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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
March 31, 2022
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____to_____
 
Commission File Number:
001-38739
 
TOUGHBUILT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
46-0820877
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
25371 Commercentre Drive, Suite 200
Lake Forest, CA
 
92630
(Address of principal executive offices)
 
(Zip Code)
 
(949) 528-3100
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and formal fiscal year, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class:
 
Trading Symbol(s)
 
Name of each exchange on which registered:
Common Stock
 
TBLT
 
NASDAQ CAPITAL MARKET
Series A Warrants
 
TBLTW
 
NASDAQ CAPITAL MARKET
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
Accelerated filer
 
 
Non-accelerated filer
Smaller reporting company
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
 
As of May
20
,
2022, the registrant had 1,015,637 shares of common stock, $0.0001 par value per share outstanding.

 
 
 
TABLE OF CONTENTS
 
 
 
 
 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
P
A
RT I. FINANCIAL INFORMATION
 
I
TEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
TOUGHBUILT INDUSTRIES, INC.
C
O
NDENSED CONSOLIDATED BALANCE SHEETS
 


 
 
March 31,
 
 
December 31,
 
 
 
2022
 
 
2021
 
 
 
(UNAUDITED)
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
Cash
 
$
936,822
 
 
$
7,472,224
 
Accounts receivable, net
 
 
15,059,121
 
 
 
18,179,933
 
Inventory, net
 
 
41,342,689
 
 
 
38,432,012
 
Prepaid and other current assets
 
 
1,075,379
 
 
 
786,036
 
Total Current Assets
 
 
58,414,011
 
 
 
64,870,205
 
Other Assets
 
 
 
 
 
 
 
 
Property and equipment, net
 
 
15,698,940
 
 
 
13,341,629
 
Right-of-use asset
 
 
1,952,984
 
 
 
-
 
Other assets
 
 
1,398,908
 
 
 
742,691
 
Total Assets
 
$
77,464,843
 
 
$
78,954,525
 
 
 
 
 
 
 
 
 
 
Liabilities and
Stockholders’
Equity
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
Accounts payable
 
$
21,952,919
 
 
$
14,440,506
 
Accrued expenses
 
 
1,999,023
 
 
 
1,815,567
 
Lease
liability
, current maturities
 
 
495,964
 
 
 
-
 
Warrant liabilities
 
 
3,831,904
 
 
 
4,801,929
 
Total Current Liabilities
 
 
28,279,810
 
 
 
21,058,002
 
 
 
 
 
 
 
 
 
 
Lease
liability
,
net of
current maturities
 
 
1,448,042
 
 
 
-
 
Total Liabilities
 
 
29,727,852
 
 
 
21,058,002
 
 
 
 
 
 
 
 
 
 
Commitment and Contingencies
 
(Note 5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’
 
Equity
 
 
 
 
 
 
 
 
Series C Preferred Stock, $0.0001 par value, 4,268 authorized, 0 issued and outstanding at March 31, 2022 and December 31, 2021
 
 
-
 
 
 
-
 
Series D Preferred Stock, $1,000 par value, 5,775 shares authorized, issued, and outstanding at March 31, 2022 and December 31, 2021, respectively
 
 
-
 
 
 
-
 
Series E Preferred Stock, $0.0001 par value, 15 authorized, 9 issued and outstanding at March 31, 2022 and December 31, 2021, respectively
 
 
-
 
 
 
-

Series F Preferred Stock, $0.0001 par value, 2,500 authorized, issued and outstanding at March 31, 2022, 0 authorized, issued and outstanding at December 31, 2021
 
 
-
 
 
 
-
 
Series G Preferred Stock, $0.0001 par value, 2,500 authorized, issued and outstanding at March 31, 2022, 0 authorized, issued and outstanding at December 31, 2021
 
 
-
 
 
 
-
 
Common stock, $0.0001 par value, 200,000,000 shares authorized, 861,997 and 861,997 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
 
 
86
 
 
 
86
 
Additional paid-in capital
 
 
158,031,423
 
 
 
156,184,327
 
Accumulated deficit
 
 
(110,294,518
)
 
 
(98,287,890
)
Total
Stockholders’
Equity
 
 
47,736,991
 
 
 
57,896,523
 
Total Liabilities and
Stockholders’
Equity
 
$
77,464,843
 
 
$
78,954,525
 
 
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
 
3
 
TOUGHBUILT INDUSTRIES, INC.
C
O
NDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) 
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
Revenues, net of allowances
 
 
 
 
 
 
 
 
Metal goods
 
$
7,868,628
 
 
$
4,345,197
 
Soft goods
 
 
8,858,578
 
 
 
7,937,058
 
Electronic goods
 
 
493,538
 
 
 
-
 
Total revenues, net of allowances
 
 
17,220,744
 
 
 
12,282,255
 
 
 
 
 
 
 
 
 
 
Cost of Goods Sold
 
 
 
 
 
 
 
 
Metal goods
 
 
7,351,882
 
 
 
