Digital Brands Group, Inc.

NOTE 1: NATURE OF OPERATIONS

Digital Brands Group, Inc. (the “Company”) was organized on September 17, 2012 and is a portfolio company of apparel brands, including Bailey 44, Stateside and Sundry. The Company completed the acquisitions of Bailey 44 in February 2020, Stateside in August 2021 and Sundry in December 2022.

Reverse Stock Split

On July 15, 2026 the Board of Directors approved a reverse stock split of the Company’s issued and outstanding common stock at a ratio of one-for-forty. A Certificate of Change was filed with the Secretary of State of the State of Nevada on July 20, 2026 and the reverse stock split became effective at 12:01 a.m. Eastern Time on July 24, 2026, at which time the common stock began trading on a post-split basis under a new CUSIP number. The number of authorized shares of common stock was reduced from 1,000,000,000 to 25,000,000 and the par value per share remained unchanged at $0.0001. Proportionate adjustments were made to the exercise prices and the number of shares issuable under the Company’s outstanding warrants and equity awards, and to the conversion factors applicable to the Company’s outstanding preferred stock. No fractional shares were issued.

All share and per-share amounts in these unaudited condensed consolidated financial statements and the accompanying notes have been retroactively adjusted to reflect the reverse stock split for all periods presented. The reduction in the aggregate par value of common stock of $2,135 has been reclassified to additional paid-in capital and total stockholders’ equity is unchanged.

NOTE 2: LIQUIDITY AND GOING CONCERN

The Company has not generated profits since inception and has sustained net losses of $8,983,422 and $2,117,862 for the three months ended June 30, 2026 and 2025, respectively, and $20,375,455 and $4,207,772 for the six months ended June 30, 2026 and 2025, respectively. The Company also incurred negative cash flow from operations of $10,302,957 for the six months ended June 30, 2026. Historically, the Company has lacked sufficient liquidity to satisfy obligations as they come due and, as of June 30, 2026, reported a working capital deficit of $12,851,221, cash and cash equivalents of $1,386,167 and an accumulated deficit of $175,729,051. The Company expects to continue to generate operating losses for the foreseeable future. The accompanying condensed consolidated financial statements do not include any adjustments as a result of this uncertainty.

Through the date these financial statements were available to be issued, the Company has been primarily financed through the issuance of capital stock and debt. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses, which it has done, or obtain financing through the sale of debt and/or equity securities, which it has done. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations. While the Company has several potential sources of cash, including the ability to sell shares under its at-the-market (“ATM”) facility and the pending equity line of credit, no assurance can be given that the Company will be successful in these efforts.

Management’s Plans

On April 15, 2026, the Company entered into an At-the-Market Issuance Sales Agreement with Aegis Capital Corp., pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $100.0 million under the Company’s effective shelf registration statement on Form S-3. The Company intends to utilize the At-the-Market facility, together with other potential financing transactions, as a source of future liquidity and working capital. On July 23, 2026, the Company issued a convertible promissory note in the principal amount of $3,529,412 for gross proceeds of $3.0 million, and entered into a purchase agreement providing for an equity line of credit of up to $100.0 million through July 2029 (see Note 16). As of August 19, 2026, the Company had unrestricted cash and cash equivalents of approximately $1.1 million.

As of the date of issuance of these unaudited condensed consolidated financial statements, the Company expects that its cash and cash equivalents of $1,386,167 as of June 30, 2026, together with the measures described below, will be required to fund its operating expenses, debt obligations and capital expenditure requirements for at least one year from the date these unaudited condensed consolidated financial statements are issued.

Throughout the next twelve months, the Company intends to fund its operations from the funds raised through equity offerings, including at-the-market equity financings or other public or private equity offerings. Additionally, the Company intends to fund operations from increased revenues due to its new marketing efforts, including its collegiate apparel program and increased wholesale pricing, through settlement and renegotiation of aged payables, conversions of outstanding debt and accrued interest, and continuing its cost-cutting measures implemented during 2025 and the six months ended June 30, 2026.

The conditions described above — including the Company’s recurring losses, negative operating cash flows, working capital deficit, the matured Bailey sellers’ promissory note and the monthly payment obligations under the RallyTown secured note (see Note 7) — raise substantial doubt about the Company’s ability to continue as a going concern, and the Company’s plans depend in significant part on its ability to sell equity securities under the at-the-market facility and the equity line of credit and to realize expected revenues from its collegiate apparel program, which are subject to market conditions and other factors, certain of which are not within the Company’s control. After considering these conditions and management’s plans described above, management has concluded that its plans cannot be considered probable of being effectively implemented and of fully mitigating these conditions within twelve months from the date these financial statements are issued, because the plans depend in significant part on the sale of equity securities and other financing transactions that are not solely within the Company’s control. Accordingly, substantial doubt about the Company’s ability to continue as a going concern exists. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments that might result from the outcome of this uncertainty.

There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to access capital, sell equity securities in the amounts or at the times anticipated, or if expected revenues from its collegiate apparel program do not materialize, the Company may be forced to curtail or suspend its business plans.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the unaudited condensed financial statements included herein contain all adjustments necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the period presented. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2026.

Principles of Consolidation

These condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries (Bailey, Stateside and Sundry). All inter-company transactions and balances have been eliminated on consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Equivalents and Concentration of Credit Risk

The Company considers all highly liquid securities with an original maturity of less than three months to be cash equivalents. As of June 30, 2026 and December 31, 2025, the Company did not hold any cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits of $250,000.

Prepaid Marketing Expenses and Liability-Classified Share-Based Awards

The Company enters into long-term marketing, licensing, manufacturing, and sponsorship arrangements with third-party service providers under which it may issue common stock or equity-linked instruments in exchange for future services, including distribution, licensing access, product specification support, and marketing and promotional activities. These arrangements are accounted for as share-based payments to nonemployees in accordance with ASC 718, Compensation—Stock Compensation.

Where share-based consideration is determined to be in exchange for distinct goods or services, including those received from a customer, the Company accounts for such transactions as the purchase of services. The Company recognizes a prepaid marketing or service asset measured at the grant-date fair value of the share-based consideration issued, representing the value of services to be received over the contractual term. Such prepaid assets are amortized on a straight-line basis over the period in which the related services are received, which generally corresponds to the contractual service period.

Certain share-based arrangements include make-whole provisions that require the Company to deliver a fixed monetary value using a variable number of shares, or, in certain cases, cash. These provisions result in liability classification under ASC 718 and ASC 480, Distinguishing Liabilities from Equity, as the Company has an obligation to settle a fixed dollar amount rather than a fixed number of shares.

Liability-classified share-based awards are initially measured at fair value on the grant date and subsequently remeasured at fair value at each reporting date until settlement. Changes in fair value are recognized in earnings in the period of change. Compensation cost is recognized over the requisite service period, with cumulative adjustments recorded for changes in fair value.

The Company evaluates features within these arrangements, including make-whole provisions, under ASC 815, Derivatives and Hedging, to determine whether such features should be accounted for separately as derivatives. The Company has concluded that these features qualify for the scope exception applicable to share-based payment arrangements and therefore are not accounted for as freestanding or embedded derivatives. Accordingly, no bifurcation is required.

The fair value of liability-classified share-based awards is estimated using a Monte Carlo simulation model. This valuation technique incorporates significant assumptions, including the Company’s stock price, expected volatility, risk-free interest rate, expected term, and other market-based inputs. Due to the use of significant unobservable inputs, these measurements are classified within Level 3 of the fair value hierarchy.

Separately, certain contractual marketing investment commitments represent best-efforts obligations and do not create a present obligation or identifiable asset. Accordingly, such costs are expensed as incurred in accordance with ASC 720, Advertising Costs.

Fair Value of Financial Instruments

The Company measures certain assets and liabilities at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement. ASC 820 establishes a three-level hierarchy that prioritizes the inputs used in valuation techniques:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement. These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The Company’s only recurring fair value measurements are its share-based payment liabilities arising from the make-whole provisions in the collegiate apparel agreements. These are classified as Level 3, as their valuation relies on significant unobservable inputs that are significant to the overall fair value measurement. Specifically, the expected stock price volatility is estimated from the Company’s own historical stock price data; because the Company does not have actively traded options or other instruments from which implied volatility could be observed, this input is unobservable. Under ASC 820-10-35-52, an instrument is classified based on the lowest level input that is significant to the fair value measurement. Changes in fair value are recognized in earnings each reporting period. See Note 9.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and short-term debt approximate fair value due to their short-term nature. The carrying value of the Company’s long-term SBA loan approximates fair value as the interest rate is fixed at a rate commensurate with current market rates for similar instruments.

