I like the business that you have.

Unknown Executive: And as those things start to get behind us, that gets really interesting for us.

Richard Molenski: And I think what you're saying the second half could be very exciting to me as a shareholder in the company.

Richard Molenski: But my biggest concern is, are you going to be okay with the capital that you currently have?

Richard Molenski: Or have you publicly disclosed that you're going to be looking to raise more money in the second, half of this year to have that growth?

Richard Molenski: You know, do you have enough at this point?

Unknown Shareholder: All right.

Richard Molenski: All right, but I appreciate your time.

Unknown Executive: Yeah, I think we're just taking it week by week.

Unknown Executive: Thank you.

Richard Molenski: I know I'm taking up too much time, you know?

Unknown Executive: You know, we're looking at everything, that's going on and what makes sense and what doesn't make sense.

Unknown Executive: Yep.

Unknown Executive: No, I appreciate the questions.

Unknown Executive: We know the Warren exchange came out of just kind of an offer out of nowhere, and it gave us an opportunity to clean up some stuff.

Unknown Executive: Thank you.

Richard Molenski: All right, thank you very much and good luck.

Unknown Executive: So we'll be proactive where it makes sense.

Unknown Executive: Thanks for the question.

Richard Molenski: Take care.

Unknown Executive: I think the other thing as, as we look at it is, you know, what do we ever get credit for?

Richard Molenski: Yeah, thank you.

Unknown Executive: You know, we got to start getting credit for something.

Speaker Change: All right, thank you.

Richard Molenski: Thank you, bye.

Unknown Executive: And, and so that's, you know, especially in talks in the private markets, you know, they look at the business, they look at the baseline business, and they feel like, you know, the interesting is the valuation we get in the private market seems drastically different than when we get in the public markets to the positive in the private markets, which there shouldn't be such a disassociation between those two markets, especially when, you know, it's private as values you more than the public.

Richard Molenski: No, I understand that.

Operator: If there are any remaining, questions, please indicate so by pressing star one on your touchtone phone.

Operator: Once again, if you have a question or a comment, please indicate so by pressing star one.

Speaker Change: Yep. Thank you. Thanks for the question.

Richard Molenski: But, but at the end of the day, you know, they do see the last quarter was, was off, we're still losing money.

Operator: Up next, we have Timothy Indactor, private investor.

Richard Molenski: My biggest concern is that can, can you go the next six months and prove to Wall Street that look, what you're discussing publicly, you know, is a chance that's going to happen, we're gonna see a nice ramp up, you know, and now you don't have the debt expense.

Timothy Indactor: Timothy, please proceed.

Richard Molenski: But I'm just concerned that, you know, do you have that capital?

Speaker Change: If there are any remaining questions, please indicate so by pressing star one on your touchtone phone.

Timothy Indactor: The only question I have, yes, I'm here.

Richard Molenski: If we didn't have to raise money, do you have enough at this point?

Timothy Indactor: The only question I have is I'm a longtime investor.

Richard Molenski: Because you did get that, warrant money, you know?

Timothy Indactor: I'm not rich.

Unknown Executive: Yeah, we can continue to go along this pace.

Timothy Indactor: I've dumped a bunch of money into this thing.

Unknown Executive: The question is what, what makes the most sense for the business.

Timothy Indactor: What are you gonna do to prevent this from RSing, from reverse splitting?

Unknown Executive: And that's why we're always reviewing, right?

Timothy Indactor: I mean, are you going to start maybe doing a stock buyback?

Unknown Executive: I mean, that's why, you know, we're always in talks with private investors and looking at all the different option sets, debt, convertible debt, nothing, raising capital, not it's, it's always, it's all very fluid.

Timothy Indactor: Are you gonna, do you have any plan, to prevent this from reverse splitting again?

Unknown Executive: And we're looking at all of it.

Unknown Executive: Well, I think all we can do is continue to focus, on the fundamentals, right?

Operator: Okay, it appears we have no further questions in queue.

Operator: Okay, it appears we have no further questions in queue.

Unknown Executive: So I can't answer the question because it's always fluid.

Unknown Executive: I mean, that's the thing.

Operator: We've reached the end of the question and answer session.

Operator: We've reached the end of the question and answer session.

Richard Molenski: Yeah.

Unknown Executive: I mean, look at our market cap relative to where we are.

Operator: This concludes today's conference and you may disconnect your lines at this time.

Richard Molenski: The last thing I'll just mention is just one good thing is that if you do a raise, it's always good to see insiders participate in the raise.

Unknown Executive: It's definitely a dislocation and that's not lost, on people in the private markets, right?

Speaker Change: Okay, it appears we have no further questions in queue. We've reached the end of the question and answer session.

Richard Molenski: And that was always, you know, I'm always interested in that when insiders are participating too.

Unknown Executive: Because with, especially our leverage on our fixed costs, I mean, we're $250,000 a month, $300,000 a month in revenue away from being cashflow break even.

Richard Molenski: But look, I'm looking forward, to the future and seeing, you know, you execute on the plan, you know, that you discussed, should be interesting.

Unknown Executive: That's not a massive increase in anything, right?

Unknown Executive: Yeah.

Operator: This concludes today's conference and you may disconnect your lines at this time.

Unknown Executive: It's not like we've got to get up to, you know, $100 million in revenue to break even.

Unknown Executive: And I think just, just so everyone understands too on the, on the insider.

Unknown Executive: And so we're just gonna continue to focus on that.

Unknown Executive: And I agree with that.

Unknown Executive: We just kind of felt the big thing for us is, with the Avvo opportunity, the new brand we're launching is, you know, there's a, in this market right now, there is value wins.

Unknown Executive: The problem is, is because we are in these strategic discussions, we're privy to material non-public information.

Unknown Executive: I mean, when Walmart tells you they have, more 100,000 plus household income shoppers shopping at Walmart than they've ever seen in their history, that tells you where the consumer is.

Unknown Executive: And so that prevents us from doing anything. So it's kind of a double-edged sword, right?

Unknown Executive: So we had a decision.

Unknown Executive: Like it's doing a strategic review and, and in talks.

Operator: Thank you for your participation.