3,328,000
 
Soft goods
 
 
6,385,371
 
 
 
5,491,127
 
Electronic goods
 
 
480,364
 
 
 
-
 
Total cost of goods sold
 
 
14,217,617
 
 
 
8,819,127
 
 
 
 
 
 
 
 
 
 
Gross profit
 
 
3,003,127
 
 
 
3,463,128
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
15,934,045
 
 
 
7,949,783
 
Research and development
 
 
2,514,050
 
 
 
1,406,385
 
Total operating expenses
 
 
18,448,095
 
 
 
9,356,168
 
 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
 
(15,444,968
)
 
 
(5,893,040
)
 
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
 
Warrant issuance costs
 
 
(275,130
)
 
 
-
 
Change in fair value of warrant liabilities
 
 
3,616,160
 
 
 
-
 
Interest expense
 
 
-
 
 
 
(160,619
)
Total other income (expense)
 
 
3,341,030
 
 
 
(160,619
)
 
 
 
 
 
 
 
 
 
Net loss
 
$
(12,103,938
)
 
$
(6,053,659
)
     
 
 
 
 
 
 
Basic and diluted net loss per share attributed to common stockholders
 
$
(14.04
)
 
$
(13.43
)
Basic and diluted weighted average common shares outstanding
 
 
861,997
 
 
 
450,624
 
 
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
 
4
 
TOUGHBUILT INDUSTRIES, INC.
S
T
ATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED March 31, 2022 AND 2021
(UNAUDITED)
 
 
 
 
Series C
 
 
Series D
 
 
Series E
 
 
Series F
 
 
Series G
 
                             
 
 
Preferred
 
 
Preferred
 
 
Preferred
 
 
Preferred
 
 
Preferred
 
           
 
Additional
 
     
 
Total
 
 
 
Stock
 
 
Stock
 
 
Stock
 
 
Stock
 
 
Stock
 
 
Common Stock
 
 
Paid-in
 
 
Accumulated
 
 
Stockholders’
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Equity
 
                                                                                           
January 1, 2021
 
 
-
 
 
$
-
 
    -     $ -       -       -       -     -       -     -       297,792     $ 29     $ 80,108,016     $ (60,761,992 )   $ 19,346,053  
Issuance of common stock upon conversion of warrants
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       36,057       4       5,408,536       -       5,408,540  
Issuance of common stock for services
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       1,000       -       189,000       -       189,000  
Issuance of common stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       214,186       21       39,074,368       -       39,074,390  
Stock based compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       -       -       81,537       -       81,537  
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       -       -       -       (6,053,659 )     (6,053,659 )
Balance - March 31, 2021
 
 
-
 
 
$
-
 
    -     $ -       -     $ -       -      $ -     -      $ -       544,035     $ 54     $ 124,861,457     $ (66,815,651 )   $ 58,045,861  
January 1, 2022
 
 
-
 
 
$
-
 
    -     $ -       9     $ -       -      $ -       -      $ -       861,997     $ 86     $ 156,184,327     $ (98,287,890 )   $ 57,896,523  
Adoption of lease guidance
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       -       -       -       97,310       97,310  
Issuance of preferred stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       2,500       -       2,500       -       -       -       1,833,995       -       1,833,995  
Stock based compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       -       -       13,101       -       13,101  
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
    -       -       -       -       -       -       -       -       -       (12,103,938 )     (12,103,938 )
March 31, 2022
 
 
-
 
 
$
-
 
    -     $ -       9       -       2,500      $ -       2,500      $ -       861,997     $ 86     $ 158,031,423     $ (110,294,518 )   $ 47,736,991  
 
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
 
5
 
TOUGHBUILT INDUSTRIES, INC.
C
O
NDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
 
Three Months Ended March 31,
 
 
 
2022
 
 
2021
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(12,103,938
)
 
$
(6,053,659
)
Adjustments to reconcile from net loss to net cash used i
n
 operating activities:
 
 
 
 
 
 
 
 
Depreciation
 
 
933,725
 
 
 
296,016
 
Stock-based compensation expense
 
 
13,101
 
 
 
81,537
 
Amortization of capitalized contract costs
 
 
-
 
 
 
213,353
 
Amortization of right-of-use asset
 
 
72,829
 
 
 
-
 
Common stock issued for services
 
 
-
 
 
 
189,000
 
Warrant issuance costs
 
 
275,130
 
 
 
-
 
Loss on sale of property and equipment
 
 
15,806
 
 
 
 
-
 
Change in fair value of warrant liabilities
 
 
(3,616,160
)
 
 
-
 
Changes in operating assets and liabilities
 
 
 
 
 
 
 
 
Accounts receivable, net
 
 
3,120,812
 
 
 
(3,726,729
)
Factor receivables, net
 
 
-
 
 
 
(233,172
)
Inventory
 
 
(2,910,677
)
 
 
(2,752,846
)
Prepaid assets
 
 
(289,343