Accounts Receivable and Expected Credit Loss

We carry our accounts receivable at invoiced amounts less allowances for customer credit losses and other deductions to present the net amount expected to be collected on the financial asset. All receivables are expected to be collected within one year of the consolidated balance sheet. We do not accrue interest on the trade receivables. Management evaluates the ability to collect accounts receivable based on a combination of factors. Receivables are determined to be past due based on individual credit terms. An allowance for credit losses is maintained based on the length of time receivables are past due, historical collections, or the status of a customer’s financial position. Receivables are written off in the year deemed uncollectible after efforts to collect the receivables have proven unsuccessful. We do not have any off-balance sheet credit exposure related to our customers.

We periodically review accounts receivable, estimate an allowance for bad debts, and simultaneously record the appropriate expense in the statements of operations. Such estimates are based on general economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Past due accounts are written off against that allowance only after all collection attempts have been exhausted and the prospects for recovery are remote. Recoveries of accounts receivable previously written off are recorded as income when received. The Company provides credit to its customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk.

As of June 30, 2026, and December 31, 2025, the Company determined an allowance for credit losses of $308,460 and $307,526, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value and accounted for using the weighted average cost method for the Company’s DSTLD brand and first-in, first-out method for Bailey, Stateside and Sundry. The inventory balances as of June 30, 2026, and December 31, 2025 consist substantially of blanks and other raw materials purchased for modification, work in process, and finished goods purchased or produced for resale.

Inventory consisted of the following:

Property, Equipment, and Software

Property, equipment, and software are recorded at cost. Depreciation/amortization is recorded for property, equipment, and software using the straight-line method over the estimated useful lives of assets. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. The balances at June 30, 2026 and December 31, 2025 consist of software with three year lives, property and equipment with three to 10 year lives, and leasehold improvements which are depreciated over the shorter of the lease life or expected life.

Depreciation and amortization charges on property, equipment, and software are included in general and administrative expenses and amounted to $10,689 and $3,371 for the six months ended June 30, 2026 and 2025.

Business Combinations

The Company accounts for acquisitions in which it obtains control of one or more businesses as a business combination. The purchase price of the acquired businesses is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments, in the period in which they are determined, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition. Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase.

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

Intangible assets are established through business combinations and asset acquisitions. Technology assets are acquired through asset acquisitions, while brand names and customer relationships are primarily recognized in connection with business combinations. Intangible assets with finite lives are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. The estimated useful lives of amortizable intangible assets are as follows:

Impairment

Long-Lived Assets

The Company reviews its long-lived assets (property and equipment and amortizable intangible assets) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value.

Goodwill

Goodwill and identifiable intangible assets that have indefinite useful lives are not amortized, but instead are tested annually for impairment and upon the occurrence of certain events or substantive changes in circumstances. The annual goodwill impairment test allows for the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An entity may choose to perform the qualitative assessment on none, some or all of its reporting units or an entity may bypass the qualitative assessment for any reporting unit and proceed directly to step one of the quantitative impairment test. If it is determined, on the basis of qualitative factors, that the fair value of a reporting unit is, more likely than not, less than its carrying value, the quantitative impairment test is required.

The quantitative impairment test calculates any goodwill impairment as the difference between the carrying amount of a reporting unit and its fair value, but not to exceed the carrying amount of goodwill. It is our practice, at a minimum, to perform a qualitative or quantitative goodwill impairment test in the fourth quarter at every year end on December 31st.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets established in connection with business combinations consist of the brand name. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

Accounting for Preferred Stock

ASC 480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both liabilities and equity.

Management is required to determine the presentation for the preferred stock as a result of the redemption and conversion provisions, among other provisions in the agreement. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether the conversion feature should be accounted for as a derivative instrument.

If the host instrument and conversion feature are determined to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging, is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly, liability accounting is not required by the Company. The Company has presented preferred stock within stockholders’ equity.

Costs incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company, resulting in a discount to the preferred stock. The discount is not amortized.

Revenue Recognition

In accordance with FASB ASC 606, Revenue from Contracts with Customers¸ the Company determines revenue recognition through the following steps:

Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product, upon shipment of product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance.

The Company derives its revenue primarily from wholesale and e-commerce transactions. For both channels, revenue is recognized at the time the product is shipped to the customer, which is the point in time when control is transferred. The Company considers the sale of products as a single performance obligation. For the Company’s licensing agreement via Bailey44, the Company recognizes royalty revenue on a monthly basis over the term of the license agreement.

The Company provides the customer the right of return on the product and revenue is adjusted based on an estimate of the expected returns based on historical rates.

The Company deducts discounts, sales tax, and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued expenses until remitted to the taxing authorities. Shipping and handling fees charged to customers are included in net revenues. All shipping and handling costs are accounted for as distribution expenses, and are therefore not evaluated as a separate performance obligation.

University Collegiate Apparel Revenue

The Company generates revenue through collegiate apparel agreements with university-affiliated collectives, licensing agents and marketing partners (see Note 4). Revenue is recognized through two channels: (i) university store consignment, under which products are shipped to university campus bookstores and revenue is recognized based on actual sales reported by the store, and (ii) university online direct-to-consumer, under which revenue is recognized based on Shopify sales data from each university’s dedicated online portal when products are sold to end customers. In both cases, products are placed with the counterparty on consignment and the Company recognizes revenue only when a sale to an end consumer has occurred, consistent with ASC 606-10-55-37. Revenue from university channels is tracked separately in dedicated receivable accounts.

Cost of Revenues

Cost of revenues consists primarily of inventory sold and related freight-in. Cost of revenues includes direct labor pertaining to our inventory production activities and an allocation of overhead costs including rent and insurance.

Shipping and Handling

The Company recognizes shipping and handling billed to customers as a component of net revenues, and the cost of shipping and handling as distribution costs. Total shipping and handling billed to customers as a component of net revenues was approximately $26,322 for the six months ended June 30, 2026. Total shipping and handling costs included in distribution costs were $112,070 and $252,044 for the three and six months ended June 30, 2026, and $137,926 and $204,350 for the three and six months ended June 30, 2025, respectively.

Advertising and Promotion

Advertising and promotional costs are expensed as incurred. These costs are included in sales and marketing expense.

General and Administrative

General and administrative expenses consist primarily of compensation and benefits costs, professional services and information technology. General and administrative expenses also include payment processing fees, design and warehousing fees.

Common Stock Purchase Warrants and Other Derivative Financial Instruments

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At June 30, 2026 and December 31, 2025, the Company did not have any derivative instruments that were designated as hedges.

Stock Option and Warrant Valuation

Stock option and warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model. For warrants and stock options issued to non- employees, the Company accounts for the expected life based on the contractual life of the warrants and stock options. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of options grants. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The Company recognizes forfeitures as they occur.

Stock-Based Compensation

The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as an expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services.

The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company used the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

Segment Information

In accordance with ASC 280, Segment Reporting, we identify our operating segments according to how our business activities are managed and evaluated. As of June 30, 2026, we had one operating segment which pertains to the sale of apparel. All brands and reporting units currently report to the Chief Executive Officer. Each of our brands serve or are expected to serve customers through our wholesale, in store and online channels, allowing us to execute on our omni-channel strategy. We have determined that each of our brands share similar economic and other qualitative characteristics, and therefore the results of our operating businesses are aggregated into one reportable segment. All of the operating businesses have met the aggregation criteria and have been aggregated and are presented asone reportable segment, as permitted by ASC 280. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

Net Loss per Share

Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of June 30, 2026 and 2025, diluted net loss per share is the same as basic net loss per share for each period. Potentially dilutive items outstanding as of June 30, 2026 and 2025 are as follows:

The stock options and warrants above are out-of-the-money as of June 30, 2026 and 2025.