Unknown Executive: Do we continue to do what we're doing?

Unknown Executive: And I mean, we get an offer once a week to reverse, right?

Unknown Executive: Or do we also step back and say, hey, how can we participate in this shift that consumers are experiencing?

Unknown Executive: I mean, there's, there's no, in this market, you know, no one can really get public.

Operator: Then anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

Hill Davis: Good afternoon everyone and welcome to our second quarter conference call. I think that first thing I want to highlight on today's call is that we've paid off over 5 million in debt and other abilities during the first half of the year which is very significant as you can imagine. This was driven by conversations with strategic partners as part of our strategic review and what they wanted to see us do was start to clean up the balance sheet which we've done now and that was an incredibly important attribute for them especially as they look at potential opportunities with us.

Unknown Executive: And given that we already have a supply chain, given that we already have, you know, fabrics and products, how can we step back and figure out how to take advantage of that?

Unknown Executive: So the shell's worth a lot of money to people, which is really interesting.

Unknown Executive: And so that's what we're doing.

Unknown Executive: You know, we think we have a growth concept and we think we're working. I mean, you know, you look at our, I guess what we put up almost 7 million in revenue in the, in the first half of the year, and we're trading at what a fraction of even that.

Unknown Executive: And all that becomes incremental to us.

Richard Molenski: So yeah.

Unknown Executive: And I think that's what really gets exciting.

Richard Molenski: Oh, sorry, go ahead.

Unknown Executive: I mean, you look at our revenue and, you know, we've had very little growth capital in a year and a half. It's all gone back to service debt and old AP.

Richard Molenski: No, here's the good news on your part.

Unknown Executive: So imagine as we shift into more of that mode, what can happen?

Richard Molenski: Because there's a few shares out, there's not many shares outstanding on the company, there was a company like last week, it only had like a million shares outstanding called CELATE.

Unknown Executive: So there's not, I don't know if a share buyback, is the best use of capital right now versus starting to see where the growth is, especially after cleaning up the balance sheet, but we're gonna just focus on executing the business and see where it goes and really focus on driving that top line because we're knocking on the door of profitability.

John Mcnamara: I will now turn the conference over to your host, John McNamara, of Investor Relations.

Richard Molenski: Stock was trading below $2 a share, and it went up to over $20 in just a couple of days because it was a small float, and they came out with some good news.

Unknown Executive: It's not very far away.

Richard Molenski: So I don't know when that's gonna happen, but if you continue to come out with contracts or news, you're gonna get caught.

Unknown Executive: And we believe we can achieve it, especially as we shift from cleanup balance sheet to, you know, growth, especially post-election.

Richard Molenski: I think that someone's gonna recognize that, look, this is a small float that has exciting potential.

Unknown Executive: You know, the election creates a lot of hangover, when you talk to people.

Richard Molenski: And even CELATE traded like a billion dollars worth of stock, you know, it was amazing, you know, what happened?

Unknown Executive: And then I think everyone kind of feels, like a Fed rate cut is coming, which I think will also help.

Richard Molenski: But it was a small float, and people got excited about it, you know?

Unknown Executive: And as those things start to get behind us, that gets really interesting for us.

Richard Molenski: So the small float is very positive, you know?

Timothy Indactor: All right.

Richard Molenski: Well, there's a cutting edge like it does.

Unknown Executive: Thank you.

Richard Molenski: Now, I don't think you have a lot of institutional investors, that are market cap sniffing around.

Timothy Indactor: Yep.

Richard Molenski: But when they do, they do wanna see a larger float.

Unknown Executive: Thank you.

Richard Molenski: Having said that, you know, we're just gonna, you know, it's fine.

Unknown Executive: Thanks for the question.

Richard Molenski: We're not gonna make a decision based on float, to your point, right? No, no, like I said, there's so many companies, with small floats that have had runs over the last year or so that people love it for some reason it's got caught up.

Operator: If there are any remaining, questions, please indicate so by pressing star one on your touchtone phone.

Richard Molenski: So that's an advantage, not a disadvantage, you know?

Operator: You may begin.

Richard Molenski: And then when it runs up, then you could raise money at your price, you know?

Richard Molenski: But hopefully you'll see that soon enough, you know, as you announce developments.

Unknown Executive: Thank you.

Hill Davis: Also, I'd like to highlight that we continue to get offers for our Nasdaq Shell that are between three and a half to five million dollars in value plus a percentage of whatever company would be coming in that's usually 10 to 20 million. So as you can imagine, there's value in our shell alone and so one of the things as part of the strategic review process was based on feedback from strategic partners what was most critical for them to focus on and the debt cleanup which we did which was 5 million in debt and other abilities was a big piece of that.

Hill Davis: Good afternoon, everyone, and thank you for just on the Digital Brands Group, 2024, second quarter earnings conference call and webcast.

Hill Davis: With us on the line for management this afternoon is L Davis, Chief Executive Officer.

Hill Davis: As part of that too, just through our sundry acquisition and basically focusing on those synergies, we've lowered our GMA expenses by 4.5 million during the first six months. We're going to continue to see those savings in the back half of the year and in our conversations as strategic partners that has been incredibly well received in the private markets as you can imagine. You get your cost to good or your cost down and then any incremental revenue really starts to flow through at a much higher level.

Hill Davis: We will begin the call with an overview of the quarter and then we will open up the lines, questions.

Hill Davis: As usual, we would remind you that this call may contain forward-looking statements as defined in section 27A of the Security Jack of 1933 as amended.

Hill Davis: This may include statements regarding among other things the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties some which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in these forward-looking statements.

Hill Davis: And so these were two of the big pieces. We knew the operating leverage would come as we talked about for a while. The big piece in change for us was really clean up the balance sheet, especially given this environment where the consumer is softer today. I think you've seen a ton of companies report from Home Depot to even Walmart saying they've seen more 100K plus household income and you've seen it across Levi's and other apparel companies.

Hill Davis: In light of these risks and uncertainties there can be no assurance that the forward-looking information will prove to be accurate.

Hill Davis: With that, I will now turn the call over to Hill Davis.

