Following the completion of a new deal, Digital Brands Group Inc. (Nasdaq: DBGI) has increased 4.81% to $0.085 in pre-market trading hours on the most recent check Monday.
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Which contract has DBGI completed?
Digital Brands (DBGI) revealed last week that the definitive purchase agreement between the Company and Sunnyside, LLC (“Sundry”) had been modified to need less cash and equity to consummate the deal. According to Digital Brands, the deal should be finalized in November.
Highlights of the Sundry Acquisition include:
- Sundry earned $22.8 million in sales in 2021; and
- The acquisition is anticipated to increase EBITDA right away after closing.
Hil Davis, Chief Executive Officer of DBGI, said, “We are delighted about the considerable revenue scale and positive cash flow that we will gain between integrating with the Sundry’s purchase.”
Holders of Sundry membership interests will swap all of their interests for I $7.5 million in cash, (ii) $1.0 million in equity valued at the Issuance Price, and (iii) $5.5 million in debt to the sellers, under the terms of the new agreement.
DBGI’s equity efforts:
With its senior lender, Black Oak Capital, Digital Brands recently engaged into a debt-for-equity exchange deal to pay off and retire the company’s principal debt of about $6.25 million.
The debt swap positions DBGI’s financial sheet well to pursue growth and acquisitions. For DBGI, this will result in both immediate and long-term shareholder value.
Investors are bound by the agreement, which states that they may not convert more shares than the greater of I $500,000 of shares or (ii) shares underlying shares of common stock that account for more than 10% of the total trading volume of the Company’s common stock as reported by Nasdaq in any calendar month.
This debt swap considerably strengthens DNGI’s balance sheet and opens up prospects for expansion and acquisition that would not have been conceivable without Black Oak Capital as a long-term shareholder.
What more does the agreement say?
A new series of convertible preferred stock of the company, designated as Series A Convertible Preferred Stock, with a par value of $0.0001 per share has been authorized by Digital Brands (DBGI) in accordance with the terms of the agreement. This Series A Preferred Stock is convertible into shares of DBGI common stock.