Leases

The Company accounts for leases in accordance with ASC 842, Leases. The Company determines whether an arrangement contains a lease at inception and recognizes operating lease right-of-use (“ROU”) assets and corresponding lease liabilities at the commencement date based on the present value of lease payments over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company uses its incremental borrowing rate in determining the present value of lease payments when the implicit rate is not readily determinable. The Company has elected the short-term lease exemption for leases with an initial term of 12 months or less.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures. This update requires entities to disaggregate operating expenses into specific categories, such as salaries and wages, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. ASU 2024-03 may be applied retrospectively or prospectively. The Company is currently evaluating the impact of this standard on its financial statement presentation and disclosures.

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

NOTE 4: PREPAID MARKETING EXPENSES

The Company has entered into multi-year marketing, licensing, sponsorship, and service agreements under which it provides equity instruments, pre-funded warrants, or cash as consideration. Amounts paid or the fair value of instruments issued in excess of amounts currently expensed are recorded as prepaid assets and amortized over the contractual service period on a straight-line basis.

University Marketing Agreements

AAA Tuscaloosa, LLC — University of Alabama

Effective July 16, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with AAA Tuscaloosa, LLC (“AAA”), pursuant to which the Company manufactures University of Alabama–branded apparel. AAA is responsible for marketing and selling the products through its website and campus bookstores and is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through AAA’s distribution channels.

As consideration, the Company agreed to issue common stock valued at $1,000,000 per year over the three-year term (total equity commitment of $3,000,000). On December 12, 2025, the Company issued 7,143 shares of common stock at a grant-date fair value of $316.80 per share (grant date: September 22, 2025; aggregate equity fair value: $2,262,855). The share-based consideration represents payment for distinct services, including licensing access, distribution, and marketing services, and is accounted for under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision at grant date, was $4,341,104. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the three and six months ended June 30, 2026, the Company recognized $356,752 and $713,555 of marketing expense, respectively. As of June 30, 2026, the prepaid balance was $2,961,517, of which $1,447,035 is classified as current and $1,514,482 as non-current.

The agreement includes a 15-month make-whole provision (through March 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the $3,000,000 commitment. AAA Tuscaloosa’s rights under this agreement were subsequently transferred to RallyTown Alabama, LLC, an affiliate of RallyTown, LLC, and the make-whole obligations under this agreement and under the RallyTown agreement described below were assigned to and are determined together under the Setoff and Reimbursement Agreement dated March 30, 2026, which fixed the combined obligation by formula. The combined obligation was settled upon under the Secured Payment and Security Agreement dated July 16, 2026 and is presented within notes payable at June 30, 2026. See Note 7 for the settlement terms and Note 8 for the related remeasurement.

RallyTown, LLC (formerly Traffic Holdco, LLC) — Collegiate NIL Program

Effective July 16, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with RallyTown, LLC, formerly Traffic Holdco, LLC (“RallyTown”), pursuant to which the Company obtained exclusive apparel manufacturing rights for collegiate Name, Image and Likeness (“NIL”) programs at a minimum of three universities. RallyTown is responsible for licensing, marketing, and distribution through university channels and is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through RallyTown’s distribution channels.

As consideration, the Company agreed to issue common stock valued at $1,000,000 per university per year over the three-year term (minimum total equity commitment of $9,000,000). On December 12, 2025, the Company issued 21,429 shares of common stock at a grant-date fair value of $316.80 per share (grant date: September 22, 2025; aggregate equity fair value: $6,788,573). The share-based consideration represents payment for distinct services, including licensing access, distribution, marketing, and compliance services, and is accounted for under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision, was $13,023,328. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the three and six months ended June 30, 2026, the Company recognized $1,069,843 and $2,140,254 of marketing expense, respectively. As of June 30, 2026, the prepaid balance was $8,884,974, of which $4,341,109 is classified as current and $4,543,865 as non-current.

The agreement includes a 15-month make-whole provision (through March 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment. That obligation, together with the AAA Tuscaloosa obligation, is determined under the Setoff and Reimbursement Agreement dated March 30, 2026 and is presented within notes payable at June 30, 2026; see Note 7.

The Grove Collective, LLC — University of Mississippi

Effective November 19, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with The Grove Collective, LLC (“Grove”), pursuant to which the Company will exclusively manufacture apparel products to be sold through Grove’s website and retail channels. The agreement supports marketing and brand development initiatives related to the University of Mississippi NIL program. Grove is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through Grove’s channels.

As consideration, the Company issued 9,628 shares of common stock at a grant-date fair value of $300.00 per share (aggregate equity fair value: $2,888,303), representing a total equity commitment of $3,000,000. The share-based consideration is accounted for as payment for distinct marketing, distribution, and related services under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision at grant date, was $4,970,835. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the three and six months ended June 30, 2026, the Company recognized $408,358 and $816,920 of marketing expense, respectively. As of June 30, 2026, the prepaid balance was $3,963,253, of which $1,656,945 is classified as current and $2,306,308 as non-current.

The agreement includes a 15-month make-whole provision; accordingly, the award is liability-classified under ASC 718. The make-whole provision had a fair value of $2,687,999 at June 30, 2026. See Note 8 for the fair value detail and Monte Carlo assumptions.

Buffalo Sports Properties / Learfield — University of Colorado

Effective December 3, 2025, the Company entered into a three-year Marketing and Sponsorship Agreement with Buffalo Sports Properties, LLC and Learfield (the “Provider”) for the University of Colorado athletic program. Under the agreement, the Company receives sponsorship, media, and NIL marketing benefits in exchange for a combination of cash and equity consideration. The Provider is considered the Company’s customer under ASC 606; revenue is recognized upon delivery of sponsorship and marketing benefits over the term.

As consideration, the Company agreed to pay $550,000 per year over the three-year term, consisting of $350,000 per year in common stock (total equity commitment: $1,050,000) and $200,000 per year in cash (total cash: $537,931). On December 12, 2025, the Company issued 4,826 shares of common stock at $267.20 per share (grant date: December 3, 2025; aggregate equity fair value: $1,289,480). The equity component is accounted for as payment for distinct sponsorship, media, and marketing services under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision, was $2,014,433. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the three and six months ended June 30, 2026, the Company recognized $165,220 and $330,790 of marketing expense, respectively. As of June 30, 2026, the prepaid balance was $1,631,761, of which $671,478 is classified as current and $960,283 as non-current.

The agreement includes an 18-month make-whole provision (through June 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed amount; accordingly, the award is liability-classified under ASC 718. The related make-whole obligation was settled during the three months ended March 31, 2026, and the liability of $814,266 was reclassified to additional paid-in capital; its fair value was $0 at June 30, 2026. See Note 8.

Athlete Capital Sports

Effective March 12, 2026, the Company entered into a consulting agreement with Athlete Capital Sports LLC to participate in The Pennsylvania State University’s name, image and likeness (“NIL”) program for student-athletes, pursuant to which the Company is required to issue shares with an aggregate value of $3,000,000 in exchange for consulting services to be provided over a three-year term. As the arrangement represents a binding obligation and the related services are to be received over the contractual term, the Company recorded a prepaid consulting asset with a corresponding stock payable, and will amortize the prepaid balance over the service period. During the three months ended June 30, 2026, the Company issued 23,511 shares of common stock in settlement of the related stock payable and recognized the initial fair value of the make-whole provision of $2,325,625, recorded as an addition to the prepaid asset and a corresponding share-based payment liability. For the three and six months ended June 30, 2026, the Company recognized $355,230 and $407,285 of consulting expense, respectively, and the prepaid balance was $4,918,340 as of June 30, 2026. The make-whole provision is liability-classified under ASC 718 and had a fair value of $2,508,035 at June 30, 2026; see Note 8.

Learfield College LLC

Effective January 26, 2026, the Company entered into a Marketing and Sponsorship Agreement with Learfield relating to Vanderbilt University, providing for equity consideration of $925,000 over four contract years through June 30, 2029 — $100,000 for the first contract year and $825,000 for the remaining contract years — together with cash and trade consideration, in exchange for marketing services to be provided over the contract term. As the arrangement represents a binding obligation and the related services are to be received over the contractual service period, the Company recorded a prepaid marketing asset with a corresponding stock payable liability, and will amortize the prepaid balance over the service period. During the three months ended June 30, 2026, the Company issued shares under the agreement and recognized additional consideration of $1,608,133, comprising the shares issued and the initial fair value of the make-whole provision, recorded as an addition to the prepaid asset. For the three and six months ended June 30, 2026, the Company recognized $107,458 and $147,458 of marketing expense, respectively, and the prepaid balance was $1,560,675 as of June 30, 2026. The make-whole provision is liability-classified under ASC 718 and had a fair value of $826,218 at June 30, 2026; see Note 8.