Hill Davis: Go ahead, Hill.

Operator: Hill is your phone on mute.

Hill Davis: For us, you know, we don't have as much exposure to the majors. So we do have one big major department store asking to bring on our brands and another one that is increasing the number of doors we're in. So we're seeing success in the wholesale market. What we've done is we kind of shifted our direct consumer marketing spend into paying off the debt and the AP per our conversations with the strategic partners and now we're starting to turn that back on and start to ramp.

Operator: Hill, your line is live.

Operator: Okay, we still have Hill's line connected.

Operator: I can try to dial back out to him just one moment.

Operator: All right, sorry about that.

Hill Davis: We're just very thoughtful in this environment to because there's no reason to lean into a soft consumer. You just want to manage through this process, which we're doing and focused on that. And despite that, we're still seeing a 2.6 to 2.9 relapse. So what does that mean? What that means is for every dollar we spend, we're getting $2.60 and $2.90 in revenue back. So that usually what you want you to about 2x row as is when you start to become break even.

Hill Davis: Can everyone hear me okay?

Unknown Executive: Yes.

Hill Davis: All right, sorry about that.

Hill Davis: Good afternoon everyone and welcome to our second quarter conference call.

Hill Davis: And so that shows you how much room we have now to continue to basically lean in and spend on the marketing side, especially since we focused the first half of the year on the cleanup. And now we're going to start to move into the growth phase again.

Hill Davis: And again, as we said, we're going to do a strategic review. And these were the conversations we've had and this was one of the critical things that they wanted to hear. And that's been a big piece of our strategy. And now that we're basically turned digital marketing back on, we're seeing that launch. And then we're also seeing incredible sell through we had to call it one of our majors two weeks ago.

Hill Davis: And we are in their top five of sell through we continue sell through really well. They're increasing the number of doors. They're taking products to all doors. And then like I said, as well, we have another big major that wants to add us, which we will we're in talks with to figure that out and onboard them as well sometime. So we're excited about how the product is selling.

Hill Davis: I think that first thing I want to highlight on today's call is that we've paid off over 5 million in debt and other abilities during the first half of the year which is very significant as you can imagine.

Hill Davis: And really it was just a strategic decision in the first half of this year to focus on the balance sheet cleanup as opposed to the growth based on those conversations. Now that we're through that, we are starting to now work on and look back at to the growth side, especially on the DTC side as the wholesale though is there as you can see. So we're excited about that. And we continue to think that's going to continue to grow.

Hill Davis: This was driven by conversations with strategic partners as part of our strategic review and what they wanted to see us do was start to clean up the balance sheet which we've done now and that was an incredibly important attribute for them especially as they look at potential opportunities with us.

Hill Davis: Also, I'd like to highlight that we continue to get offers for our Nasdaq Shell that are between three and a half to five million dollars in value plus a percentage of whatever company would be coming in that's usually 10 to 20 million.

Hill Davis: As we also announced a couple weeks ago, we tested a concept with distilled called build your own bundle. And that's been incredibly successful with no digital advertising zero digital advertising. We saw 114% growth actually to start 150% growth in those in that brand by doing build your own bundle. And what that made us realize that along with looking at brands such as true classics fresh clean threads, which are all bundle concepts that have grown incredibly well that there was a major opportunity in the women's category to build the same concept.

Hill Davis: So we've also been working on that. You're going to see that launch in the next couple of weeks, which we're really excited about. We've been beta testing it with a high success rate. And we've already had some stores lean in. We're shipping a big order this week to a store. And we're excited about where this brand is going to go. And it's based on that, but in the women's space. And the nice thing about it is we can use our current infrastructure to do this.

Hill Davis: And so there's very little incremental cost. In fact, the fabrics that we're using right now came from the sundry acquisition that sundry doesn't sell on wholesale anymore. But we have zero costs on that fabric. And it's a great fabric. And what's exciting about that is you're talking about a $20 t-shirt in women's that is a Nordstrom's quality. And we'll be able to with a bundle. It'll be $50, but a three unit or more bundle.

Hill Davis: It'll be 20 each. And so we're excited to see where that goes given the success of those other brands. And especially our beta test with the still, which is denim and a more expensive price point to see where that goes.

Hill Davis: So as you can imagine, there's value in our shell alone and so one of the things as part of the strategic review process was based on feedback from strategic partners what was most critical for them to focus on and the debt cleanup which we did which was 5 million in debt and other abilities was a big piece of that.

Hill Davis: So we've got the we've got several growth drivers and then we've been really focused on cleaning up the balance sheet as we said.

Hill Davis: So with that, I'm going to get into the numbers net revenues for 3.4 million compared to 4.5 million a year ago. That also, by the way, was peak sundry before we had to kind of we bought them that already sold through this period. And the brand was in slight decline to our next two comparisons are going to be a lot easier this year. But more importantly, the volume of that brand, we've doubled the units sold at that brand.

Hill Davis: The net revenues have really noticed were negative impacted by no digital advertising spend. And so think about this. If we would have spent a million dollars during the quarter at a 2.6 to 2.9 row as you're looking at an incremental 2.6 to 2.9 million dollars in revenue. Now, if we were spending a million dollars, we'd expect that row has to come down to 2.2 and a half times. But you can see how quickly we can accelerate revenue again when we shift from the debt and old AP pay down being accounts payable back into a growth phase.

Hill Davis: And as we noted to the companies paid over $5 million a debt and other liabilities during the first half of 2024. Our growth profit margins for 45.9% compared to 52% a year ago. The declining this is all associated with the no digital revenue, very little digital revenue for the quarter. You know, the digital growth profit margin is around 75 to 80%. So you can imagine how that changes when you have the digital revenue grow through.

Hill Davis: Growth profit margin or growth profit dollars was 1.6 compared to 2.3. GNA expenses decreased 1.1 million to 2.9 million compared to 4.1 million a year ago. As we said, that is a significant reduction both in the first quarter and the second quarter. And we expect that to continue. Keep in mind, GNA includes 1.8 million in non cash expenses, which is primarily associated with depreciation and amortization. And of that over approximately half that will roll off in the first quarter as the amortization of state side acquisition, the good will of that will go to zero.

