{"url_path":"/sec/dbgi/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 LEGAL PROCEEDINGS**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-20","source_url":"https://www.sec.gov/Archives/edgar/data/1668010/0001493152-26-024610-index.html","accession_number":"0001493152-26-024610","cik":"0001668010","ticker":"DBGI","issuer_name":"Digital Brands Group, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1668010/0001493152-26-024610-index.html","primary_entity_key":"0001668010","primary_entity_name":"Digital Brands Group, Inc."},"word_count":711,"has_tables":true,"body_markdown":"**ITEM\n1. LEGAL PROCEEDINGS**\n\n \n\nWe\nare currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary\ncourse of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial\nmatters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property\nrights. These matters also include the following:\n\n \n\n \n●\n\nIn June 2022, a dispute originated due to a contractual arrangement involving\nalleged unpaid service fees of approximately $28,000, as well as additional disputed amounts, and counterclaims asserted by the Company\nfor damages arising from website-related issues. A default judgment of approximately $28,000 was entered against the Company in January\n2025. The Company is currently challenging the judgment and has initiated a new action reasserting its claims.\n\n \n \n \n\n \n●\nOn\nMarch 20, 2024, a former temporary worker engaged through a third-party placement agency, who was never an employee of the Company,\nfiled a wrongful termination lawsuit against the Company. The Company is disputing this claim. The individual has since engaged a\nnew law firm, The Finkel Firm, and the matter is scheduled for arbitration this fall.\n\n \n \n \n\n \n●\nOn\nApril 17, 2024, a former employee filed a wrongful termination lawsuit against the Company. The employee was part of the marketing\nteam, which was fully transitioned to a third-party outsourced marketing solution. The Company disputed the claim and initially pursued\narbitration; however, the matter was settled in May 2025 for a total of $81,000. Of this amount, $41,000 was paid in late June 2025,\nwith the remaining $40,000 to be paid in three equal installments of $13,000 at the end of July, August, and September 2025.\n\n \n \n \n\n \n●\n\nIn June 2021, a vendor filed a lawsuit against Bailey related to a retail\nstore lease in the amount of $1,500,000. The Company is disputing the claim for damages and the matter is ongoing. The vendor has recently\nupdated the claim to now be $450,968 after signing a long-term lease with another brand for this location. The Company is disputing\nthis new amount after review of the lease. In the summer of 2024, Century City Mall, LLC obtained a judgment against Bailey 44, LLC in\nthe amount of approximately $1.4 million, inclusive of both damages for unpaid rent and attorney fees and costs. This amount is included\nwithin the liabilities of Bailey 44, LLC in these accompanying financial statements. In this action, Century City Mall is attempting to\nhold Digital liable for the judgment against Bailey 44 on the theory that Digital is Bailey 44’s “alter ego.” The case\nis set for trial on July 21, 2026. The Company is unable to weigh in on the likely outcome of the case but will vigorously defend.\n\n \n \n \n\n \n●\nOn\nNovember 15, 2023, a vendor, Simon Showroom, filed a lawsuit against Digital Brands Group related to trade payables totaling approximately\n$582,208, representing “double damages,” while the actual amount due to the vendor was $292,604. The case was settled\nin full on December 10, 2024, for a total settlement amount of $400,000. As part of the settlement, the Company paid $50,000 in December\n2024, followed by a $60,000 payment in February 2025. As of March 31, 2026, the Company has an outstanding balance of $130,000 remaining,\nwith monthly payments of $30,000 being made under the terms of the settlement agreement.\n\n \n\nAll\nclaims above, to the extent management believes it will be liable, have been included in accounts payable and accrued expenses and other\nliabilities in the accompanying unaudited condensed consolidated balance sheet as of March 31, 2026.\n\n \n\n44\n\n \n\n \n\nDepending\non the nature of the proceeding, claim, or investigation, we may be subject to monetary damage awards, fines, penalties, or injunctive\norders. Furthermore, the outcome of these matters could materially adversely affect our business, results of operations, and financial\ncondition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant\njudgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes,\nwe believe based on our current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate,\nhave a material adverse effect on our business, results of operations, cash flows, or financial condition."}