The Battle’s End, LLC — Florida State University

Effective May 1, 2026, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with The Battle’s End, LLC (“The Battle’s End”), the name, image and likeness collective supporting Florida State University athletics, pursuant to which the Company is engaged as the exclusive manufacturer of private label apparel bearing The Battle’s End’s and Florida State University marks. As consideration, the Company agreed to issue common stock with an aggregate value of $1,050,000, representing the entire stock consideration for the three-year term. The Company recorded a prepaid marketing asset with a corresponding stock payable and amortizes the prepaid balance on a straight-line basis over the three-year term. For the three and six months ended June 30, 2026, the Company recognized $58,493 of marketing expense, and the prepaid balance was $991,507 as of June 30, 2026. The agreement includes a 15-month make-whole provision of the type described above. As no shares had been issued as of June 30, 2026, no share-based payment liability was recognized at that date. See Note 9 for the related stock payable.

Other Marketing Agreements

MavDB Consulting LLC

In January 2025, the Company entered into a two-year marketing services agreement with MavDB Consulting LLC for content production, social media marketing, student athlete engagement, and event staffing. The consideration was satisfied through the issuance of 51,724 pre-funded warrants with an aggregate fair value of $2,689,656, accounted for as share-based consideration for marketing and advisory services. The warrants are equity-classified with no make-whole provision. The Company recognized $656,039 of amortization within sales and marketing expenses during the six months ended June 30, 2026. During the second quarter of 2026, the Company recorded an impairment charge of $764,424 within sales and marketing expenses for the three months ended June 30, 2026, representing the full remaining unamortized balance of the prepaid asset. The impairment was recorded in connection with a pending dispute with the principal of MavDB, as a result of which the Company concluded that it would not receive further services under the agreement and that the remaining prepaid balance was not recoverable. Amounts received from that individual and affiliated entities in respect of warrant exercises for which shares have not been issued are presented within stock payable; see Notes 9 and 13. As of June 30, 2026, the MavDB prepaid marketing balance was $0.

Other

Costs associated with all cash-based agreements are recognized as prepaid assets and expensed over the respective contractual service periods.

Summary of Consideration and Prepaid Balances

The following table summarizes the consideration provided under each agreement and the resulting prepaid marketing balances as of June 30, 2026:

The Company’s collegiate apparel and marketing agreements include make-whole provisions under which the Company may be required to deliver additional shares or cash to satisfy guaranteed value commitments. Because the settlement value may vary based on the Company’s stock price, these arrangements are classified as liability-classified share-based payment awards under ASC 718 and are remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.

See Note 8 for the fair value of the remaining share-based payment liabilities as of June 30, 2026 and December 31, 2025. The amounts in the table above are grant-date fair values and do not represent balances at June 30, 2026.

As of June 30, 2026, the aggregate fair value of the Company’s share-based payment liabilities related to make-whole provisions was $6,022,252. During the three and six months ended June 30, 2026, the Company recognized fair value losses of $1,770,393 and $5,641,847, respectively. Of those amounts, $1,270,295 and $4,115,735, respectively, relate to the obligations owed to RallyTown, LLC and AAA Tuscaloosa, LLC, including the remeasurement of those obligations to the settlement amount determined under the Setoff and Reimbursement Agreement described in Note 7, and the remainder relates to the remeasurement of the other arrangements, primarily attributable to changes in the Company’s stock price and other valuation assumptions utilized in the Monte Carlo simulation model. The obligations arising under the Company’s arrangements with RallyTown, LLC and AAA Tuscaloosa, LLC are no longer measured on that basis and are presented within notes payable at June 30, 2026, as described in Note 7.

Classification and Future Amortization

Prepaid marketing expenses are classified as current or non-current based on the portion of each agreement expected to be amortized within the next twelve months from the balance sheet date. Current prepaid balances represent the pro-rata share of total consideration allocable to services to be received in the twelve months ending June 30, 2027. Non-current prepaid balances represent the remaining unamortized consideration allocable to periods beyond June 30, 2027.

Total prepaid marketing expense recognized during the three and six months ended June 30, 2026 was $2,838,841 and $5,255,082, respectively. Estimated future amortization of prepaid marketing expenses as of June 30, 2026 is as follows:

NOTE 5: DUE FROM FACTOR

The Company, via its subsidiaries, Bailey, Stateside and Sundry, assigns a portion of its trade accounts receivable to third-party factoring companies, who assumes the credit risk with respect to the collection of non-recourse accounts receivable. The Company may request advances on the net sales factored at any time before their maturity date. The factor charges a commission on the net sales factored for credit and collection services. For one factoring company, interest on advances is charged as of the last day of each month at a rate equal to the LIBOR rate plus 2.5% for Bailey. For Stateside and Sundry, should total commission and fees payable be less than $30,000 in a single year, then the factor shall charge the difference between the actual fees in said year and $30,000 to the Company. Interest on advances is charged as of the last day of each month at a rate equal to the greater of either, (a) the Chase Prime Rate + (2.0)% or (b) (4.0)% per annum. For another factoring company, interest is charged at 1/33 of 1 per day, which rate will increase or decrease in accordance with changes in the “Prime Rate”, which such prime rate to be deemed to be 4.25% on the date of the agreement.

Advances are collateralized by a security interest in substantially all of the companies’ assets.

Due to/from factor consist of the following:

NOTE 6: GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company recorded goodwill from each of its business combinations. The following is a summary of goodwill by entity as of June 30, 2026, and December 31, 2025:

Intangible Assets

The following table summarizes information relating to the Company’s identifiable intangible assets as of June 30, 2026 and December 31, 2025:

On April 1, 2025, the Company entered into an Asset Purchase Agreement (the “Open Daily APA”) with Open Daily Technologies Inc. (“Open Daily”). Pursuant to the terms of the Open Daily APA, the Company agreed to purchase, and Open Daily agreed to sell certain intellectual property owned by Open Daily, including, but not limited to, patent applications, trademarks, and software products and platforms (the “Open Daily Assets”), but not any liability or obligation of Open Daily in connection with the Company’s purchase of the Open Daily Assets, in exchange for the issuance by the Company of 8,621 shares of the Company’s common stock (the “Open Daily Acquisition”).

The technology asset acquired from Open Daily Technologies Inc. was placed in service during 2025 and is being amortized on a straight-line basis over its estimated useful life.

The Company recorded amortization expense of $141,356 and $282,712 during the three and six months ended June 30, 2026, respectively, and $416,540 and $833,080 during the three and six months ended June 30, 2025, respectively, which is included in general and administrative expenses in the consolidated statements of operations.

NOTE 7: LIABILITIES AND DEBT

Accrued Expenses and Other Liabilities

The Company accrued expenses and other liabilities line in the condensed consolidated balance sheets is comprised of the following as of June 30, 2026 and December 31, 2025:

Payroll related liabilities are primarily related to overdue payroll taxes due to be remitted to federal and state authorities by the parent company (Digital Brands Group, Inc.) and Bailey.

Accrued interest payable of $3,019,888 as of June 30, 2026 (December 31, 2025: $2,787,506) relates primarily to unpaid interest on the Bailey sellers’ promissory note and is presented separately on the consolidated balance sheet.

Debt

The following table summarizes the Company’s outstanding debt obligations as of June 30, 2026 and December 31, 2025:

Loan Payable — PPP and SBA Loan

In April 2022, Bailey received notification of full forgiveness of its second SBA Paycheck Protection Program (“PPP”) loan totaling $1,347,050 and partial forgiveness of its first PPP loan totaling $413,705. As of June 30, 2026 and December 31, 2025, Bailey had an outstanding PPP loan balance of $933,294, classified as current. The loan matured in April 2026, remains unpaid and is past due. No additional forgiveness was recognized during the year ended December 31, 2025 or during the three and six months ended June 30, 2026.

In June 2020, the Company received a SBA loan in the principal amount of $150,000, bearing interest at a rate of 3.75% per annum. As of June 30, 2026 and December 31, 2025, the Company maintained an outstanding balance of $150,000 on this loan. The loan matures in April 2050.