Hill Davis: As part of that too, just through our sundry acquisition and basically focusing on those synergies, we've lowered our GMA expenses by 4.5 million during the first six months.

Hill Davis: And it will no longer impact the PNL sales and marketing as you can imagine was lower than a year ago at 615,000 versus 1.1 million again due to no digital advertising. It was 18.1% compared to 24.4% a year ago and we're going to start ramping that back up as we've cleaned up that balance sheet piece that we were talking about. It net loss was 3.5 compared to a net loss of 5.7 million a year ago, which includes a one time cash benefit at 10.7 in a year ago period, including this benefit net income would have been 5 million a year ago versus a loss of 3.5 net loss per diluted share was $2.08 compared to net income per diluted share 31 since a year ago, but please keep cash gain in the quarter.

Hill Davis: We're going to continue to see those savings in the back half of the year and in our conversations as strategic partners that has been incredibly well received in the private markets as you can imagine.

Hill Davis: So in in closing, what I want people to realize is they as they look at these numbers is the first half of this year was really about cleaning up the balance sheet and especially in the second quarter. And that was driven by the fact that as everyone's reported, the consumer has been soft. So this is the right time to really focus on the balance sheet cleanup versus the growth given what everyone's experiencing as we shift into the second half of the year, especially as we move through the election and what everyone is believing will be a rate cut, we will really start to dial that growth marketing dollars back up, especially given we're getting 2.6 to 2.9 rowas.

Hill Davis: You get your cost to good or your cost down and then any incremental revenue really starts to flow through at a much higher level.

Hill Davis: And so these were two of the big pieces.

Hill Davis: I can't stress how significant that is. Again, like for every dollar you spend, you want to continue to spend until you get to about 2x rowas. And there's plenty of room there. So you've got significant room on the digital marketing side. You've got wholesale that continues to perform. We're in talks with a major department store about adding the brands. We're also are launching another license brand, something side by sundry, where we already have our first order, which we're excited about, which will be significant licensing revenue on top of our Bayley licensing revenue.

Hill Davis: And then finally, we're launching the new brand in the next couple of weeks, a DTC brand that based on the distilled results as well as other brands, we believe is a huge growth driver for us. And there's zero incremental calls for us to launch that brand as we can use our current G&A structure as well as supply chain and finally fabric that we have to really drive that going forward.

Hill Davis: We knew the operating leverage would come as we talked about for a while.

Hill Davis: So you've kind of got what we felt like was an important piece of our strategic review, which was focus on the balance sheet cleanup first, especially given a software consumer environment and then start to shift back into significant growth mode as we move forward, especially given the rowas results and then what we think will be the success of our new brand. So we're excited about where we've been.

Hill Davis: I know the numbers were a little bit lower, but please keep in mind, that was almost all wholesale. It was very little digital. So if we would have focused on putting a million or half a million dollars to work in digital, we could have generated significant revenue over that time frame. And we did not, we focused on clean up the balance sheet because this strategic review, because it's reviewed what our NASAC show has worked, is reviewed what the investors would get for reverse merger. All these different things, there's significant upside that is there. And so as far as this process, that was a very important part of it.

Hill Davis: The big piece in change for us was really clean up the balance sheet, especially given this environment where the consumer is softer today.

Hill Davis: I think you've seen a ton of companies report from Home Depot to even Walmart saying they've seen more 100K plus household income and you've seen it across Levi's and other apparel companies.

Hill Davis: For us, you know, we don't have as much exposure to the majors.

Unknown Executive: So with that, I'll turn it over to Q&A. Thank you.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone indicate your line is in the question Q. You may press star two if you'd like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull, for questions. Once again, please press star one if you have a question or come.

Hill Davis: So we do have one big major department store asking to bring on our brands and another one that is increasing the number of doors we're in. So we're seeing success in the wholesale market.

Richard Mullensky: The first question comes from Richard Mullensky, Private Investor. Please proceed. Hi, how are you? I'm a recent shareholder of the company. My course is around about $50, $60, but here it is. I just was curious to find out how you pay off the $5 million in that debt. Was that cash that was on the balance sheet? Was there an equity line on that? I'm curious first time that was paid off. Yeah, so it's a combination of two things primarily.

Hill Davis: What we've done is we kind of shifted our direct consumer marketing spend into paying off the debt and the AP per our conversations with the strategic partners and now we're starting to turn that back on and start to ramp.

Hill Davis: We're just very thoughtful in this environment to because there's no reason to lean into a soft consumer.

Hill Davis: You just want to manage through this process, which we're doing and focused on that.

Hill Davis: And despite that, we're still seeing a 2.6 to 2.9 relapse.

Hill Davis: So what does that mean?

Hill Davis: What that means is for every dollar we spend, we're getting $2.60 and $2.90 in revenue back.

Richard Mullensky: It was working capital from the business, which we continue to use to pay that down and we'll continue to use. And then secondly, except there's almost 100% toward that. And then secondly, we did that Warren exchange in May, and we used a lot of that. You know, it was $3.3 million before, you know, all the fees and everything else is approximately 2.8 after all fees and expenses. And that was that was a piece of it.

Hill Davis: So that usually what you want you to about 2x row as is when you start to become break even.

Richard Mullensky: So it's both working capital as well as that piece. My biggest concern is also when we look at the balance sheet, you see the current assets over current liabilities. You know, I like the business that you have. And I think what you're saying the second half could be very exciting. You need to share hold on the company, but my biggest concern is are you going to be okay with the capital that you currently have?

Richard Mullensky: Or have you publicly disclosed that you're going to be looking to raise more money in the second half of this year to have that growth. You know, do you have enough at this point? Yeah, I think we're just taking it week by week. You know, we're looking at everything that's going on and what makes sense and what doesn't make sense. We know the warning change came out of just kind of an offer out of nowhere and it gave us an opportunity to clean up some stuff.

Hill Davis: And so that shows you how much room we have now to continue to basically lean in and spend on the marketing side, especially since we focused the first half of the year on the cleanup.

Hill Davis: And now we're going to start to move into the growth phase again.