The Company’s Sunnyside subsidiary maintains a Shopify Capital loan with an outstanding balance of $24,559 and $58,296 as of June 30, 2026 and December 31, 2025, respectively, classified as current.

In January 2026, the Company’s subsidiary availed a motor loan with an outstanding balance of $78,148 as of June 30, 2026.

Merchant Advances

Future Sales Receipts

From 2022 through 2024, the Company obtained several merchant advances. These advances are, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis. The Company made total cash repayments, pertaining to principal and interest, of $132,500 and $264,500 for the three and six months ended June 30, 2026, respectively.

Promissory Note Payable

As of June 30, 2026 and December 31, 2025, the outstanding principal on the note payable to the sellers of Bailey 44, LLC was $3,500,000. The note bears interest at 12% per annum, payable quarterly. Interest expense was $105,000 and $210,000 for the three and six months ended June 30, 2026, respectively. Accrued and unpaid interest was $3,019,888 as of June 30, 2026, recorded separately as accrued interest payable on the condensed consolidated balance sheet. The note matured on December 8, 2025 and remains outstanding. The Company has not received a notice of acceleration from the holders.

The note matured on December 8, 2025. As of June 30, 2026, the note has not been repaid and is in technical default. The Company is currently in discussions with the lender regarding repayment, extension, or refinancing of the obligation. Management has not identified any cross-default provisions in other material agreements that would be triggered by this default. This default has been considered in the Company’s going concern assessment.

As of June 30, 2026, the note remains outstanding and unpaid. The Company continues to accrue interest at the contractual rate of 12% per annum. No formal acceleration notice has been received from the lender as of the date these financial statements were available to be issued.

1800 Diagonal Lending Promissory Note

On June 9, 2026, the Company issued a promissory note to 1800 Diagonal Lending LLC in the principal amount of $238,050, comprising a purchase price of $207,000 and an original issue discount of $31,050. After fees withheld from funding of $7,000, the Company received cash proceeds of $200,000. A one-time interest charge of 12% of principal, or $28,566, was applied on the issue date, and the total amount repayable of $266,616 is due in nine monthly installments of $29,624 commencing July 15, 2026, with a final installment due March 15, 2027. Amounts not paid when due bear interest at 22% per annum, and upon an event of default the Company becomes obligated for 150% of outstanding principal, accrued interest and default interest. The Company may prepay at any time without penalty and is required to repay the note within five business days of the closing of its next public offering of securities. The note is recorded net of the discount and the bifurcated conversion feature described below, and interest is recognized using the effective interest method at an effective rate of approximately 99% per annum. The carrying value of the note was $172,433 at June 30, 2026, comprising an outstanding principal balance of $238,050 less unamortized original issue discount, fees and the bifurcated conversion feature aggregating $65,617. Interest of $11,990 was recognized during the period under the effective interest method and is reflected in the carrying value; no interest was separately accrued at June 30, 2026.

At any time following an event of default, the holder may convert the outstanding balance of the note into common stock at a conversion price equal to 61% of the lowest trading price of the common stock during the ten trading days preceding the conversion date, representing a 39% discount. The Company determined that the conversion feature is not clearly and closely related to the debt host, meets the definition of a derivative, and does not qualify for the scope exception for contracts indexed to an entity’s own equity, because the number of shares issuable varies inversely with the trading price and is subject to no floor price. The beneficial ownership limitation and the exchange cap restrict but do not fix the number of shares deliverable. The feature is exercisable only following an event of default, which does not preclude separation, and no event of default had occurred as of June 30, 2026. The feature has accordingly been separated from the debt host and is accounted for as a derivative liability measured at fair value, with changes in fair value recognized in earnings.

The derivative liability was measured using a Monte Carlo simulation reflecting the ten-trading-day lookback in the conversion price, applied to the unpaid balance of the note at each scheduled payment date, using a common stock price of $30.12, expected volatility of 208.94% and a risk-free rate of 3.61%. The resulting fair value is weighted for the probability that an event of default occurs, which management estimated at 25%. The fair value of the derivative liability was $39,557 at June 30, 2026 and is presented within accrued expenses and other liabilities on the condensed consolidated balance sheet. The measurement is classified within Level 3 of the fair value hierarchy because the probability of default is an unobservable input. No change in fair value was recognized between the issue date and June 30, 2026.

RallyTown Secured Payment Obligation

The Company’s make-whole obligations to RallyTown, LLC and AAA Tuscaloosa, LLC arose under the collegiate marketing arrangements described in Note 4 and were previously liability-classified share-based payment awards measured at fair value under ASC 718 (see Note 8). Under the Setoff and Reimbursement Agreement dated March 30, 2026, the amount payable became fixed by formula: $12.0 million, less the net cash proceeds realized by the counterparty on sales of the shares issued to it, less the market value of the shares it continues to hold. Because the obligation ceased to vary with the Company’s stock price and became a fixed monetary obligation determinable under a contract in force at the balance sheet date, the share-based payment liability was derecognized and the obligation is recognized as a note payable at June 30, 2026. The share-based payment liability immediately before derecognition was $10,893,890, net of a $70,000 payment applied during the quarter; the obligation was remeasured to the settlement amount of $11,249,786, and the resulting loss of $355,896 was recognized within change in fair value of share-based payment liability. No separate gain or loss arose on reclassification, because the note payable was recognized at the amount at which the obligation was settled upon.

On July 16, 2026, subsequent to the balance sheet date, the Company and RallyTown entered into a Secured Payment and Security Agreement establishing the terms of payment. Under ASC 855-10-25-1, that agreement provides additional evidence about conditions that existed at the balance sheet date — the amount of the obligation determined under the Setoff and Reimbursement Agreement — and is therefore a recognized subsequent event reflected in the June 30, 2026 measurement above. On the Calculation Date of July 16, 2026, the $1,750,000 Holdback Amount funded by the Company was applied against the obligation and, together with $221,000 of additional program cost, was settled by a payment of $1,971,000 made on July 23, 2026, leaving acknowledged arrears of $9,278,785.

The remaining obligation bears interest at 10% per annum from July 16, 2026 and is payable in monthly installments of $400,000 commencing August 1, 2026 through expected maturity in September 2028. It is secured by a first-priority security interest in the Company’s Avo-brand program revenues, related accounts and contract rights, inventory and equipment relating to the program, and the intellectual property and goodwill associated with the Avo brand, in each case subject to pre-existing senior liens, and the Company is required to establish a controlled deposit account into which program revenues are swept. Upon an event of default, the counterparty may require the Company to issue shares of common stock in partial satisfaction of the obligation, valued at 85% of the volume-weighted average price of the common stock over the ten trading days preceding issuance (see Note 16).

At June 30, 2026, $6,371,000 of the obligation is classified as current and $4,878,786 as non-current. The current portion comprises the $1,971,000 paid on July 23, 2026 and the eleven monthly installments of $400,000 falling due in the twelve months ending June 30, 2027, aggregating $4,400,000. The installments are applied entirely to principal; interest at 10% per annum is payable in addition to the monthly installments. Maturities, by fiscal year, are as follows:

NOTE 8: SHARE-BASED PAYMENT LIABILITY

The Company’s collegiate apparel agreements (AAA Tuscaloosa, RallyTown (formerly Traffic Holdco), Grove Collective, Buffalo Sports / Learfield, Athlete Capital Sports, Learfield College and The Battle’s End – see Note 4) include make-whole provisions under which the Company is required to deliver a guaranteed aggregate dollar value through a variable number of common shares. Because the number of shares required for settlement varies based on the Company’s stock price, these arrangements are classified as liability-classified share-based payment awards under ASC 718. At inception, the Company measures the liability at fair value using a Monte Carlo simulation model, with a corresponding prepaid marketing asset recognized. The liability is remeasured at fair value at each subsequent reporting date, with changes recognized in earnings. The prepaid marketing asset is amortized on a straight-line basis over the contractual service period. See Note 4 for prepaid marketing balances.

The share-based payment liability is classified within Level 3 of the fair value hierarchy under ASC 820, consistent with the Company’s accounting policy described in Note 3, because expected volatility — a significant input to the Monte Carlo simulation — is estimated from the Company’s own historical share prices and is unobservable. The other primary inputs are the Company’s common stock price, the guaranteed value per share under each arrangement, the risk-free rate for the corresponding term and the remaining measurement period. The derivative liability arising from the conversion feature embedded in the 1800 Diagonal Lending promissory note is also classified within Level 3, because its fair value reflects an unobservable input in the form of the probability that an event of default occurs. See Note 7.