Richard Mullensky: So we'll be proactive where it makes sense. I think the other thing as we look at it is, you know, what do we ever get credit for? You know, we got to start getting credit for something. And so that's, you know, especially in talks in the private markets, you know, they look at the business, they look at the baseline business, and they feel like, you know, the interesting is the valuation we get in the private market seems drastically different than we get in the public market to the positive and the private markets, which there shouldn't be such a disassociation between those two markets, especially when, you know, it's private as values you more than the public.

Hill Davis: And again, as we said, we're going to do a strategic review.

Hill Davis: And these were the conversations we've had and this was one of the critical things that they wanted to hear.

Hill Davis: And that's been a big piece of our strategy.

Hill Davis: And now that we're basically turned digital marketing back on, we're seeing that launch.

Richard Mullensky: No, I understand that, but at the end of the day, you know, they do see the last quarter was was all for still losing money. My biggest concern is that can we can you go the next six months and prove to Wall Street that look what you're discussing publicly. You know, there's a chance it's going to happen. We're going to see a nice ramp up, you know, and now you don't have the debt expense.

Hill Davis: And then we're also seeing incredible sell through we had to call it one of our majors two weeks ago.

Hill Davis: And we are in their top five of sell through we continue sell through really well.

Hill Davis: They're increasing the number of doors.

Hill Davis: They're taking products to all doors.

Richard Mullensky: But I'm just concerned that, you know, do you have that capital, if we didn't have to raise money, do you have enough at this point because you get that warrant money, you know. Yeah, we can continue to go along this pace. The question is what what makes the most sense for the business, and that's why we're always reviewing, right. I mean, that's why, you know, we're always in talks with private investors and looking at all the different options that debt, convertible debt, nothing.

Hill Davis: And then like I said, as well, we have another big major that wants to add us, which we will we're in talks with to figure that out and onboard them as well sometime.

Hill Davis: So we're excited about how the product is selling.

Hill Davis: And really it was just a strategic decision in the first half of this year to focus on the balance sheet cleanup as opposed to the growth based on those conversations.

Hill Davis: Now that we're through that, we are starting to now work on and look back at to the growth side, especially on the DTC side as the wholesale though is there as you can see.

Hill Davis: So we're excited about that.

Richard Mullensky: Yeah. Raising capital, not it's always it's all very fluid and we're looking at all of it. So I can't answer the question because it's all. No problem. Yeah. The last thing I just mentioned is just one good thing is that if you do a raise, it's always good to see in size, participating in the raise. And that was always, you know, I'm always interested in that when you decide to participate in two.

Richard Mullensky: But look, I'm looking forward to the future and seeing, you know, you execute on the plan. You know that you discussed should be interesting. Yeah, and I think just just everyone understands too on the on the insider and I I agree with that. The problem is is because we are in these strategic discussions. We're privy to material non public information. And so that prevents us from doing anything. So it's kind of a double edged sword, right.

Richard Mullensky: Like it's doing a strategic review and and in talks and I mean, we get an offer once a week to reverse. Right. I mean, there's there's no in this market. You know, no one can really get public. So the shells worth a lot of money to people, which is really interesting. Yeah. You know, we think we have a growth concept and we think we're working. I mean, you know, you look at our, I guess what we put up almost seven million in revenue in the in the first half of the year and we're trading in what a fraction of even that.

Hill Davis: And we continue to think that's going to continue to grow.

Hill Davis: As we also announced a couple weeks ago, we tested a concept with distilled called build your own bundle.

Hill Davis: And that's been incredibly successful with no digital advertising zero digital advertising.

Hill Davis: We saw 114% growth actually to start 150% growth in those in that brand by doing build your own bundle.

Hill Davis: And what that made us realize that along with looking at brands such as true classics fresh clean threads, which are all bundle concepts that have grown incredibly well that there was a major opportunity in the women's category to build the same concept.

Richard Mullensky: Yeah. So yeah. What a good idea too. No, here's the good news on your part. Because there's a few shares out there's not many shares outstanding on the company. There was a company like last week. It has it only had like a million shares outstanding close sea late stock was trading below $2 a share and it went over $20 in just a couple of days because it was a small float and they came out some good news.

Hill Davis: So we've also been working on that.

Hill Davis: You're going to see that launch in the next couple of weeks, which we're really excited about. We've been beta testing it with a high success rate.

Hill Davis: And we've already had some stores lean in.

Hill Davis: We're shipping a big order this week to a store.

Hill Davis: And we're excited about where this brand is going to go.

Richard Mullensky: So I don't know when that's going to happen, but if you continue to come out with contracts or news, you're going to get caught. I think that someone's going to recognize that look, this is a small float that has outstanding potential and even like trade is like a billion dollars worth of stock. You know, it was amazing. You know, what happened, but it was a small float and people got excited about it.

Hill Davis: And it's based on that, but in the women's space.

Hill Davis: And the nice thing about it is we can use our current infrastructure to do this. And so there's very little incremental cost.

Richard Mullensky: You know, so the small float is very, it's very positive. You know, with it. There's a cutting edge like it. It does. Now, I don't think you have a lot of institutional investors at our market capsific in around, but when they do, they do want to see a larger float having said that. Yeah, we're just going to, you know, it's fine. We're not going to make a decision based on float to your point, right?

Richard Mullensky: No, they're so. Yeah, you could do so many companies with small floats that have had runs over the last year. So that people love it. Some reason it's got caught up. So that's an advantage, not a disadvantage. You know, and then when it runs up and you could raise money at your price, you know, but hopefully you'll see that soon enough, you know, as you announce developments. All right. But I appreciate your time.

Richard Mullensky: I know I'm taking up too much time. You know, I'm sorry. I appreciate the questions. All right. Thank you, Mark. Thank you very much and good luck. Yeah, thank you. Thank you, Mike. Once again, if you have a question or a comment, please indicate so by pressing star one.

Timothy End Actor: Up next, we have Timothy end actor, end actor, private investor. Timothy, please proceed. The only question I have. Hey, yes, I'm here. The only question I have is I'm a long time investor. I'm not rich. I've dumped a bunch of money into this thing. What are you going to do to prevent this from our essay from reverse splitting? I mean, are you going to start? Whether it's maybe you do want to stock buy back?