The following summarizes the composition of the share-based payment liability as of June 30, 2026 and, for positions measured using the Monte Carlo simulation model, the assumptions used at remeasurement as of that date:

RallyTown and AAA Tuscaloosa — Setoff and Reimbursement Agreement

The Company’s make-whole obligations to RallyTown, LLC (formerly Traffic Holdco, LLC) and AAA Tuscaloosa, LLC are determined under a Setoff and Reimbursement Agreement dated March 30, 2026. That agreement fixes the amount payable by formula: $12.0 million, less the market value of the shares held by the counterparty at the calculation date, less net cash proceeds received by it on sales of shares. The combined obligation, measured on that basis, was $11,249,786 at June 30, 2026, before the $1,971,000 payment made on July 23, 2026, which had not occurred at the balance sheet date. The carrying value before remeasurement was $10,893,890, net of a $70,000 payment applied during the quarter, and the resulting increase of $355,896 was recognized in change in fair value of share-based payment liability. The Secured Payment and Security Agreement executed on July 16, 2026 reports the result of the calculation prescribed by the March 30, 2026 agreement, a contract in force at the balance sheet date, in respect of an obligation outstanding at that date. Under ASC 855-10-25-1, it provides additional evidence about conditions that existed at the balance sheet date and is a recognized subsequent event reflected in the June 30, 2026 measurement. Because the obligation is now settleable in a fixed monetary amount that does not vary with the Company’s share price, it no longer meets the definition of a share-based payment liability under ASC 718 and is presented within notes payable at June 30, 2026, classified between current and non-current as described in Note 7. The Company’s remaining make-whole obligations continue to be measured using a Monte Carlo simulation model.

At Remeasurement (June 30, 2026)

Share counts, per-share amounts and strike prices are stated on a post-split basis.

The fair value of share based payment liability for Buffalo Sports/Learfield agreement is $0 as of June 30, 2026.

Volatility was estimated based on the historical stock price of the Company over the applicable measurement period. The risk-free rate is based on the U.S. Treasury yield curve for the instrument’s remaining term as of the measurement date. The strike price represents the minimum guaranteed aggregate value per the respective agreement divided by the number of shares issued.

The following is a summary of activity of the share-based payment liability for the six months ended June 30, 2026:

Level 3 Rollforward — Share-Based Payment Liability

There were no transfers between levels during the six months ended June 30, 2026.

NOTE 9: STOCKHOLDERS’ EQUITY

Amendments to Certificate of Incorporation and Reincorporation

On August 21, 2023, the Board of Directors approved a 1-for-25 reverse stock split, effective August 22, 2023. On December 11, 2024, the Board approved a 1-for-50 reverse stock split, effective December 11, 2024. On July 15, 2026, the Board of Directors approved a 1-for-40 reverse stock split, which became effective on July 24, 2026. All share and per-share amounts for all periods presented have been retroactively adjusted to reflect all reverse stock splits. See Note 3.

Effective December 29, 2025, the Company reincorporated from the State of Delaware to the State of Nevada pursuant to a plan of conversion approved by the Board of Directors. The reincorporation did not affect the Company’s authorized capital structure, par values, or outstanding equity.

Common Stock

As of June 30, 2026, the Company had 1,000,000,000 shares of common stock, $0.0001 par value per share, authorized. Effective July 24, 2026, authorized common stock was reduced to 25,000,000 shares in connection with the reverse stock split (see Note 16).

Common stockholders have voting rights ofone vote per share. The voting, dividend, and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers, and preferences of preferred stockholders.

2026 Transactions

During the three months ended June 30, 2026, the Company issued 14,608 shares of common stock upon the exercise of pre-funded warrants previously issued in connection with a January 2025 marketing services agreement, for exercise proceeds of $5,843. During the six months ended June 30, 2026, the Company issued 46,497 shares upon the exercise of those warrants, for aggregate exercise proceeds of $18,599.

During the six months ended June 30, 2026, holders converted 1,250 shares of Series D Preferred Stock, with an aggregate stated value of $1,437,501, into 14,082 shares of the Company’s common stock.

During the six months ended June 30, 2026, the Company issued 203,613 shares of common stock upon the exercise of common stock purchase warrants originally issued in connection with the February 2025 Offering — of which 91,998 shares related to April and May 2026 exercises for which proceeds had been received and classified as common stock to be issued at March 31, 2026 — including 59,149 shares issued pursuant to warrant exchange agreements entered into on February 16, 2026. Aggregate exercise proceeds of the warrants exercised during the six months were approximately $5.4 million. No such warrants were exercised during the three months ended June 30, 2026.

During the three months ended June 30, 2026, the Company issued 91,998 shares of common stock related to warrant exercises at $26.40 per share for which the cash proceeds of $2,428,737 had been previously recorded within common stock to be issued, and accordingly reclassified the corresponding balances to common stock and additional paid-in capital within stockholders’ equity.

During the three months ended June 30, 2026, the Company issued 23,511 shares of common stock to Athlete Capital Sports and 3,788 shares of common stock to Learfield College and Crimson Tide Sports Marketing in settlement of stock payable, at an aggregate value of $4,262,000. Of the $1,262,000 value of the Learfield and Crimson Tide shares, $337,000 relieved amounts previously recorded in stock payable and $925,000, representing equity consideration for the full contract term of the Learfield College (Vanderbilt) agreement, was credited to additional paid-in capital.

During the three months ended June 30, 2026, the Company also issued 36,335 shares of common stock under its at-the-market sales agreement for net proceeds of $1,677,052.

Stock Payable

As of June 30, 2026, stock payable of $2,463,835 represents amounts received or committed in connection with common stock issuances for which the underlying shares had not yet been issued as of the reporting date. The balance primarily relates to obligations to issue shares under certain marketing agreements and to cash-funded warrant exercises for which the related shares of common stock had not yet been issued.

During the six months ended June 30, 2026, the Company issued shares in settlement of obligations under the Athlete Capital Sports, Learfield College and Crimson Tide Sports Marketing agreements for which the corresponding balances had been previously recorded within stock payable, and accordingly reclassified those balances from stock payable to common stock and additional paid-in capital within stockholders’ equity.

The balance at June 30, 2026 includes $1,406,811 related to cash-funded warrant exercises by a former holder and affiliated entities for which the underlying shares have not been issued and which are subject to litigation that has not commenced; these amounts are presented within stock payable rather than additional paid-in capital for that reason; see Note 13.

No balance remained within common stock to be issued at June 30, 2026.

The stock payable balance also includes obligations to issue shares under certain marketing and consulting agreements, including $1,050,000 relating to the Florida State University (The Battle’s End) agreement entered into during the three months ended June 30, 2026, for which corresponding prepaid marketing and consulting assets were recognized. Upon issuance of the related shares of common stock, the associated balances will be reclassified from stock payable to stockholders’ equity.

Series A Convertible Preferred Stock

On September 29, 2022, the Company designated up to 6,800 shares of Series A Convertible Preferred Stock, par value $0.0001, with a stated value of $1,000 per share. Each share of Series A Preferred Stock is convertible at the holder’s option into a number of shares of common stock determined by dividing the stated value ($1,000) by the conversion price of $465,000, as adjusted for reverse stock splits (originally $9.30, the closing price on September 29, 2022). Series A holders are entitled to vote with the holders of common stock on an as-converted basis. Series A Preferred Stock ranks senior to common stock and junior to Senior Securities as to dividends and liquidation.

As of June 30, 2026 and December 31, 2025, there were 6,300 shares of Series A Convertible Preferred Stock issued and outstanding, with an aggregate liquidation preference of $6,300,000.

Series C Convertible Preferred Stock

On June 21, 2023, the Company issued 5,761 shares of Series C Convertible Preferred Stock, par value $0.0001, with a stated value of $1,000 per share, to the Sundry sellers in exchange for cancellation of promissory notes issued in December 2022. Each share of Series C Preferred Stock is convertible at the holder’s option into common stock at a conversion price of $35,850 per share, as adjusted for reverse stock splits (originally determined as the lower of the closing price on June 20, 2023 and the five-day average preceding the issuance date). The Company may redeem all or any portion of the outstanding Series C shares at 112% of the then-current stated value at any time after June 21, 2023, provided an effective registration statement is in place. Series C holders are entitled to vote with common stockholders on an as-converted basis. Series C ranks pari passu with Series A and senior to common stock.

As of June 30, 2026 and December 31, 2025, there were 1,344 shares of Series C Convertible Preferred Stock issued and outstanding, with an aggregate liquidation preference of $1,344,000.

Series D Convertible Preferred Stock

2026 Transactions

During the six months ended June 30, 2026, holders converted 1,250 shares of Series D Preferred Stock into 14,082 shares of common stock.

As of June 30, 2026, there were 14,656 shares of Series D Convertible Preferred Stock issued and outstanding.

Conversion: Each share of Series D Preferred Stock is convertible at the holder’s option into common stock at a price equal to 80% of the lowest closing price of the Company’s common stock for the five trading days immediately preceding the conversion date, subject to beneficial ownership limitations of 4.99% (adjustable to 9.99%).

Dividends: Series D holders are entitled to receive dividends equal (on an as-converted basis) to dividends paid on common stock, when and if declared. No dividends have been declared or paid.

Voting: Series D holders vote with holders of common stock on an as-converted basis, subject to ownership limitations.

*Liquidation Preference:*Series D ranks senior to common stock and Junior Securities, pari passu with Series A and Series C, and junior to Senior Securities. Upon liquidation, each Series D holder is entitled to receive the greater of: (i) the stated value plus accrued dividends, or (ii) the amount such holder would receive if Series D were converted to common stock immediately prior to such liquidation. As of June 30, 2026, the aggregate liquidation preference of the Series D Preferred Stock was approximately $14,656,250.

Under ASC 480-10-S99-3A, the Company evaluated whether the Series D should be classified as temporary equity. Because there are no redemption features exercisable at the option of the holder or upon the occurrence of events not solely within the Company’s control, the Series D Preferred Stock does not meet the criteria for temporary equity classification. Accordingly, the Series D is classified as permanent equity in the Consolidated Balance Sheets.

The beneficial conversion feature (“BCF”) guidance under ASC 470-20 was superseded by ASU 2020-06, which the Company has adopted. Accordingly, no BCF was recognized at issuance.

Liquidation Preferences

As of June 30, 2026, the aggregate liquidation preferences of the Company’s preferred stock were as follows:

NOTE 10: WARRANTS AND STOCK OPTIONS

Common Stock Warrants

A summary of common stock warrant activity for the six months ended June 30, 2026 is as follows:

Warrant Transactions

MavDB Consulting LLC Pre-Funded Warrants

During the six months ended June 30, 2026, holders exercised pre-funded warrants resulting in the issuance of 46,497 shares of common stock. The rollforward above presents warrants outstanding per the Company’s warrant records, which are reconciled to the transfer agent’s registration statement reserves; share issuances described in Note 9 include settlements of exercises effected, and of proceeds received, in prior periods.

February 2025 Offering Warrants

During the six months ended June 30, 2026, holders exercised 203,613 common stock purchase warrants — of which 91,998 were exercised in April and May 2026 with proceeds received prior to March 31, 2026 — at an exercise price of $26.40 per share, including 59,149 warrants exercised pursuant to exchange agreements entered into on February 16, 2026.

In June 2026, an aggregate of 240,851 common stock purchase warrants issued in connection with the February 2026 warrant inducement, which were previously unexercised, expired unexercised. In addition, on June 15, 2026, the Company placed a hold on 179,690 pre-funded warrants issued in connection with the February 2025 Offering, pending their expected cancellation; the warrants remain outstanding on the transfer agent’s records and the outcome of the related dispute has not been determined (see Note 13).

On February 16, 2026, the Company entered into warrant inducement agreements with certain existing holders of common stock purchase warrants previously issued in connection with the Company’s February 2025 financing. Pursuant to the agreements, the holders exercised an aggregate of 59,149 existing warrants at an exercise price of $26.40 per share. In consideration for such exercises, the Company agreed to issue 240,851 modified common stock purchase warrants with substantially similar terms to the original warrants, except that the expiration date was extended to June 17, 2026. To the extent a holder would have exceeded applicable beneficial ownership limitations, pre-funded warrants were issued in lieu of common stock purchase warrants.

The Company evaluated the transaction in accordance with the accounting guidance applicable to modifications and inducements of freestanding equity-classified warrants. The Company concluded that the modified warrants substantially represent a continuation and extension of the existing warrants rather than the issuance of entirely new freestanding instruments, as the exercise price and underlying economics remained substantially unchanged and the primary modification related to the extension of the contractual term. The Company further evaluated the accounting impact of the transaction, including the shares issued upon exercise, cash proceeds received, and the modification of the warrant terms. Based on such evaluation, the Company concluded that any accounting impact associated with the warrant modification represents an equity-classified financing-related adjustment within additional paid-in capital and therefore did not result in recognition of an operating expense in the accompanying condensed consolidated financial statements for the three months ended June 30, 2026

Stock Options

As of June 30, 2026 and December 31, 2025, the Company had 1 stock option outstanding with a weighted average exercise price of $18,100,000 per share, in each case on a post-split basis reflecting the reverse stock split effected July 24, 2026. All outstanding options are exercisable. No options were granted, exercised, or forfeited during the three or six months ended June 30, 2026 or 2025.

There wasno stock-based compensation expense for the three or six months ended June 30, 2026 or 2025. There isno unrecognized compensation cost related to outstanding stock options as of June 30, 2026.

The 2020 Omnibus Incentive Stock Plan (the “2020 Plan”) authorizes an aggregate of 1 share of common stock for awards on a post-split basis. As of June 30, 2026, grants covering that share have been made and no shares remain available for future issuance under the 2020 Plan.

NOTE 11: RELATED PARTY TRANSACTIONS

As of both June 30, 2026 and December 31, 2025, amounts due to related parties was $370,921 and $370,921, respectively. The advances are unsecured, non-interest bearing and due on demand. Amounts due to related parties consist of amounts due to current and former executives, and a board member.

As of both June 30, 2026 and December 31, 2025, due to related parties includes $87,222 in advances from Mark Lynn, a director and former officer of the company, and accrued salary and expense reimbursements of $134,699 to current officers of the company.

In October 2022, the Company received advances from a director, Trevor Pettennude, totaling $325,000. The advances are unsecured, non-interest bearing and due on demand. As of both June 30, 2026 and December 31, 2025, $149,000 and $149,000, respectively, was outstanding.

NOTE 12: LEASE OBLIGATIONS

Management uses judgment in determining lease classification, including determination of the economic life and the fair market value of the identified asset. The fair market value of the identified asset is generally estimated based on comparable market data provided by third-party sources.

In January 2026, the Company entered into a lease agreement extension for its distribution center in Round Rock, Texas that expires on June 30, 2033. The lease provides for initial monthly base rent payments of $45,627, which increase annually each July in accordance with the terms of the agreement. The Company recognized a right of use asset of $4,193,060 and lease liability of $4,120,769 using a discount rate of 10.0%.

The following is a summary of operating lease assets and liabilities:

NOTE 13: CONTINGENCIES

Marketing Agreement Commitments

The Company has entered into multi-year marketing and sponsorship agreements with AAA Tuscaloosa, LLC, RallyTown, LLC (formerly Traffic Holdco, LLC), The Grove Collective, LLC, Athlete Capital Sports LLC and Learfield, each of which includes equity and, in some cases, cash commitments over three-year terms. Certain of these agreements include make-whole provisions under which the Company may be required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment during the protection period. These arrangements are accounted for as liability-classified share-based payment awards; the related liabilities are measured at fair value at each reporting date using Monte Carlo simulation models. See Note 4 for the prepaid marketing balances and Note 8 for the fair value of those liabilities as of June 30, 2026.

Legal Contingencies

All claims above, to the extent management believes it will be liable, have been included in accounts payable and accrued expenses and other liabilities in the accompanying condensed consolidated balance sheet as of June 30, 2026.

Depending on the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect our business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, we believe based on our current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on our business, results of operations, cash flows, or financial condition.

Except as may be set forth above the Company is not a party to any legal proceedings, and the Company is not aware of any claims or actions pending or threatened against us. In the future, the Company might from time to time become involved in litigation relating to claims arising from its ordinary course of business, the resolution of which the Company does not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

NOTE 14: INCOME TAXES

The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Company has used a discrete effective tax rate method to calculate taxes for the fiscal three month periods ended June 30, 2026. The Company determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the fiscal three month period ended June 30, 2026.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due, cumulative losses through June 30, 2026, and no history of generating taxable income.