Timothy End Actor: Are you going to drop any plan to prevent this from reverse splitting again? Well, I think all we can do is continue to focus on the fundamentals, right? I mean, that's, that's the thing. It's like it's, I mean, look at our market cap relative to where we are. It's definitely a dislocation and that that's not lost on people in the private markets, right? Because with especially our leverage on our fixed costs, I mean, we're, we're $250,000 a month, $300,000 a month and revenue away from being cash flow break even.

Hill Davis: In fact, the fabrics that we're using right now came from the sundry acquisition that sundry doesn't sell on wholesale anymore.

Hill Davis: But we have zero costs on that fabric. And it's a great fabric.

Timothy End Actor: That's not a massive increase in anything, right? It's not like we've got to get up to, you know, $100 million in revenue to break even. And so we're just going to continue to focus on that. We just kind of felt the big thing for us is with the although opportunity. The new brand we're launching is, you know, there's a in this market right now. There is value wins. I mean, when Walmart tells you they have more 100,000 plus household income shoppers shopping at Walmart than they've ever seen in their history, that tells you where the consumer is.

Timothy End Actor: So we had a decision. Do we continue to do what we're doing, which we're going to do, or do we also step back and say, hey, how can we participate in this shift that consumers are experiencing and given that we already have a supply chain given that we already have, you know, fabrics and products, how can we step back and figure out how to take advantage of that? And so that's what we're doing.

Timothy End Actor: And all that becomes incremental to us. And I think that's what really gets exciting. I mean, you look at our revenue. And we've had very little growth capital in a year and a half. It's all going back to service debt and old AP. So imagine as we shift into more of that mode, what can happen? So there's not, I don't know if share buyback is the best use of capital right now versus starting to see where the, where the growth is especially after cleaning up the balance sheet, but we're going to just focus on executing the business and and see where it goes and really focus on driving that top line because we're knocking on the door profitability.

Hill Davis: And what's exciting about that is you're talking about a $20 t-shirt in women's that is a Nordstrom's quality.

Hill Davis: And we'll be able to with a bundle.

Hill Davis: It'll be $50, but a three unit or more bundle.

Hill Davis: It'll be 20 each.

Hill Davis: And so we're excited to see where that goes given the success of those other brands.

Hill Davis: And especially our beta test with the still, which is denim and a more expensive price point to see where that goes.

Timothy End Actor: It's not very far away. And we believe we can achieve it especially as we shift from clean up balance sheet to, you know, growth especially post election. You know, the election creates a lot of hangover when you talk to people. And then I think everyone kind of feels like a fed rate cut is coming, which I think will also help. And as those things start to get behind us, that gets really interesting for us. Yes. All right.

Hill Davis: So we've got the we've got several growth drivers and then we've been really focused on cleaning up the balance sheet as we said.

Hill Davis: So with that, I'm going to get into the numbers net revenues for 3.4 million compared to 4.5 million a year ago.

Hill Davis: That also, by the way, was peak sundry before we had to kind of we bought them that already sold through this period.

Hill Davis: And the brand was in slight decline to our next two comparisons are going to be a lot easier this year.

Hill Davis: But more importantly, the volume of that brand, we've doubled the units sold at that brand.

Hill Davis: The net revenues have really noticed were negative impacted by no digital advertising spend.

Hill Davis: And so think about this.

Unknown Executive: Thank you. Yeah. Thank you. Thanks for the question. If there are any remaining questions, please indicate so by pressing star one on your touch tone phone. Okay. It appears we have no further questions in queue. We've reached the end of the question and answer session.

Hill Davis: If we would have spent a million dollars during the quarter at a 2.6 to 2.9 row as you're looking at an incremental 2.6 to 2.9 million dollars in revenue.

Hill Davis: Now, if we were spending a million dollars, we'd expect that row has to come down to 2.2 and a half times.

Hill Davis: But you can see how quickly we can accelerate revenue again when we shift from the debt and old AP pay down being accounts payable back into a growth phase.

Hill Davis: And as we noted to the companies paid over $5 million a debt and other liabilities during the first half of 2024.

Hill Davis: Our growth profit margins for 45.9% compared to 52% a year ago.

Hill Davis: The declining this is all associated with the no digital revenue, very little digital revenue for the quarter.

Hill Davis: You know, the digital growth profit margin is around 75 to 80%.

Hill Davis: So you can imagine how that changes when you have the digital revenue grow through.

Hill Davis: Growth profit margin or growth profit dollars was 1.6 compared to 2.3.

Hill Davis: GNA expenses decreased 1.1 million to 2.9 million compared to 4.1 million a year ago. As we said, that is a significant reduction both in the first quarter and the second quarter.

Hill Davis: And we expect that to continue.

Operator: This concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation.

Hill Davis: Keep in mind, GNA includes 1.8 million in non cash expenses, which is primarily associated with depreciation and amortization.

Hill Davis: And of that over approximately half that will roll off in the first quarter as the amortization of state side acquisition, the good will of that will go to zero.

Hill Davis: And it will no longer impact the PNL sales and marketing as you can imagine was lower than a year ago at 615,000 versus 1.1 million again due to no digital advertising.

Hill Davis: It was 18.1% compared to 24.4% a year ago and we're going to start ramping that back up as we've cleaned up that balance sheet piece that we were talking about.

Hill Davis: It net loss was 3.5 compared to a net loss of 5.7 million a year ago, which includes a one time cash benefit at 10.7 in a year ago period, including this benefit net income would have been 5 million a year ago versus a loss of 3.5 net loss per diluted share was $2.08 compared to net income per diluted share 31 since a year ago, but please keep cash gain in the quarter.

Hill Davis: So in in closing, what I want people to realize is they as they look at these numbers is the first half of this year was really about cleaning up the balance sheet and especially in the second quarter.

Hill Davis: And that was driven by the fact that as everyone's reported, the consumer has been soft.

Hill Davis: So this is the right time to really focus on the balance sheet cleanup versus the growth given what everyone's experiencing as we shift into the second half of the year, especially as we move through the election and what everyone is believing will be a rate cut, we will really start to dial that growth marketing dollars back up, especially given we're getting 2.6 to 2.9 rowas.

Hill Davis: I can't stress how significant that is.

Hill Davis: Again, like for every dollar you spend, you want to continue to spend until you get to about 2x rowas.

Hill Davis: And there's plenty of room there.

Hill Davis: So you've got significant room on the digital marketing side.

Hill Davis: You've got wholesale that continues to perform.

Hill Davis: We're in talks with a major department store about adding the brands.

Hill Davis: We're also are launching another license brand, something side by sundry, where we already have our first order, which we're excited about, which will be significant licensing revenue on top of our Bayley licensing revenue.

Hill Davis: And then finally, we're launching the new brand in the next couple of weeks, a DTC brand that based on the distilled results as well as other brands, we believe is a huge growth driver for us.

Hill Davis: And there's zero incremental calls for us to launch that brand as we can use our current G&A structure as well as supply chain and finally fabric that we have to really drive that going forward.

Hill Davis: So you've kind of got what we felt like was an important piece of our strategic review, which was focus on the balance sheet cleanup first, especially given a software consumer environment and then start to shift back into significant growth mode as we move forward, especially given the rowas results and then what we think will be the success of our new brand.

Hill Davis: So we're excited about where we've been.

Hill Davis: I know the numbers were a little bit lower, but please keep in mind, that was almost all wholesale.

Hill Davis: It was very little digital. So if we would have focused on putting a million or half a million dollars to work in digital, we could have generated significant revenue over that time frame.

Hill Davis: And we did not, we focused on clean up the balance sheet because this strategic review, because it's reviewed what our NASAC show has worked, is reviewed what the investors would get for reverse merger.

Hill Davis: All these different things, there's significant upside that is there.

Hill Davis: And so as far as this process, that was a very important part of it.

Hill Davis: So with that, I'll turn it over to Q&A.

Operator: Thank you.

Operator: At this time, we will be conducting a question and answer session.

Operator: If you would like to ask a question, please press star one on your telephone keypad.

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Operator: One moment please, while we pull, for questions.

Operator: Once again, please press star one if you have a question or come.

Richard Mullensky: The first question comes from Richard Mullensky, Private Investor.

Richard Mullensky: Please proceed.

Richard Mullensky: Hi, how are you?

Richard Mullensky: I'm a recent shareholder of the company.

Richard Mullensky: My course is around about $50, $60, but here it is.

Hill Davis: I just was curious to find out how you pay off the $5 million in that debt.

Hill Davis: Was that cash that was on the balance sheet?

Hill Davis: Was there an equity line on that?

Hill Davis: I'm curious first time that was paid off.

Hill Davis: Yeah, so it's a combination of two things primarily.

Hill Davis: It was working capital from the business, which we continue to use to pay that down and we'll continue to use.

Hill Davis: And then secondly, except there's almost 100% toward that.

Hill Davis: And then secondly, we did that Warren exchange in May, and we used a lot of that.

Hill Davis: You know, it was $3.3 million before, you know, all the fees and everything else is approximately 2.8 after all fees and expenses.

Hill Davis: And that was that was a piece of it.

Hill Davis: So it's both working capital as well as that piece.

Richard Mullensky: My biggest concern is also when we look at the balance sheet, you see the current assets over current liabilities.

Richard Mullensky: You know, I like the business that you have.

Richard Mullensky: And I think what you're saying the second half could be very exciting.

Richard Mullensky: You need to share hold on the company, but my biggest concern is are you going to be okay with the capital that you currently have?

Hill Davis: Or have you publicly disclosed that you're going to be looking to raise more money in the second half of this year to have that growth.

Hill Davis: You know, do you have enough at this point?

Hill Davis: Yeah, I think we're just taking it week by week.

Hill Davis: You know, we're looking at everything that's going on and what makes sense and what doesn't make sense.

Hill Davis: We know the warning change came out of just kind of an offer out of nowhere and it gave us an opportunity to clean up some stuff.

Hill Davis: So we'll be proactive where it makes sense.

Hill Davis: I think the other thing as we look at it is, you know, what do we ever get credit for?

Hill Davis: You know, we got to start getting credit for something.

Hill Davis: And so that's, you know, especially in talks in the private markets, you know, they look at the business, they look at the baseline business, and they feel like, you know, the interesting is the valuation we get in the private market seems drastically different than we get in the public market to the positive and the private markets, which there shouldn't be such a disassociation between those two markets, especially when, you know, it's private as values you more than the public.

Richard Mullensky: No, I understand that, but at the end of the day, you know, they do see the last quarter was was all for still losing money.

Richard Mullensky: My biggest concern is that can we can you go the next six months and prove to Wall Street that look what you're discussing publicly.

Richard Mullensky: You know, there's a chance it's going to happen.

Richard Mullensky: We're going to see a nice ramp up, you know, and now you don't have the debt expense.

Hill Davis: But I'm just concerned that, you know, do you have that capital, if we didn't have to raise money, do you have enough at this point because you get that warrant money, you know.

Hill Davis: Yeah, we can continue to go along this pace.

Hill Davis: The question is what what makes the most sense for the business, and that's why we're always reviewing, right.

Hill Davis: I mean, that's why, you know, we're always in talks with private investors and looking at all the different options that debt, convertible debt, nothing.

Hill Davis: Yeah.

Hill Davis: Raising capital, not it's always it's all very fluid and we're looking at all of it.

Hill Davis: So I can't answer the question because it's all.

Richard Mullensky: No problem.

Richard Mullensky: Yeah.

Richard Mullensky: The last thing I just mentioned is just one good thing is that if you do a raise, it's always good to see in size, participating in the raise.

Richard Mullensky: And that was always, you know, I'm always interested in that when you decide to participate in two.

Richard Mullensky: But look, I'm looking forward to the future and seeing, you know, you execute on the plan.

Richard Mullensky: You know that you discussed should be interesting.

Hill Davis: Yeah, and I think just just everyone understands too on the on the insider and I I agree with that.