NOTE 15: SEGMENT REPORTING

The Company operates as a single reportable segment — direct-to-consumer (“DTC”) fashion brands. The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM reviews consolidated financial results to evaluate performance, allocate resources, and make operating decisions for the Company as a whole.

In accordance with ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, effective for annual periods beginning after December 15, 2023, the Company is required to disclose significant segment expenses regularly provided to the CODM and included in the reported measure of segment profit or loss, even as a single reportable segment entity.

The CODM uses net loss as the measure of segment profit or loss to assess performance and allocate resources. The significant segment expenses regularly provided to the CODM are presented in the table below.

Total segment assets as of June 30, 2026 and 2025 were $46,674,701 and $27,820,287, respectively, equal to total consolidated assets. All assets are attributable to the Company’s single operating segment.

All revenues and long-lived assets are attributable to operations within the United States. No single customer accounted for more than 10% of net revenues during either period presented

NOTE 16: SUBSEQUENT EVENTS

RallyTown Secured Payment and Security Agreement

On July 16, 2026, the Company and RallyTown, LLC, formerly Traffic Holdco, LLC, entered into a Secured Payment and Security Agreement establishing the terms of payment of the obligation described in Note 7. The obligation is payable in monthly installments of $400,000 commencing August 1, 2026, bears interest at 10% per annum, and is secured by a first-priority security interest in the Company’s Avo-brand program revenues, related accounts and contract rights, inventory and equipment relating to the program, and intellectual property and goodwill associated with the Avo brand, subject to pre-existing senior liens. The agreement requires the Company to establish a controlled deposit account, subject to a deposit account control agreement, into which program revenues are to be swept and applied in a defined order of priority, and restricts the Company from granting further liens on the program collateral or diverting program revenues. Upon the occurrence and during the continuance of an event of default the counterparty may require the Company to issue shares of common stock in partial satisfaction of the secured obligations, valued at 85% of the volume-weighted average price of the common stock over the ten trading days preceding issuance, subject to applicable law, Nasdaq rules and any required stockholder approval. On July 16, 2026, the Holdback Amount of $1,750,000 was applied against the obligation on the Calculation Date and the parties acknowledged arrears of $9,278,785. On July 23, 2026, the Company made a payment of $1,971,000 under the agreement, comprising the Holdback Amount together with $221,000 of additional program cost. See Note 7.

Convertible Note Financing

On July 23, 2026, the Company issued a convertible promissory note to Shakawe Capital LLC in the original principal amount of $3,529,412 for an aggregate subscription amount of $3,000,000, reflecting an original issue discount of $529,412. The proceeds were held in escrow pending disbursement in accordance with joint written instructions delivered by the Company and Aegis Capital Corp. The note does not bear stated interest, matures on January 23, 2027 and is repayable in installments of $1,000,000 on each of October 23, November 23 and December 23, 2026 and $529,412 at maturity. Amounts not paid when due bear interest at 20% per annum, and upon an event of default the Company becomes obligated for 120% of the outstanding principal, accrued interest and other amounts owing. The note ranks senior to the Company’s other indebtedness and equity. At any time during the continuance of an event of default, the holder may convert the outstanding balance into common stock at a conversion price equal to the greater of 90% of the lowest closing price during the five trading days preceding conversion and a floor price of $3.9592 per share on a post-split basis, which floor resets on each six-month anniversary of issuance to the lower of the floor then in effect and 20% of specified recent closing prices, and which becomes zero if the common stock ceases to be listed on the trading market. Conversion is subject to a beneficial ownership limitation of 4.99%, which increases to 9.99% in specified circumstances, and to a cap of 19.99% of the outstanding common stock.

Collegiate Sponsorship and Name-Image-Likeness Agreements

Subsequent to June 30, 2026, the Company entered into additional multi-year collegiate sponsorship and name-image-likeness agreements, including agreements with Playfly Sports Properties, LLC and its affiliates relating to Baylor University, the University of Nebraska-Lincoln, the University of Virginia and Auburn University, and agreements relating to North Carolina State University, in each case with terms commencing on or after July 1, 2026. First-contract-year consideration under these agreements aggregates approximately $2.0 million, of which $1.1 million is payable in shares of the Company’s common stock and is subject to make-whole provisions of the type described in Note 8, with the remainder payable in cash. Because the terms of those agreements commence on or after July 1, 2026 and no consideration was due and no shares were deliverable on or before June 30, 2026, no amounts have been recognized in these financial statements in respect of them. In addition, a sponsorship fee of $500,000 for the 2026-2027 contract year became payable in shares of common stock under the Company’s existing agreement relating to Pennsylvania State University. Shares in respect of the 2026-2027 contract year under the Pennsylvania State University, Baylor University and University of Nebraska-Lincoln agreements, aggregating $1,300,000, were deliverable on or about August 1, 2026 and had not been issued as of the date of this report. Shares under the University of Virginia agreement are deliverable on or about September 1, 2026.

Reverse Stock Split

On July 15, 2026 the Board of Directors approved aone-for-forty reverse stock split, which became effective July 24, 2026 following the filing of a Certificate of Change with the State of Nevada on July 20, 2026. Authorized common stock was reduced from 1,000,000,000 to 25,000,000 shares. All share and per-share amounts in these financial statements have been retroactively adjusted. See Note 1.

Amendment to Series D Certificate of Designations and Lock-Up Agreement

On July 17, 2026 the Company filed an amendment to the certificate of designations of its Series D Convertible Preferred Stock with the State of Nevada, revising the definition of Floor Price to 20% of the lower of the closing price on the preceding trading day and the average closing price over the preceding five trading days. As an inducement for the amendment, the majority holder of the Series D Preferred Stock entered into a Lock-Up and Leak-Out Agreement imposing a restricted period of 180 days, during which sales are limited to 3% of the daily trading volume of the common stock, subject to waiver by the Company. The Company is determining the impact of the amendment to the classification and carrying value of the Series D Preferred Stock.

Equity Line of Credit

On July 23, 2026, the Company entered into a purchase agreement providing for an equity line of credit of up to $100 million through July 2029. Shares issued under the facility are priced at 95% of the applicable lowest volume-weighted average price or traded price, and issuances are subject to a beneficial ownership limitation of 4.99%. A commitment fee of 1% is payable in shares of common stock, and on July 23, 2026 the Company issued 1,207,219 shares of common stock, or 30,180 shares on a post-split basis, in satisfaction of that fee. Aegis Capital Corp. acted as placement agent in respect of the facility and the convertible note described above for commissions of 3%. Under a related registration rights agreement the Company is required to file a registration statement covering 200% of the shares issuable under the note together with the shares issuable under the equity line within 15 days of closing, and to cause it to become effective within 75 days.

At-the-Market Offering

Subsequent to June 30, 2026 and through August 17, 2026, the Company sold 113,171 shares of common stock, on a post-split basis, through its sales agent under the at-the-market offering program established pursuant to the Company’s registration statement on Form S-3, for gross proceeds of $1,897,843 and net proceeds of $1,859,849 after sales agent commissions of 2%, in each case per the sales agent’s account statements and the transfer agent’s records.

Conversions of Series D Convertible Preferred Stock

Between July 20, 2026 and August 17, 2026, holders converted an aggregate of 2,100 shares of Series D Convertible Preferred Stock, having an aggregate stated value of $2,415,000, into 222,061 shares of common stock on a post-split basis, at conversion prices ranging from $9.608 to $14.368 per share. Following these conversions,12,556 shares of Series D Convertible Preferred Stock remained outstanding.

Appointment of Director

On July 14, 2026 the Board of Directors appointed David Sosnowski as an independent director under a board agreement with an initial term of one year, renewable annually. Mr. Sosnowski is entitled to an annual cash retainer of $100,000 payable quarterly commencing July 31, 2026, together with options to purchase 500 shares of common stock, on a post-split basis, at an exercise price of $200.00 per share, vesting 25% quarterly from the date of grant and expiring five years from grant.

Management has evaluated subsequent events through the date these unaudited condensed consolidated financial statements were issued and has determined that, other than as described above, no events have occurred that would require recognition or disclosure in these financial statements.