Hill Davis: The problem is is because we are in these strategic discussions.

Hill Davis: We're privy to material non public information.

Hill Davis: And so that prevents us from doing anything. So it's kind of a double edged sword, right.

Hill Davis: Like it's doing a strategic review and and in talks and I mean, we get an offer once a week to reverse.

Hill Davis: Right.

Hill Davis: I mean, there's there's no in this market.

Hill Davis: You know, no one can really get public.

Hill Davis: So the shells worth a lot of money to people, which is really interesting.

Hill Davis: Yeah.

Hill Davis: You know, we think we have a growth concept and we think we're working. I mean, you know, you look at our, I guess what we put up almost seven million in revenue in the in the first half of the year and we're trading in what a fraction of even that.

Hill Davis: Yeah.

Hill Davis: So yeah.

Hill Davis: What a good idea too.

Hill Davis: No, here's the good news on your part.

Hill Davis: Because there's a few shares out there's not many shares outstanding on the company.

Richard Mullensky: There was a company like last week. It has it only had like a million shares outstanding close sea late stock was trading below $2 a share and it went over $20 in just a couple of days because it was a small float and they came out some good news.

Richard Mullensky: So I don't know when that's going to happen, but if you continue to come out with contracts or news, you're going to get caught.

Richard Mullensky: I think that someone's going to recognize that look, this is a small float that has outstanding potential and even like trade is like a billion dollars worth of stock.

Richard Mullensky: You know, it was amazing.

Richard Mullensky: You know, what happened, but it was a small float and people got excited about it.

Richard Mullensky: You know, so the small float is very, it's very positive.

Richard Mullensky: You know, with it.

Richard Mullensky: There's a cutting edge like it.

Richard Mullensky: It does.

Hill Davis: Now, I don't think you have a lot of institutional investors at our market capsific in around, but when they do, they do want to see a larger float having said that.

Hill Davis: Yeah, we're just going to, you know, it's fine.

Hill Davis: We're not going to make a decision based on float to your point, right?

Hill Davis: No, they're so.

Hill Davis: Yeah, you could do so many companies with small floats that have had runs over the last year.

Hill Davis: So that people love it.

Hill Davis: Some reason it's got caught up.

Hill Davis: So that's an advantage, not a disadvantage.

Hill Davis: You know, and then when it runs up and you could raise money at your price, you know, but hopefully you'll see that soon enough, you know, as you announce developments.

Hill Davis: All right.

Hill Davis: But I appreciate your time.

Hill Davis: I know I'm taking up too much time.

Hill Davis: You know, I'm sorry.

Hill Davis: I appreciate the questions.

Hill Davis: All right.

Hill Davis: Thank you, Mark.

Hill Davis: Thank you very much and good luck.

Hill Davis: Yeah, thank you.

Hill Davis: Thank you, Mike.

Operator: Once again, if you have a question or a comment, please indicate so by pressing star one.

Timothy End Actor: Up next, we have Timothy end actor, end actor, private investor.

Timothy End Actor: Timothy, please proceed.

Timothy End Actor: The only question I have.

Timothy End Actor: Hey, yes, I'm here.

Timothy End Actor: The only question I have is I'm a long time investor.

Timothy End Actor: I'm not rich. I've dumped a bunch of money into this thing.

Timothy End Actor: What are you going to do to prevent this from our essay from reverse splitting?

Timothy End Actor: I mean, are you going to start?

Timothy End Actor: Whether it's maybe you do want to stock buy back?

Timothy End Actor: Are you going to drop any plan to prevent this from reverse splitting again?

Hill Davis: Well, I think all we can do is continue to focus on the fundamentals, right? I mean, that's, that's the thing.

Hill Davis: It's like it's, I mean, look at our market cap relative to where we are.

Hill Davis: It's definitely a dislocation and that that's not lost on people in the private markets, right?

Hill Davis: Because with especially our leverage on our fixed costs, I mean, we're, we're $250,000 a month, $300,000 a month and revenue away from being cash flow break even.

Hill Davis: That's not a massive increase in anything, right?

Hill Davis: It's not like we've got to get up to, you know, $100 million in revenue to break even.

Hill Davis: And so we're just going to continue to focus on that.

Hill Davis: We just kind of felt the big thing for us is with the although opportunity.

Hill Davis: The new brand we're launching is, you know, there's a in this market right now.

Hill Davis: There is value wins.

Hill Davis: I mean, when Walmart tells you they have more 100,000 plus household income shoppers shopping at Walmart than they've ever seen in their history, that tells you where the consumer is.

Hill Davis: So we had a decision.

Hill Davis: Do we continue to do what we're doing, which we're going to do, or do we also step back and say, hey, how can we participate in this shift that consumers are experiencing and given that we already have a supply chain given that we already have, you know, fabrics and products, how can we step back and figure out how to take advantage of that?

Hill Davis: And so that's what we're doing.

Hill Davis: And all that becomes incremental to us.

Hill Davis: And I think that's what really gets exciting.

Hill Davis: I mean, you look at our revenue.

Hill Davis: And we've had very little growth capital in a year and a half. It's all going back to service debt and old AP.

Hill Davis: So imagine as we shift into more of that mode, what can happen?

Hill Davis: So there's not, I don't know if share buyback is the best use of capital right now versus starting to see where the, where the growth is especially after cleaning up the balance sheet, but we're going to just focus on executing the business and and see where it goes and really focus on driving that top line because we're knocking on the door profitability.

Hill Davis: It's not very far away.

Hill Davis: And we believe we can achieve it especially as we shift from clean up balance sheet to, you know, growth especially post election.

Hill Davis: You know, the election creates a lot of hangover when you talk to people.

Hill Davis: And then I think everyone kind of feels like a fed rate cut is coming, which I think will also help.

Hill Davis: And as those things start to get behind us, that gets really interesting for us.

Hill Davis: Yes.

Hill Davis: All right.

Hill Davis: Thank you.

Hill Davis: Yeah.

Hill Davis: Thank you.

Hill Davis: Thanks for the question.

Operator: If there are any remaining questions, please indicate so by pressing star one on your touch tone phone.

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